No Wonder the Economy Isn't Improving

I've read countless news headlines recently about how economists are "surprised" over an "unexpectedly bad" economic indicator.

But it's not surprising at all. It's no mystery.

The government hasn't taken the necessary actions, and has instead been doing all of the wrong things.

Let's recap.

The leading monetary economist told the Wall Street Journal that this was not a liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach. Nobel economist Paul Krugman and leading economist James Galbraith agree. They say that the government's attempts to prop up the price of toxic assets no one wants is not helpful.

The Central Banks' Central Bank (BIS) slammed
the easy credit policy of the Fed and other central banks, the failure
to regulate the shadow banking system, "the use of gimmicks and
palliatives", and said that anything other than (1) letting asset
prices fall to their true market value, (2) increasing savings rates,
and (3) forcing companies to write off bad debts "will only make things
worse".

BIS also cautioned that bailouts could harm the economy (as did the former head of the Fed's open market operations).

And BIS warned
that the Fed and other central banks were simply transferring risk from
private banks to governments, which could lead to a sovereign debt
crisis.

Virtually all leading independent economists have said that the too big to fails must be broken up, or the economy won't be able to recover (and see this). Instead, they have been allowed to get even bigger (and see this and this).

While modern economic theory shows that debts do matter (and see this), the U.S. is spending on guns and butter like debts are a good thing.

Nobel prize winning economist George Akerlof predicted
in 1993 that credit default swaps would lead to a major crash, and that
future crashes were guaranteed unless the government stopped letting
big financial players loot by placing bets they could never pay off
when things started to go wrong, and by continuing to bail out the
gamblers. (Not only has the government rewarded the gamblers, bailed them out and let them engage in a new round of risky betting, but it hasn't even reined in credit default swaps.)

And instead of trying to restore trust in our financial system - which is a prerequisite for any sustainable economic recovery
- Summers, Geithner, Bernanke and the boys have tried to sweep the
problems under the rug and con the public into believing that
everything is okay and that no real reform is needed.

As I wrote in October:

William K. Black - professor of economics and law, and the senior regulator during the S & L crisis - says that that the government's entire strategy now - as during the S&L crisis - is to cover up how bad things are ("the entire strategy is to keep people from getting the facts").

Indeed, as I have previously documented,
7 out of the 8 giant, money center banks went bankrupt in the 1980's
during the "Latin American Crisis", and the government's response was
to cover up their insolvency.

Black also says:

There has been no honest examination of the crisis because it would embarrass C.E.O.s and politicians . . .

Instead, the Treasury and the Fed are urging us not to examine the crisis and to believe that all will soon be well.

PhD economist Dean Baker made a similar point, lambasting
the Federal Reserve for blowing the bubble, and pointing out that those
who caused the disaster are trying to shift the focus as fast as they
can:

The current craze in DC policy circles is
to create a "systematic risk regulator" to make sure that the country
never experiences another economic crisis like the current one. This
push is part of a cover-up of what really went wrong and does absolutely nothing to address the underlying problem that led to this financial and economic collapse.

Baker also says:

"Instead of striving to uncover the truth, [Congress] may seek to conceal it" and tell banksters they're free to steal again.

***

Time Magazine called Tim Geithner a "con man" and the stress tests a "confidence game" because those tests were so inaccurate.

William Black said:

How
do you think we did the stress tests? Like doing a stress test on an
airplane wing, but you don’t actually have airplane wing. And don’t
know what airplane wing is made out of. It’s a farce.

And see this.

And
while stopping the rising tide of unemployment is key to reversing the
financial crisis, the government hasn't done much at all to staunch the
loss of jobs.

For example, as I wrote last August:

The government has committed to give trillions
to the financial industry. President Obama's stimulus bill was $787
billion, which is less than a tenth of the money pledged to the banks
and the financial system. [106]

Of the $787 billion, little more than perhaps 10% has been spent as of this writing. [107]

The Government Accountability Office says that the $787 billion stimulus package is not being used for stimulus. [108]
Instead, the states are in such dire financial straights that the
stimulus money is instead being used to "cushion" state budgets,
prevent teacher layoffs, make more Medicaid payments and head off other
fiscal problems. So even the money which is actually earmarked to help
the states stimulate their economies is not being used for that purpose.

Indeed, much of the $787 billion was earmarked pork [109], not for anything which could actually stimulate the economy. [110]

Mark
Zandi - chief economist for Moody's - has calculated which stimulus
programs give the most bang for the buck in terms of the economy:

[111]

But very little of the stimulus funds are actually going to high-value stimulus projects.

Indeed, as the Los Angeles Times points out:

Critics
say the [stimulus money reaching California] is being used for projects
that would have been built anyway, instead of on ways to change how
Californians live. Case in point: Army latrines, not high-speed rail.

***
Critics say those aren't the types of projects with lasting effects on the economy.

"Whether
it's talking about building a new [military] hospital or bachelor's
quarters, there isn't that return on investment that you'd find on
something that increases efficiency like a road or transit project,"
said Ellis of Taxpayers for Common Sense.

Job creation is
another question. A recent survey by the Associated General Contractors
of America found that slightly more than one-third of the companies
awarded stimulus projects planned to hire new employees. But about
one-third of the companies that weren't awarded stimulus projects also
planned to hire new employees.

"While the construction portion
of the stimulus is having an impact, it is far from delivering its full
promise and potential," said Stephen E. Sandherr, chief executive of
the contractors group.

It's unclear how many jobs will be
created through the Defense Department projects. Most of the
construction jobs are awarded through multiple award contracts, in
which the department guarantees a minimum amount of business to certain
contractors, and lets only those contractors bid on projects.

That
means many of the contractors working on stimulus projects already have
been busy at work on government projects.even the stimulus money which
is being spent [112]

David Rosenberg writes:

Our
advice to the Obama team would be to create and nurture a fiscal
backdrop that tackles this jobs crisis with some permanent solutions
rather than recurring populist short-term fiscal goodies that are only
inducing households to add to their burdensome debt loads with no
long-term multiplier impacts. The problem is not that we have an
insufficient number of vehicles on the road or homes on the market; the
problem is that we have insufficient labour demand.[113]

Donald
W. Riegle Jr. - former chair of the Senate Banking Committee from 1989
to 1994 - wrote (along with the former CEO of AT&T Broadband and
the international president of the United Steelworkers union):

It's
almost as if the administration is opting for a rose-colored-glasses PR
strategy rather than taking a hard-nose look at actual consumer and
employment figures and their trends, and modifying its economic
policies accordingly.[114]

As yesterday's front-page story on ABC notes:

Even as many Americans still struggle to recover from the country's worst economic downturn since the Great Depression,
another crisis – one that will be even worse than the current one – is
looming, according to a new report from a group of leading economists,
financiers, and former federal regulators.

In the report, the
panel, that includes Rob Johnson of the United Nations Commission of
Experts on Finance and bailout watchdog Elizabeth Warren, warns that
financial regulatory reform measures proposed by the Obama
administration and Congress must be beefed up to prevent banks from
continuing to engage in high risk investing that precipitated the near
collapse of the U.S. economy in 2008.

The report warns that the
country is now immersed in a "doomsday cycle" wherein banks use
borrowed money to take massive risks in an attempt to pay big dividends
to shareholders and big bonuses to management – and when the risks go
wrong, the banks receive taxpayer bailouts from the government.

"Risk-taking at banks," the report cautions, "will soon be larger than ever."

Without
more stringent reforms, "another crisis – a bigger crisis that weakens
both our financial sector and our larger economy – is more than
predictable, it is inevitable," Johnson says in the report,
commissioned by the nonpartisan Roosevelt Institute.

The
institute's chief economist, Nobel Prize-winner Joseph Stiglitz, calls
the report "an important point of departure for a debate on where we
are on the road to regulatory reform."

The report blasts some
of Washington's key players. Johnson writes, "Our government leaders
have shown little capacity to fix the flaws in our market system." Two
other panelists, Simon Johnson, a professor at MIT, and Peter Boone of
the Centre for Economic Performance, voiced similar criticisms.

Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner "oversaw policy as the bubble was inflating," write Johnson and Boone, and "these same men are now designing our 'rescue.'"

The
study says that "In 2008-09, we came remarkably close to another Great
Depression. Next time we may not be so 'lucky.' The threat of the
doomsday cycle remains strong and growing," they say. "What will happen
when the next shock hits? We may be nearing the stage where the answer
will be – just as it was in the Great Depression – a calamitous global
collapse."

***

Frank Partnoy, a panelist from the
University of San Diego, claims that "the balance sheets of most Wall
Street banks are fiction." Another panelist, Raj Date of the Cambridge
Winter Center for Financial Institutions Policy, argues that
government-backed mortgage giants Fannie Mae and Freddie Mac have
become "needlessly complex and irretrievably flawed" and should be
eliminated. The report also calls for greater competition among credit
rating agencies and increased regulation of the derivatives market,
including requiring that credit-default swaps be traded on regulated
exchanges.

With the Senate Banking Committee, led by Chris
Dodd, D-Conn., poised to unveil its financial regulatory reform
proposal sometime in the next week, the report calls on Congress to
enact reforms strong enough to prevent another meltdown.

"Sen.
Dick Durbin once said the banks 'owned' the Senate," says Johnson. "The
next few weeks will determine whether or not that statement is true."

(Here is the Roosevelt Institute report.)

Heck of a job, guys.

Comments

[Anonymous]

After spending a bundle on bailouts and stimulus we are learnig some thing entirely "NEW". There is a leak, GDP multiplier is not the same what it used to be. Thanks to globaliztion - free trade spending ends up at distant shores.

A massive economic diffusion/equalization is going on due spread of knowledge/internet, free trade and globalization.

Economies and lives of many are on upward trajectory in India China Brazil and South Korea. While we may have reached a collossal dead end in pursuit of false gold of financial innovation.

[Anonymous]

Uh interesting.

We are past behind the possibility of a massive equalization upwards.

But if you meant an equalization downwards, well, that is sound.

I read that some people in here think that the US is a dying empire.

On the contrary. The US is an empire about to mature.

Usually, empires have all to go through a stage they no longer have to use their own population the way they had when they started.
When they have to take a distance with their population.
The US is at that stage: the US needs less and less its population to man its armies, less and less to provide tax resources. Less and less of the US population is needed to operate the US empire.

Some people seem to confuse this stage as they are probably among the rejected as the end of the empire when actually it is the stage when an empire shines the most.

People participating to an empire building sometimes think that their participation will earn them a share of the final product.
Which is wrong of course. The final product of an empire is only for a select few, compared to the bulk who joined at the start.

People seem to have forgotten that. Free labourers who participated in building the pyramids knew from the start that the pyramids were not for them.

[Bear]

^{"Critics say the [stimulus money reaching California] is being used for projects that would have been built anyway, instead of on ways to change how Californians live. Case in point: Army latrines, not high-speed rail"}

Thank God!

[Anonymous]

I would like to see a military junta sweep the Capiotl and Wall Street simltaneously. An A-10 warthog and a Spector Gunship hit the ISDA....while delta force and Army Rangers take Goldma Sachs and tear up all creit default swaps.

The 101st Airborne and the 82nd Could take all the members of congress out onto Pennsylvania Avenue and tie-them to
the lampposts by the achilies heel and set ther corpses on fire.

Navy seals can take the White House and hold Obama untill DNA tsts reveals that he is in fact a decendant of Mao, Stalin and Pol Pot.

The airforce as to park on the runway at Dlules and do nothing because they pissed away a Trillion bucks on the last farce.

The burnt corpses must remain hing on the lamposts untill the election of 2012 or the debt is balanced.

The public is required o chan Jnta, Junta all day on april 15th

[Quantum Nucleonics]

While I agree with the premise of this article that the economy is not getting better, that graph from Moody's is grotesquely incorrect.  Academic research and empirical data has not pinned down what the multiplier of government spending is, but there is a strong consensus (aside from the Keynesian dinosaurs) that it is definitely less than one.  For specific programs the chart should be inverted.  Tax cuts provide the most bang for the buck while social entitlement transfer payments (aka welfare) provide the least.  You just have to look past the short term instant gratification of they spend-spend-spend mentality.  By Mr. Zandi's logic, since food stamps have a GDP multiplier of 1.73, if the federal government simply expanded food stamps to pay 100% of every one's food bill, we could increase GDP by 73% of our current food consumption??  That would be a neat trick, but sorry, that doesn't pass the smell test.

[Ned Zeppelin]

Zandi is a Keynesian putz.  He also predicts an almost complete restoration of the housing market - back to 2006 levels, 1.7MM housing starts per annum - by 2012, with a straight face.  Zero analysis of the simple fact that you cannot have housing developments without financing (there is none) and the next looming problem: hardly anyone can buy a house without financing, and once the agency MBS market settles in after the Fed puts up the "No Mas" sign, it is hard to see where all theses mortgages will be coming from.  I would not rule out some sort of spontaneous, free market response, but it will be at substantially higher rates that will force down pricing, thus harming the regional lenders (the TBTFs not being in that business anymore), thus another leg down and even more insolvencies for the FDIC to not resolve.  That is one chain of events I see in motion.

[Anonymous]

Why a linear progression?

[Anonymous]

Extending unemployment benefits yet *again*??

Sorry, but that's just a damn waste.

I speak from personal experience. Years ago, I was laid off. Collected unemployment bennies... pretty sweet, considering I was getting a pretty fat check every week for *not* working.

Nice long paid vacation.

Until the benefits were about to be exhausted, with no further extension.

I sucked it up and went for a temp job. Lasted about 6 months, since I did such a good job. Not great pay, but I survived.

Then I got the ax due to a prolonged slowdown. Worked a few other short-term temp jobs for a couple months, while keeping in touch with my former boss from the prior 6-month temp job... who one day informed me that they had a few openings for *permanent* positions. Interviewed, got hired, eventually transferred departments, worked my way up a bit, decent salary.

Eventually I left for an even better job in the same industry.

Making a damn career out of it now.

Go figure.

To sum up: Cut 'em off from free money, and people have this "strange" tendency to get off their asses and hustle.

I am living proof.

Time to stop this extension-after-extension-after-extension nonsense.

[Anonymous]

The thing is Work was created because without it, people were going crazy. (Just look at CONgress for an up to date example)

You would likely be one of them, going nuts without work to do.

However, there is a growing number of people world wide who have been able to shake off the mortal coil of labor and find other things to do with their time, since there are far more diversions than there have ever been, including this blog.

Good on'ya.

[Anonymous]

Except there are no temp jobs. So what then? See the problem?

[Anonymous]

So you're telling me that across the country, there is not even one available temp job out there today?

Bull. Shit.

Odds are it will be low pay. Odds are it will only be temporary. Odds are there will be no benefits. Odds are it will be a lousy job.

However... a temp job is a temp job. It is there to get at least *some* money coming in to the household wallet.

But more important, it is a foot in the door.

And once you get that foot in the door, you bust your ass, do a great job, make connections, and do your damndest to make sure it ends up as a full-time job with benefits somewhere within the company.

So put down the TV remote, brush the Doritos dust off your t-shirt, and get a damn temp job, you lazy mooching bums!

[Anonymous]

The core reason for a 15% consumption tax is because this is what it is going to take to replace US manufacturing....

If the increase in taxes crap is enacted....the US has officially signed its economic death warrant....

The fact is ....moving taxes up to 50 to 70% on those that have will not come close to what is needed....The tax take will plummet as taxes are raised.....

What we are talking about ....is not meeting the current obligations.....

What we are talking about is a total rebuild....

This means starting from a method that will work such that when one walks into WalMart...one actually buys US manufactured products....

The 15% consumption tax on all tangible goods that are consumed would replace all other taxes....5% to the Fed ....and 10% to the state.....

And it would be up to the states as to how the revenues are allocated....not DC lobbyists....

......................................

That's right guys .....

You can have A or B.....

a) The economy you have now with higher and higher taxes....such that it will be impossible to compete on prices ....and will insure that the US WILL NOT rebuild sustainable wealth....

or

b) 15% consumption tax only

Guarantees price competitiveness ....and a complete rebuiling of manufacturing and sustainable wealth....

In 10 years the B economy would be many times the size of the A economy....

In 50 years ....The B economy would be over a 100 times bigger than the A economy....

You do the math....

Hard nosed change is required my friends....

[Anonymous]

The banksters have $2 trillion on reserve at the FED. Why don't we tap that stash in the form of prepaid VISA debit cards that expire in one year, and must be spent at US retailers. Just mail out $20K cards to 100 million households? Let's get the party started again.

In my best Dick Vitale, "Reparations BABY!!!"

[Kreditanstalt]

This talk of stimulus direction is a moot point.

Stimulus will do nothing unless it results in more wealth somehow being produced...more productive (mining, fishing, farming, manufacturing...) enterprises.

Sure, you can say, "Well, services earn money from overseas and stimulate domestic demand (spending)."  But this is not real wealth, though it may be "money" and, with declining international confidence in the USD, it will BUY less real wealth too.

Sometimes things are really SIMPLE: "money" is going around and around the economy and the world in CIRCLES, faster and faster, but in the end it is a closed system and new wealth is not being created - either because of natural resource limitations or a lack of consumer buying power from low-living-standard economies.  

But more likely there is a slowly-growing lack of confidence in governments and their money.

What people need are GOODS.  More and/or cheaperfood, more services, cheaper oil, cheaper health care.  Simply paying navvies to construct new concrete infrastructure produces exactly diddly-squat in terms of new wealth: it merely passes "money" from taxpayers to construction workers to stores to stores to services to Wal-Mart to their wives' shopping to 7-11 to...

Where's the WEALTH?  

[Anonymous]

GW, thank you. Gee, we keep giving more and more to the rich people who already have more than they know what to do with, and the economy just refuses to grow. Imagine!

[Anonymous]

Brownie, you're doing a heck of a job

[Dirtt]

We have elections. And they are in November.

We can literally change America overnight.  Of course that won't mean we won't feel the pain. We will. But at least we know that - if successful - the perpetrators will feel the ultimate pain.

"La Guillotine shall claim her bloody prize!"

[anarkst]

What most Americans fail to appreciate is that this type of socio-economic betrayal is the norm for humanity.  We just thought it could never happen here.  Well, ...

[B9K9]

GW, I understand you point regarding providing vital information to newer readers who perhaps aren't as well versed on the reality of our situation.

However, from a very selfish standpoint, why would you or anyone else want to tip off people (outside a close circle of family & friends) who to this point have remained in denial, or are so intellectually lazy that they have only begun to ferret out the truth? Do you really want the competition for scarce resources?

I believe I speak for many, if not most, when I admit I was temporarily checked by the full extent of the government's raw, unbridled illegal conduct over the last 12 months. Yet, there was that smidgen of doubt that somehow, someway they could possibly pull off a miracle. I would think that is why many people gravitated to a site like ZH in which to re-assure themselves that it simply isn't possible to get out debt by going further into debt.

Now the evidence is coming in, and unsurprisingly, the fact is that the 'Hail Mary' pass failed and that time has run out. So what's the point of remaining in the stands? Why allow your fellow man a leg-up on the resulting mad rush for the exit?

[merehuman]

WHY?  Because THEY are US.! See that selfish attitude still persists! Its us that has to change and our values.

[Hulk]

Well here is where I disagree with you B9K9,
for the first time
The resources are not that scarce and 99.9%
of all people who read this stuff will do
NOTHING about it.
They will process it, get depressed and do nothing.
Depression is nature way of telling a person
to get off their ass and do something....
The "do something" for most people is to take medication....

[George Washington]

Here are two shots of courage for you ...

Hope In a Time of Hopelessness

Several long-time activists have told me recently they are overwhelmed, worried, and think that we may be losing the struggle ....

One very smart friend asked me if there is any basis for hope.

But hope is an act of will, not a passive mood. Admittedly, things are easier when circumstances bring hope to us, and we can just receive the hopeful and inspiring news.

But if we care about winning, we have to be able to decide to have hope even when outer circumstances aren't so positive.

I have children who are counting on me to leave them with a reasonably safe and sane planet. As I've said elsewhere, "I care too much about my kids and my freedom to be afraid. I care enough about them that it gets my heart beating, connects me to something bigger than myself, and that gives me courage, even when the chips are down."

If I allowed myself to lose hope about exposing falsehoods, about protecting our freedom and building a hopeful future, I would be dropping the ball for my kids. I would be condemning them to a potentially very grey world where bigger and worse things may happen, where their liberties and joys are wholly stripped away, where every ounce of vitality is beholden to joyless and useless tasks.

Many of us may be motivated by other things besides kids .... Only you can know what that is. But we each must dig down deep, and connect with our most powerful motivations to win the struggle for freedom and truth.

I don't know about you . . . but I don't have the luxury of giving up hope. When I get depressed, overwhelmed or exhausted by the stunning acts of savagery, treason, and disinformation carried out by the imperialists, or the willful ignorance of many Americans, I will myself into finding some reason to have hope.

Because the struggle for liberty is too important for me to give up.

If you lose hope, somehow you lose the vitality that keeps life moving, you lose that courage to be, that quality that helps you go on in spite of it all. And so today I still have a dream.
- Martin Luther King, Jr.

Do not let your fire go out, spark by irreplaceable spark, in the hopeless swamps of the approximate, the not-quite, the not-yet, the not-at-all. Do not let the hero in your soul perish, in lonely frustration for the life you deserved, but have never been able to reach. Check your road and the nature of your battle. The world you desired can be won. It exists, it is real, it is possible, it is yours.
- Ayn Rand

Hope is like a road in the country; there was never a road, but when many people walk on it, the road comes into existence.
- Lin Yutang

Hope is passion for what is possible.
- Soren Kierkegaard

Turn your face to the sun and the shadows fall behind you.
- Maori Proverb

I steer my bark with hope in the head, leaving fear astern. My hopes indeed sometimes fail, but not oftener than the forebodings of the gloomy.
- Thomas Jefferson

He who does not hope to win has already lost.
- Jose Joaquin Olmedo

When you do nothing, you feel overwhelmed and powerless. But when you get involved, you feel the sense of hope and accomplishment that comes from knowing you are working to make things better.
- Pauline R. Kezer

Hope is a state of mind, not of the world. Hope, in this deep and powerful sense, is not the same as joy that things are going well, or willingness to invest in enterprises that are obviously heading for success, but rather an ability to work for something because it is good.
- Unknown

We should not let our fears hold us back from pursuing our hopes.
- John Fitzgerald Kennedy

Your hopes, dreams and aspirations are legitimate. They are trying to take you airborne, above the clouds, above the storms, if you only let them.
- William James

Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence.
- Helen Keller

The capacity for hope is the most significant fact of life. It provides human beings with a sense of destination and the energy to get started.
- Norman Cousins

When I despair, I remember that all through history the way of truth and love has always won. There have been tyrants and murderers and for a time they seem invincible but in the end, they always fall -- think of it, ALWAYS.
- Mahatma Gandhi

We must accept finite disappointment, but we must never lose infinite hope.
- Martin Luther King, Jr.

There is no medicine like hope, no incentive so great, and no tonic so powerful as expectation of something better tomorrow.
- Orison Marden

Difficulties are meant to rouse, not discourage. The human spirit is to grow by conflict.
- William Ellery Channing

Hope is medicine for a soul that's sick and tired.
- Eric Swensson

Hope has two beautiful daughters. Their names are anger and courage; anger at the way things are, and courage to see that they do not remain the way they are.
- Augustine of Hippo

What oxygen is to the lungs, such is hope to the meaning of life.
- Emil Brunner

The very least you can do in your life is to figure out what you hope for. And the most you can do is live inside that hope. Not admire it from a distance but live right in it, under its roof.
- Barbara Kingsolver

Hope is not the conviction that something will turn out well, but the certainty that something makes sense regardless of how it turns out.
- Vaclav Havel

Hope is the companion of power, and mother of success; for who so hopes strongly has within him the gift of miracles.
- Samuel Smiles

Of all ills that one endures, hope is a cheap and universal cure.
- Abraham Cowley

Every area of trouble gives out a ray of hope; and the one unchangeable certainty is that nothing is certain or unchangeable.
- John Fitzgerald Kennedy

Let perseverance be your engine and hope your fuel.
- H. Jackson Brown Jr

Develop sincere desire for the goal. Out of fire of desire comes success.
- Unknown

You must not lose faith in humanity. Humanity is an ocean; if a few drops of the ocean are dirty, the ocean does not become dirty.
- Mahatma Gandhi

Everything that is done in the world is done by hope.
- Martin Luther King, Jr.

Don't lose hope. When it gets darkest the stars come out.
- Unknown

Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all.
- Dale Carnegie

The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty.
- Winston Churchill

The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function. One should, for example, be able to see that things are hopeless and yet be determined to make them otherwise.
- F. Scott Fitzgerald

It is from numberless diverse acts of courage and belief that human history is shaped. Each time a man stands up for an ideal, or acts to improve the lot of others, or strikes out against injustice, he sends forth a tiny ripple of hope, and crossing each other from a million different centers of energy and daring, those ripples build a current that can sweep down the mightiest walls of oppression and resistance.
- Robert F . Kennedy

Courage

It all comes down to courage . . .

If you have courage, then you're willing to face that really stinky mess in the garage and clean it up.

You have faith you can clean it up, because you've cleaned up other really stinky messes, or seen other people do it. In other words, you have faith because you have experience of succeeding in the past.

Fat and Happy

We Americans have led a very pampered life for the past couple of decades. Sure, there has been inequality and exploitation, and some have had it a lot worse than others. But, other than stopping extreme forms of racism (Ku Klux Klan, etc.), we haven't had to defend our borders or our liberties.

Basically, we complain if our tv goes on the fritz, or our team loses the game, or we can't afford that new, nicer whatzit, or if our boss is mean. We think those are big, Earth-shattering, history-changing events. But they are quite small in the grand scheme of things

And even those of us who think of ourselves as brave heroes usually only act like that when we know it is within the bounds of safety, within the limits of what we can handle. "Tough guys" tend to turn into meek mice whenever they are really threatened.

So we're basically lazy and timid, but we don't know or admit it. We like to pretend we are like the Founding Fathers or John Wayne (at least the cowboys had to rough it a little).

But we have no experience of successfully standing up to tyrants, so we have no faith that it can be done, and while the evidence is right before our noses that our current leaders are tyrants, we're so terrified that we have our knickers in a bunch.

What Would They Do?

Even if you haven't experienced success in standing up to tyrants, remember that the Founding Fathers did just that.  They were just men, not gods. Sure, they were too persistent and stubborn to give up, but that's because they CARED about something: freedom and the possibility of a better life.

They may have lived hundreds of years before our time, but that doesn't matter -- we can still learn from their experience as if it were happening now. Time is an illusion, since human nature is the same now as it was then. Just as many people of faith ask "what would Jesus do?", we can also ask "what would the founding fathers do?" If they could do it, we can do it.

Take Heart

There is a real misunderstanding of what it means to be courageous. In America, courage is often thought of as a testosterone-driven toughness. There's nothing the matter with testosterone. Masculinity is a great thing. But many American men secretly fear that they don't have sufficient testosterone to really be brave when the chips are down. As I said above, even those of us who think of ourselves as brave men usually only act like that when we know it is within the bounds of safety, within the limits of what we can handle.

We might jump in a bar room brawl to protect our buddy, but that's because we know we're only going to get knocked around a little bit -- nothing but bruises that will go away in a little while. The stakes just aren't that high.

But most American men secretly doubt whether they are macho enough to pull it off under fire. They may watch alot of action movies, and talk tough, and stand up when its not really dangerous (or when they clearly outgun the other guy), but they are secretly terrified that they don't have quite enough backbone to pull it off against the big boys, such as tyrants.

I would argue that this view fundamentally misunderstands the nature of courage, and ensures that we will never have true courage when it counts.

By way of analogy, the word "discipline" comes from "disciple". If you are a true "disciple" of an idea of a plan or a strategy or a religion, then you will stick to it and "have discipline" to reach your goal. It is not just a matter of willpower; it is also devotion to something bigger than ourselves.

Similarly, the word "courage" comes from the French "with heart". Why does it have this root meaning? Because it takes heart to act bravely. That's how my childhood Karate teacher used the word: when I was practicing with courage, power and focus, he would say "you have alot of heart today" (indeed, many old-school warriors use the phrase "fighting with heart" in that way).

If courage is acting "with heart", we've lost heart. And without heart, we cannot face the truth.

So how do we regain our heart? Well, let's start with what gets our hearts beating.

Remember that the mother bear is one of the fiercest animals of all. Just get between a mother bear and her cub and you'll see what I mean. It is her love of her cub which gives her the heart to face any enemy when her cub is threatened. It is not her level of testosterone, but rather her love for her cub which makes her so fierce.

Just as discipline is more than just willpower, courage stems from something bigger than just cajones. In fact, the strongest courage comes from the love of something we care about, since our heart will sustain us even when the chips are really down and we are really up against a tyrant. As the ancient Chinese philosopher Lao Tzu said: "Being deeply loved by someone gives you strength, while loving someone deeply gives you courage. "

In addition, we're no longer living in the old west. Individualism is very important in numerous ways, but we can only win against the tyrants as a team, as a community, as a nation. And only by opening our hearts to what matters will we be able to work together, to fight for all of our kids, and all of our freedom. Only then will we be able to put the crooks and the looters and the tyrants back in the box.

Do we care about our kids, our significant others, our parents, our friends? Do we care about the freedom to choose what we want, instead of having our "great leader" choose for us?

If not, what DO we care about? Because if that is where your heart is, that is what will give you courage.

I care too much about my kids and their future to be afraid. I care enough about them that it gets my heart beating, connects me to something bigger than myself, and that gives me courage, even when the chips are down.

Courage is an innate human quality. It is within each of us, waiting to reveal itself when we open our hearts. When we act with heart, by definition, we are courageous.

Those who would trade safety for freedom deserve neither.
– Thomas Jefferson

Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure, or nothing.
- Hellen Keller

Whatever you can do or dream you can, begin it. Boldness has genius, power, and magic in it.
- Goethe

Courage is not the absence of fear, but rather the judgment that something else is more important than fear.
- Ambrose Redmoon

Courage is an everyday thing. When we look reality squarely in the eye and refuse to back away from our awareness, we are living courage.
- Anonymous

To have courage for whatever comes in life - everything lies in that.
- Mother Teresa

It is from numberless diverse acts of courage and belief that human history is shaped. Each time a man stands up for an ideal, or acts to improve the lot of others, or strikes out against injustice, he sends forth a tiny ripple of hope, and crossing each other from a million different centers of energy and daring, those ripples build a current that can sweep down the mightiest walls of oppression and resistance.
- Robert F . Kennedy

It is not because things are difficult that we do not dare; it is because we do not dare that they are difficult.
- Seneca, Native American

Courage is the first of human qualities because it is the quality which guarantees the others.
- Aristotle

Courage is being scared to death but saddling up anyway.
- John Wayne

Courage is doing what your afraid to do. There can be no courage unless you're scared.
- Eddie Rickenbacker

Courage is fear holding on a minute longer.
- George Patton

One man with courage makes a majority.
- Andrew Jackson

Be bold and courageous. When you look back on your life, you'll regret the things you didn't do more than the ones you did.
- H. Jackson Brown, Jr.

You gain strength, courage, and confidence by every experience in which you really stop to look fear in the face.
— Eleanor Roosevelt

Within each of us is a hidden store of energy. Energy we can release to compete in the marathon of life Within each of us is a hidden store of courage. Courage to give us the strength to face any challenge Within each of us is a hidden store of determination. Determination to keep us in the race when all seems lost.
- Roger Dawson

We must never despair; our situation has been compromising before; and it changed for the better; so I trust it will again. If difficulties arise; we must put forth new exertion and proportion our efforts to the exigencies of the times.
- George Washington

We must remember that one determined person can make a significant difference, and that a small group of determined people can change the course of history.
-Sonia Johnson

Never doubt that a small, group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.
- Margaret Mead

[Bob]

And that was frackin' GREAT, GW!  Thanks. 

[Hulk]

Now thats what I am talking about GW
Out of all those I find this one to be a
personal truth:
"It is not because things are difficult that we do not dare; it is because we do not dare that they are difficult.
- Seneca, Native American"
Thanks for using the nuclear option, perhaps
you should post this as a contribution for all to see....

[Manbarepig]

Its not about those who know first getting to run to the exits sooner - its about everyone in the audience banding together and charging the stage and taking control.

The powers that be want you to cut your ties and run around like a loose cannon - its going to take a group effort to undo the system as it stands and to bring sanity back. Your attitude is self defeating.

[George Washington]

+1,000,000

[Anonymous]

Eh I think that's the good part of being human. Maybe the only good part left. What other power do you have?

[WaterWings]

Again, bravo.

The lifeboats can only hold so many. Cry a little for those buried by the sea, bundle up, and pass the whiskey. Not necessarily in that order.

[Anonymous]

Rubin is trying to save a spot on the lifeboat for him and his family. Like the creep in the movie Titanic, who survived by pushing others away from the empty lifeboat he was in, Rubin will blame whomever to shun any responsibility from himself. I am getting sick again!!!!!!!!!!!!!!ughhh

[Heroic Couplet]

Bankers and financiers created crap financial products. Wage arbitrage: if, heaven forbid, the US suffered a terrorist strike that left thousands unemployed, or if the cretin top billionaires shipped jobs offshore and left people unemployed, what is heck the difference? Cretin billionaires are herewith declared terrorists.

[Rick64]

William Black and Brooksley Born are two patriots with integrity that would still be working for the government if it wasn't so corrupt.

GW your posts are good, you can't please everybody.

[fromthebleachers]

For quoted recollections of specific discussions of Born with Greenspan, Rubin, Summers, Leavitt, etc., about her adventures trying to regulate the OTC derivatives as chair of the CFTC in the late '90's:

http://www.stanfordalumni.org/news/magazine/2009/marapr/features/born.html

Before I started reading ZH coupla weeks ago I had no clue. Still an idiot but working on it. Old now, 65, but just got near 7 figures of cash sitting right now in FDIC accounts I feel real queasy about. The trust is gone.

[Ned Zeppelin]

Don't worry - if they lose it, they'll just print more. You just might have to wait your turn to get it.

[bugs_]

Are all of my "cons" so small?

[Anonymous]

The bush tax cuts made so many jobs ??????????????????????????????? The Bush tax cuts and Bush Fake wars caused the Bush depression !!!!!!!!!!!!!!!!!!!! Maybe u can ask the french king how spending all his money on wars worked out for him ??????? Jim bunning says let them eat cake !!!!!!

[Ned Zeppelin]

Bunning: anyone who busts Bernanke's cajones at his reappointment hearing is OK by me.  He was trying to make a pretty serious poiint about how dollars are being borrowed like mad. But he was misguided in his target, since the point never would have been made if it were TBTFs or military budgets in the sights.

[Anonymous]

"Robert Rubin, the former Clinton-era Treasury Secretary and noted champion of deregulation, told a New York City audience last night that "virtually nobody" -- himself included -- foresaw the financial meltdown.

In a discussion at the 92nd Street Y cultural center, Rubin touched on the financial crisis, Obama's economic policies and America's potential in the new global economy -- but not on financial reform or the deregulatory agenda of the 1990s...

Much of the blame for the current crisis falls on the shoulders of the fiscal policy decisions of the Bush administration, Rubin said, under which "we lost a decade to some extent."

Yep, its ALL George's fault, repeat after me ....

[scaleindependent]

Rubin belongs in the same 5th circle of Hades as Paulson, Summers and Bernanke.

There will be a sign there that says: "Geithner is two floors down."

[Anonymous]

Rubin is trying to save a spot on the lifeboat for him and his family. Like the creep in the movie Titanic, who survived by pushing others away from the empty lifeboat he was in, Rubin will blame whomever to shun any responsibility from himself. I am getting sick again!!!!!!!!!!!!!!ughhh

[Rick64]

Rubin is a liar. He knew.

[Anonymous]

Although this is a rehashing of the obvious that all ZH'ers already know, this was a great synopsis article for those new to what is really going on. I have sent all the people I know that simply won't listen to me and my detailed comments to this article. For that purpose (getting new, resistant people to the table to start to learn) I think this post is fantastic. Maybe it can help make for some new ZH followers.

[Yardfarmer]

Thanks for all the rehashing of all the stale leftovers from yesterdays news, george. This kind of redundancy has reached a mind numbing and predictable level as well practiced and endlessly rehearsed as it has become over the past several months. I imagine that these replications are news to anyone who hasn't been following the economic situation over the past couple of years but to many of us all these talking points have been worn threadbare by overuse. No surprise then that you resort to recycling your old blog posts which themselves probably spoke the last word on this tiresome theme a year ago. If it's any consolation you're not alone. The same level of mental inhibition bred by over saturation is evident across the internet forums with a few notable exceptions including of course, many other more vital postings on ZH. 

[MinnesotaNice]

Yardfarmer... some commentary will cater to new readers... and some commentary will cater to those of us who have a more comprehensive understanding of the economy and markets. 

But, these kind of negative comments also become mind-numbing and predictable and reflect a person who believes that the world revolves around them, their unique knowledge base, and their needs. 

Perhaps just a bit more respect for those who offer commentary... it seems to be a volunteer position... and if you can do better then we will all be waiting to read your fresh, exciting, and vital take. 

[mtomato2]

I am just a humble, small-time capitalist who has never much invested in anything but his own family, his small business, and the future.

I am Joe Nobody.

But I AM sort of smart, and I want to know where we are, how we got here, and where we're going. Because it matters.

I read ZH every single night with my eyes wide open and my jaw on the floor. Sometimes I have to keep another web page open so I can look up what some of this stuff means.

I am learning. A lot.

When I go outside my four walls, I am perplexed and horrified at all the people who don't know, and don't WANT to know the common dreary future we all share. Being ready in your mind is 99% of preparedness. I weep for the generations.

I say all this to encourage the writers and contributors to this phenomenon 'Zero Hedge'... Don't stop, don't change a thing. Simpletons like me and those I see around me every day need this. Drudge and Fox won't touch the depth you all bring to the table. And certainly not the financial porn stars at CNN and CNBC.

The sluts.

[merehuman]

+1000.

[Ned Zeppelin]

In tight sweaters.

[George Washington]

There are a lot of Zh readers who are super-informed.  For them, this will all be old hat.

But there are also - I would guess - a lot of new readers.  Personally, I write different essays to reach different audiences.

I've also noticed the following dynamic when writing about controversial topics over the years:

(1) First, defenders of the status quo attack each new point made. The attack often takes the form of "you're taking that out of context";

(2) When a more comprehensive round up is made placing things in context (which can only be done after the individual news stories break), defenders of the status quo often say "that's old news, why are you posting old news?"

[Bob]

I thought it obvious, GW.  Nice work in summary--which was the entire point of the piece.  Nothing wrong with that I can see. 

[Pike Bishop]

"(snip)...defenders of the status quo often say "that's old news, why are you posting old news?"

As Simon Johnson put it, you are fighting a "belief system". It is so ingrained, that any perspective or "news" is dismissed by any cognitive convenience which has a clear connotation that it doesn't apply.

If the past is ruled out for research, where do you get supporting argument.. the future?

Denial is becoming the largest river in the US. Greenspan is a prime example. He admits his core assumption that "markets regulate themselves" proved incontrovertibly to be baloney. He also commented that the "recovery" is an "unbalanced" flop.

Well no shit, if you take the entire Treasury and monetary system and load it into the top end of the Supply side, the Demand side is going to stay decimated and further deteriate. At best, you end up with businesses without capital or customers.

Greenspan (close enough) quote "the rich have their portfolios back, and are spending. But the job situation is not improving. Jobs and the Consumer will likely take a long period to recover."

He acts like this "imbalance" is some freak of nature. This brilliant ideologue can't see that the outcome is a direct result of his ideological assumptions for a solution.

From day one it has been an insolvency and damaged balance sheet problem.

Until the bill is paid in full, nobody is going anywhere.

Which is fine with the powers that be, while the middle class takes the brunt of it on a road to economic Perdition, which they didn't build.

Truths have just as much of a right to be repeated as a mob's consensual lies and distortions.

In fact, it is an imperative..

[viahj]

GW, this is the internet and as such, if you are not the first to post something, you're called out because everyone else on the internet is better than you for already knowing the information. 

I appreciate this write-up as it is informative to those who are not daily ZH readers and as such, I will be emailing this to my friends and family as they are not clued in and this article is writen in a way that they can understand. 

For those who are only concerned about the echo chamber, maybe rather than simply commenting how stupid the 'Merican serfs are, educate them.