Dmitry Orlov has a flashback:

Perestroika 2.0 Beta

Congratulations, everyone, we have a new president: a fresh new face, a capable, optimistic, inspiring figure, ushering in a new era of responsibility, ready to confront the many serious challenges that face the nation; in short, we have us a Gorbachev. I don’t know about you, but I find the parallel rather obvious.

Update: Tom Whipple looks to the year ahead:

What of 2009?

Our wish has been granted for we are indeed living in interesting times. The world’s economy is either collapsing or is putting on a very good imitation of doing so.

Production of cheap, abundant fossil fuels is peaking and will soon be withering away, yet gasoline for our cars has almost never been inflation-adjusted cheaper. Around the world, numerous sovereign governments are close to becoming dysfunctional — likely with very bad consequences. We are pumping so much of the wrong kinds of gases into the atmosphere that the poles are melting, the seas are rising, the land is drying out and some day soon this planet is going to be very tough to live on. On top of all this, the world seems to be acquiring a fair number of people who are convinced that only they understand God properly and that the rest of us deserve to be done in. The only good news is that, so far as we know, there are no large meteors heading towards earth that would render the foregoing problems irrelevant.

A long time ago, I ran across a review of a play or book about chronically-unemployed Irish men and their infidelity and violence towards their families. The reviewer asserted that the men were trying to prove themselves sexually or physically to compensate for having failed economically. I have no particular expertise in psychology, but recent discord on TPM reminds me of the idea that people, particularly men, might react very badly to unemployment. A quick Google brought me to this rather dry abstract :

Predicting self-esteem during unemployment: the effect of gender, financial deprivation, alternate roles, and social support.

… Arguably one of the most damaging, and certainly one of the most commonly reported, of all the psychological consequences of unemployment is a loss of self-esteem (Sheeran & Abraham, 1994; Waters, 2000; Winefield, Tiggemann, & Winefield, 1992). Among others, Amundson and Borgen (1987) and Amundson (1994) have characterized unemployment as an experience that leads to self-doubt and an internal struggle with confidence.
…
… the bulk of evidence suggests that gender is an important factor in psychological reaction to unemployment. More particularly, the results often show that during unemployment, men report poorer psychological health than do women (Najam, Ashraf, Nasreen, Bashir, & Khan, 1996). For example, Shamir (1985) found that unemployed men experienced lower morale and higher anxiety than did unemployed women.
…
Loss of role identity has been shown to be a major contributor to lowered self-esteem during unemployment (Bolton & Oatley, 1987). Hence, one factor that may reduce the impact of unemployment on self-esteem is the availability of alternate non-employment-related roles (Dilnot & Kell, 1988; Fielden & Davidson, 1999). Jahoda (1982) and Warr and Parry (1982) argued that roles such as spouse, parent, and community worker can be used as psychological compensations for the loss of one’s role as employee.

Now we seem to be headed towards a period of high unemployment, both here in the US and in the world. The knee-jerk response to massive economic deprivation seems to be survivalism: Get yourself some guns and lots of freeze-dried goods because the world will soon resemble (pick one):

Lord of the Flies
Mad Max
Zardoz
Children of Men
The Road

I know which one I’d pick:

… but whenever I think about owning a gun, I recall one history professor, who pointed out that during the great American Westward expansion, more settlers were killed by the accidental discharge of firearms than by actual conflict with each other or with the native peoples they encountered.

Rather than jumping the gun on survivalism, I’m more worried about what happens during the transition away from what we think of as a normal society. Orlov described Russian men who, after the fall of the Soviet Union, methodically drank themselves to death. Others were killed in black market squabbles. Crime is of course a concern, political turmoil may be a concern, but getting along with the people in your safety net is probably the more immediate concern.

How are your father, husband, boyfriend, brothers or sons going to handle losing their jobs?

How are you going to handle it?

While our media endlessly covers Flight 1549 and Obama’s second oathtaking, the world’s finances are imploding:

Britain offers the most colorful phrasing:

The tone towards the banks is becoming more aggressive. Gordon Brown and a phalanx of ministers will say they share the frustration of the public at the irresponsibility of past lending practices, the slowness with which they have revealed their debts and their stubborn refusal in the past few months to release credit.

Privately, something close to desperation is starting to develop inside government. After watching the slide in bank shares on Friday, one cabinet minister did not altogether joke when he said: “The banks are fucked, we’re fucked, the country’s fucked.”

Greece, Spain, Portugal, Ireland, Bulgaria, Lithuania, and yes, Latvia

Events are moving fast in Europe. The worst riots since the fall of Communism have swept the Baltics and the south Balkans. An incipient crisis is taking shape in the Club Med bond markets. S&P has cut Greek debt to near junk. Spanish, Portuguese, and Irish bonds are on negative watch.
…
A great ring of EU states stretching from Eastern Europe down across Mare Nostrum to the Celtic fringe are either in a 1930s depression already or soon will be. Greece’s social fabric is unravelling before the pain begins, which bodes ill.
…
This week, Riga’s cobbled streets became a war zone. Protesters armed with blocks of ice smashed up Latvia’s finance ministry. Hundreds tried to force their way into the legislature, enraged by austerity cuts.
“Trust in the state’s authority and officials has fallen catastrophically,” said President Valdis Zatlers, who called for the dissolution of parliament.
…
In Lithuania, riot police fired rubber-bullets on a trade union march. Dogs chased stragglers into the Vilnia river. A demonstration outside Bulgaria’s parliament in Sofia turned violent on Wednesday.
…
Spain lost a million jobs in 2008. Madrid is bracing for 16pc unemployment by year’s end.
…
Private economists fear 25pc before it is over. Spain’s wage inflation has priced the workforce out of Europe’s markets. EMU logic is wage deflation for year after year. With Spain’s high debt levels, this is impossible.

Update: Thain Resigns From Bank of America

Media reports Thursday said former Merrill Lynch & Co. CEO John Thain has resigned from Bank of America Corp. following news that Merrill had moved up its yearend bonuses, paying them just before BofA’s government-brokered acquisition of Merrill was completed.

Executive compensation

Here are some numbers for the compensation received in 2006 by some of the folks who helped get us into our current mess:

-Bear Stearns: $34 million for CEO James Cayne. The acknowledged direct cost to the taxpayers from Bear’s demise so far is $2.7 billion; ten times that number may be a more reasonable assessment of the actual cost.

-Lehman Brothers: $27 million for CEO Richard Fuld. The financial freeze that followed the collapse of Lehman is seen by many as the key event that turned the recession of 2007-08 into the frightening freefall currently under way.

-Citigroup: $25 million for CEO Charles Prince. Citi’s stock price has since fallen from $50 a share to $3.50.

-Countrywide Financial: $43 million for CEO Angelo Mozilo. According to Ashcraft and Schuermann, Countrywide was at that time the nation’s leading issuer of subprime mortgage-backed securities and the third biggest originator of subprime mortgages.

That these individuals should have profited so richly from running their companies into the ground, and bringing the rest of us down with them, offends anyone’s sense of justice. But it also raises a profoundly important question from the perspective of economic efficiency, in that the above numbers constitute a prima facie case that there were powerful economic incentives for these individuals to make decisions that were in fact not in their companies’ or society’s best interest.

That the incentives for CEOs need not necessarily coincide with those of the shareholders is a well understood phenomenon that is a special case of what economists call the principal-agent problem. This arises in situations when an agent (in this case, the CEO) has better information about what is going on than the principals (in this case, the shareholders) who rely on the agent to perform a certain task. One way to try to cope with these problems of asymmetric information is to tie the agent’s compensation directly to performance.

….
My interest in this issue is not so much to exact revenge on those who created our current problems, but instead to ask, how can we change the incentives so that this kind of problem is not repeated again? And that in turn leads me to wonder, why limit the proposals above only to a handful of companies?

Comment:

Hourly worker here. I have lost a large sum of my retirement savings, my home value has fallen, I am not out of work yet but I went from 40+ hours to a forced 32 hours starting this week. I have not consumed more than I can afford, my only debt is my mortgage which is not subprine, and I am sure there are millions like me.

And just so the record is clear, many of us DO want “to exact revenge on those who created our current problems”! We want them hanged.

Caroline Baum
Americans ‘Get’ TARP, They Just Can’t Stand It

Driving in the car Saturday morning, I was listening to “Washington Journal” on C-SPAN radio. Callers were voicing their opinions — grievances, mostly — on Obama’s proposed economic stimulus plan and the bank bailouts. One woman wanted to know why it is “when rich people need financial assistance from the government it’s called a bailout, but when low-income people need assistance from the government it’s called welfare.”

Another caller conceded that bailing out the banks was necessary “to save the economy, but it makes me mad.” She went on to say that she didn’t have good credit because of medical bills several years ago and pays “very high rates on credit cards.” Somehow banks “don’t mind taking my tax dollars to bail themselves out, but when I ask for help from them, they don’t help us out,” she said.

One man said the whole bank bailout was “smoke and mirrors,” which is not too different from the verdict handed down by TARP’s Congressional Oversight Panel earlier this month. Another asked how the government could “spend like crazy” when it has no money. Someone else advocated cutting the corporate tax rate to re-energize animal spirits in this country. Still another put the blame at the feet of the government, including the Environmental Protection Agency, “which makes laws and tells people how to run their businesses.”

To be fair, it’s generally the opponents of any policy that have the loudest voices. So there may be an inherent bias to the feedback.

Still, what struck me about the polling results and the call-ins was their essential truth; some kernel, at least. Ordinary Americans, it seems, “get it.”

They understand that financial stocks are trading at such depressed levels because shareholders anticipate a significant injection of new capital, that in the current circumstances no one but the government is going to provide it, and that existing shareholders will be at the end of the line when it comes to any cash dividend or voting power.

They understand at a fundamental level that rewarding failure is not only a bad idea but antithetical to the principles on which this country was founded.

And they understand that, as a practical matter, the need to save the banking system may supersede even principles, as bad a precedent as it sets.

What ordinary Americans also understand is the current initiatives aren’t working. Come to think of it, maybe the public is way ahead of even the new administration.

A long time ago, Swammerdam, and later Galvani, discovered that a spark of electricity could make a dead frog’s legs kick. An inspired Mary Shelley wrote a novel in which Victor Frankenstein reanimates dead tissue, his creature, by capturing electricity from lightning. As anyone who watches doctor dramas knows, they can often bring people out of cardiac arrest with electrical defibrillators.

Having studied the Great Depression, some economists have decided that a sufficiently high amperage of credit applied to banks will restart our ailing economy. But while defibrillation does revive people for a while, it doesn’t make them healthy. The economy hasn’t dropped dead, but it certainly hasn’t recovered. Now President Obama is ready to say, “Clear” and apply a bigger shock. We’re all hoping he knows what he’s doing. But amidst the euphoria of the inauguration are a few voices that doubt whether the proposed stimulus can save such a seriously ill patient:

Wall Street Voodoo Paul Krugman

Old-fashioned voodoo economics — the belief in tax-cut magic — has been banished from civilized discourse. The supply-side cult has shrunk to the point that it contains only cranks, charlatans, and Republicans.

But recent news reports suggest that many influential people, including Federal Reserve officials, bank regulators, and, possibly, members of the incoming Obama administration, have become devotees of a new kind of voodoo: the belief that by performing elaborate financial rituals we can keep dead banks walking.

Not Advice, but a Warning Sharon Astyk

I suspect you’ve already guessed the parallel I’m going to draw, but I’ll make it explicit - you stand in Lincoln’s shoes today, having embarked on a project whose price is far too high, and whose moral legitimacy is questionable at best. You’ve decided your job is to save the economy, and to restore the American people to prosperity. Everyone expects it of you - your own party has made this the central agenda, as the Republicans did for Lincoln. But that way lies tyranny, and moral failure. To do so represents the tyranny of the present over their posterity - the extraction of resources that will be urgently needed by your daughters and my sons and their children. The direction you’ve taken, which involves salvaging the failed industrial and financial projects of the rich, rather than serving the poorest represents tyranny as well - wealth extracted from ordinary working people will now feed the rich, while California cuts off its disability payments to the poor, the lame, the blind.

It isn’t merely tyranny, though, although that would be bad enough. It is also impossible to accomplish - you will not restore us to what we were at any time in the recent present, because even then, we were not as we seemed - that is, virtually all the accumulated wealth of the last decade and more that actually percolated down to ordinary people was illusory, debt-based, and based on false assumptions. And all the wealth of the last few decades has been based on a rapidly declining natural resource base that is now not merely depleted, but emptying. You will not restore us to past versions of our prosperity, nor can you carry the moral water of the preservation of the future on the backs of a false and tyrannical promise.

I posted this article last May:

Sen. Barack Obama became the first American presidential candidate to visit the reservation of the Crow Nation, and in doing so was adopted into the nation under the Crow name “One Who Helps People Throughout the Land.”

So I wonder, is Obama also our first Crow President, albeit adopted into the tribe?

Native American Resources

Obama, who would be the first black U.S. president, was “adopted” by Hartford and Mary Black Eagle and given a name which means “one who helps all people of this land.”

“I like my new name, Barack Black Eagle,” he said. “That is a good name.”

Many in the audience wore traditional feather headdresses and some banged drums ahead of Obama’s visit, the first by a presidential candidate to the Crow Nation.

The state is home to some 60,000 American Indians, making them a key swing vote, according to Dale Old Horn, 62, a spokesman for the Crow Nation.

Obama said he would appoint a Native American adviser to his senior White House staff if he wins and would work on providing better health care and education to reservations across the country.

“Few have been ignored by Washington for as long as Native Americans, the first Americans,” Obama said.

Old Horn said the tribal members related to Obama because of his background.

“His heritage of being poor, of being an outsider, you know those two things are the commonalities that he has with us,” he said. “We’ve always been treated like outsiders when it comes to government policy. In addition to that, we all grew up poor.”

In this vid, Obama speaks at Crow Agency