The Headline in yesterday’s Daily Telegraph (London) was We’re All Socialists, Now . It echoes Nixon’s “We’re all Keynsians now.” But It also leads one to the brutal irony that maybe Marx had something right.
Within the next 12 months, the United States government will have ownership positions at the country’s biggest banks, auto companies,insurance companies, start up Green Tech Companies and many others. Unbelievably under a Republican Presidency, the government was needed to save capitalism. You can call it what you want but it looks like Democratic Socialism to me. This is the European tradition of the ruling parties over the last decade of the UK, France, Germany, Italy, Netherlands and pretty much all of Scandanavia.
Whatever Democratic Socialism will look like in the entrepreneurial American climate, we don’t know. We don’t even know how long the government will have to hold on to the securities it buys. What we do know is that Laissez Faire Capitalism is in the ER. Only the state can save it. But the state will not let capitalism be the wild boy it has been for the past twelve years. So this will be interesting. We will not run out of ideas. And if you are an artist in one of the European Socialist Countries, there is a lot of support for your work. The City of Paris spends more per year on the arts than the whole United States.
Paulson and Bernanke clearly miscalculated when they let Lehman fail. The number of counter parties, especially sovereign ones like the government of Iceland, made it too interconnected. We live in a networked world, we can’t get off the Net.Here is why the governments need to make these investments. Here is The Worst Case Scenario.
“With no desire to exaggerate, this might be considered the financial pre-conditions of a depression,” Citigroup economist Steven Wieting wrote in a note to clients.”Evidence suggests credit rationing is inhibiting day-to-day activities for many firms, with a harsh and worsening backdrop for consumers,” he said. “Sadly, some risk exists that financial events could still unfold like a proverbial ‘dam break.’ This might leave policy-makers treating very serious and lasting damage to the financial system, rather than preventing further erosion.”Already, the crisis has taken a heavy toll on economic prospects. Wieting now expects nominal U.S. economic growth next year will be the weakest since 1954, with unemployment climbing to 8.5 percent from the current 6.1 percent.
You know I’ve been saying this for a while. The first 100 days will be crucial. This morning on This Week the notion was floated at the Roundtable (I think by Paul Krugman) of a “national unity government” being created right after the election (across party lines) to begin moving things ahead in the legislature that would be ready for the President to sign on Inaugural Day.
We live in interesting times.