He's Back!

John Donne March 31, 2009

They are happy men whose natures sort with their vocations. -Francis Bacon, essayist, philosopher, and statesman (1561-1626)

When Michael Dwinell (Father Dwinell, Brother Michael Simon) died last Monday - calling my bluff, again – he triggered in me a clutter of visions.

Michael may be the only authentic priest/shaman I have ever known. He was unnervingly God-intoxicated.

His father (another story worth telling) told of Michael playing in the Harvard/Yale Game (The Game). At a critical point late in the 4th quarter Harvard needed less than a yard for a first down.

Watch this. Harvard quarterback takes the snap, waits a split second for Michael to grind forward ahead of him (Michael was only about 250 lbs then). Pile of bodies obscured by a cloud of Michael-made debris, lifts, and the crowd sees Michael astride two flattened Yale defenders. No need to measure for the first down.

He grew up in the Dedham, Massachusetts parish where I was rector. His family Yankee Unitarians. Michael sang in the Episcopal boy choir, fell in love with medieval ceremony and music. He and his father were baptized together. Launching his life’s quest battling God, Michael stripped of armor.

He came to preach each of my 14 years there, always exciting, startling, frightening, challenging. Always some cleaning up afterwards.

The first year I had just bought a new Honda Civic. I showed him the lever next to the driver’s seat that would spring open the trunk remotely. Nifty, I thought. He liked it. You ever look at this new car and picture it smushed to a steel pancake in a junkyard?

In those days, in our early 30s, he already looked venerable. Limping under his prodigious weight and an old football injury, he carried a cane. And he still had even more hair in more places than I did.

I told him about the hot June day I was ordained in Boston, before the subway was air conditioned. Riding the Red Line to the Cathedral on Tremont Street, in my Roman collar for the first time, I kept my Macintosh buttoned to my neck, sweating, for fear of some Irishman mistaking me for the real thing. People eyed me suspiciously, likely thought I was a flasher.

I didn’t know whether I was an authentic overhaul from God or the world’s biggest phony, I told him. He laughed. You were both.

He tried out parish life, soon discovered he wasn’t cut out for facades or popular piety. His parents worried about him, his several wives loved him but found he couldn’t be domesticated. He could heal or disturb.

Just when I would decide the whole religious enterprise was a crock, Michael would weigh in with something that felt almost like literal belief. Until you paid closer attention and understood he may be the only person you ever knew who decided building his life on an unseen interior reality was as sensible a choice as banking.

When he told me he was renouncing his ordination, I thought he must be very angry at the church. That wasn’t it. He meant to live out the implication of his writing (listed below): every person who lives intentionally is a God bearer, ordained by God at birth. He joined a lay order, took the name Brother Michael Simon.

Not long after, he called me in Vermont, wanted to visit. Where’s the closest airport?

Flying to Vermont from Maine? You’d do better to drive.

No, my knee can’t last that long. I’m flying my own plane.

He flew his tiny plane to N. Adams where I met him, went to our house for lunch and an afternoon of his destabilizing insights. Later he took me up for a spin (I had promised Lacey I wouldn’t.) Who would have believed he could squeeze his 300 lbs and me into that flying lawn mower and defeat gravity? I finally breathed enough to look when we buzzed our pond.

A year or so after I crashed my truck into a tree, I told him that when something seems even remotely like a near accident, my first alert is an acrid smell (air bag exploding?), my first sense in the wreck, filling my nostrils.

Good stuff! You’re full sensory system is finally unblocking. You may yet get some release from your overactive mind.

Michael read in a recent Zone Note about my atomic watch that sometimes doesn’t pick up the signal from Colorado.

I have those tune into colorado clocks too....they don't adjust right away but they do...just give them time man, give them time.. Best M

A couple of other recent exchanges:


If the best is the enemy of the good,
motion and noise are the enemy of
……………. Let’s reflect.


Do you know how fragile God is ???
Yes, alas, I do...
that is the key best m

well spoken indeed....oedipus poked his eyes out so that he might see more clearly..m


A couple of years ago Michael felt especially weary one morning as be drove to his office where he was to see one of the people who came to him for spiritual direction. He stopped at his doctor’s office, who briefly examined him and took him to the emergency room where Michael slipped into a coma, his body checked out. He was on life support for months.

When he emerged – he really never recovered – he wrote vividly about his time in that other dimension. The story of Jesus’ terrifying time in the desert doing time with Satan will give you the flavor.

After several exchanges about that experience, Michael said that anyone who seeks an encounter with God is either uncommonly brave or insane.

Michael was not insane.


Michael’s titles:

Being Priest To One Another
God-Birthing
From Within The Heart Of God

A friend from childhood, recently found, who has lived as different a life from mine as two of the same species could, suggests I might want to lighten up a little.

I acknowledged that as great advice, often offered by friends and family (especially wife), which I would have taken long ago if it were a matter of choice.

He says he regrets a lot of his life and his choices. That he was right about 30% of the time.

Though I might make different choices were I making them now, I can't say I regret any of them. I think many of them turned out to be disasters. Which could be said for some of the investments many of us made, which sound judgment would have (did in fact) pronounced sound at the time.

There's a pretty focused example of how differently my friend's life and mine have unfolded.

While I was dutifully following the counsel my father gave me, investing my pennies and my pension in stocks, companies that were synonymous with the nation's strength - like GM, GE, P&G - he decided to invest in assault weapons.

That's right, assault weapons.

I went to visit him last fall in his fascinating house he and his sons built on top of a mountain in Virginia, wanting to renew a friendship that was strong when we were school boys, and to see the largest collection of assault weapons in private hands.

He has collected at least one weapon from every war this country has fought, from the Revolution to Iraq, and many from most wars. Every one of them has been documented as to its source of manufacture (some of the old ones were made by hand in homes), where it was used in battle and how he acquired it. He built three extra rooms onto his house to accommodate the collection, which is displayed on walls and some on the floors. He has given to a museum enough weapons for them to build a wing to house them.

When I asked him what he thought the collection was worth, he said he had no idea. But there is always a market for them. A small, esoteric, but always eager market. Unaffected by economic conditions.

I asked him if he had one weapon I had heard about because he had used to in a scrape he got into in a middle eastern country. The story makes James Bond movies seem tame. He did have it and agreed to show it to me with one condition. That was that I agree to fire it.

I have always been terrified of guns. I protested that I didn't trust myself to fire a significant gun. He insisted both that he would ensure the safety of me, the gun and anyone else in the vicinity.

And, he said, You need to hold and fire this thing to at least have the visceral sense of what it's like. Your life has been so sheltered.

I did. The initial fear quickly gave way to an exhilaration I would neither have expected nor thought a good thing. He laughed. Loved it.

As to our various life decisions about which he said he felt sad and I said I felt OK, I allowed as how I'm not sure I have made many conscious decisions in my life. That is, I wonder if I didn't just pretty much put one foot in front of the other, ending up someplace pretty random. In retrospect one can speak of good and bad decisions.

Masters? Of what? Not much. Nothing about that robs events of their fascination. Just the temptation to think I really run a rational existence.

I bet he has less than a third the dollars invested in those guns that I have in the stock market. And I bet he could unload them today for about five times what I could my portfolio.

So do I think I made a bad decision and he made a good one?

Where would I have put all those weapons?

A friend died on Monday.

I hadn't seen him in many years - he lives in Maine, practiced psychotherapy, had a weird months long coma a couple of years ago - and have been keeping up with him through this medium.

He'd told me he would never really recover from that coma, and not long ago he had some sort of recurrence. But somehow I hadn't given much thought to the possibility that he might die.

But he did. Monday.

Among our last communications was one after I had written saying I had one of those "atomic" wrist watches that is supposed to get a signal from some exotic source in Colorado at 3AM each morning, so it is never more than a fraction of a second off. (Who determines what's off?). But it often seems to lose the icon that reassures it has received the signal. And when I go from the Pacific time zone to the Eastern, it doesn't seem to be able to work that out. Daylight Savings either.

"Give it time, man," he wrote. "It will do it."

He was right. It does.

I loved him for the way he gave everything and everyone time.

I think I'll do some random wandering this afternoon in his honor. Maybe even some unfocused wondering.

I live my life in widening circles that reach out across the world. I may not complete this last one but I give myself to it. - Rainer Maria Rilke, poet and novelist (1875-1926)

******

more marvelous moments for loosening the grasping grip of ego:

daughter, son-in-law and grandson come for a sure-thing late March
S. California respite from New England’s global-warming-defying winter

first night 40º 50mph offshore blow followed in the morning by
driving rain

Hates California, it’s cold and it’s damp… [Rodgers & Hart for you newcomers]

and those noisy night herons thwarted by cutting down their usual nesting trees? nope trying prickly palms give the palms a crew cut and the
big birds simply stand on what’s left, complaining ever closer to all our windows

Paul Krugman, who, after all, won a
NOBEL
despairs at the president’s bail-out (rescue?) plan because it
stubbornly refuses to nationalize banks while Wall St.’s
wondrous wall of worry provides a catapult for a moment
you and I read that this is our money they are messing with
we wonder where this Main St. may be maybe one block south of Park Place
(we actually walked on Boardwalk after the storm, but didn’t land there, so
didn’t have to pay rent and at S. California prices – even now – never
considered buying)

we apologized to our offspring for the weather
they graciously absolved us our apology apparently sufficiently sincere so sun suffused s. California

last week David Eagleman spoke of his book Sum; 40 Tales of the Afterlife
(one of 12 books I am reading – more below)
fanciful imaginings by a young (37) neuroscientist about how we project life’s ironies onto our fantasies of Forever
asked what he hoped readers might take away David smiled said
he hoped perhaps perspective that might make me feel being here now is enough
he mentioned two NASA projects that may well wean us from projecting a universe designed for us
Mission Kepler sent deep into space looking for earth-like planets
hard to find
because earth-like planets are so
tiny
and another in which they focused on a minute black seemingly empty
spot
for three years taking millions of photos when analyzed the photos
found that e m p t y spot contained 10,000 (or was it 10M?)
galaxies that’s galaxies not planets

yes 12 books strewn like galaxies across our small apartment
on average between ¼ & ½ read 4 of them huge tomes like life
without discernible beginning middle end unless I provide it
all exquisitely fashioned
Robert Bolaño’s 2666, David Foster Wallace’s Infinite Jest Paul Verhaeghen’s Omega Minor, Ken Kesey’s Sometimes a Great Notion
all may have markers sticking up from their pages stopping point
when my marker sticks up from the sod
marking my most recent carbon contribution to
the universe

Whether we have passed the point of no return on treating every public issue as if it were a mud-fest, i don't know.

I hope not.

This morning Paul Krugman came as close as I've ever known him to, at trashing the new president and his attempts to right the downed economy. Krugman now has a Nobel Prize, so if one were inclined previously to dismiss his views (which I was not), it is much harder to do now.

Which must make Obama and Geithner more uneasy than if it were some lesser light throwing mud at their latest effort.

I think what I wish is that Krugman might search for less harsh language to state his disagreements. But he clearly sees - as he has for more than a year - this economic collapse as the Armageddon. Not simply a downturn or a cyclical reverse after an unusually long bull market, but a structural collapse that much either be met by a dramatic structural change, or bring us to a depression at least as severe as the one we have named the Great Depression.

Who am I to disagree? I have never so much as taken an undergraduate economics course.

On the other hand, I have never taken a course in meteorology either, and though I respect the vast amount of expertise and data and computer number crunching that goes into weather prediction these days, I also notice how frequently the day's weather trumps the learned predictions.

I hope something like that is true of Krugman's dire predictions about Obama's plan announced today to partner government with private investors in finally getting the toxic investments off the banks' books so they can begin lending money again.

Looks like the markets are enthusiastic this morning. But we have been here before, so no one will rest easy because of a big one day jump in the indexes. (I think the Wall St. term for a big rise that isn't sustainable - a dead cat bounce - is one of the most colorful and clear expressions I have ever seen.)

Looks to me as if Obama is trying to walk much the same tightrope Franklin Roosevelt walked more than 3/4 of a century ago when faced with much the same dilemma. In order to preserve the genius of free enterprise, the government had to make the paradoxical move of engaging in the normally private sector to an unprecedented extent.

In the debate now going on about whether Roosevelt's intervention helped or hurt the recovery, I come down squarely on the side of helped.

I understand why Wall St. believes the opposite. And that they hold up Ronald Reagan - who set out to undo the entire New Deal - as their model.

It looks to me as if the biggest enemy of free enterprise is the big wheeler-dealers who want to be free of all regulation so they can d their deals without interference. They very nearly did in capitalism in the 1920s and they have put it seriously at risk again now.

Obama's plan may err on the side of spending too little government money (as Friedman and Krugman both believe), and/or of leaving too much of the solution in the hands of the investment community whose recklessness is being blamed for having brought us to this point.

Hoping I am not whistling past the graveyard, I put myself on the side that says incremental investing of government money - recognizing that deficits and inflation await us down the road (even though, as Krugman worries, it may mean congress is reluctant to vote more money when and if needed), and building in as much market incentive as seems possible, are not merely smart, but essential, even if only to signal the world that we still believe markets are important mechanisms for healthy economies.

Truthout has printed a piece from Washington Monthly by the economist that seems to me the most comprehensive description of where we are now, and what he thinks must be done:


OPINION


No Return to Normal
Friday 20 March 2009
by: James K. Galbraith | Visit article original @ Washington Monthly


US Treasury Secretary Timothy Geithner. (Photo: Reuters Pictures)
Why the economic crisis, and its solution, are bigger than you think.

Barack Obama's presidency began in hope and goodwill, but its test will be its success or failure on the economics. Did the president and his team correctly diagnose the problem? Did they act with sufficient imagination and force? And did they prevail against the political obstacles - and not only that, but also against the procedures and the habits of thought to which official Washington is addicted?

The president has an economic program. But there is, so far, no clear statement of the thinking behind that program, and there may not be one, until the first report of the new Council of Economic Advisers appears next year. We therefore resort to what we know about the economists: the chair of the National Economic Council, Lawrence Summers; the CEA chair, Christina Romer; the budget director, Peter Orszag; and their titular head, Treasury Secretary Timothy Geithner. This is plainly a capable, close-knit group, acting with energy and commitment. Deficiencies of their program cannot, therefore, be blamed on incompetence. Rather, if deficiencies exist, they probably result from their shared background and creed - in short, from the limitations of their ideas.

The deepest belief of the modern economist is that the economy is a self-stabilizing system. This means that, even if nothing is done, normal rates of employment and production will someday return. Practically all modern economists believe this, often without thinking much about it. (Federal Reserve Chairman Ben Bernanke said it reflexively in a major speech in London in January: "The global economy will recover." He did not say how he knew.) The difference between conservatives and liberals is over whether policy can usefully speed things up. Conservatives say no, liberals say yes, and on this point Obama's economists lean left. Hence the priority they gave, in their first days, to the stimulus package.

But did they get the scale right? Was the plan big enough? Policies are based on models; in a slump, plans for spending depend on a forecast of how deep and long the slump would otherwise be. The program will only be correctly sized if the forecast is accurate. And the forecast depends on the underlying belief. If recovery is not built into the genes of the system, then the forecast will be too optimistic, and the stimulus based on it will be too small.

Consider the baseline economic forecast of the Congressional Budget Office, the nonpartisan agency lawmakers rely on to evaluate the economy and their budget plans. In its early-January forecast, the CBO measured and projected the difference between actual economic performance and "normal" economic performance - the so-called GDP gap. The forecast has two astonishing features. First, the CBO did not expect the present recession to be any worse than that of 1981-82, our deepest postwar recession. Second, the CBO expected a turnaround beginning late this year, with the economy returning to normal around 2015, even if Congress had taken no action at all.

With this projection in mind, the recovery bill pours a bit less than 2 percent of GDP into new spending per year, plus some tax cuts, for two years, into a GDP gap estimated to average 6 percent for three years. The stimulus does not need to fill the whole gap, because the CBO expects a "multiplier effect," as first-round spending on bridges and roads, for example, is followed by second-round spending by steelworkers and road crews. The CBO estimates that because of the multiplier effect, two dollars of new public spending produces about three dollars of new output. (For tax cuts the numbers are lower, since some of the cuts will be saved in the first round.) And with this help, the recession becomes fairly mild. After two years, growth would be solidly established and Congress's work would be done. In this way, the duration as well as the scale of action was driven, behind the scenes, by the CBO's baseline forecast.

Why did the CBO reach this conclusion? On depth, CBO's model is based on the postwar experience, and such models cannot predict outcomes more serious than anything already seen. If we are facing a downturn worse than 1982, our computers won't tell us; we will be surprised. And if the slump is destined to drag on, the computers won't tell us that either. Baked into the CBO model we find a "natural rate of unemployment" of 4.8 percent; the model moves the economy back toward that value no matter what. In the real world, however, there is no reason to believe this will happen. Some alternative forecasts, freed of the mystical return to "normal," now project a GDP gap twice as large as the CBO model predicts, and with no near-term recovery at all.

Considerations of timing also influenced the choice of line items. The bill tilted toward "shovel-ready" projects like refurbishing schools and fixing roads, and away from projects requiring planning and long construction lead times, like urban mass transit. The push for speed also influenced the bill in another way. Drafting new legislative authority takes time. In an emergency, it was sensible for Chairman David Obey of the House Appropriations Committee to mine the legislative docket for ideas already commanding broad support (especially within the Democratic caucus). In this way he produced a bill that was a triumph of fast drafting, practical politics, and progressive principle - a good bill which the Republicans hated. But the scale of action possible by such means is unrelated, except by coincidence, to what the economy needs.

Three further considerations limited the plan. There was, to begin with, the desire for political consensus; President Obama chose to start his administration with a bill that might win bipartisan support and pass in Congress by wide margins. (He was, of course, spurned by the Republicans.) Second, the new team also sought consensus of another type. Christina Romer polled a bipartisan group of professional economists, and Larry Summers told Meet the Press that the final package reflected a "balance" of their views. This procedure guarantees a result near the middle of the professional mind-set. The method would be useful if the errors of economists were unsystematic. But they are not. Economists are a cautious group, and in any extreme situation the midpoint of professional opinion is bound to be wrong.

Third, the initial package was affected by the new team's desire to get past this crisis and to return to the familiar problems of their past lives. For these protégés of Robert Rubin, veterans in several cases of Rubin's Hamilton Project, a key preconception has always been the budget deficit and what they call the "entitlement problem." This is D.C.-speak for rolling back Social Security and Medicare, opening new markets for fund managers and private insurers, behind a wave of budget babble about "long-term deficits" and "unfunded liabilities." To this our new president is not immune. Even before the inauguration Obama was moved to commit to "entitlement reform," and on February 23 he convened what he called a "fiscal responsibility summit." The idea took hold that after two years or so of big spending, the return to normal would be under way, and the costs of fiscal relief and infrastructure improvement might be recouped, in part by taking a pound of flesh from the incomes and health care of the old.

The chance of a return to normal depends, in turn, on the banking strategy. To Obama's economists a "normal" economy is led and guided by private banks. When domestic credit booms are under way, they tend to generate high employment and low inflation; this makes the public budget look good, and spares the president and Congress many hard decisions. For this reason the new team instinctively seeks to return the bankers to their normal position at the top of the economic hill. Secretary Geithner told CNBC, "We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

But, is this a realistic hope? Is it even a possibility? The normal mechanics of a credit cycle do involve interludes when asset values crash and credit relations collapse. In 1981, Paul Volcker's campaign against inflation caused such a crash. But, though they came close, the big banks did not fail then. (I learned recently from William Isaac, Ronald Reagan's chair of the FDIC, that the government had contingency plans to nationalize the large banks in 1982, had Mexico, Argentina, or Brazil defaulted outright on their debts.) When monetary policy relaxed and the delayed tax cuts of 1981 kicked in, there was both pent-up demand for credit and the capacity to supply it. The final result was that the economy recovered quickly. Again in 1994, after a long period of credit crunch, banks and households were strong enough, even without a stimulus, to support a vast renewal of lending which propelled the economy forward for six years.

The Bush-era disasters guarantee that these happy patterns will not be repeated. For the first time since the 1930s, millions of American households are financially ruined. Families that two years ago enjoyed wealth in stocks and in their homes now have neither. Their 401(k)s have fallen by half, their mortgages are a burden, and their homes are an albatross. For many the best strategy is to mail the keys to the bank. This practically assures that excess supply and collapsed prices in housing will continue for years. Apart from cash - protected by deposit insurance and now desperately being conserved - the American middle class finds today that its major source of wealth is the implicit value of Social Security and Medicare - illiquid and intangible but real and inalienable in a way that home and equity values are not. And so it will remain, as long as future benefits are not cut.

In addition, some of the biggest banks are bust, almost for certain. Having abandoned prudent risk management in a climate of regulatory negligence and complicity under Bush, these banks participated gleefully in a poisonous game of abusive mortgage originations followed by rounds of pass-the-bad-penny-to-the-greater-fool. But they could not pass them all. And when in August 2007 the music stopped, banks discovered that the markets for their toxic-mortgage-backed securities had collapsed, and found themselves insolvent. Only a dogged political refusal to admit this has since kept the banks from being taken into receivership by the Federal Deposit Insurance Corporation - something the FDIC has the power to do, and has done as recently as last year with IndyMac in California.

Geithner's banking plan would prolong the state of denial. It involves government guarantees of the bad assets, keeping current management in place and attempting to attract new private capital. (Conversion of preferred shares to equity, which may happen with Citigroup, conveys no powers that the government, as regulator, does not already have.) The idea is that one can fix the banks from the top down, by reestablishing markets for their bad securities. If the idea seems familiar, it is: Henry Paulson also pressed for this, to the point of winning congressional approval. But then he abandoned the idea. Why? He learned it could not work.

Paulson faced two insuperable problems. One was quantity: there were too many bad assets. The project of buying them back could be likened to "filling the Pacific Ocean with basketballs," as one observer said to me at the time. (When I tried to find out where the original request for $700 billion in the Troubled Asset Relief Program came from, a senior Senate aide replied, "Well, it's a number between five hundred billion and one trillion.")

The other problem was price. The only price at which the assets could be disposed of, protecting the taxpayer, was of course the market price. In the collapse of the market for mortgage-backed securities and their associated credit default swaps, this price was too low to save the banks. But any higher price would have amounted to a gift of public funds, justifiable only if there was a good chance that the assets might recover value when "normal" conditions return.

That chance can be assessed, of course, only by doing what any reasonable private investor would do: due diligence, meaning a close inspection of the loan tapes. On the face of it, such inspections will reveal a very high proportion of missing documentation, inflated appraisals, and other evidence of fraud. (In late 2007 the ratings agency Fitch conducted this exercise on a small sample of loan files, and found indications of misrepresentation or fraud present in practically every one.) The reasonable inference would be that many more of the loans will default. Geithner's plan to guarantee these so-called assets, therefore, is almost sure to overstate their value; it is only a way of delaying the ultimate public recognition of loss, while keeping the perpetrators afloat.

Delay is not innocuous. When a bank's insolvency is ignored, the incentives for normal prudent banking collapse. Management has nothing to lose. It may take big new risks, in volatile markets like commodities, in the hope of salvation before the regulators close in. Or it may loot the institution - nomenklatura privatization, as the Russians would say - through unjustified bonuses, dividends, and options. It will never fully disclose the extent of insolvency on its own.

The most likely scenario, should the Geithner plan go through, is a combination of looting, fraud, and a renewed speculation in volatile commodity markets such as oil. Ultimately the losses fall on the public anyway, since deposits are largely insured. There is no chance that the banks will simply resume normal long-term lending. To whom would they lend? For what? Against what collateral? And if banks are recapitalized without changing their management, why should we expect them to change the behavior that caused the insolvency in the first place?

The oddest thing about the Geithner program is its failure to act as though the financial crisis is a true crisis - an integrated, long-term economic threat - rather than merely a couple of related but temporary problems, one in banking and the other in jobs. In banking, the dominant metaphor is of plumbing: there is a blockage to be cleared. Take a plunger to the toxic assets, it is said, and credit conditions will return to normal. This, then, will make the recession essentially normal, validating the stimulus package. Solve these two problems, and the crisis will end. That's the thinking.

But the plumbing metaphor is misleading. Credit is not a flow. It is not something that can be forced downstream by clearing a pipe. Credit is a contract. It requires a borrower as well as a lender, a customer as well as a bank. And the borrower must meet two conditions. One is creditworthiness, meaning a secure income and, usually, a house with equity in it. Asset prices therefore matter. With a chronic oversupply of houses, prices fall, collateral disappears, and even if borrowers are willing they can't qualify for loans. The other requirement is a willingness to borrow, motivated by what Keynes called the "animal spirits" of entrepreneurial enthusiasm. In a slump, such optimism is scarce. Even if people have collateral, they want the security of cash. And it is precisely because they want cash that they will not deplete their reserves by plunking down a payment on a new car.

The credit flow metaphor implies that people came flocking to the new-car showrooms last November and were turned away because there were no loans to be had. This is not true - what happened was that people stopped coming in. And they stopped coming in because, suddenly, they felt poor.

Strapped and afraid, people want to be in cash. This is what economists call the liquidity trap. And it gets worse: in these conditions, the normal estimates for multipliers - the bang for the buck - may be too high. Government spending on goods and services always increases total spending directly; a dollar of public spending is a dollar of GDP. But if the workers simply save their extra income, or use it to pay debt, that's the end of the line: there is no further effect. For tax cuts (especially for the middle class and up), the new funds are mostly saved or used to pay down debt. Debt reduction may help lay a foundation for better times later on, but it doesn't help now. With smaller multipliers, the public spending package would need to be even larger, in order to fill in all the holes in total demand. Thus financial crisis makes the real crisis worse, and the failure of the bank plan practically assures that the stimulus also will be too small.

In short, if we are in a true collapse of finance, our models will not serve. It is then appropriate to reach back, past the postwar years, to the experience of the Great Depression. And this can only be done by qualitative and historical analysis. Our modern numerical models just don't capture the key feature of that crisis - which is, precisely, the collapse of the financial system. If the banking system is crippled, then to be effective the public sector must do much, much more. How much more? By how much can spending be raised in a real depression? And does this remedy work? Recent months have seen much debate over the economic effects of the New Deal, and much repetition of the commonplace that the effort was too small to end the Great Depression, something achieved, it is said, only by World War II. A new paper by the economist Marshall Auerback has usefully corrected this record. Auerback plainly illustrates by how much Roosevelt's ambition exceeded anything yet seen in this crisis:

[Roosevelt's] government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York's Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown. It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country's entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.
In other words, Roosevelt employed Americans on a vast scale, bringing the unemployment rates down to levels that were tolerable, even before the war - from 25 percent in 1933 to below 10 percent in 1936, if you count those employed by the government as employed, which they surely were. In 1937, Roosevelt tried to balance the budget, the economy relapsed again, and in 1938 the New Deal was relaunched. This again brought unemployment down to about 10 percent, still before the war.

The New Deal rebuilt America physically, providing a foundation (the TVA's power plants, for example) from which the mobilization of World War II could be launched. But it also saved the country politically and morally, providing jobs, hope, and confidence that in the end democracy was worth preserving. There were many, in the 1930s, who did not think so.

What did not recover, under Roosevelt, was the private banking system. Borrowing and lending - mortgages and home construction - contributed far less to the growth of output in the 1930s and '40s than they had in the 1920s or would come to do after the war. If they had savings at all, people stayed in Treasuries, and despite huge deficits interest rates for federal debt remained near zero. The liquidity trap wasn't overcome until the war ended.

It was the war, and only the war, that restored (or, more accurately, created for the first time) the financial wealth of the American middle class. During the 1930s public spending was large, but the incomes earned were spent. And while that spending increased consumption, it did not jumpstart a cycle of investment and growth, because the idle factories left over from the 1920s were quite sufficient to meet the demand for new output. Only after 1940 did total demand outstrip the economy's capacity to produce civilian private goods - in part because private incomes soared, in part because the government ordered the production of some products, like cars, to halt.

All that extra demand would normally have driven up prices. But the federal government prevented this with price controls. (Disclosure: this writer's father, John Kenneth Galbraith, ran the controls during the first year of the war.) And so, with nowhere else for their extra dollars to go, the public bought and held government bonds. These provided claims to postwar purchasing power. After the war, the existence of those claims could, and did, establish creditworthiness for millions, making possible the revival of private banking, and on the broadly based, middle-class foundation that so distinguished the 1950s from the 1920s. But the relaunching of private finance took twenty years, and the war besides.

A brief reflection on this history and present circumstances drives a plain conclusion: the full restoration of private credit will take a long time. It will follow, not precede, the restoration of sound private household finances. There is no way the project of resurrecting the economy by stuffing the banks with cash will work. Effective policy can only work the other way around.

That being so, what must now be done? The first thing we need, in the wake of the recovery bill, is more recovery bills. The next efforts should be larger, reflecting the true scale of the emergency. There should be open-ended support for state and local governments, public utilities, transit authorities, public hospitals, schools, and universities for the duration, and generous support for public capital investment in the short and long term. To the extent possible, all the resources being released from the private residential and commercial construction industries should be absorbed into public building projects. There should be comprehensive foreclosure relief, through a moratorium followed by restructuring or by conversion-to-rental, except in cases of speculative investment and borrower fraud. The president's foreclosure-prevention plan is a useful step to relieve mortgage burdens on at-risk households, but it will not stop the downward spiral of home prices and correct the chronic oversupply of housing that is the cause of that.

Second, we should offset the violent drop in the wealth of the elderly population as a whole. The squeeze on the elderly has been little noted so far, but it hits in three separate ways: through the fall in the stock market; through the collapse of home values; and through the drop in interest rates, which reduces interest income on accumulated cash. For an increasing number of the elderly, Social Security and Medicare wealth are all they have.

That means that the entitlement reformers have it backward: instead of cutting Social Security benefits, we should increase them, especially for those at the bottom of the benefit scale. Indeed, in this crisis, precisely because it is universal and efficient, Social Security is an economic recovery ace in the hole. Increasing benefits is a simple, direct, progressive, and highly efficient way to prevent poverty and sustain purchasing power for this vulnerable population. I would also argue for lowering the age of eligibility for Medicare to (say) fifty-five, to permit workers to retire earlier and to free firms from the burden of managing health plans for older workers.

This suggestion is meant, in part, to call attention to the madness of talk about Social Security and Medicare cuts. The prospect of future cuts in this modest but vital source of retirement security can only prompt worried prime-age workers to spend less and save more today. And that will make the present economic crisis deeper. In reality, there is no Social Security "financing problem" at all. There is a health care problem, but that can be dealt with only by deciding what health services to provide, and how to pay for them, for the whole population. It cannot be dealt with, responsibly or ethically, by cutting care for the old.

Third, we will soon need a jobs program to put the unemployed to work quickly. Infrastructure spending can help, but major building projects can take years to gear up, and they can, for the most part, provide jobs only for those who have the requisite skills. So the federal government should sponsor projects that employ people to do what they do best, including art, letters, drama, dance, music, scientific research, teaching, conservation, and the nonprofit sector, including community organizing - why not?

Finally, a payroll tax holiday would help restore the purchasing power of working families, as well as make it easier for employers to keep them on the payroll. This is a particularly potent suggestion, because it is large and immediate. And if growth resumes rapidly, it can also be scaled back. There is no error in doing too much that cannot easily be repaired, by doing a bit less.

As these measures take effect, the government must take control of insolvent banks, however large, and get on with the business of reorganizing, re-regulating, decapitating, and recapitalizing them. Depositors should be insured fully to prevent runs, and private risk capital (common and preferred equity and subordinated debt) should take the first loss. Effective compensation limits should be enforced - it is a good thing that they will encourage those at the top to retire. As Senator Christopher Dodd of Connecticut correctly stated in the brouhaha following the discovery that Senate Democrats had put tough limits into the recovery bill, there are many competent replacements for those who leave.

Ultimately the big banks can be resold as smaller private institutions, run on a scale that permits prudent credit assessment and risk management by people close enough to their client communities to foster an effective revival, among other things, of household credit and of independent small business - another lost hallmark of the 1950s. No one should imagine that the swaggering, bank-driven world of high finance and credit bubbles should be made to reappear. Big banks should be run largely by men and women with the long-term perspective, outlook, and temperament of middle managers, and not by the transient, self-regarding plutocrats who run them now.

The chorus of deficit hawks and entitlement reformers are certain to regard this program with horror. What about the deficit? What about the debt? These questions are unavoidable, so let's answer them. First, the deficit and the public debt of the U.S. government can, should, must, and will increase in this crisis. They will increase whether the government acts or not. The choice is between an active program, running up debt while creating jobs and rebuilding America, or a passive program, running up debt because revenues collapse, because the population has to be maintained on the dole, and because the Treasury wishes, for no constructive reason, to rescue the big bankers and make them whole.

Second, so long as the economy is placed on a path to recovery, even a massive increase in public debt poses no risk that the U.S. government will find itself in the sort of situation known to Argentines and Indonesians. Why not? Because the rest of the world recognizes that the United States performs certain indispensable functions, including acting as the lynchpin of collective security and a principal source of new science and technology. So long as we meet those responsibilities, the rest of the world is likely to want to hold our debts.

Third, in the debt deflation, liquidity trap, and global crisis we are in, there is no risk of even a massive program generating inflation or higher long-term interest rates. That much is obvious from current financial conditions: interest rates on long-maturity Treasury bonds are amazingly low. Those rates also tell you that the markets are not worried about financing Social Security or Medicare. They are more worried, as I am, that the larger economic outlook will remain very bleak for a long time.

Finally, there is the big problem: How to recapitalize the household sector? How to restore the security and prosperity they've lost? How to build the productive economy for the next generation? Is there anything today that we might do that can compare with the transformation of World War II? Almost surely, there is not: World War II doubled production in five years.

Today the largest problems we face are energy security and climate change - massive issues because energy underpins everything we do, and because climate change threatens the survival of civilization. And here, obviously, we need a comprehensive national effort. Such a thing, if done right, combining planning and markets, could add 5 or even 10 percent of GDP to net investment. That's not the scale of wartime mobilization. But it probably could return the country to full employment and keep it there, for years.

Moreover, the work does resemble wartime mobilization in important financial respects. Weatherization, conservation, mass transit, renewable power, and the smart grid are public investments. As with the armaments in World War II, work on them would generate incomes not matched by the new production of consumer goods. If handled carefully - say, with a new program of deferred claims to future purchasing power like war bonds - the incomes earned by dealing with oil security and climate change have the potential to become a foundation of restored financial wealth for the middle class.

This cannot be made to happen over just three years, as we did in 1942-44. But we could manage it over, say, twenty years or a bit longer. What is required are careful, sustained planning, consistent policy, and the recognition now that there are no quick fixes, no easy return to "normal," no going back to a world run by bankers - and no alternative to taking the long view.

A paradox of the long view is that the time to embrace it is right now. We need to start down that path before disastrous policy errors, including fatal banker bailouts and cuts in Social Security and Medicare, are put into effect. It is therefore especially important that thought and learning move quickly. Does the Geithner team, forged and trained in normal times, have the range and the flexibility required? If not, everything finally will depend, as it did with Roosevelt, on the imagination and character of President Obama.

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James K. Galbraith's new book is The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. He holds the Lloyd M. Bentsen Jr. Chair in Government/Business Relations at the LBJ School of Public Affairs, University of Texas at Austin, and is senior scholar with the Levy Economics Institute.

An old (Navy, I think) saying, speaks of phony pumping up of insignificant issues, as "a fart in a typhoon."

In a sense that's what these AIG bonuses are.

They have no impact on the huge numbers involved in the larger picture. And are hardly of significance compared to the systemic madness that went on for decades and has now nearly brought the global financial system to its knees.

But as many have pointed out, it may serve a useful purpose.

Which is to put us back on notice that simply having money electronically transferred into our 401Ks and then going on as if our future was automatically ensured, is not prudent management.

I am describing my own case. Although I have been paying a fee to a financial advisor for many years, who is my surrogate in watching what happens to my fortunes, I have let him do that without much from me. He likely would take issue with that since I email him an endless stream of articles and my own opinions on all sorts of things. And I am a market watcher.

But when it comes to specifically how to invest, I inevitably defer to him. He is kind - and smart - enough to consult me, and feed me a lot of information, then ask if I think it sounds like a good move. I wonder how many - if any - times I have disagreed with his counsel.

And there's the rub in this matter of paying closer attention so the scoundrels like Madoff don't have free rein.

It's not simply that I don't have the time or expertise to read a company's balance sheet or prospectus and decide whether they have a business plan that fits with my investment strategy. It's that there are so many layers between my small investment and the company (or bond), that I really have no idea how it goes through the layers.

This came to mind in the article I read about the indictment of Madoff's accountant. He is not being accused of having been a part of the scam, but basically - if I am reading it right - of simply not doing his due diligence. He was hired by Madoff (there's a fly in the ointment, that man who paid his fee was the one he was supposed to be watching over) to examine his books and, at the very least, let investors know that the books were in order, met basic accounting rules.

Which they didn't. Because there were in fact not investments to match the numbers on the opposite side of the ledger.

But the accountant - who took over doing Madoff's books more than a decade ago, from his father-in-law who had kept them for many decades before - was a friend and longtime associate of Madoff (who invested with him and lost a lot), and likely assumed, along with all those other investors, that the fraud we know know about, was simply unimaginable for a man of Madoff's character.

My investment advisor points out the many safeguards in our relationship that make such a thing impossible. I trust him and I believe there are as many safeguards as possible.

Yesterday some techie won a large cash prize for hacking into Microsoft's new software. Microsoft put up the prize, both, not doubt believing their new product was unassailable, and, horrors, needing to find out if it may be.

The populist outrage about the AIG bonuses is an appropriate response in a democratic society by people who believe no one should be powerful or smart enough to be able to manipulate the system at their expense.

But the reality in this wired, interconnected world is that, if I want to play in the traffic, I am going to have to take risks, because those are smart, avaricious people out there who are looking for ways to game the system.

So maybe raising a stink when something comes along that we can all understand - like huge bonuses for the very people who ran the companies into the ground - at least makes them nervous enough to cool it for a while.

Like many men of my vintage and rank I have a stud box on my bureau. The name and function come from a period predating stud meaning virile. It refers instead to the fasteners that hold together a boiled-front blouse a man wears with formal evening dress.

The stud box, red leather, my initials embossed in gold, was an usher’s present from my college roommate’s wedding 46 years ago. It has survived the ravages of time and at least 20 moves, because I open it only perhaps once every other year. I find paper clips, a silver dollar, a few coins from the Philippines, mother-of-pearl studs I think belonged to my grandfather.

A gold pocket watch – also my grandfather’s - I actually carried for a few years in my vest when three piece suits signaled having arrived. It is inscribed B. Laval­ on the back. Son, the Cambodian watchmaker, tells me it is in fact a clock, not a watch (because it winds and sets with a key, which is attached by a chain), made in France in the latter part of the 19th century. On the end with the key is a gold medallion marked with my ordination date, a tiny flat gold case holding a carpenter’s pencil, and a gold cigar cutter sized for snipping the end of a between-the-acts small cigar a gentleman would smoke during intermission at the opera. I once bought a pack of those small cigars just to try the thing. After shredding three cigars, I threw away the rest and was content to have the thing remain a vestigial icon.

Not likely enough gold to restore my shriven fortune.

Among the paper clips and gold, a pair of cufflinks, large and gaudy (I have only one shirt that will take cuff links, a clergy shirt I trot out for the odd funeral) but too evocative to get rid of. Triangular, faux gold with raised image of the U.S. Capitol and the Presidential Seal, they are from the only presidential inauguration I am likely ever to attend. January 1973, my friend Jeb Magruder, soon to face federal prison – Watergate - was in charge of the inauguration. Despite having put up with my endless grousing about his administration, he generously gave me access to virtually every event.

So I have these cufflinks, inscribed, The Inauguration of Richard Nixon and Spiro Agnew as President and Vice-President of the United States.

Nixon, and his HEW Secretary, Daniel Patrick Moynihan, came to mind yesterday when I took the attached photograph. Lacey told me that in the alley behind the Ferrari dealer a homeless woman had lined up several market baskets filled with her goods, an eloquent, unsettling statement about relative agencies of transport. [I tried to upload a photo of a Ferrari in the foreground, with market baskets with a homeless person's stuff in them, but it came up as gibberish]

Even when I still hoped my stud box might mark my station, I remember my uneasiness. In what our new progressive president wouldn’t dare suggest – for fear of the cries of Socialism - Moynihan persuaded Nixon that the best way to manage despised welfare in those dark days was to provide everyone a guaranteed annual income.

Moynihan understood the danger to a civil society of a few mega-rich calling the shots for the many who were struggling. But the Great Society had run smack into the inflation and rage Viet Nam inflicted on our nation and no one was in a mood to try bold new social experiments.

Driving home Wednesday night on dark, winding Rt. 79 from low to high desert, as you go from scruffy wilderness to the edge of the mega housing built fast and furiously recently for commuters to both San Diego and Los Angeles – where foreclosures have metastasized like a fast growing tumor – a car coming the other way on the winding, two lane road, flashed its lights.

I was driving the prescribed speed so I paid little heed. 1/8th of a mile later, a fleeting glimpse of a coyote, tall enough to look me in the eye, straddling the center line. I couldn’t have missed him by more than a couple of feet, the car coming the opposite way the same. I watched in my rear view mirror, but at 50mph I couldn’t see whether he made it across.

Yesterday walking home I heard someone shouting, No, Fred, you listen to me. You listen to me, Fred. No, Fred, you listen to me. Everyone on the street stopped and watched the young man on his phone, walking at a furious pace as he screamed, again and again, No Fred, you listen to me. Until finally (after one had the feeling the person on the other end had hung up), Either you offer me the price we agreed on, or… he stopped in mid-sentence, snapping his phone shut, reversed direction, his head down, shoulders slumped. We all resumed walking, grateful, in my case, to have been spared the awful details.

The night herons that have nested in the tall trees in La Jolla Shores for as long as anyone can remember, have come back. Though two of the larger tress in which their young fledge have been cut down to spare us their intolerable noise and mess, they’ve moved into palm trees everyone thought too spiny and flimsy.

Trying to divert coyotes and herons from ancient habitat is proving tricky. A generation of Americans is forming around realities unimaginable a couple of years ago. In the ubiquitous futures market it might be fascinating to see what you could get for that resilient homeless woman. Or the $300,000 Ferrari across the alley.

Or the gold icons I hoard in my stud box.






Now it is outrage at the AIG bonuses and claims that Obama's policies on "enemy combatants" is nothing more than window dressing on the policies of the Bush people that so enraged so many.

Seems the AIG business has the administration nervous that a "populist backlash" is building that could make it difficult or impossible for the administration to persuade congress to vote any further money (which most seem to think will likely be needed) to stabilize the banking system enough to get business going again.

The argument do far has been that the issue of rewarding proper behavior and punishing bad must wait until things stabilize. In practical terms this means giving more taxpayer money to the people who most contributed to this calamity, because to fail to do that would mean they might bring all the rest of us down with them.

The closest voice to sanity I have heard so far was voiced by a commentator who walked up and down the long line of people waiting to get into the court room the day Bernie Madoff was being sentenced. Many were people who had given him their money - all of it in many cases - to invest, because, as Elie Weisel of all people, said, "He had this almost mystical quality about him."

The commentator - in response to virtually unanimous sentiment among the bilked newly impoverished that the government should reimburse them in some way to some extent (duh, who would wish that?) - said, "Now wait a moment. I feel sorry for these people, and think Madoff should receive the worst punishment we hand out in this country. But these were mostly sophisticated investors. Hadn't they heard about not putting all your eggs in one basket?"

Anyone who has ever invested - and that includes people with 401Ks - has seen that disclaimer at the bottom of every report (often in fainter type than the rest) that says investments are not guaranteed by the FICA, and investors are always subject to loss.

Alongside our outrage at Madoff and AIG there needs to be a reminder that the happy riching up so many of us have enjoyed over the years, was a combination of luck and a growing economy. And that, were luck to change and the economy shrink - as has happened so dramatically - our happy riching could well turn to unhappy impoverishing.

It became part of the American sense of natural rights that investing - which my father taught me along with washing my hands and standing when a lady entered the room - was a proper thing to do. And doing what is proper should surely always be rewarded.

I hope we can stop those AIG bonuses, I think they are outrageous. But the auction we all played in has many parts. I always knew there was a downside. But I can't say I honestly thought we might have to go through anything like this. The reason I want those bonuses stopped is because I want young financial wannabes to understand the consequences when things go wrong, and because those guys are still in business only at the largesse of those of us who pay taxes.

As for the "enemy combatant" policies f the new administration, I see them in the same light as I see an awful lot of what has been done up until now by the Obama people.

Symbolic signals that they take a different view of many things the Bush people did, while wanting not to become too definitive so they may have to either reverse themselves or lie as they figure out some of the realities of what they face.

I asked a friend who was career undercover CIA how he imagined the security briefings given to candidate Obama might differ from those given to President Obama. He treated my question as if I had asked him to give me the code to unlock the nuclear trigger.

I think it is impossible to imagine what this young president hears shortly after he has his breakfast every morning.

Whether a bright, thoughtful person of integrity and complex mind can govern consistently with compassion and humanity in the world we now have, is being tested even as I write this.

I have immense respect, admiration, affection for Barack Obama. I am happy every day that we elected him, that he now sits in the seat occupied the past eight years by the many who gave me daily apoplexy. But I have never sat in that seat. I don't think I can conceive what comes to him every day.

If it is possible to make rules that treat middle and lower income with as much respect and fairness as those who are rich and powerful, and to wage war without polluting the ideals we Americans love to think imbedded in our character, this unusual young president may do it.

We'll see.

I love to think. And to read. And think.

Sometimes, as those closest to me are loathe to point out, I can create an entire world with my mind that turns out to be quite unrelated to what works best - or maybe even required - to navigate the real world.

But I become so wedded to what I have created in my rich imagination (and sometimes in this medium) that I will defend it to the death.

I have been doing that again.

To the death.

No need to get into the specifics except to say that I would almost literally be willing to die to defend my position of things that amount - to quote a phrase - to a fart in a typhoon.

I think I have done this all my life.

Is it possible to change such an entrenched habit?

I hope so.

But I better get busy. I'm slipping down that westward slope.

Who could have imagined a year ago at this time that we would be cheering the Dow struggling its way all the way above 7000?

And when you read the comments, you see no one is. Just tentatively welcoming three days of big gains rather than losses. But still wondering if we're going to see it all evaporate. As my wife says, "Watch out for Fridays; no one wants to get caught with money on the table facing two days of God-knows-what without a chance to sell."

CNBC isn't the only one fingering our new president for the market crashing. Never mind that it had already clearly showed its determination to plummet before he took office.

They decry his huge spending habits (they didn't think those were so bad when their guy was calling for those gigantic bail-outs) and are especially uneasy that he seems to want to do expensive things like making health care accessible, finding innovative ways to generate energy without adding more carbon to the atmosphere, and rewriting tax structure so it puts more burden on the wealthiest while providing relief to the rest of us. (Can it be that $250,000 really is the cut off between wealthy and whatever the rest of us are?)

Fix the banks first, they say. Then maybe we can - if prosperity returns - address those other issues.

But suppose one thinks the seeming sumptuous of a 14,000 Dow (yep, it hit 14,000 once) was an illusion, built on schemes no one really understood but - until the collapse - were eager to invest in because they looked like the fastest way to make big bucks?

And suppose one thinks that one reason confidence seems so hard to restart is not only because the banks balance sheets are still littered with those toxic investments, but because big business can't afford the health insurance costs for employees? And because the cost of cleaning up the environment - swept under the rug until now, are coming due. And the loss of jobs for people in the $50,000 - $100,000 range has so crippled, not only our nearly dormant industrial base, but resulted in ennui among the people who are the backbone of any healthy economy, that is like an open sore that won't heal?

I have no idea what might ignite a sustainable rally in the stock market. But I hope it won't again look for new ways to do its shell game to prop up stock prices, at the expense of honest and useful work.

But if our economy - and our country - are to regain health, it will be because these long neglected issues are at last being addressed. Yes, it is going to be expensive. Understanding that has no doubt been among the reasons we have put it off this long.

But President Obama - and by the way, me, too - believes not only that one reason for his election was to take these things on, but that if we don't, this scary slide we have been experiencing is going to keep on.

I'd love to believe one reason the stock market has had a nice run these past few days is because investors, much as they may dislike and even fear Obama's taking on health care, poverty, the environment, carbon dependence, they now believe he means to do it. So, as they always do, they are beginning to let go of all their old favored ways of making big money, and figure out how to play ball in this new league.

Now, that's capitalism at work.

March 10, 2009

The whole Drama of history is enacted in a frame of meaning too large for human comprehension or management. – Reinhold Niebuhr (1892-1971)

Only the madman is absolutely sure. -Robert Anton Wilson, novelist (1932-2007)

******

The mornings are still cold – 50º - especially now that 6am is the old 5am. But seemingly suddenly yesterday the air became redolent with the surprise of mock orange. On my walk up to my writing station this morning I noticed the flowering fruit trees displaying colors I seem every year to have forgotten. Two Bentleys – apparently unrelated – passed by on Torrey Pines Road. Turning left onto Cave Street my aging nostrils alerted me to the jasmine on the white picket fence before I saw it.

Last night, just as we were falling asleep, we heard a ruckus in our driveway. Because the young beautiful Argentinean couple who live downstairs have an enviable capacity for fun, I assumed that’s what we were hearing. This morning she told me he surprised a prowler slinking along the garage wall, trying to stay out of range of the motion detector light, our first brush with the crime wave we read these times have triggered.

Amidst the fear of impoverishment, and the rhetoric for and against the various rescue attempts – first by Bush, now by Obama – our capacity for surprise is perhaps the most surprising piece of this puzzle.

Even though I no longer have a day job I might lose, I follow all this as if I were standing on the precipice of the eroding cliff. I never had the courage to take a piece of the action as the adventuresome scaled heights that seemed to defy gravity, yet I feel the Gs tearing at us as the laws we thought we had repealed declare themselves.

You may find it partisan when I say I am glad this elegant, peculiarly American hybrid, seemingly unflappable, Zen-like young man has become cock of the walk just as so many chickens come home to roost.

But my pleasure is not about what he has so far done – it seems clear that no one yet knows what may slow, let alone reverse our descent – but that he is the sort to provide the symbols so necessary in a moment like this.

No need to recite the familiar statistics again about how out of balance things became – one nation spending more defending herself than the next 22 nations combined. Spending more on health care, on education, while falling behind in results. Consuming and polluting all out of proportion with our percentage of world population. 1% of us own 33.4% of total wealth, next 19%, 51%, leaving just 16% for remaining 80%. (2001 figures)

(Guess I just did recite them…)

With no way of knowing the outcome, this new president is presiding over a return to reality. Since we had been living with sumptuous illusion for a generation (unless you were among those falling behind) it’s no surprise we held out against reality as long as we could.

Although I felt free to stand aside and criticize plutocracy gone wild (even while I was producing nothing useful, enjoying a comfortable existence at the pleasure of some of the plutocrats) I, too, allowed myself to live as if perhaps some slice of reality had been revoked.

The surprise is that we are surprised. (Alan Greenspan, last year’s savior: The flaw in my system was assuming people behave rationally.)

Long before we knew, cyber forces and air travel erased the armor oceans provided for our charmed life. Viet Nam, Kosovo, N. Korea, Iraq, Afghanistan, mosquitoes buzzing maddeningly in the ear of Gulliver. We exported Hollywood images of life in the fast lane, (the first outdoor movie we saw in Zimbabwe was West Side Story) and the rest of the world sent us the gear to support it, happily funding our growing debt to keep us buying.

In an admiring piece about former Yankee’s manager, Joe Torre, Roger Angell explains how Torre managed to hang onto his humanity in the face of crushing pressure from Yankees megalomaniac owner Gorge Steinbrenner, not merely to win the World Series, but every game in the season: Torre’s instinctive fairness came from his firsthand knowledge of the inexorable built-in swoops and lurches of baseball fortune. (March 9 New Yorker)

In one of those mysterious ways reality has of appointing an unlikely patron, Barack Obama has become sponsor of reality reasserting itself. Spokesmen can end up scapegoat, driven into the wilderness before we embrace the reality. Perhaps the president is prepared should that be his lot.

The You Tube video of the black/white/Indonesian/African American President of the United States, trash-talking with Washington Wizard fans as he rooted for the Chicago Bulls at an NBA game, did more to cheer me up about how we’re going to cope with reality reclaiming our national life, than any op-ed piece or political speech.

You know, some days one just has to step back and punt.

Maybe some of that every day.

I look around as I go about my daily round, and the world looks much as it has.

But if I were to watch a time lapse film of - let's just say the neighborhood I live in, the walk I take every day to my writing station, the church where I worked for a decade, and the museum where I write now - a fast forwarding film of the people I see, the buildings and houses I pass, the cars that pass by - just the past 22 years I have been here, I would be astounded looking back at what it all looked like 22 years ago.

And looking forward from the beginning, even more astounded at what it looks like now.

But I have watched all this happening gradually, and hardly notice it. (Not quite true. As I age I become like all old people, incredulous at change and the habits, mores, dress and manners of people now)

So as I try to sort out what in the world things are going to be like going forward - and I do still think we will continue going forward - I get it that I not only don't know, but wouldn't be able to recognize it if I was granted a vision of it.

This week someone asked my what I think of the attacks - particularly by physicists and scientists - of all the recent attacks on religion.

I suppose he thought I would feel duty bound to defend religion, since I made my living at it all my working life.

Much of what people loath about religion, I like.

The pomp and ceremony of rich, liturgical worship. The mystery. The fun of speculating and imagining. Singing. Great music.

If only we didn't feel tied to the content.

The Bible is fascinating because it may be the richest summary of western human reaching for the stars, trying to find meaning and grandeur in the dirt of daily life.

The problem with religion as it seems usually portrayed, at least in this country, is that it claims to know the unknowable, to have experienced the ineffable, and to have the authority to demand fidelity to its conclusions about those matters on pain of eternal damnation.

Now eternal damnation begins at home. Though religions often promise that we will be lifted out of this vale of tears into a paradise if only we follow the prescriptions of the religious elders, the reality is that what is happening at this moment is the most we can know of heaven, hell or any other time and place.

And that there might be some great being somewhere who listens to our pleas to be released from the bonds of reality and then determines the outcome - and reorganizes the forces of the universe - is so beyond even the most primitive understanding of things as to be laughed at by anyone over eight years old.

No, the fun of religion is the practice of ceremony in the face of mystery, and the willingness to affirm life as a gift we neither earned nor deserve. And since - against inconceivable odds and beyond the reach of human wisdom - we found ourselves here, this is worthy of a celebration at least as great as marking the gift of another birthday.

Seems to me the mark of a religious person is the ability - after a long life, knowing what a long-lived person learns - one can say that, on balance, being here was a good thing for which he is grateful.

Now there is a creed worthy of the name.

I recently wrote a piece about my grandfather.

He was a difficult man. Likely an alcoholic. Smoked heavily (in the evening he smoke Melachrinos, a Turkish cigarette that pervaded his whole house.), had little use for his grandchildren until they were old enough to have drink with him and discuss world affairs. He was a snob, a racist and anti-semitic.

As I wrote about him I realized how much I loved him.

Then last night I picked up a new book, The Selected Letters of Thornton Wilder, which was given to me by friends who are friends with Tappy Wilder, executor of his uncle's literary estate.

Aside from "Our Town," Wilder had not much penetrated my consciousness. Turns out he was a contemporary of my grandfather, and went to Yale, as did Papa. So far as I know the two never met.

I might have merely glanced through the book and put it down, had not a name referred to in the introduction caught my attention. The name of a man I knew a little when I was an assistant at St. John's, Lafayette Square, the Episcopal Church across the square from the White House that immodestly refers to itself as "The Church of the Presidents." (Every president since Madison has at least made an appearance, as Obama did the morning of his inauguration.)

The man was an Episcopal priest, had been rector of St. John's until his divorce unseated him. (It wasn't until 1976 that an Episcopal priest could be divorced and still function as a priest). He was still very much present the years I was there - 1969-1973 - and, much to the annoyance of the rector at the time (my boss), a sought after dinner guest at embassies and even the White House (He had, by this time, remarried a very fancy lady)

I am embarrassed now to tell you that I held him in contempt. Which, I think, is the dark side of envy.

Always perfectly turned out, seemingly comfortable exchanging pleasantries in the corridors of power, he was everything I thought corrupted in a clergyman. And likely what I secretly (even to myself) longed to be like.

I dare tell you this now because I am old and beyond the seductions of those years. And I can look back on that man - and myself - with a compassion I dared not allow myself at the time.

If one of my grandchildren were to write about me fifty years after my death (that's how long my grandfather has been dead), I have no doubt they would find foibles too frequent to tally. And, I hope, the fun of having known a man of his time.

I think I learned a lot from Papa, much of it what I wanted to avoid.

And even more, a real live, fascinating, rich character still lays claim to space in my marrow.

In the writing group in Brattleboro I have been a part of for many years, Roger - who hasn't been with us for a while - used to do a variation on a theme that always rattled the rest of us.

Roger was born into a patrician Boston family from which - despite being educated at Milton and Harvard, the family academies - he departed, physically and emotionally. And philosophically and politically.

A film-maker by trade, Roger's real interest was economics. He was as sophisticated an economic theorist as I am likely ever to rub elbows with, and more weeks than not, that was what his writing focused on.

Roger understood the chimera of money.

That somewhere deep in the shadows of human pre-history, we agreed to let currency of various sorts stand in for the goods and services we exchange. This agreement made economic growth possible.

Roger - writing brilliantly, seductively, led us into the storm that would hit on the day we humans lost confidence in this confidence game we have been about for millennia. We never wanted to talk about it.

It left us potentially vulnerable to a degree unimaginable.

Until a moment like the one we are now in.

Roger's writings came back to me when I heard Alan Greenspan's mea culpa testimony before a congressional committee in which he said that the present collapse of the economic system in this country and around the world had exposed the flaw in his economic system, a system for which we had come close to canonizing him just a couple of years ago.

The flaw was not an error in some complex mathematical formula, understandable only by those with PhDs from the University of Chicago.

The flaw, the great man admitted, was his assumption that people in positions of great financial responsibility would always act rationally and in their own self-interest.

By self-interest - it turned out - he meant not willing to risk wrecking the corporation and stockholder positions by taking a dangerously risky short term position.

If he was giving it to us straight, he is the worst sort of policy wonk, sticking stubbornly to an elegant theory which reality has already clearly trumped. Or he is so old world that he truly still believes CEOs equate self-interest with the future prospects of the corporation they head. All a simpleton like me needs do is look at the social pages of the NY Times, or read the real estate section, or scan an annual report for the salary, bonus and stock options (if you are clever enough to discover where they have been amongst the trillion arcane numbers) to know that the game had shifted from good management to relative personal wealth.

There is a lot of moralizing abroad right now about the greedy Wall Street bankers and CEOs. But they are merely extensions of all the rest of us. Had their reach not so grievously exceeded their grasp - hiding time bombs in investment packages and selling them at insane prices - and the system that once took us to the nosebleed Dow number 14,000 - we would still be calling them Masters of the Universe. And without the barb.

But what those poor bastards did was to dangerously expose the soft underbelly of that agreement that has been in place for eons, and always rests on the most fragile of platforms: our consensus that the currency - in whatever form - does represent value. And that we can find common ground about what that value is.

As recently as a few decades ago, the world currencies were said to be backed by gold. In theory, the dollar in your wallet was represented by a dollar's worth of gold stored in Fort Knox. (Was it all in Fort Knox?) Since the value of gold fluctuates (it has gone just in the past 18 months from $400 - $1000) it was a tricky and uncertain equation. But it was the agreement we maintained in the world. That period's chimera.

When we felt it was too constraining, we abandoned the gold standard and moved to currency trading. You decided what a currency was worth by seeing how much of one currency (say, dollars), you would need to buy some other currency (say, yen).

Although this was a much less precise and more volatile method, it did juice up international commerce dramatically.

I have always been in awe of the willingness and ability of banks and brokerage houses to move billions of dollars back and forth overnight, without anything in my life seeming to be affected.

With the coming of digital electronic communication, trades and relative currency values are decided instantly.

And so are dilemmas.

When the game changed from good management to building vast personal wealth (the Big Dick contest), clever money managers looked for new ways to jack up profits fast. Analysts no longer measured a corporation's fortunes in years or quarters, or even months or weeks, but in instants. Managers found new ways to make the numbers jump, ways that often had nothing to do with increased value.

Banks (that had been freed to act like investment companies) and investment companies began to realize that they had on their books and large - but unknown - amount of things like mortgages made to people with no credit, mortgages with likely future default. And those mortgages had been bundled with a lot of other type investments, and rating companies had rated them AAA - meaning little or no risk. So they had paid top dollar for them.

In the click of a keystroke, the value of those bundles of investments began bleeding out.

And, it turns out, still no one is sure where all those bad debts are or what they are worth. Which means no one wants to lend money to the banks or investment houses that carry those investments, until someone, somehow decides their value.

Oh Roger, you were so right!

I just got word that a high school classmate killed himself last week.

He was far from my best friend, but I had gotten to know him at recent reunions, and liked him. A free spirit, thanks largely to decades in AA and a natural empathy for people beat up by life.

Seems the economic collapse finally caused him to decide he didn't want to go on. I know nothing of what he was facing. He wasn't married any longer, though he had a long list of children, step-children and people he called his "adopted family." I assume he wasn't financially responsible for them.

From what I know of John, his decision to commit suicide was brave and principled. I think some of our classmates found him a little scary because he went face-first into every tough issue there was. And he loved nothing better than to take on those in the class who had an Ayn Rand view of life, believing it should be every man for himself and may the devil take the hindmost.

His suicide, which I hugely regret, triggers my confusion about the anger my hard right Republicans are expressing about Obama these days. (I am so glad they seem to be in an ever decreasing number, a minority)

The old arguments about big government, nanny government, reckless spending, gigantic deficits.

As if all that began on January 20th.

I say to them, When the global financial system regains some semblance of order - assuming it does, which I do assume - then we can resume arguing about how much government versus private enterprise.

But right now we are like the doctor treating a patient with a rapidly advancing systemic infection in intensive care. Having tried the medical options - antibiotics, steroids - to none effect, we had to decide whether to amputate limbs ahead of the infection to try to save the patient's life. We all understood that amputating a limb, and maybe more than one, meant the patient's life would never again be what it once was. But we judged that saving his life was highest priority, and we would be faced with more difficult decisions about how to manage the consequences of this drastic treatment if and when he recovered his health.

No one is arguing that the government becoming the country's primary banker is a welcome occurrence. Nor that printing money to cover massive, unrecoverable debt won't have unwelcome consequences down the road. Right now we are in triage mode, simply intervening to try to save the life ebbing quickly out of grasp.

No doubt there comes a point in any treatment protocol at which the question of relative value comes up. Even if this next drastic choice might keep the patient alive, will he suffer irreversible brain damage, or be so severely dependent on outside help to live day to day, that letting him die might be a better choice?

Although some of the anger of my Republican friends makes me wonder what they think, I feel we are still a long way from letting the financial system die. Bernanke and company had a brief go at that when they let Lehman fail. And that quickly had such drastic effect around the world, that they quickly reversed themselves when AIG (which is sinking markets today with its nasty earnings numbers a need for further capital) looked to be in death throes.

I am grieved that my friend John decided to throw in the sponge, but I understand and respect his decision.

But until our government, and governments around the world, decide to do the same, I would think even Republicans who are swallowing the bitter pill of a Democrat in the White House, might want to hold their fire while the system on which we all depend, is getting CPR.