Nate Silver - Chill out, y'all!

Nate Silver, over at 538.com has a post up making a compelling case that we should essentially trust Obama and Geithner to get this thing right.  The crux of his argument is that they have every incentive to fix the economy and no incentive to cave to Wall Street or some other fantastic notion of insider influence-peddling.

I generally agree with his assessment, although I think there are different ways of conceptualizing the current crisis.  One concept is to get us back to where we were economically two years ago.  This presumably presages another economic collapse in 2011.  The other concept is to get us back to pre-Reagan economics both with its vicissitudes and its protections for the middle class.  That, to me, is the real question about Summers & Geithner.  Do they want late Bush II-era social and economic divides and credit-card living?  Or do they want a solidly middle-class country?  I'm not sure of the answer to this.

From Nate:


1. Nobody, absolutely nobody, has more incentive to get this right than the Obama Administration. If the economy collapses -- well, more than it already has -- then the Democrats get slaughtered in 2010, Obama is a one-termer, health care doesn't happen.

Point well taken.  Geithner is trying.  I will certainly give him that.


2. If the banks fail, then rich people lose a lot of money, and poor people lose a lot of jobs (and also much of what money they have). But I swear to God, there's a lunatic fringe out there that would take this trade and call it "progress".

Hmm.  Losing me a little Nate.  I think what he's missing is that the mask has been effectively pulled off of the banking industry.  All of the brilliance and obscene salaries can now be seen for what they were:  empty promises, bad decisions, and public bailouts.  The banking industry has profited tremendously from changes in statutes and in the overall lifestyle of the average American.  The financial services sector was on fire for the better part of the last two decades.  Anyone lucky enough to be within two or three degrees of separation from Wall Street benefited tremendously.  And for a while, it appeared that we were all benefiting.  But now, we're looking at the colossal failures of the people who were supposed to be the modern-day Captains of Industry and our response is to give them huge chunks of public money and hope for a better outcome.


3. I'm sorry, but somewhere between 99.9% and 99.999999% of us are severely underqualified to be making policy recommendations on this particular issue. And I'm certainly in the majority on this one.

Couldn't agree more.  Still, who are the experts?  Paul Krugman?  Greg Mankiw?  David Axelrod?  Paul Volcker?  Jim DeMint?  We still haven't figured that one out.  Plus it isn't as if Tim Geithner has landed on this planet from Mars and is now going to save us all from ourselves.  This guy was the head of the New York Reserve during the time that all of these crises developed.  It is fair to ask how much control he had over the situation.  Still, I don't recall his testimony to Congress last year warning that a collapse was imminent or that many of the large banks were in trouble but haven't realized it yet.

Actually, the person that I trust most on this (hold on while I get my kool-aid....there), is Obama.  He stuck a very important note on ABC last night when he said (paraphrasing here) "Wall Street was hoping for an easy out and there isn't one." Well played, sir.  

I had a strangely gratified feeling watching the stocks tumble yesterday.  Call me a fringe radical, but I suspect that the insiders aren't so much concerned about the "lack of specificity" in Geithner's plan as they are concerned that they may actually pay for their mistakes.  You have to imagine that the tone struck by Obama on ABC last night was echoed in many backroom discussions throughout the day yesterday.

To me, this isn't about retribution, it's about changing our concept of the U.S. economy.  We'll make it through to the other side.  The rich will still be rich.  The poor will still be poor.  But we will be less dependent on risky lines of credit and the poor decisions of multi-billionaires trying to meet this quarter's expectations.

Or something like that.

Tags: 538, Geithner, obama (all tags)

Comments

26 Comments

"If the banks fail"...

That is the part I do not understand.  The "If" implies that there is an option.

The banks will fail short of a bailout from the taxpayers to the bankers (shareholders/bondholders).  And so, he is recommending that we (the taxpayers) bail them out...by giving them lots of money..., because if we don't, then the rich people will lose all their money and the poor people will lose their jobs.

But I would rather just keep the money.  Roubini estimates that it will take 2.5 trillion to rescue the banks.  Generously including every man, woman and child in the US...that amounts to $10,000 per head.  or $40k for a family of 4.  We can afford to have a lot of people go without jobs, and take care of them, at that going rate.

by Ravi Verma 2009-02-11 08:28AM | 0 recs
Playing devil's advocate

If we just give $40k/person (and I realize you aren't explicitly suggesting this), then next year you'd either have to do it again or accept that some of these people will go without.  The point of rescuing the banks is to keep the financial infrastructure somewhat intact so that when the conditions are right, the economy can recover.  In this sense, you could view the bailout as a "financial stimulus package".  As I alluded to in the diary, to me it's a question of whether we're trying to roll things back two years or to come up with a new, more robust model of our economy.

As an aside, I saw Paul Krugman on Joe Scarborough a few days ago and he told an nerdy economist joke saying that if an economist runs over a pedestrian with a car, they will try to fix it by putting the car in reverse and running over the person again.  I think that's a decent metaphor for what I'm talking about.

by the mollusk 2009-02-11 08:37AM | 0 recs
Re: Playing devil's advocate

Actually, while I wasnt explicitly advocating giving $40k to every family of 4, I was advocating something close to it.

I would like to see the money being put to use into a social safety net for people who lose their jobs.  I suspect it will cost a lot less than $40k/family of 4...but then again, any estimate I provide would be from the back end of my...

Let the banks fail.  Bailing them out is simply impractical, and immoral to boot.  Let the banks fail, and let us use to money to mitigate the fallout.

Letting the banks fail is the only way to get to the more robust economy you talked about.. one based on innovation in technology and manufactring, rather than innovation in financial services.

by Ravi Verma 2009-02-11 08:49AM | 0 recs
We are not very trusting types here at MyDD...

The rich will still be rich.  The poor will still be poor.

Well, so it always will be.

Still, we have seen the gap between Super-rich and the rest of us turn into a chasm.

The concentration of ownership in the hands of so few..Oligarchies are almost always a very deterimental system for everybody except the ruling class.

by WashStateBlue 2009-02-11 08:35AM | 0 recs
Re: We are not very trusting types here at MyDD...

I'm certainly of the same mind as you.  But, then again, even people of relatively modest means can afford to eat, have a decent means of transportation, usually a TV, some forms of entertainment, etc.  I realize there are the homeless and dispossessed out there, but they make up a very small percentage of the overall society.  The poor of today's U.S. aren't really comparable to those of the Great Depression or of modern-day developing nations.

Believe me, I'd like to see the income gap narrowed mostly because I think it would give us a stronger and more diverse nation, culture, and economy.  But that classes will still be there.

by the mollusk 2009-02-11 08:41AM | 0 recs
Re: We are not very trusting types here at MyDD...

I agree also, but the more the few control, the worse for society.

Unfortunately, most mega-rich are not like Warren Buffet, but more like the Coors and Nestle families, that fund Cato and Heritage for their own agenda.

Off topic a bit, have you ever read "Perfectly Legal" by David Johnston?

I was always kind of a left liberal on taxes, but after reading that book, I am boderline French Revolution about it...We need to basically cut off a few heads to send the fear of some kind of consequences into these people...

by WashStateBlue 2009-02-11 08:51AM | 0 recs
What does Nate Silver know?

He's only right about pretty much everything, with mathmatical precision.

by Dracomicron 2009-02-11 08:59AM | 0 recs
Re: What does Nate Silver know?

Sure, I'll give him his due.  But he isn't infallible.  Plus he doesn't really talk at all about the merits or demerits of the plan.  He views everything through the lens of probability for re-election.  It often clarifies things, but there is sometimes more to the story.

by the mollusk 2009-02-11 09:08AM | 0 recs
Fair enough

I'm just sayin', he correctly predicted a win for Franken in the recount, and was too conservative by 200 votes out of 3 million.

The guy has a great big brain.

by Dracomicron 2009-02-11 09:33AM | 0 recs
Nate Silver knows he knows nothing...

...about economics (which he acknowledges in his own words), which is why his entire statement about all of this means...abso-freakin'-lutely nothing.

by bobswern 2009-02-11 09:34AM | 0 recs
he is outside his

expertise.  this is neither polling nor statisitic.  It's his opinion, and it's an undemocratic one at its core and contrary to all Obama talks about regaridng bottom up change.  Rule by so-called "experts" is not what real change is about.

by TomP 2009-02-11 10:58AM | 0 recs
with all due respect

Nate Silver supported the Wall Street bailout back in the fall--you know, the one that failed to unlock credit and failed to restore confidence in the markets.

I don't understand why Obama wants to own all of the worst aspects of the Wall Street bailout. I suspect he is mainly listening to the wrong people (Geithner and Summers).  

by desmoinesdem 2009-02-11 09:28AM | 0 recs
You know, that plan probably wasn't that bad

If it weren't for the fact that Bush's people were running it, it might've turned out okay.

I know, I know, fool me once, shame on you... fool me twice, shame on me.  That doesn't change the fact that they were obligated to do something about a problem we haven't faced for almost a century.

by Dracomicron 2009-02-11 09:36AM | 0 recs
Re: with all due respect

agreed, as I wrote below, at issue is whether Obama's policies are good, not whether he wants to improve or screw up the economy. And Bush had every incentive to get Iraq right...

by LeftistAddiction 2009-02-11 09:39AM | 0 recs
You really think so?

Bush had no incentive to get Iraq right.  Wartime presidents have an even better than normal re-election rate, and he was making gobs of money for the only people whose opinion mattered to him, already-filthy-rich oil and defense industry profiteers.

Considering he'd intended to have the U.S. involved with whatever brushfire wars he could from the beginning, I'd say Iraq (and, for that matter, Afghanistan) worked out pretty well for him.  What does he care about a 24% approval rating?

by Dracomicron 2009-02-11 01:07PM | 0 recs
Re: with all due respect

Geithner and Summers have both publically stated they are idealogically (not economically, but idealogicallly) opposed to many of the ideas that are being tossed out in public. Thus, you get a lot of b.s. out of them that's really just conservative dogma, and then, you see people defending it because they are now Obama's people. The same plans and argument that no one would have accepted under bush are now okay becuase its okay. One faith based presidency for another.

by bruh3 2009-02-11 11:15AM | 0 recs
'because they are now Obama's people'

pot kettle black

by QTG 2009-03-21 02:01PM | 0 recs
I apologize, in advance, but...

...I have just as much of a problem with Nate Silver getting into this kind of proselytizing mode about matters non-analytical, such as this, as I do when Krugman starts getting into matters unrelated to his area of expertise, economics, too.

At least, this time, despite his words to the contrary, Silver acknowledges he really doesn't know what he's talking about, other than telling us that we can count on Obama and Geithner to do the right thing.

First off, as much as folks like to bloviate otherwise, economics has almost as much "art" in it as it does "science." That's why there are so many "schools"  of thought in the field, so to speak.

Secondly, with Joseph Stiglitz being, literally, kept out of Obama's earshot (by Summers, since Stiglitz and Summers have had a longstanding feud since Stiglitz was chair of Clinton's Council on Economic Advisors back in the mid-90's), the reality is the leaders of the entire neo-Keynesian school of economic thought (i.e.: Stiglitz, Roubini, Rogoff and many others), who happen to be just about the only ones that have been getting this right for over a decade (i.e.: Stiglitz was vehemently opposed to Glass-Steagall, for instance) aren't even being listented to, as a group, as well.

So, please, don't tell me the "anti-bank-nationalization" crowd is going to get this "right." Because that begs the even bigger question: Right for whom?

Right for Wall Street?

Right for whomever's the incumbent, creating a lameass, patchwork solution led by deniers that somehow manage to make it appear that the economy is struggling along, perhaps slightly upward, but just enough to get re-elected, just like Bush and Co. did for virtually his entire second term? (Up until the the last few months of it, anyhow.)

"They're going to get this right????" Get this right because they want to get re-elected? Get this right because we can't let Wall Street fail? (They've already failed us, massively, looting our future in the process of doing same.) I see little difference between that kind of mentality and folks that disrupt diaries with not a single iota of support for their unsubstantiated arguments that anyone who criticizes anything about the current efforts to fix our economy must be anti-Obama or some sort of PUMA.

You see, I am critical of what I see going on right now. Because they must get this right. It's not an either/or proposition, frankly. And, I say that knowing that "good is good enough," if not necessarily "right;" and that's fine, too!

But TARP certainly isn't even "good" right now, let alone "right." And, it's much more than likely that we're going to need to "stimulate" this economy a hell of a lot more than just this one bill will accomplish now, too. And, as Krugman asked the other day, perhaps not in so many words: Will we be able to go back to the money tree and be enabled to pluck more leaves from it down the road? And, his answer was: More than likely, no.

But, don't tell me "they're going to get this right." (Especially when they're simultaneously acknowledging they really don't know what they're talking about when it comes to the economy.) The reality is that virtually nobody has gotten the economy "right" in this nation's history. Ever.

by bobswern 2009-02-11 09:30AM | 0 recs
Re: I apologize, in advance, but...

I'm not if you're criticizing me or Nate here, but in the diary I think it's clear that I'm ambivalent at best about what Nate is saying.

His columns remind of the "Best political team on television" schtick.  When you're considering political calculus or electoral probabilities, these people know what they're talking about.  They have the scuttlebutt (from Capitol Hill staffers and industry spokespeople) but when it comes to substantive discussion, they fall a little flat.

Nate is a statistics guy.  And he uses statistics to discern people's motives.  Sure, Geithner is highly motivated to get this right, but it doesn't mean that he has the proper perspective to be successful.

by the mollusk 2009-02-11 09:47AM | 0 recs
Re: I apologize, in advance, but...

He's making the point of analytically how to look at the situation, and how Nate is not someone we should be listening to at all because he lacks the expertise. And, I agree. I keep telling people I take my cues from the experts where it counts, and then from there craft my views on policies. I don't listen to a) the political hacks (regardless of whether they agree with me or support me or disagree with me they are irrelevant) and b) process people or c) anyone else not interested in the bottom line sucess of a policy (ie, online Obama supporters who are hoping and praying something will work rather than being able to show me that it will). This leaves a narrow range of people who really matter substantive. That's probably as it should be since these are very complicated questions. for example, I keep reading people say to me  of the stimulus "it's not a great bill, but it's not terrirble." My issue with that is the aren't talking about the economic impact. They are discussing political outcomes.

by bruh3 2009-02-11 11:19AM | 0 recs
Re: Nate Silver - Chill out, y'all!

People are blinded by their pre-conceptions of what is possible.

by Carl Nyberg 2009-02-11 09:32AM | 0 recs
Re: Nate Silver - Chill out, y'all!
I'm skeptical of such arguments: "Nobody, absolutely nobody, has more incentive to get this right than the Obama Administration."
How is that an argument for trusting Geithner? No one is suspecting him of wanting to screw up the economy, only of not proposing good policies... After all, nobody, absolutely nobody had more incentive to get Iraq right than Bush did, no?
by LeftistAddiction 2009-02-11 09:35AM | 0 recs
Re: Nate Silver - Chill out, y'all!

Well if we do follow Nate's advice the number of diaries around the Progressive blogs are going to dwindle to almost nil.

Now, I tend to fall into the school of knowing just enough to be really dangerous, but there are some diarist that have valid opinions and concerns that  enjoy reading. Do I agree with bobswern all the time, no, but do I still want to hear what he/she has to say? Absolutely. So, Nate love ya man, but this piece of advise I think is asking a bit too much.

by jsfox 2009-02-11 09:43AM | 0 recs
My exact reaction

"I had a strangely gratified feeling watching the stocks tumble yesterday.  Call me a fringe radical, but I suspect that the insiders aren't so much concerned about the "lack of specificity" in Geithner's plan as they are concerned that they may actually pay for their mistakes.  You have to imagine that the tone struck by Obama on ABC last night was echoed in many backroom discussions throughout the day yesterday."

I agree 100%.

Remember it was smoke and mirrors that gave us the last stock market boom during the housing bubble. The market won't react well to realism, but in the long run, it will be healthier and more stable.

by s5 2009-02-11 12:22PM | 0 recs
Re: Divining

 what moves the broader markets intraday is necromancy. Ignore those who try.

by QTG 2009-02-11 03:28PM | 0 recs
Re: Nate Silver - Chill out, y'all!

Nobody, absolutely nobody, has more incentive to get this right than the Obama Administration.

Last time I checked, most folks in the Obama Administration still had jobs - could still pay their mortgages - feed their families - etc.

by shmooth 2009-02-11 06:38PM | 0 recs

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