A Justice Site
Home - About Us - What's NEW?
MIRROR SITES: CSUDH - Habermas - UWP
SEARCH: Site Index - Topics Index - Archival Index by Volume
DOUBLE-CLICK any word for definition.
Unjam the Sources of Credit? Or Build Workers' Wealth?
Strengthen Investors? or Strengthen Ordinary Folks? Maybe a Little of All That?
At the Least, A New Mix
California State University, Dominguez Hills
University of Wisconsin, Parkside
Created: October 7, 2008
Latest Update: October 8, 2008
jeannecurran@habermas.org
takata@uwp.edu
patriciaacone@yahoo.com
- Introduction
Most of our newspapers are offering us information on what questions we need answered in the second debate between our presidential candidates. CNN almost begged the candidates to please not take off on a fairly pointless negative name-calling, character-assassination campaign effort.
What I would suspect that Habermas would say is that this is a great opportunity for governance discourse. Here's our chance to have our leaders talk to us seriously about serious issues. Here's our chance to understand those issues as best we can, and try to choose the leader who best represents our perception of best what's best for us all.
Some people simply enjoy a good fight. Seems to relieve some of their stress. They will probably be bored by substantive debates. There was an old cartoon we had posted on our refrigerator years ago: Two women at a grave site. One saying to the other, "I used to tell him it wouldn't hurt him to just be nice to people. Guess I was wrong." A good fight may clear the air and relieve your stress, but it won't give us the knowledge to choose our leaders more wisely, so we won't find ourselves in such crises of conscience and monetary policy again. To that end, I agree with Habermas that, if we are to live together without killing one another, in genocides, or just plain wars of acquisition, we must engage in talk. Illocutionary talk = talk that leads to figuring out what each perspective is trying to get across; talk that weighs the pros and cons of alternative tactics, strategies, and their policies; talk that negotiates compromise that we can all live with. Not as exciting as a good fight. But far more effective for policy, infrastructure, innovation, development, and governing in the one world we all live in.
In 1997 the Nobel Prize in Economic Sciences went to Robert C. Merton and Myron S. Scholes for "a new method to determine the value of derivatives." So you can see that I've been choosing my sources with an eye to what seems to have been happening over the last decade in our present financial debacle. Derivatives are a big piece of whatever is happening.
I suffer no illusions that the presidential debate will answer all these questions. But they give us a good feel for the kinds of questions we should be asking ourselves about the leader we choose. Itook the questions from the New York Times on the morning of the Town Hall debate on October 7, 2008, a month before the actual election. ("The Dismal Questions," New York Times, Opinion Section, at p. A 27, October 7, 2008. Consulted by jeanne in print and online, October 7, 2008. Questions by three noted economists for the presidential Town Hall debate.)
Plain English Version of the
Questions Economists Suggested for Our Presidential Candidates:
* * * * * Some of this is taken verbatim from the article.* * * * *
Please check the article before quoting my rephrasing of their questions. Occasionally I used their words, and little time for checking this same-day effort. jeanneJoseph E. Stiglitz, who has advised the Obama campaign:
- What if these bailouts don't work? Do we keep on bailing them out?
- What will you do to help the more than 2 million homeowners who have lost their homes so far? How does the tax rate affect the poorer homeowner who can deduct less for his less expensive home?
- Bankruptcy law changes make it harder for an ordinary American to get out from under terrible debt, but encourages lenders who can force poor debtors to pay. How will you handle that?
- Do you support bankruptcy reforms that would make it easier for homeowners to stay in their homes?
R. Glenn Hubbard, Chairman of Council of Economic Advisers from 2001 to 2003.
- Regulation - do we need more? or do we need more effective regulation? People who "knew" better helped make this crisis.
- How do you protect markets without "sowing doubts" about them and destroying confidence in them?
- The Federal Reserve has had to jump into this political fray. Should we have a Regulator who would take over different regulative duties? - I'm not clear what he meant by this question. The Fed is supposed to keep the economy stable by varying the interest rate when necessary and making credit easier or tighter to control inflation. The Treasury prints the money. Who's watching the Federal Open Market Commission, the guys who decide what the interest rate should be??? The FOMC seems to have a role like the communist "central committee" on production and economy. More on this later. jeanne
- How much risk may our financial institutions take on? What should the standard be for how much capital they should have for their transactions? If they buy stock, should they be expected to have capital available for 50% of the cost of that stock or 20% of the cost, etc.? This is called "capitalization."
- Do you propose a "commission" to study the causes of the current crisis and regulatory reform?
Myron S. Scholes, Nobel Prize Winner on valuing derivatives, 1997.
- "Discuss the tradeoffs for our economy, if any, between growth (so-called trickle down) and redistribution (so-called sprinkle around) policies."
- Given the climate for "retribution," what is your view on punishing those responsible with regulation?
- " How will . . . new regulations take into account . . .
- trading securities or goods and services
- financing businesses and homes
- saving for college or retirement
- and reducing and transferring risk?"
- How will you balance creativity and innovation with acceptable risk taking? How will it handle
- the provision of health care for our citizens
- an immigration policy that attracts and retains the best
- educational policies that increase the value of our human capital, our most important resource
- helping people accumulate enough retirement savings
- international trade and manufacturing
- the evolution of information technology, biotechnology, nanotechnology and neuroscience
- the allocation of water, food and energy and the development of alternative energy sources
- and, to some, the most important, the environment?
Discussion Questions
- What is a derivative?
My first attempt to answer this question is that it is a tool? a financial instrument? an agreement? a thingamajig? for dividing up the risk attached to a given transaction. What I mean by that is that if some transaction is riskier than I want, speculators or arbitrageurs (people who speculate on the price differences in different markets) will trade in some of that risk. Trouble is, we've entered here into an area where measurement is at best murky. I'll come back to this as I learn more. Maybe I'll find a clear, simple definition somewhere. But when they're giving out Nobel prizes for it, maybe not. jeanne
References:
- The Dismal Questions New York Times, Opinion Section, at p. A27, October 7, 2008. Questions for the presidential debates tonight by three noted economists.
- The Government Accounting Standards Board This is one of the pieces I'll try to summarize in Level 3. Trickle Down or Sprinkle Around. jeanne
- Reference
- Farlex Free Online Dictionary:
