financial system

Podcast • September 26, 2008

Candid Capitalist: John Bogle

John Bogle of Vanguard We asked the legendary investor, John C. Bogle, patriarch of the trillion-dollar Vanguard family of funds, for wisdom that would get us past the weekend in this financial rockslide. He sees ...
John Bogle of Vanguard

We asked the legendary investor, John C. Bogle, patriarch of the trillion-dollar Vanguard family of funds, for wisdom that would get us past the weekend in this financial rockslide. He sees an avalanche and three years of severe pain ahead, but something less than Armageddon, and no reason to realize Sarah Palin’s vision of another “great depression,” except that the Washington cast in the drama so far has been inept. “Embarrassing,” he said. John Bogle is famously a “value investor,” not a speculator. The overgrown financial sector of the economy is doomed, he says. But “America will continue to grow,” even in “fettered capitalism,” or whatever it comes to be called. And healthcare, technology, energy and consumer-product stocks will prove yet again to be good buys.

Click to listen to Chris’s conversation with John Bogle (30 minutes, 14 mb mp3)

Bogle is an insider who thinks, writes and invests like an outsider. At 78, he is a prolific, incisive, often philosophic observer who has written eight (8) books, best-sellers among them, since his heart transplant 11 years ago. He has always spoken as a common-sense sort of common man and often a very tough scold of his own industry.

We were looking for nest-egg advice and the broadest brushstrokes on the crisis. If Warren Buffett can get a guaranteed 10-percent return on his investment in Goldman Sachs, what stake should the taxpayers get for the companies they will bail out? Where, as Ralph Nader asks, is the shareholder uprising? If this is the end of market capitalism as we’ve known it, what is the common-sense name for the alternative system we are backing into?

I’ll tell you something about capitalism — and I somehow remember this, I don’t know how, from the first edition of Paul Samuelson’s textbook ‘Economics: an Introductory Analysis’ — my first taste of economics at Princeton University in 1951 — and what Paul Samuelson said in his introduction was, ‘The problem with capitalism, like the problem with Christianity, is that it’s never been tried.’

John Bogle, in conversation with Christopher Lydon, September 26, 2008.

Podcast • May 14, 2008

Bad News in High Style: Kevin Phillips

Kevin Phillips: how bad is it really? People I know count on Paul Krugman in The Times to give us all the bad news we can believe in. But Kevin Phillips (a Nixon-brain turned populist ...
kevin phillips

Kevin Phillips: how bad is it really?

People I know count on Paul Krugman in The Times to give us all the bad news we can believe in. But Kevin Phillips (a Nixon-brain turned populist grand historian) not only trumps Krugman in the Cassandra Stakes, he also explains why Krugman and media in general have gone soft and squishy (“now that the financial clouds have lifted a bit”) on the global apocalypse coming in the convergence of our housing collapse, the explosion of public and private debt, the fall of the dollar, the rise of (a) China and (b) $125 oil, and the consolidation of finance (the debt business) as our leading industry. Phillips notes that the best of big media, meaning the Times, the Wall Street Journal and the Financial Times, hate to be out front with bad news. And Krugman, the best of the best, is too heavily invested in the Clinton Democrats’ myth of a renewable once-and-future politics of prosperity — and too polite to dwell, for example, on the financialization of the Clinton campaign base. Nobody I know tells the story of catastrophe with higher style and a broader sweep of knowledge than Kevin Phillips — in his new book, Bad Money and in conversation here:

Click to listen to Chris’s conversation with Kevin Phillips here (36 minutes, 16 MB MP3)

There’s a growing sense that the imperial era of the United States is over almost before it started. I think we’re seeing the weakness of the United States that has allowed the financial sector to take over the private economy… 20 to 21 percent of GDP is now finance, pushing manufacturing way down. I think what you’ll see happen to the US is… a degree of implosion that will involve everything from too much debt, collapsing home prices, rising oil prices and the declining dollar. It doesn’t spell the end of the United States, but it spells the end of the United States as the total big cheese in the world. We’re going to lose some of the yardsticks that everybody enjoyed for a long time…

We used to be leading world creditor nation, lead world manufacturer, leading world producer of oil; we’re now leading the world’s leading debtor, the largest importer of manufactures in the world, and we’re the worlds largest oil importer. It’s a disastrous transformation. The only part of the economy that’s really profited is the financial sector because an awful lot of the transition is towards more debt,

more credit, more living on things you can’t afford, more keeping up pretenses, and more ambition around the world and less to back it up. And the consummation of this in many ways has been the George W Bush administration…

They invade Iraq, partly in order to get Iraq’s oil which hasn’t been tapped too much historically, and they thought they might be able to get 6 or 7 million barrels a day, and they could use that to bust open OPEC, and that would bring the price down — that was their ambition. And the futures market showed briefly in 2003, that there was an expectation that oil would come down to $15-18 dollars a barrel. At the time it was $20-25 — and now its $120-125. The notion that this imbecility was orchestrated, totally contrary to what they wanted, by two people who came from the oil industry — we could have done better with two bums or two Good Humor men, than these two men from the oil industry who knew nothing about the forces they were unleashing…

There was the ‘neutron loan’ – it kills the people but leaves the housing standing. The real thing they did that made this thing gain legs, is that no matter how crummy the loans were, most were securitized…. It’s mindboggling — If these people were in the manufacturing business, production of these things would have been enjoined because they were unsafe. You have consumer safety product commissions and things like that — you don’t have a financial products safety commission, which we sure as hell should have.

Kevin Phillips, in conversation with Chris Lydon on Open Source, May 14, 2008

Podcast • February 14, 2008

In the Neo-Liberal Ruins: Why Venezuela Matters

Jeffrey Sachs had the wit to foresee the doom in his own economic remedies for Bolivia in the mid-1980s. The crisis then was hyper-inflation. “If you’re bold,” he remembers telling Bolivians in power, “you could ...

Jeffrey Sachs had the wit to foresee the doom in his own economic remedies for Bolivia in the mid-1980s. The crisis then was hyper-inflation. “If you’re bold,” he remembers telling Bolivians in power, “you could turn a poor, land-locked, hyper-inflated country into a poor, land-locked country with stable prices.” The problem that free markets, free trade and foreign direct investment didn’t solve over the next twenty years was majority poverty in a pigmentocracy, as Sachs put it on Open Source two years ago. Bolivia was “a society of division, a society of conquest,” in which the 10-percent elite of white skin and European blood had never been impelled to invest in the impoverished Indian masses.

Click to listen to Chris’s conversation with Julia Buxton here (20 minutes, 9 mb mp3)

Julia Buxton, Bradford University

With a bit of a vengeance, Julia Buxton here picks up the history of the unraveling of the so-called “Washington consensus” of free-market cures for Latin economies. Inequality in fact widened in most of Latin America under the investment rules of the 1990s. The rules had to change “because the model wasn’t working,” she says. But it was homegrown politics — “this constituency of resistance,” as Julia Buxton calls it — that drove the undoing of policy: in Venezuela (which elected Hugo Chavez president in 1998), Bolivia (where the neo-socialist and “cocalero” Evo Morales won election in 2005) and Ecuador (where Rafael Correa took power in 2006). Venezuela remains for Professor Buxton the world model of the post-Washington development reality: the regeneration of community politics and economic development go ever hand-in-hand; and the Washington connection is discounted, if not unplugged.

Julia Buxton teaches at Bradford University in the U.K. She writes on openDemocracy. And she cleared the air at Brown’s “Changes in the Andes” conference with a PowerPoint stemwinder that triggered this conversation.