Consumer confidence men

Sam IsraelThe more I see pundits scoring Barack Obama’s performance based on Wall Street’s reaction, according to how much hope Obama is able to infuse into the public’s faltering confidence in the economy, I have to ponder the uncomfortable etymology of the term CON ARTIST. Con Man is short for Confidence Man, itself a now obscure euphemism for chiseler, defrauder, grifter, scammer, swindler, gouger, or fraud. But the term is still charmingly descriptive.

While even the disreputable economists now admit that Americans can expect much worse from our economy, Bill Clinton is publicly counseling President Obama to come across with more confidence about our nation’s financial prospects.

The ex-president formally known as Slick Willy is talking about your confidence to spend, without regard to whether you may lose your job, your home, your health, or your life savings.

It’s money that makes the world go round. They need everybody’s, including yours. All the better if you have to borrow it, because you really are of little use to a monetary system unless you take out a loan and pay interest.

Otherwise, with what is anybody going to laugh all the way to the bank?

The following are a few relevant dictionary definitions. Actually, I thought they were going to be more tangential:

consumer confidence
The degree of optimism that consumers are expressing for the state of the economy through their saving and spending activity.

con·fi·dence
Trust or faith in a person or thing.

confidence man
A swindler who exploits the confidence of his victim.

confidence game
A swindle in which the victim is defrauded after his or her confidence has been won.

confidence trick
A swindle in which you cheat at gambling or persuade a person to buy worthless property.

toxic asset
Not in the dictionary. Not even Orwell’s 1984. Could this be the balance sheet doppelganger to the “good-for-you liability?” Does it share the value of a “profit-net-loss” as n approaches zero? The meaning of toxic asset would be recognizably oxymoronic, if it weren’t for the fine suits worn by the FED’s confidence men. Literally, shouldn’t a carcinogenic nutrient translate, currency-exchange wise, into Funny Money?

Much as the banks want to disguise it, a Toxic asset sounds to me like Spilt Milk, an idiom for which we already know the recourse. A chorus of cries from Bernanke, Volcker, Paulson & Rubin would not then be able to convince us to put it back in the bottle and pay for it again.

Eric Verlo

About Eric Verlo

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7 Responses to Consumer confidence men

  1. Avatar Don says:

    Eric,

    You wrote:

    …Bill Clinton is publicly counseling President Obama to come across with more confidence about our nation’s financial prospects.

    The ex-president formally known as Slick Willy is talking about your confidence to spend, without regard to whether you may lose your job, your home, your health, or your life savings.

    What President Clinton is advising is consistent with mainstream economic thought. Markets can and do go to excess. The collapsed housing bubble is just the latest example where home prices rose to levels unjustified by underlying fundamentals and later plunged in the other direction, undermining the nation’s banking system and sparking a severe credit crunch.

    In order to reduce the risk of the kind of negative psychology that can lead to a self-reinforcing downturn that would be extremely difficult to reverse, a President needs to provide the nation with a measure of confidence that his program will turn things around. Otherwise, people could make steps that would lead to an overall deeper and longer recesson.

    In terms of a confidence to spend, President Clinton is addressing the “Paradox of Thrift.” While it makes sense for individuals to restrain their spending/cut their debt, the macroeconomic impact is a sharper and longer economic contraction. In such a situation, consumers cut spending, business revenue falls, companies lay off more workers, increasingly worried consumers further reduce their spending and the cycle goes on. That’s the kind of situation President Clinton’s advice aims to avert.

  2. Avatar Tony Logan says:

    Don, don’t you find all this pretense that traditional American national economic policy is somehow going to reverse a capitalist downturn in the world economy all by itself somewhat delusional? I mean especially since there is no willingness to give up much of the corruption and graft of the American national economy anyway.

    Whether or not Barack Obama has a big shit eating smile on his face when he talks to the public about the economic future of the country is kind of beside the point? It won’t fool people for very long no matter what.

  3. Avatar Don says:

    Tony,

    I never suggested that the U.S., alone, can turn around its economy. The fiscal and monetary policy measures it takes can help. Longer-term regulatory, monetary and fiscal policy reforms can reduce, but not eliminate, the risk of future asset bubbles similar to the housing bubble that precipitated the current economic challenges and strengthen the ability of the banking system to cope with such situations.

    However, as has often happened when an economic crisis originates in a regional or global financial center e.g., the U.S. this time around, the contagion is present regionally or globally.

    Consistent with the historical experience, there are synchronized recessions occurring in the U.S., Europe, Japan, and other parts of Asia with the recession being transmitted through the global financial system and also trade via collapsing exports. A coordinated global response will also be necessary to help restore economic growth and, later, address some of the factors that led to or amplified the current economic challenges.

  4. Avatar Tony Logan says:

    Hey, Don, I’m glad you’re still here and even posting to other items than the Israel-Palestine split! So I asked my original question of you from a friendly position, not an adversarial one. To me, it does get rather irritating to see national leaders of any country all pretending that national solutions will solve problems in the national economy that are mainly generated by international collapse of the world capitalist economy.

    The world is not able to sell the goods it has already produced because the world has a standard capitalist downturn caused by overproduction. In short, we face a down in the standard capitalist economic cycle. Some downs are rather small and isolated to one nation or other, and some are huge and worldwide in scope. That’s what’s faced today.

    Unfortunately, the record the world capitalist economy has on historical file is a rather bleak one. Both WW1 and WW2 came out of 2 other world wide collapses of this magnitude, and this one is worse because it comes on top of planetary ecological collapse. It’s a very depressing situation for human kind. No pun intended.

  5. Avatar Don says:

    Tony,

    I didn’t take your response as “adversarial.”

    Unfortunately, national leaders can sometimes take a more provincial view, because, in general, they are less familiar with overseas relationships e.g., global linkages between financial systems, capital flows, information flows, etc. Sometimes they can favor more national solutions simply because they have greater control over national policy than they do over matter of international affairs where the interests of the various nations may diverge.

    I don’t believe the current economic crisis is the result of overproduction. Typically overproduction leads to a pileup of inventory and a recession occurs until such excesses are worked off.

    The current recession has resulted from the collapse of a housing bubble. In the run-up of the bubble, outstanding U.S. mortgage debt rocketed to more than 100% of GDP. Previously, mortgage debt had never topped 67% of GDP.

    As housing prices turned downward, the excessive debt undermined the nation’s financial institutions. Afterward, despite aggressive policy steps by the Federal Reserve, a severe credit crunch eventually unfolded. The securitization process and trade linkages resulted in what had initially been a U.S. financial crisis evolving into a global macroeconomic downturn. Additional significant economic shocks may yet occur.

    Of course, the housing bubble illustrates the reality that markets are not perfect. They contain random inefficiencies. Their participants are not always rational. Otherwise, externalities, e.g., pollution, could be addressed purely through markets, but that isn’t the case, and the kind euphoria that leads to asset bubbles and panic that leads to stock market crashes or housing busts once such bubbles burst, as they always do, would not develop.

    All said, some regulation is necessary. Some role for government is essential. In the aftermath of the current severe recession, it will be incumbent on policymakers to find the proper regulatory balance to address broad matters such as financial risk management, pollution, climate change, etc.

  6. Avatar Tony Logan says:

    To see a discussion about this, Don, check out ‘Overproduction not Financial Collapse is the Heart of the Crisis: the US, East Asia, and the World’ at http://www.japanfocus.org/_Robert_Brenner__S_J_Jeong-Overproduction_not_Financial_Collapse_is_the_Heart_of_the_Crisis__the_US__East_Asia__and_the_World/

    And I might mention that American economist and historian William Greider also discussed this back in 1998 in his book published then, ‘One World, Ready or Not: The Manic Logic of Global Capitalism’. See ‘Greider’s Crisis of Overproduction and Underconsumption’ for a discussion of this back in 2007 at http://www.associatedcontent.com/article/285624/greiders_crisis_of_overproduction_and.html

    What find especially interesting about Jeong Seong-jin’s opinion is that he correctly centers this crisis in over production with China, plus correctly states that China is a capitalist country at this point in time.

  7. Avatar Don says:

    Thanks Tony.

    I’ll take a look at those links later today.

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