Thomas Frank discusses his book, “Rendezvous With Oblivion” at Politics and Prose on 6/21/18.
If anyone can make sense of our polarized, divided, and increasingly frustrated nation, Frank can. One of the sharpest political commentators at work today, Frank, author of Listen, Liberal and the classic What’s the Matter with Kansas?, has gathered a wide-ranging selection of his essays that begins to put the messiness that is Trump’s America into some kind of perspective. Energetic, realistic, and outraged, Frank, founding editor of The Baffler and regular contributor to The Guardian, writes with his signature wit and uncompromising common sense, taking us around the country for an incisive examination of how inequality is manifesting itself in cities, workplaces, and politics.
Thomas Frank is the author of Listen, Liberal, Pity the Billionaire, The Wrecking Crew, and What’s the Matter with Kansas? A former columnist for The Wall Street Journal and Harper’s, Frank is the founding editor of The Baffler and writes regularly for The Guardian. He lives outside Washington, D.C.
A big financial-firm collapse in near future is exceedingly unlikely, but another crisis isn’t
.. Bear and Lehman were the manifestation of deeper economic forces that since the 1970s have produced crises roughly every decade. They are still at work today: ample flows of capital across borders, mounting debts owed by governments, corporations and households, and ultralow interest rates that nurture risk-taking in hidden corners of the economy.
By the early 1980s, though, deregulation had allowed capital to flow freely within and across borders and crises became a regular occurrence: the Latin American debt crisis that began in 1982,
- the U.S. commercial real estate and savings and loan crisis of the 1980s,
- the Asian and Russian financial crisis of 1997-98,
- the dot-com bubble of 1998-2000,
- the U.S. mortgage crisis of 2007-2009 and
- the European sovereign debt crisis of 2009-2013
.. Bear was both facilitator and victim of a housing bubble inflated by low interest rates and huge inflows of foreign capital—a “global saving glut” as then-Federal Reserve Chairman Ben Bernanke put it.
.. It arranged mortgages that financed the housing bubble while borrowing heavily with short-term IOUs.
.. When those mortgages went bad, Bear’s creditors yanked their funds—a de facto run on the bank.
Most of the regulatory effort since has been to ensure the largest financial institutions such asJPMorgan Chase & Co., which bought Bear Stearns in a fire sale brokered by the Fed, don’t succumb to anything similar:
- thicker buffers of capital to absorb losses,
- more reserves of cash and liquid assets to pay off skittish creditors,
- restrictions on trading and compensation that incentivize risk-taking, and
- new procedures for winding down failing institutions without taxpayer bailout or a chaotic bankruptcy.
Hyun Song Shin, research chief at the Bank for International Settlements, warned in a 2014 speech against the tendency to “focus on known past weaknesses rather than asking where the new dangers are.”
.. bond markets are growing at the expense of banks in supplying credit, enabling business and government debt loads in many countries to surpass their precrisis peaks.
.. Emerging markets have borrowed heavily in dollars, which leaves them vulnerable should the dollar’s value rise sharply
.. Total U.S. debt, at around 250% of GDP, still stands at crisis-era peaks while debt levels in China have caught up and passed the U.S.
.. Crises surprise because they usually start with an assumption so sensible that everyone acts on it, planting the seeds of its own undoing:
- in 1982 that countries like Mexico don’t default;
- in 1997 that Asia’s fixed exchange rates wouldn’t break;
- in 2007 that housing prices never declined nationwide; and
- in 2011 that euro members wouldn’t default.
.. the equivalent today might be, “We will never see higher inflation or higher growth.” If either in fact occurs, the low interest rates that have raised household stock and property wealth to an all-time high relative to disposable income won’t be sustainable.
.. A 1.5 to 2 percentage point increase in real interest rates, which he isn’t forecasting, would be small by historical standards but could potentially make the debts of Italy or Portugal unsustainable.
.. Central banks know this, of course, which is one reason they are wary of raising interest rates too quickly—while nervous that if they raise them too slowly, the problem will get worse.
.. State and local officials have praised the move, saying their securities could suffer if banks begin to shun them.
.. “It’s an outrageously bad idea,” said Phillip Swagel, a professor at the University of Maryland who served in the George W. Bush Treasury, characterizing the provision as an implicit federal guarantee of the municipal market. In the next crisis, banks will have trouble selling their municipal securities, freezing up the market for them and requiring the government to step in to backstop it, he predicted.
.. the Volcker rule, which limits certain types of trading for banks, should get a “less burdensome” implementation.
With Steve Bannon out of the White House, it’s clearer than ever that Donald Trump’s promise to be a populist fighting for ordinary workers was worth about as much as any other Trump promise — that is, nothing.
His agenda, such as it is, amounts to reverse Robin Hood with extra racism — the conventional Republican strategy of taking from struggling families to give to the rich, while distracting lower-income whites by attacking Those People, with the only difference being just how blatantly he plays the race card.
.. So is the Trump agenda dead? Not necessarily, because trickle-down has never been the whole story of the Republican assault on workers. Or to put it another way: Don’t just watch Congress, keep your eyes on what federal agencies are doing.
.. According to the Congressional Budget Office, back in 1980 the top 1 percent paid 33 percent of its income in federal taxes. Under Reagan, that share briefly fell below 25 percent. But as of 2013, the most recent year covered, Obama’s tax hikes had brought federal taxes on the 1 percent back up to 34 percent of income.
.. Medicaid, which in 1980 covered only 7 percent of nonelderly Americans. Today that number is up to 21 percent.
.. While the rich still pay taxes and the safety net has in some ways gotten stronger, the decades since Reagan have nonetheless been marked by vastly increased inequality, with stagnating wages for most, but soaring incomes for a tiny elite. How did that happen?
Yes, globalization probably played some role, as did technology. But other wealthy countries, just as exposed to the winds of global change, haven’t seen anything like America’s headlong rush into a new Gilded Age. To understand what happened to us, and in particular to American workers, you need to look at policy
.. truck drivers, whose pay used to make them members of the middle class. No more: Their real wages have fallen about a third since the 1970s, with most of the decline taking place during the Reagan years.
.. What happened to truckers was, basically, the collapse of their bargaining power due in part to a changed ideological climate — not least at the National Labor Relations Board — that encouraged private employers to fight unionization, and in part to deregulation that undercut the position of unionized firms.
.. Does anyone doubt that financial deregulation played an important role in surging incomes at the very top of the income distribution?
Nothing in his history as a developer showed any inclination to a friend of working people:
- He bought foreign steel because it was cheaper;
- he imported foreign workers because he could pay them less and they are more vulnerable;
- he stiffed small contractors because they couldn’t fight back.
.. I bristle when i hear the chattering class call Trump a populist. He’s not. Like the entire GOP, he is a classist, mouthing platitudes to fool the masses but acting as reverse Robin Hoods when it really counts. The entire charade of repealing ACA is a prime example
.. Populists are politicians who fight to help people who need the federal government to protect them against the rich and powerful.
.. James J: .. For those who do not know and associate with members of the working class, voting against one’s own economic self interest is a head-scratcher. But today’s working class is not your father’s working class. It certainly is not MY father’s working class.
Dad, because of The Depression and then war in Europe, never graduated high school. But he was an avid reader — our small working class home in a Midwest auto town was filled with books, newspapers and magazines of all varieties. He and our neighbors were union and they knew the issues.
Today’s working class has an appetite for information, but the source of that info is polluted. It comes from outlets owned by the same corporate billionaires who are picking workers’ pockets for 40 hours a week.
The outlets — Fox News, Breitbart… — are managed by very intelligent, very schooled and very slick pros. They play the intellectually lazy and proudly uneducated like a symphony; the best cons are the ones where the marks walk away thinking they got the best of the deal.
Today’s working class thinks it understands complex issues because its members read Tweets and listen to manipulating right-wing talk radio all day.
And once whipped into a hateful lather by millionaires con artists like Rush and Hannity and Bannon, economic self interest disappears behind a fog of anger and dogma.