Hi,
This excerpt if from yesterday's Casey's Daily Dispatch from Casey Research. This should have been in every paper in the US.
regards,
5412
You Can't Handle the Truth
By Vedran Vuk, Casey Research
The outrage over a memo by James Glassman, a senior economist at JPMorgan Chase, reminds me why I prefer working at Casey Research over a financial giant. Glassman has been attacked by the media for basically telling the truth. In the modern political and corporate environment, truth is an unacceptable and dangerous public relations faux pas. In the memo, Glassman starts by blasting the Goldman hearings:
The low level of economic literacy exposed in last week's hearings before the Senate's Subcommittee on Investigations offered an unnerving insight into much that is driving the financial reform effort.
There's absolutely nothing wrong with the statement. Most senators are entirely ignorant of basic economics. What are we supposed to do instead, pretend that they have doctorates in the field? Apparently, senators take upon themselves the elevated status of god-kings - perfect in every way and all-knowing too. Thankfully, people like Glassman reveal that the emperor has no clothes. Glassman continues:
From the perspective of economic literacy, last week's hearings before the Senate's Permanent Subcommittee on Investigations had to be, well, not memorable, or inmemorable (as infamous is to famous). The hearings exposed an unnerving ignorance of fundamental principles of market economics by folks who have a hand in remapping rules of finance that will be with us for a while.
Flip assertions about what is and is not socially valuable reflect a confusion about our market economy that is as fundamental as knowing that George Washington was the first president of the United States. Maybe it's human nature to get self righteous about the mistakes others make when there are even worse problems in our own back yard that we should be tending to. Where are the hearings about the shameful story in the figure below.
The figure mentioned shows unemployment rates for various high-manufacturing states. Glassman points out that Michigan perpetually trails behind others due to a decades-long anti-business strategy. He suggests similar hearings to hold politicians accountable for their destructive policies. Senator Carl Levin, who presides over the Subcommittee on Investigations, just happens to be from Michigan.
Glassman is absolutely right about this double standard. Politicians are never held responsible for their economic crimes. Many times, they are even praised and worshipped for their economic destruction - just look at FDR and the New Deal. Glassman finishes the memo with these great paragraphs:
The low level of economic literacy is plaguing financial reform. Reform is dangerous - it produces unintended consequences - if we don't understand the connection between incentives and economic behavior. Folks may like to hear that someone else is to blame for the mistakes they made, but everyone knows - including those who bought houses far beyond what they could afford and then walked when the promise of endless capital gains died and including the investors who bought funky financial instruments that enabled the housing bubble out west and in Florida to inflate - that Wall Street isn't the only culprit in the housing debacle. Sir, Goldman was no more culpable in the housing debacle than Congress. Because Washington is mostly focused on appeasing (or stoking) political outrage, the financial reform legislation in its present form seems likely to do little to fix the flaws and is heavily focused on changing things that had little to do with the housing debacle..
..Now that the financial reform debate is in the final innings, it's time for the grownups to step in. In its present form, financial reform will make credit more expensive and more difficult to obtain and businesses will find it more difficult to shed risk, harming the very people we are trying to help. Done right, reform will increase transparency, allow failing institutions to fail, and not stand in the way of financial innovation that has allowed those who want to shed risk to pass it to those who seek it, an evolution that has contributed to the US economy's robust performance in the past."
If Glassman had claimed that senators were members of the communist party, I could see a reason to get upset. But there isn't a single untrue or slanderous sentence in the whole memo. This whole drama perfectly fits Ron Paul's quote, "Truth is treason in an empire of lies." Glassman's fault is not being overly cruel or slanderous but rather being overly honest. D.C. aims to increase financial transparency, yet restrain truth from the conversation. Washington's financial hearings and reform proposals are nothing more than a kangaroo court on a grand scale.
In response to the bad press, JPMorgan Chase released a statement disagreeing with Mr. Glassman's view. Understandably, Glassman's views don't represent everyone. But to specifically disagree is problematic. It automatically makes me think, "Disagree with what part?" Is JPMorgan saying that senators are financial and economic geniuses? Is the company saying that economic disasters in Michigan are just accidents unrelated to poor policy decisions? Is it saying that Washington had nothing to do with the crisis and the blame belongs to Wall Street alone? Where exactly is the disagreement?
The press release should have simply explained that a large company necessitates many opinions and different viewpoints. Mr. Glassman's view represents one perspective but does not necessarily reflect the position of the entire company.
As the Glassman "scandal" shows, major banks cannot tell the truth without political repercussions. CEOs and other representatives must lie on topics ranging from universal healthcare to financial reform to avoid the consequences. Right of free speech is only a technicality to participants in Washington's witch trials. In political reality, it is nonexistent. Thankfully at Casey Research, we don't have any of these obstacles when creating our big-picture newsletter, The Casey Report. Our message isn't filtered through a public relations department, and we don't need to kiss some ignorant senator's rear end in Washington. We give our view of the economy, pure, simple, and unadulterated. In these troubled times, we need more intelligent and honest economic commentary. However, it's not going to happen outside a few select independent voices. Any dissent from the regime view will meet the end of Washington's billy club. Glassman has learned his lesson.
