[p2p-research] the end of the bank-centric universe

Thu May 21 11:04:36 CEST 2009

Obama is just a person. Like us. He can be persuaded by the dark side or he
can rise above it. He's in a constant struggle between his true ideals and
the temptation of power.

It's not a static picture but Ariana benefits from presenting it as such.
Her online newspaper thrives on unfounded or little founded controversy.

On Wed, May 20, 2009 at 6:53 PM, Ryan Lanham <rlanham1963 at gmail.com> wrote:

> I agree Michel...brilliant, and I agree with every word Arianna Huffington
> wrote.  Obama is failing big time on this one, and I'm a huge fan.  People
> in power always go with institutions because they need the power.  Big banks
> appear powerful, but they are shells of their former selves.  The same is
> happening to newspapers and will happen next to universities.
>
> Ryan Lanham
>
>
>
> On Wed, May 20, 2009 at 4:03 AM, Michel Bauwens <michelsub2004 at gmail.com>wrote:
>
>> brilliant:
>>
>> By Arianna Huffington, Huffington Post
>>
>> A series of recent meetings with members of Barack Obama's economic team
>> (including running into Larry Summers on my way to an appointment in the
>> West Wing, leading to a spirited back-and-forth that made me feel like I was
>> back at Cambridge, debating the smartest kid in the class), left me with a
>> pair of indelible impressions:
>>
>> 1) These are all good people, many of them brilliant, working incredibly
>> hard with the best of intentions to solve the country's financial crisis.
>>
>> 2) They are operating on the basis of an outdated cosmology that places
>> banks at the center of the economic universe.
>>
>> Talking about our financial crisis with them is like beaming back to the
>> 2nd century and discussing astronomy with Ptolemy. Just as Ptolemy was
>> convinced we live in a geocentric universe -- and made the math work to
>> "prove" his flawed theories -- Obama's senior economic team is convinced we
>> live in a bank-centric universe, and keeps offering its versions of
>> "epicycles" and "eccentric circles" to rationalize their approach to the
>> bailout. And because, like Ptolemy, they are really smart, they are really
>> good at rationalizing.
>>
>> It's easy to get lost debating the complexity of each new iteration of
>> each new bailout, but the devil here is not in the details -- but in the
>> obsolete cosmology.
>>
>> If you believe the universe is revolving around the earth -- when, in
>> fact, it isn't -- all the good intentions in the world, and all the endless
>> nights spent coming up with plans like Tim Geithner's Public-Private
>> Investment Program will be for naught.
>>
>> The successive bailout plans have been frustrating to many observers
>> (yours truly included), but when you realize how fully the economic team is
>> mired in a bank-centric universe, all the moves suddenly make perfect sense.
>>
>>
>> Here is one example. Everybody agrees on the paramount importance of
>> freeing up credit for individuals and businesses. In a bank-centric
>> universe, the solution was a bailout plan giving hundreds of billions to
>> banks. It failed because, instead of using the money to make loans, the
>> banks "are keeping it in the bank because their balance sheets had gotten so
>> bad," as the president himself acknowledged on Jay Leno. As a result, the
>> administration, again according to the president, had to "set up a
>> securitized market for student loans and auto loans outside of the banking
>> system" in order to "get credit flowing again."
>>
>> But think of all the time we wasted while the first scheme predictably
>> failed. And how much better off we'd now be if we had provided credit
>> directly through credit unions or small healthy community banks or, as
>> happened during the Depression, through a new entity like the Reconstruction
>> Finance Corporation.
>>
>> Luckily, there is a plethora of economic Galileos out there who recognize
>> that the old bank-centric cosmology is just plain wrong. But while Joseph
>> Stiglitz, Simon Johnson, Jeffrey Sachs, Nassim Taleb, Niall Ferguson, Paul
>> Krugman, etc. are not being imprisoned for life for their heretical views --
>> they are also not being listened to. Which is really surprising for an
>> administration that has prided itself on a "team of rivals" approach.
>>
>> Worse, as the fundamental flaw in the administration's cosmology becomes
>> more and more evident, the economic team around the president is closing
>> ranks. Even David Axelrod, once the administration's champion of a more
>> skeptical view of a bank-centric universe, appears to be peering through the
>> Geithner-Summers telescope.
>>
>> Back in February, he crossed swords with Geithner, arguing for executive
>> pay caps. But there he was on Sunday, whiffing on a pro-populist softball
>> offered up by Fox News' Chris Wallace, who asked: "When taxpayers are
>> putting up most of the money and taking more of the risk, why would the
>> Obama administration allow some of these executives to get even richer?"
>>
>> Axelrod's answer? "On some of these programs, we're asking financial
>> companies to come in and help solve this problem by providing more lending,
>> by buying up toxic assets and so on. We don't want to create disincentives
>> and undermine the program."
>>
>> "Asking" them? Aren't we, in fact, bribing them with massive capital
>> infusions and loan guarantees? That's what being surrounded by a group of
>> modern day Ptolemys will do to a person.
>>
>> Of course, it's less of a surprise that Geithner and Summers believe in
>> bank-centrism -- they're both creatures of it. Which is why it wasn't a
>> shock when it was reported this weekend that Summers had received $5.2
>> million for advising a hedge fund last year, or that he received hundreds of
>> thousands of dollars in speaking fees from some of the very banks --
>> including J.P. Morgan, Citigroup, and Goldman Sachs -- that have been on the
>> receiving end of billions in taxpayers money. Billions that have come with
>> very few strings attached -- and almost no transparency.
>>
>> I am in no way suggesting there is anything corrupt about this or any quid
>> pro quo involved. It's just that in a bank-centric universe, funneling
>> no-strings-attached money to too-big-to-fail banks is the logical thing to
>> do.
>>
>> So is arguing that the banking crisis is just a liquidity problem rather
>> than an insolvency one, as Geithner continues to do (and if the stress tests
>> come back declaring Citi solvent, it will be high time to start stress
>> testing the stress testers).
>>
>> In a bank-centric universe, it's also no surprise that "mark-to-market"
>> accounting rules, in which banks have to calculate and report their assets
>> based on what those assets are actually worth, instead of what they'd like
>> them to be worth, are being abandoned. A good name for the reworked
>> accounting standards would be mark-to-fantasy, because that's basically what
>> balance sheets will be under these new rules. Of course, to a true believer
>> in bank-centrism, the problem with mark-to-market is that it's not good for
>> the banks. It's the accounting equivalent of Galileo's telescope.
>>
>> Last week at the G-20 meeting, Gordon Brown proclaimed that "the old
>> Washington consensus is over." But when it comes to attacking the financial
>> crisis, the zombie Wall Street/Washington consensus that has everything in
>> America orbiting around the banks is still the order of the day.
>>
>> The longer bank-centrism is the dominant cosmology in the Obama
>> administration -- and the longer it takes to switch to a plan that reflects
>> a cosmology in which the American people are the center of the universe and
>> are deemed too-big-to-fail -- the greater the risk that the economic crisis
>> will be more prolonged than necessary. And the greater the suffering the
>> crisis will continue to cause.
>>
>> There is an enormous human cost to this bank-centric dogma. Unemployment,
>> already at levels not seen since 1983, is skyrocketing. In many places in
>> the country, it's approaching 20 percent (and in Detroit it's 22 percent).
>>
>> Writing about the "grand book" that is the universe, Galileo declared that
>> it "cannot be understood unless one first learns to comprehend the language
>> and interpret the characters in which it is written... without these, one is
>> wandering about in a dark labyrinth."
>>
>> That's where we find ourselves today, wandering about in a dark financial
>> labyrinth -- being led by good men blinded by an obsolete view of the world.
>>
>>
>> President Obama needs to open his inner economic circle to those
>> untethered to this flawed way of thinking and acknowledge that navigating
>> our economic crisis using maps based on a cosmology that places banks at the
>> center of the universe can only lead to our being lost at sea for years to
>> come.
>>
>>
>> --
>> Working at http://en.wikipedia.org/wiki/Dhurakij_Pundit_University -
>> http://www.dpu.ac.th/dpuic/info/Research.html -
>> http://www.asianforesightinstitute.org/index.php/eng/The-AFI
>>
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Marc Fawzi
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