Fun With Thomas Friedman

Thomas Friedman tells us today that we have "win together or lose together." That's a really cute line.

Folks who look at the National Income and Product Accounts know that corporate profits are at a record high share of national income. And within corporate profits, the financial sector is at a record high. Given that we have 25 million people unemployed, underemployed or who have given up looking for work altogether, that doesn't seem like much togetherness.

We could increase togetherness with a modest financial speculation tax like the 0.25 percent tax that the UK imposes on each side of stock trades. A similar tax applied to trades of stocks, bonds, options, futures, and other derivative instruments can easily raise more than $100 billion a year. That would help to bring down the deficit that so concerns Mr. Friedman and his friends.

Friedman gives his usual tirade about people in the United States overconsuming. The problem in this story is that people would not have been overconsuming if the housing bubble wealth was real. At its peak, the housing bubble created more than $8 trillion in housing equity compared to a situation where house prices had just followed their long-term trend. People consumed based on this wealth, exactly as economic theory predicted.

This would have been an entirely rational decision if they were able to keep their bubble equity, but of course they were not. The problem was not that people were being spendthrifts, the problem was that the people in charge of running the economy allowed an $8 trillion bubble to grow that had predictably disastrous consequences.

The blame here lies not with the average homeowner, who acted rationally with the information available. The blame lies with the people who managed the economy, like Alan Greenspan, Ben Bernanke, and Hank Paulson, and the people who opine on economic issues in major news outlets. If these people were competent, they would have been shooting at the bubble with everything they had before it reached such dangerous levels.

Friedman also turns to Harvard economist Ken Rogoff for suggestions for hastening the recovery. For some reason he missed one of his favorites. Rogoff suggested that the Fed deliberately run a high rate of inflation (e.g. 6 percent) for a couple of years. This would have the effect of reducing the real value of people's debts, making it possible for them to spend more money.

It also is worth noting that the U.S. cannot return to normal levels of employment without "overspending" unless we get the trade deficit down. This can only happen if the dollar falls substantially against other currencies. Thomas Friedman should know this.

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written by Benedict@Large, August 07, 2011 10:16

No doubt Friedman would turn to Harvard, the only place yet that has been able to out-Chicago the Chicago Boys. And Rogoff no less, a man who based a whole book on a grade school mistake in arithmentic.

Friedman Understands Game Theory: Divided We Fall
written by izzatzo, August 07, 2011 11:15

...we have [to] "win together or lose together."

As an axiom of game theory economics this wise phrase from Friedman explains why the economy cannot recover. It's a matter of critical mass. Everyone must pull in the same direction or opposing directions. There's no in between.

Friedman was obviously inspired by Rick Perry's recent invocation to pray together or die together at the altar of moral relativism.

We have no one to blame but ourselves for the gluttonous overconsumption driven by debt that flowed like a river of satanic gold from markets contaminated with government interference.

Repent now or forever hold your joblessness and underwater mortgage in a sea of moral relativism.

Stupid liberals.

-5

Friedman Speaks to His Audience
written by Hugh Sansom, August 07, 2011 11:45

Thomas Friedman is a Reiterater of the Obvious for the Oligarchs. His idiocy is not directed at the general audience. Take him as speaking only to his fellow millionaires and billionaires, his words make perfect sense. The Oligarchs must hang together or surely they will all hang separately. (Ben Franklin, saying Friedman's line far better and far earlier.)

The apparatus of power in North America and Europe is bent toward preserving power in the hands of the top 1% or so while slowly depriving the rest of us of what little power we've barely had. The growth in income inequality. The gladiatorial wars and entertainment culture of sports and reality television. And, very important, the national security state. The obsession with 'security' can and will be turned to protect the 1% from the 99%.

Sound crazy? Conspiracy theory? Watch.

Activism
written by Jeffrey Stewart, August 07, 2011 1:39

It's clear those in power positions aren't listening to the people any more. We need mass action as a first step in a progressive movement to protect and advance the interests of the working class, poor and elderly.

We know that cuts in Social Security, Medicare and Medicaid as well as other social programs are coming. If we don't do anything, we'll certainly lose. If we do something, we might win.

Surely Dr. Baker doesn't think that a financial transactions tax is going to happen without pressure from the people. The wealthy, powerful and well connected aren't just going to wake up one day and decide it's a great idea.

The first step in a 1000 mile journey: a Demo.

http://october2011.org/welcome

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written by PeonInChief, August 07, 2011 2:02

I won't waste one of my 20 articles a month reading Tom Friedman. But I will note that the "we're all in this together" hooey always shows up right before the cut taxes on the wealthy and raise taxes on the rest of us.

Togetherness
written by JL, August 07, 2011 2:05

is always prominently and eloquently mentioned and sought when one side won.

Watch in November 2013 and January 2014, one party will once again asked the country join to work "Together" to acheive and sacrifice for the good of the country.

Of course, it's the victorisous party who will be doing that, the party who has undermine the entire country every which possible ways for the last four years in order to get what they wanted.

Yep, whenever you hear someone calls for "togetherness," it means he has won!

Transaction Tax
written by EMichael, August 07, 2011 3:16

I am fine with a transaction tax, but I need a little change. Make it start at 5% and decline on a time basis to the .25% rate.

Take out the HFT's with their superfast computers who are simply technological parasites feeding off real investment income.

A billion here and a billion there and it adds up to a lot of money.

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written by diesel, August 07, 2011 3:39

Thomas says "education, infrastructure, immigration of high-I.Q. innovators and entrepreneurs, rules to incentivize risk-taking and start-ups, and government-funded research to spur science and technology."

"Brains, more brains" croak the brain-eating zombies in the Night of the Living Dead. We don't need more brains, or "incentiviz"ing. Where we consistently fail is in making the transition from great ideas to viable marketplace products. Books have been written documenting the arm's-length list of American small companies whose patents have been snatched up by Asian manufacturers, who then made a successful go at making and marketing the products.

Sad to say, those of us who know how things are made and how they work are embarrassed by the all-to-often shoddiness of the products of American design and manufacture. It's painful to hear foreigners laugh at the "quality" of American goods.

It's unlikely that this realization will get through to the likes of Thomas Friedman and his ilk. It would challenge their view of themselves as the brains of the most innovative and technically adept country on the planet.

Right-O and three points
written by Gentleman, August 07, 2011 3:58

Three points:
Right-O It was not every American wanting to buy a house that put us over the cliff. It was greedy bankers for which interest profit was not enough, but Credit Default profit too, and thus no risk banking.

Unstated: Economic history shows wars create debt. Additionally Friedman's other drum, the green economy cannot come without restructuring. We cannot grow our way into a green economy. And without changing Bigtime we will find more wars.

Regarding winning together, Democracy is majority rule; our current filibustery, the Senate’s rule of 41… is minoritiy rule.

What Together?

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