THE BUBBLE BOYS ARE BACK!


THE ETERNAL RETURN OF THE SAME: BRIGHT IS RIGHT.

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As Frank Rich points out in his editorial, “The Brightest are not always the Best”, the Obama economic team smacks of a lesson not learned, and a disaster in waiting (New York Times, December 7, 2008).

The situation is this: the Obama economic team is made of protégés, followers and assistants of Robert Rubin, and even of assistants of his assistants (the new treasury secretary is the ex-assistant of Summers, Obama’s top economic adviser, himself a Rubin protégé). Rubin was treasury secretary under Clinton, and widely viewed as a genius, by the plutocrats. Rubin directed the entire US economy towards financial deregulation, ever greater leverage and apparently, witchcraft, since Mr. Rubin, being a genius, intended to make everything from nothing. In recent years, Rubin was the genius behind the creation and strategy of Citigroup (the bankruptcy of which is in the process of costing hundreds of billions of dollars to US taxpayers; but not to worry: Citigroup is still led by Rubin, who made 119 million from it in the last few years).

Yes, the bubble boys of the Clinton era are back, thanks to Mr. Obama. This has to be considered carefully. That Clinton did not do anything about the bubble boys when they first came to power is understandable. First, they had not made their bubbles yet.

A young naive and inexperienced Clinton was not mentally equipped for high economics, and was surrounded by those with facile and glittery speech.  After Rubin told Clinton what, he, Clinton, was going to do during his presidency, Clinton said: “Are you telling me that my reelection depends upon f… bond traders?” Clinton was unaware that Rubin impressed on him a confusion between finance and economics.

Only in 2008 has it become obvious to everybody how disastrous Rubin’s policies were. Solution? More Rubin.  It reminds us of Vietnam. The Vietnam war was a disaster. Solution? More bombing. Maybe Obama was too busy campaigning with hedge fund managers funds to notice the bottom line (just ONE hedge fund in Chicago gave hundreds of thousands of dollars to Obama). After his election to the presidency, Obama was said to be working form a hedge fund’s offices. Why from a hedge fund? A hedge fund is a purely plutocratic device. It is unfortunate that Obama did not chose to work from a law firm’s office (all would have volunteered). A law firm is not fundamentally a plutocratic device. Law firms are about the law (in theory). Hedge funds are about how to use the power of money to make more money for plutocrats (this is directly true: by law non rich people cannot invest in hedge funds; people are required to have at least 2.5 million dollars in “investing capital”, namely cash, to invest in hedge funds). So why this symbol?

There is little grace in bringing back the bubble boys, because now we know what happened next to the US economy. The US economy became bubbly in 1996 (when some indicators reached 1929 levels), Then it became ever more bubbly, as Greenspan and the Clinton team went from bubble decision to more bubble decisions (each time with a new pretext). Meanwhile the real economy was going from ruin to ruin. Bush just went along for the ride. It did not build that train to hell, he just sat in it and smirked.

So now the bubble boys are back. Obama could have taken advice from others: Robert Reich (always fighting Rubin in the early Clinton administration, and now a professor at UC Berkeley) and Krugman (just laureate of the Nobel Prize) come to mind.

But the believers in the redeeming power of plutocracy are back. The most charitable explanation is that Obama will ask them to clean up the mess they made, like naughty children are asked by their Mom to clean up after themselves.

There may even be a Machiavellian explanation, because the bubble boys would be a perfect cover to implement the opposite of what they did under Clinton. That could happen if Obama is immensely strong in heart and mind.

The less charitable explanations, one does not want to contemplate at this point. Truth is, Obama is just one rather young man surrounded by grizzled, arrogant plutocrats, who are used to get away with anything. Good luck to him. Or, more exactly, good luck to us all, the non plutocrats. The bubble boys, on an individual basis, have never done better. Summers, the ex-assistant of Rubin, now chief of the economic advisory council, just bought himself a giant house, no doubt thanks to his gigantic government salary.
***

Patrice Ayme

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