martes, 30 de septiembre de 2008

Some conflicting views on the bailout, yesterday's market collapse

I've spent a good part of the last 36 hours or so trying to wrap my head around what happened yesterday. As I'm sure everyone from San Francisco to Lagos to Seoul knows, the House rejected the proposed $700 billion bailout of Wall Street 228-205, despite the fact that House Speaker Nancy Pelosi, House Minority Leader John Boehner, President Bush, and Senators John McCain and Barack Obama all supported it. In response, the Dow Jones fell 777 points, its biggest single-day loss in history. When I first heard about the losses on Wall Street yesterday, which many media outlets dubbed "Black Monday,"I was shocked. I assumed that the direct result of the turmoil on Wall Street would be immediate pain for average Americans, if not average Costa Ricans, Germans, and Japanese. I knew the compromise measure that failed to pass through congress yesterday was a bad bill, but I was beginning to feel that the congressional leadership really should have made a better effort to ensure its passage, despite its myriad flaws. Heck, the sky was falling!

Thankfully Dennis Kucinich, The New York Times' Adam Cohen, and later, Dean Baker, helped me put things in perspective a little bit.

Baker's point, spelled out directly in the title of his most recent post, "The Stock Market is not the Economy," is that we shouldn't be so quick to claim that turmoil on Wall Street spells calamity for the "Real economy". According to Baker, the markets panicked in response to sensational media coverage:

The conventional wisdom in the media was that the economy would collapse in the absence of the bailout. I know of few, if any, economists who shared this view, even among those who supported the bailout. However, the disaster view undoubtedly permeated Wall Street....

We cannot look at the markets as an independent gauge of the impact of Congress not passing the bailout. The stock markets are reflecting the conventional wisdom in the media, they do not provide an independent assessment of the economy.

He also went on to explain that a fall in a firm's stock price does not translate directly into problems for its workforce:

Furthermore, while the sharp one-day drop is in fact scary, it actually has relatively little direct impact on the economy. As former Treasury Secretary Robert Rubin often said, "markets go up, markets go down." Lower stock prices do not cause firms to cut back investment or layoff workers. Such decisions will be made based on their assessment of the state of the economy and their specific market.

In other words, just because the stock market took a dive yesterday, doesn't necessarily mean the sky is falling. This is not to say that the U.S. economy is not in serious trouble, because it most certainly is. But the economy is not in trouble because of a weak stock market. From what I can tell, the main issues facing the economy are:

- The credit crisis (financial institutions are refusing to loan to the private sector, which could have dire consequences for small and medium sized firms)
- The huge loss in housing wealth suffered by millions of Americans as a result of the collapse of the bubble
- The millions of homes that have been foreclosed on and the millions more Americans who will likely lose their houses unless the Federal government does something about it
- And, rising unemployment

Given these facts, Dennis Kucinich provided some much needed wisdom yesterday in his interview with Amy Goodman on Democracy Now!. My favorite (or at least one of my favorite) members of Congress firstly pointed out that a bailout is not the only way to deal with the credit crisis and that alternatives ought to be explored:

We haven’t looked at any alternatives, Amy. This is—you know, it isn’t as though, if you had a liquidity crisis, that—you know, a real one—that you’d start to look at all the alternatives. We haven’t done that. We have a bill here, a bill of more than a hundred pages, that we haven’t had a single hearing on the bill, you know—on the concept, yes, on what Paulson and Bernanke asked for initially. But, you know, we need to have hearings on this. There’s 400 economists and three Nobel Prize-winning economists who have said, “Whoa, wait a minute! What are you doing? Why are you rushing this?” You know, this thing doesn’t smell right, frankly.

The bill also does nothing to provide any real assistance to homeowners facing foreclosure, the true victims of this whole debacle:

one of the real conceits of this bill is that it has the word “homeowner” all over it, but when you look deeper at the fine print of the text, it does not provide any direct aid for homeowners and doesn’t even require that the government set itself on a path to help homeowners. This is not about homeowners.

And lastly, the bill does nothing to address the root cause of the problem: irresponsible lending practices and the utter lack of regulation and oversight over these firms, thanks to years of Republican (and Democratic) financial deregulation:

The bill doesn’t, by the way, address anything about the speculation, anything about the lack of regulation. The SEC has failed. The Fed has failed. And we’re essentially telling all the same actors, “Go for it. You know, here’s another opportunity,” except this time it’s with taxpayers’ money.

Kucinich's argument, with which I agree wholeheartedly, is that we shouldn't just rush to bail out Wall Street because Henry Paulson, Nancy Pelosi, or the Wall Street speculators themselves say we have to. Many observers have commented that from the time Paulson released his original bailout plan, the political atmosphere surrounding this issue--the constant evocations of fear and doom if we don't do exactly what the administration says, the pressure to move quickly, the lack of any substantive debate of possible alternatives, and the power grab by the executive branch--has had a strong and eerie resemblance to the days following September 11th when the Bush administration succeeded in convincing a quiescent congress to vote for the Patriot Act, or the buildup for the illegal war against Iraq shortly thereafter. Needless to say, these people can't be trusted and we shouldn't just stand by and allow them to abuse the American people once again.

My last point about this whole debacle, which was brought to my attention by Adam Cohen of the New York Times, is that the contrast between the behavior of this administration and this congress in the face of a financial crisis and that of FDR and the Democratic Congress in 1933 could not be any more stark. In 1933, they didn't just hand out cash to the people who got us into this mess, they fundamentally transformed how the American financial system worked, indeed they redefined the very role of the government in the economy, and they did it all within 100 days! Could you ever imagine such an act of statesmanship, of transformational leadership in times of crisis, coming from the federal government today, even if there was an even bigger Democratic majority in Congress and a Democrat was president? I certainly couldn't, Wall Street has too much control of both parties.

But maybe, just maybe, the vote against the bailout yesterday is cause for hope, that public pressure is getting so intense and the American people are getting so frustrated and angry with their corrupt leadership that fundamental changes are on the way. Here's to hoping, I suppose.

miércoles, 24 de septiembre de 2008

The Death Penalty: Long gone in Costa Rica, still in use in the U.S. of A.

I was doing some reading on the history of Costa Rica today and in the process, I was reminded of a startling fact: Not only does Costa Rica have no death penalty, but there has been no death penalty in Costa Rica since 1882. That's right, 1882! Now, to be frank, the president who abolished the death penalty, General Tomás Guardia, was an unelected dictator. Additionally, at least according to my former Human Rights in Latin America teacher (who is now Costa Rica's ambassador to Japan), his motivations were partially selfish: the penalty at the time for embezzling public funds was death and he had his hand in the public cookie jar more than once. Regardless, subsequent democratically elected presidents could have reinstated the death penalty but instead, it has remained abolished for over 125 years.

As my readers have probably assumed by now, I am adamantly opposed to capital punishment. The state simply should not kill people, even if they are guilty of heinous crimes. Whats more, the criminal justice system is not an exact science. By its very nature, it is subject to human error. As a result, the possibility will always exist that an innocent person will be killed.

Unfortunately, recent news from the United States, which has executed 1,112 people since 1976, suggests that this possibility remains frighteningly real. I'm talking about the case of Troy Davis, an African American man from Savannah, Georgia who was sentenced to death in 1991 for killing a white police officer, Mark Allen McPhail. The facts in this case are highly suspicious. There is no physical evidence tying Davis to the crime scene. Over half of the witnesses who testified against Davis have since recanted their testimony. They now say they were intimidated by the police and forced to tell the court that Davis was guilty. Further, it cannot be ingored that Davis is black, that Mark Allen McPhail was not only a police officer, but a white police officer, and that all of this is taking place in Georgia. These facts ought to speak for themselves. Thankfully, the Supreme Court has agreed to stay the execution, which was supposed to take place yesterday, so they can decide whether to allow Davis to appeal the decision of the state of Georgia. However, there is no guarantee that they will agree to hear his case and as a result, Davis may only have one more week to live.

If only the United States were as civilized as Costa Rica, this whole debacle, which drips of racism and barbarism, would never have happened. Hopefully one day, America's leaders and the American people will take a lesson from our neighbor to the south and abolish this unconscionable abuse of human rights once and for all.

First Post

This is post #1 of my first ever personal blog. I've decided to write this blog mostly because I've got a lot to say and because I enjoy hearing myself talk. I will also be living in Costa Rica for the next ten months or so, so I decided to create this blog to express my thoughts, feelings, and opinions while I'm here.

The focus of this blog will be twofold. Firstly, it will focus on my current home country of Costa Rica, its relations with the nation of my birth, the United States, and how I perceive these countries to be similar and/or different. This aspect of the blog will be both personal and intensely political. Secondly, I will use this blog as a forum to express my views on American and international politics, which are informed by my vaguely social democratic political philosophy.

I would greatly appreciate it if anyone and everyone commented on this blog. I believe the exchange of written dialogue is educational and beneficial for all parties involved and I would love to hear people's ideas and what they think about mine.

Here's to hoping that this blog doesn't just parrot the conventional wisdom! As they say in Costa Rica, Pura Vida!