Charlie Rose

sock puppet  08/17/2008 04:54 PM Report

The Piker - Your post had a delayed jarring effect. Preventing our slide into a second or third world banana republic will come closer to being achieved with crticism than with sychophantish applause. For instance it may be too late. This thread relates to the Feds, but they are just a minor actor in the main descent to ignominy. The most corrosive, putrefying decay of our system is the corporate oligarchs that have bought our government through the K-street brokers / lobbyists. The round-heeled venal whores of congress have sold themselves and us down the proverbial river. Not a historian, but I'm betting history is full of failed-states that started with corruption. Probably started with a few 'innocent' earmark equivalents of the bridge-to-nowhere.

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Your comment sounded so ingenuous to a cynic like me, that I'm betting you're (relatively) young (it's my hope anyway). Our arrogance is turning us from a hoped-for status to indifferent (to hope-not?). Think Canada, Australia, NZ?

sock puppet  08/17/2008 04:19 PM Report

Mr. Fassel - Cogent points. The human nature you describe as bubbles (tulip, hi-tech, or subprime) all translate to greed. Greenspan-speak called it irrational exuberance. Since this is old hat, 1637 as you point out (and since Adam-n-Eve = human nature), this is exactly the area where the Fed failed us and themselves. Human greed is the loose cannon that spawns the need for (gasp, choke) the dreaded word 'regulation.' Simple stuff like requiring a 4-5:1 income:mortgage ratio or illegal to sell on secondary market.

Also rating agencies required to downgrade anything less. Yadda, yadda.

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Yes, I'm sure you'll counter with the financial wise-guys would find a way around ANY regulations. But stuff like Sarbanes-Oxley might have slowed them down a little. The Feds are supposed to be smarter than us commoners and thus have some responsibility to at least try to act like it. All I've seen is their bailing out the wise-guys with our money with golden braided parachutes. Rewards for being abject failures. Which insures a repeat down the road ala tulips over and over again, aka, moral hazard.

The Piker  08/17/2008 02:52 PM Report

Wow, many of the posters need to try living outside the U.S. to gain appreciation for the United States. Economics is one big experiment in progress and no matter how you slice it, we are better off here than elsewhere. If you don't believe me, try it yourself.

Shalom Freedman  08/17/2008 02:08 AM Report

It is bad enough trying to make some sense out of the Economy as it is, but when one has to be helped in this in a broken- English discussion, in which three very hedge- their- bets people hasten to agree with each other- over who knows what- then light comes very slowly.

All I got out of this is that bubbles are bad, and big money - people should perhaps be taxed more, and the housing - downslide will continue for another couple of years anyway-and the U.S. is still innovative and flexible enough not to let China Russia all the rest wholly dominate the economic future.

Roy Fassel  08/16/2008 04:07 PM Report

All these economics professors from Princeton were taught to look at mathematical models to analyze economics. There is one major flaw with that thinking. Mathematics is a linear based analysis and all of these three guests said that the human equation was more important. Human nature never changes. History is clear that humans do not learn from history. Humans, in mass, only learn from group experiences. One must read "Extraordinary Popular Delusions and the Madness of Crowds" which discusses the tulip bulbs bubble burst in 1637. This book can never be moderized and updated. Human nature will always remain the same. We have witnessed the madness of crowds in the dot.com bubble and now in the real estate bubble. The Economist magazine, of England, had a feature article last years which stated that this "global" real estate bubble is/was the biggest bubble in human history. This is not just an American problem as many Bush/Federal Reserve haters suggest or imply. This is a global bubble. These kinds of bubbles will take many "decades" to heal. The idea that this can all be over in a few years is utterlly irrational. Humans create these bubbles by acting as a irrational crowd. We even see this madness of crowds and extraordinary popular delusions in watching this global warming-Al Gore solution madness. Humans can evolve, but human nature never changes and crowd behavior is always suseptible to madness. The great moment of this interview was when this one professor said it was very difficult to predict anything on economics. That is the final truth of the science of economics. That science is superb at explaining something that has happened and totally useless as a science which can predict anything. They think linear and human nature is not linear.

sock puppet  08/16/2008 02:14 PM Report

Harrison Hong impressed me greatly, but they all "overthunk" the problem. Some 4th grade arithmetic could have prevented the subprime overreach: Income / (Mtg princ. + int. + taxes) > 5.0. This simplistic 5:1 ratio, a requirement both for underwriting and selling a mortgage, would have maintained their quality. But these dismal-scientists advised Bernanke about esoteric BS instead of fourth grade arithmetic applications.

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The rating agencies were the second line of defense that failed the system. Moody's, Standard & Poor's rated subprime debt as AAA, which is licensing naked theft. A proper rating of XXX as in "Expect a good screwing!" would've inhibited the 'bubble' as well. Another grade-school application: pick the "responsible" letter of the alphabet.

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I've been asking, "Where the hell were the adults?" When, alas, all the while we just needed some fourth grade children on the scene. Go figure! The Feds sure as hell didn't.

guitarsandmore805  08/15/2008 10:30 PM Report

I was hoping to hear a great debate between those who agree with Naomi Klein and those who disagreed. The problem I see with economists such as Milton Freidman is they believe in "systems" instead of putting the needs of people first.

Moso  08/15/2008 10:13 PM Report

When I first tuned in and heard the discussion turn to hedge fund managers and economic bubbles, I got ready to hear an informative exchange about the volatility in the markets and the credit crisis. What I heard instead was drivel from economists, who as a profession try so hard to be taken seriously as "scientists," that they vitiate any applicability to the real world. If I were not a PhD myself and aware of the intellectual navel gazing PhD's are prone to, I would have laughed out loud when I heard that the world is not frictionless and that people disagree. The sad truth is that economists have very little to say about the very serious problems that beset the worldwide economy. Let's forget about them and listen to those, who, as Cameron Stewart asserts, have the ability to integrate diverse streams of knowledge and policy.

TABS  08/15/2008 05:50 PM Report

There is such a thing as the Global Economy based upon the notion of Capitalism and Free Trade. This was the notion that the USA launched after WW2 begining with the Marshall Plan. One may call it the American Empire. In that empire the United State is merely one part of it. The US government no longer serves only the interests of the people who live in the United States but that of the whole American Empire. Who has been the greatest benficiary of that empire to date, but the American people, for they have lived higher, longer and in greater numbers than ever before in the history of human civilization.

tara murphy  08/15/2008 05:24 PM Report

Mr. Hong was the only one who said it like it is: there is no way to avoid capital gains on those earning 250K and above (notice charlie's personal dismay?). The time to redistribute wealth is NOW. For the past 10 years Wall Street brokers, bankers CEOs, and assorted predatory capitalists and their 'venerable' institutions have fleeced each other in this 'free' marketplace and directly harmed the U.S. economy and individual Americans. He also seems to be a strong proponent of putting a leash on all of them, i.e. enforceable regulation by grown-ups. Economics is clearly not Charlie's strong suit, and his 'wrap up' at the end of the show was barely intelligible.

Cameron L. Stewart  08/15/2008 05:10 PM Report

An Interesting Show. I agree that these gentlemen seemed to be holding back and not want to say anything too controversial. And it illustrates my complaint with "The Dismal Science", which is this: All the sophisticated mathematical modeling of economics does not make a lot of sense until the subject matter is interpreted from the perspective of political economy, human psychology, and public policy, along with a host of other fields. Presumably these young men at Princeton represent the best and the brightest. Unfortunately, I got the distinct impression that Charlie Rose understands economics better than his guests. He is able to look at economics through a much broader and more integrated perspective. Charlie alluded to Dr. Stephen Hawkins quest to discover a "Theory of Everything". I submit we will not get there if we rely on "Scientific Fundamentalism" to provide such a theory. Milton Friedman fell into the same trap and gave us "Free Market Economics" - all justified by sophisticated mathematics - and we have seen the 35 years of global catastrophe that unfolded, starting in Chile. Charlie, you need to give yourself a little more credit: Do not bow to people simply because they have a scientific and mathematical background. Naomi Klein is light years ahead of this discussion.

TABS  08/15/2008 04:47 PM Report

The 3 Children from Princeton are very bright indeed. However they remain children in their notion that the Federal Deficit should be remedied by an increase in taxes. They are inured to the notion of ever larger government and increased spending. They are simply too young to remember or perhaps even to have read what the Federal Budget was before the Depression of the 1930's and during the pre WW2 period. Maybe Mr Bernanke should read up as well(btw that's a dig at Mr B)?............. There is such a thing as having lean and mean government. US corporations went through a period of cleaning out the dead wood in their systems in the 1980's and early 19990's. For some might remember that was where the resurgence of American business took place. So to can a similar cut in the bureaucracy of state and federal governments achieve the same end.

SGK  08/15/2008 02:35 PM Report

You guys make brilliant economists. Thank God we have smarter people on the Federal Reserve Board!

Janice Pitts  08/15/2008 02:00 PM Report

I think the discussion about the economy on Thursday, August 14 was basically ineffectual and academic. It appeared to me that these interviewees from Princeton were vague and would not be willing to state anything controversial that might go against the current political administration. It would be more helpful to get some people who are outside of a university setting involved in a discussion and who represent grass roots America.

sock puppet  08/15/2008 02:03 AM Report

And your conclusion is . . . ?

RE Mant  08/15/2008 12:00 AM Report

Harrison Hong is ok. One of the candidates may want him on his team. I can't say that of Brunnermeier.

Some observations from an economist 250 yrs ago:

"Our modern politics embrace the only method of banishing money, the using of paper credit; they reject the only method of amassing it, the practice of hoarding [ie, saving\; and they adopt a hundred contrivances, which serve to no purpose but to check industry, and rob ourselves and our neighbours of the common benefits of art and nature." David Hume, Of the Balance of Trade 1752

"The encrease of riches and commerce in any one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbours; ...a state can scarcely carry its trade and industry very far, where all the surrounding states are buried in ignorance, sloth, and barbarism." David Hume, Of Jealousy of Trade, 1760

"The public is a debtor, whom no man can oblige to pay. The only check which the creditors have upon her, is the interest of preserving credit;" David Hume, Of Public Credit, 1752

"High interest arises from three circumstances: A great demand for borrowing; little riches to supply that demand; and great profits arising from commerce: And these circumstances are a clear proof of the small advance of commerce and industry, not of the scarcity of gold and silver. Low interest, on the other hand, proceeds from the three opposite circumstances: A small demand for borrowing; great riches to supply that demand; and small profits arising from commerce: And these circumstances are all connected together, and proceed from the encrease of industry and commerce, not of gold and silver." David Hume, Of Interest, 1752

"Accordingly we find, that, in every kingdom, into which money begins to flow in greater abundance than formerly, every thing takes a new face: labour and industry gain life; the merchant becomes more enterprising, the manufacturer more diligent and skilful, and even the farmer follows his plough with greater alacrity and attention. This is not easily to be accounted for, if we consider only the influence which a greater abundance of coin has in the kingdom itself, by heightening the price of commodities, and obliging every one to pay a greater number of these little yellow or white pieces for every thing he purchases. And as to foreign trade, it appears, that great plenty of money is rather disadvantageous, by raising the price of every kind of labour. To account, then, for this phenomenon, we must consider, that though the high price of commodities be a necessary consequence of the encrease of gold and silver, yet it follows not immediately upon that encrease; but some time is required before the money circulates through the whole state, and makes its effect be felt on all ranks of people. At first, no alteration is perceived; by degrees the price rises, first of one commodity, then of another; till the whole at last reaches a just proportion with the new quantity of specie which is in the kingdom. In my opinion, it is only in this interval or intermediate situation, between the acquisition of money and rise of prices, that the encreasing quantity of gold and silver is favourable to industry." David Hume, Of Money, 1752

sock puppet  08/14/2008 04:46 PM Report

I'm first to admit I'm not a happy camper about the country I live in. I add to the 70% that believes we're headed in the wrong direction (read toilet). Apart from the M-I complex and K-street lobbyists, the Federal Reserve is one of the most disappointing institutions in our system. To the extent their charter charges them with maintaining stable and integral banking and markets free from "irrational exuberance," they are an abject failure.

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Where in the hell were the adults when the banks started violating all prudent underwriting norms and guidelines. Where were the Sarbanes-Oxly-type regulations? Why let Citigroup et al lobby away Glass-Steagal? Why indeed the Federal Reserve?

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Taxpayer bailouts for Federal Reserve defaults is a sorry thing to saddle our progeny with. Allowing euphemistically titled "Collateralized Debt Obligation," to be sold in the secondary market with no REAL collateral backing is a sardonic dereliction of (moral) duty. A simple regulation prohibiting the sale of mortgages without a mortgagee income of 4 or 5 to 1 (income: (Princ + Int + Taxes), could have staved off a lot of abject misery and doubtless volumes of destitute-driven crime. But for the egregious greed solely for the loan origination fees the industry wise-guys, unchecked by any adult supervision (or most notably the Feds) ran amok with a me-too, I-want-mine, irrational-exuberance shamelessly recruiting victims touting the American dream. Minorities abound.

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Greenspan's 'irrational exuberance' phrase shows he was aware of the potential and yet did nothing. A premeditated crime-of-negligence. How many are sleeping under a bridge tonight because of this doubtless fear of imposing the hated word "regulation?" Regulation would have saved themselves (and us) from themselves.

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Empires ala Ottoman, Phoenician, Roman et al may have all collapsed due to Fed-type lack of vision. Financial collapse in other words. The subprime vacuum atop the Iraq and fuel vacuums should about suck us dry.

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Lastly, the financial wise-guys penchant for leverage (read opm: other peoples money). Too clever by fractions buying the combined mortgage packages on margin doubtless leveraged the debt right into our laps. They can borrow like a whore on Friday night knowing we will pay it off if / when (Monday comes) it goes south.

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Finally (I promise), in case you missed it, I think the Federal Reserve is a feckless, sorry, ineffectual, IRRESPONSIBLE, scumbag institution. They could have been (unsung) heroes by averting the subprime disaster - the near tipping point to rendering us into historical ignominy. . . . . I need to get a dog. Something honorable.