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In Sausalito overlooking S.F. Bay with my uncle, Lucky Strike nonfilters and a case of Bud. Those splendid days are long gone.


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« What a telling juxtaposition | Main | Broadcast high crimes and misdemeanors »

February 25, 2016


Peter G

So I read your stuff and I recognize a compelling case when I see it. But I have questions. Every single pundit is out there talking about how you play King of the Castle (started by the amazingly superficial Fournier) and why it is necessary to knock off or even try to knock off Trump. So far so good. The argument is that Jeb and all the others spent money trying to damage each other instead of eliminating Trump early and that if the money had been spent wisely this could have been accomplished. If that were true how come the massive amounts of money that Jeb spent to kill Rubio's campaign didn't succeed in doing that either? It you can't swat a gnat how can you knock off a charging rhino. I will make the case general. None of these spending campaigns seem to have much effect on anything. And Trump is winning while spending the least money while Bernie is doing pretty well with much less money than the Clinton campaign.

The truth about the King of the Castle argument is that it is predicated on a very shaky foundation which is that you can knock the King off the Hill while not alienating the people who put the King on the Hill. Cuts both ways too. If Bernie thinks he can knock off Hillary without turning off a whole lot of needed voters he is wrong.

You'd think, parenthetically, at this point people would start to wonder why Sanders and his people think political money at the root of all evil since it has such little effect. Despite these questions I do firmly agree with your conclusion about what should happen and,sadly, what will. Sorry to bother you too.


The rules of conventional politics don't hold. The way to understand why Trump can't be beat is his appeal as an authoritarian. All the old guard can do is damage control, and probably not even much of that.

At the same time it's getting harder to make peace with the idea of Hillary. Her campaign has stopped her from cackling whenever anyone brings up something awkward for her, but they now have her doing a wide-eyed nodding thing that might be even more annoying. Patience with her politics of lowered expectations is also wearing thin, and significant pushback is beginning. Recently 170 respected economists and academics signed a letter supporting Bernie's approach to Wall St. over Hillary's ( ).

Bernie should definitely stay in. For the duration. Progressive Democrats should vote for him in primaries. Fairly or not, Hillary is seeming more like the candidate of a party only trying to do what all large organizations do; perpetuate itself at any cost.

Peter G

Nice try. In such a case one always puts the big names up top. He's got Reich. But he doesn't even have Stiglitz. Not even Warren unless my eyes deceive me. Not Krugman nor any of the other heavy weights of economic policy. And when you start padding your list with economic thought leaders from community colleges you're probably not convincing anyone but those already convinced. The guys with the Nobel prizes seem to disagree.

I do agree with your last sentence about perpetuating the party. If it does not then you lose. Period.


Galbraith and Baker are lightweights? Warren has conspicuously stayed neutral about almost everything. Stiglitz has sided with Bernie on healthcare, income inequality, and the TPP. Krugman seems to be alone among liberals in consistently criticizing Sanders, usually along the lines that what he's trying to do is just too difficult. Pushback against him is gathering too.


Btw, the operative phrase in my last sentence is "perpetuate itself at any cost." If the Dems continue with their "shut up and eat your spinach" approach it might very well bite them.

Peter G

Everybody sides with Bernie on income inequality. Including Hillary Clinton. Damned if I can find anyone in favor of it. And I don't think difficulty is quite how Bernie's critics are framing it. Ludicrously impossible is how the growth rates Sanders has in his economic plan is how this is being characterized.
Krugman's position on TPP is interesting. Trade is his area of expertise and he has little technical objection to it other than it is not worth the political capital needed to secure it. And that's something Hillary quickly concluded too. If her old boss gets it done before the election fine, if not, no big deal. The other countries can proceed without the US and the US can join later.

The most interesting thing about the letter to me was the content. I always have questions about such things. This one instantly occurs, which represents a higher risk, a bank which invests its capital in a business as a shareholder or a bank which loans its depositors money to a business or a person. The answer is probably neither all other things being equal. But the investment bank gets to watch and to some extent control how their investment is used. Commercial lenders just get to watch and hope they aren't being bullshitted. When the shit hits the fan the answer is usually that they were being bullshitted. So really the idea that commercial banks are better managers of risk is mostly nonsense.

The thing in the letter that is really pure horseshit is the living will nonsense. What the hell is that supposed to be? Presumably it is going to be written by management on behalf of shareholders and in whose interest would it be written if not theirs. If a bank actually does fail they got nothing to say about winding up the bank's affairs and the shareholders are going to lose their financial interests. I can't think of a more pointless document than that living will.

There was, however, one little considered provision of Glass Steagal that should actually be re-enacted and on which Clinton gets it. Once upon a time investments banks were treated as partnerships. In large measure the money they invested included their money as well as money placed with them for investments. When they were allowed to convert to publicly traded financial institutions their share of the capital at risk became nearly negligible but the demand for higher returns on the investments was ever increasing. And that was what drove the risky investments. The fix here is straightforward. Make management of investment investment banks put a bigger share of their own capital at risk.

As to publicly traded commercial banks the same criterion for risk management drives the same investment paradigms. If you want to restrict the risk you have to make risky investments costly to management. No one knows how to do that without looking over their shoulders at every loan. The only thing they do know how to do is increase reserve requirements. That's what Frank Dodd does and it is verifiably its most important and effective provision. It is working as planned. The biggest banks are now showing lower rates of return precisely because they have higher reserve requirements. Do lower rates of return make them more or less stable? You tell me.

Peter G

There we see eye to eye. I am not arguing for status quo. I am arguing for broader inclusiveness of interests. Only by doing so can the Democrats hope to achieve the electoral success long term that will make progress possible. I think what we mostly disagree about is strategy. The Democrats could easily lose a generation if they are not careful about including them in their tent.


I'm not an expert in finance. Honestly, most of it bores me numb. My purpose was to point out that not all economists agree with Krugman and Hillary. I suspect there will be more of this type of thing if Hillary's campaign persists with backing off as little as possible in lowering expectations. The public is not in the mood to hear it and has good reasons to suspect it's bullshit. Wall St. embezzled around $17 Trillion and nearly none of those responsible have gone to jail, though they have been given slap-on-the-wrist fines. Lots of other countries less rich than the US can afford universal medical care, and so on.

Peter G

Then you are not a very good target for my remarks on such topics and I won't bore you further. But I do know what I am talking about when it comes to such things and I know Bernie is selling pie-in-the-sky. You do not have to be an expert or even mildly interested in the nuts and bolts to ask yourself this question though: why is the central focus of Bernie's campaign breaking up the biggest banks when they are the healthiest banks. And why make a priority of something that seems to happen every every couple of generations. Each time differently than the last financial meltdown. You know what they say, generals always prepare to fight the last war.


I defer to the signatories of the letter:

"Secretary Hillary Clinton's more modest proposals do not go far enough. They call for a bit more oversight and a few new charges on shadow banking activity, but they leave intact the titanic financial conglomerates that practice most shadow banking. As a result, her plan does not adequately reduce the serious risks our financial system poses to the American economy and to individual Americans. Given the size and political power of Wall Street, her proposals would only invite more dilution and finagle. The only way to contain Wall Street's excesses is with reforms sufficiently bold and public they can't be watered down. That's why we support Senator Sanders's plans for busting up the biggest banks and resurrecting a modernized version of GlassSteagall."

Patrick O'Connor

Sanders calls for revolution. The revolutionaries will storm the battlements for his agenda come 1/21/17. The Revolution should start now. The last Obama budget, Gitmo, SCOTUS. Bring out them big guns of activist righteousness and commitment today. If anything it will be good drill for the struggle they have all promised to fight for an indefinite future.

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