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Where Did That $10 Trillion Go?

Posted on November 20, 2008 by Mike Bock

Scary economic news. This report says, “Wall Street in on track for its worst year since 1931, and that $10 trillion has been lost in the market — since its peak in October, 2007….The Dow Jones industrial average plunged 5.1 percent and closed below the 8,000 mark for the first time since March 2003. The market is now down 43.5 percent from a high point hit a little more than a year ago.”

Deflation is the latest fear that is depressing the market. The New York Times says, “While most consumers might welcome the idea that things are getting cheaper, deflation is an economists’ nightmare. It was a hallmark of the Depression and Japan’s so-called lost decade in the 1990s …Analysts say a sustained decline in consumer prices would be terrible for the economy. Businesses that cut prices to attract buyers are likely to have to lay off workers as well. They may also have little left over to pay lenders or shareholders. … Prices are falling outside the United States too. Consumer prices declined in Britain, France, Germany and elsewhere in Europe in October, and prices were flat in September in Japan, which has fought deflation on and off for nearly two decades. “

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Paul Krugman Gives Two Reason He Supports Bailout of Auto Companies

Posted on November 16, 2008 by Mike Bock

It was interesting this morning to see George Will confidently put forth an economic theory — only to have his theory be immediately contradicted by a Nobel winning economist. Ouch. Will probably still thinks he is right.

The discussion happened on the George Stephanoupolis program on ABC between Stephanoupolis and Cokie Roberts, Sam Donaldson, George Will, and Paul Krugman.

George Will’s theory of why the depression became the great depression is that government intervention prevented the markets from working. Krugman disagreed and said it was the collapse of the financial system that was at fault, and it was an increase in taxes, along with a policy of balancing the budget that Roosevelt imposed in 1937. Wow. I need to go back and study my history.

Krugman said that only an enormous government public project — World War 2 — eventually turned the economy around.

About the question of bailing out the auto companies, Krugman said that if the question had been asked in 1999, when the economy was strong, his advice would have been to allow the auto companies to go bankrupt — chapter 11. The companies would have continued to operate on borrowed capital and under the bankruptcy rules, they would be required to undergo major restructuring.

Krugman says that because of the bad state of the overall economy he reluctantly favors a government bailout of the auto industry. He gives two reasons:

The credit lines normally available to the auto companies are now frozen, so a Chapter 11, bankruptcy, would quickly turn into a chapter 7, liquidation. Such a liquidation would mean that over one million jobs would evaporate.
And so, the net result to the economy would be a negative stimulus, and in the terrible slump we are in, a negative stimulus is the last thing we should be engineering.

Posted in Special Reports | 11 Comments

Was Hamlet A Thoughtful Person?

Posted on November 15, 2008 by Mike Bock

The characteristic that most clearly defines what it means to be educated, I believe, is the quality of thoughtfulness.

I’m influenced by the thinking of Abraham Maslow. I put thoughtfulness at the top of Maslow’s pyramid, along with self-actualization.

Schools so completely emphasize the lower rungs of this pyramid — the development of a knowledge base, the development of specific skills — that the upper rungs are generally ignored. Schools do what they are rewarded to do, and developing thoughtfulness simply isn’t on the evaluation list.

We are developing a whole culture that defines education only in terms of the lower rungs of the pyramid — “the need to know and understand” discrete knowledge and skills — and misses the point that the purpose for developing the lower rungs is the development of the upper rung. It is within the upper rungs — thoughtfulness, self-actualization — that the hope for our better future lies. It is there that we find the inspiration, the creativity, and the insight needed for our future.

We have a debased view of what it means to be educated. The upper rungs of Maslow’s pyramid are generally ignored.

I imagine that Hamlet, as Prince of Denmark, had a top notch education for his time. He, no doubt, knew a lot of history, literature, science. He, no doubt, was an excellent writer. Shakespeare shows him to be a brilliant poet. I imagine he would have knocked the socks off of the Denmark Graduation Test, if there was one, or the SAT. But the question is: to what degree was he educated? To what degree was he thoughtful?

I got to thinking about Hamlet the other day, when I heard someone comment, “After all, the prototypical thoughtful person was Hamlet, and he wound up dead.”

There is really a distrustfulness of actual thoughtfulness — there is a feeling that thoughtfulness leads to trouble, or worse. But the opposite is the case. It is the lack of thoughtfulness that leads to trouble.

As the play unfolds, Hamlet reveals that, in fact, he is not thoughtful — not as I’m defining thoughtfulness, anyway. Hamlet’s mental turmoil — his dithering about, his making brilliant analysis, his sounding logical — should not be mistaken for thoughtfulness.

I recently reread the plot of Hamlet. I had forgotten how many people were killed in that play — bodies lying everywhere. Hamlet was responsible for the mess. I’ll not accept the notion that this destruction was the result of the actions of a thoughtful person.

Hamlet dithered and debated, but, in the end, Hamlet allowed his brilliant mind to be obsessed by one point of view — a view of revenge and duty. A mind obsessed is not a mind that is thoughtful.

Humans have evolved these millions of years and nature has endowed us with the tools we need to survive. We have an amazing capacity for insight. Brilliant minds misuse the great gifts nature has given to us and, driven by revenge or duty or religion or country or greed or power, such brilliant minds, if given a chance, are certain to bring the human race to destruction. We need to redefine what it means to be brilliant, what it means to be educated, and emphasize that our highest calling is to be thoughtful. We need to create a new culture of thoughtfulness. I’m encouraged that our new president may take the lead in doing so.

Suicide bombing is a great tragedy. A suicide bomber is driven to make a deadly, bloody mess of things, and some suicide bombers, like Hamlet, have, no doubt, been brilliant students and impressive thinkers. The grievances and thinking that guide the actions of a suicide bomber, no doubt, to the bomber seems compelling and logical. But, a mind absorbed in a prison of thought is not a thoughtful mind, regardless of how it spins its wheels — no matter if that mind is a poor Palestinian’s, or the Prince of Denmark’s.