Simon Johnson writes about what he calls “responsible populism,” not populism as it is so often portrayed in the press “in a pejorative way - as a putdown, implying “the people” want irresponsible things that would undermine the fabric of society or the smooth functioning of the economy.”
Here he takes on Obama’s famous 2009 quote to top bankers that he was all that stood between them and the pitchforks:
According to Mr. Obama’s framing of the issues, the administration sided with large banks that were in trouble at the beginning of his administration - and bailed them out repeatedly and on generous terms - because this was the responsible thing to do.
This was a mistake, with lasting consequences for the American economy, because it further entrenched the power of these banks and the people who ran them into the ground. It also changed our politics. On financial regulation, anti-elite ideas have broad appeal and represent the responsible course of action - and they should draw support from across the political spectrum. Populism and irresponsibility are not, in fact, synonyms. When any elite gets out of control and makes egregious financial mistakes, which happens in many societies, the choice is either to rein them in or provide them with unlimited state backing. You can imagine which course is preferred by that powerful elite and, not surprisingly, the “capture the state” approach is often what leads to the most trouble - including irresponsible macroeconomic policies, worsening inequality and further rounds of traumatic crisis.
— Speaking of responsible populism, Thomas Frank takes to the reborn Baffler to document the corruption of American elites and three disasters of the 1998-2008: the tech bubble/crash, the Iraq war, and the housing bubble/financial crisis:
What I didn’t understand was that these were moral failures, mistakes that were hardwired into the belief systems of the organizations and professions and social classes in question. As such they were mistakes that—from the point of view of those organizations or professions or classes—shed no discredit on the individual chowderheads who made them. Holding them accountable was out of the question, and it remains off the table today. These people ignored every flashing red signal, refused to listen to the whistleblowers, blew off the obvious screaming indicators that something was going wrong in the boardrooms of the nation, even talked us into an unnecessary war, for chrissake, and the bailout apparatus still stands ready should they fuck things up again…
Another way of putting this idea might be to say that the individuals who got things wrong—the ones who saw few problems in financial deregulation, anyone who thought derivatives eliminated risk, anyone who counted on markets to police themselves—were “one of us.” There can be no consequences for them because they merely expressed the consensus views of the time. Like John Maynard Keynes’s “sound banker,” they might have failed, but they failed in the same way that the rest of “us” failed. To hold them accountable for what they said and did would expose the rest of “us” to such judgment as well. And obviously that can’t happen.
A résumé filled with grievous errors in the period 1996-2006 is not only a non-problem for further advances in the world of consensus; it is something of a prerequisite. Our intellectual powers that be not only forgive the mistakes; they require them. You must have been wrong back then in order to have a chance to be taken seriously today; only by having gotten things wrong can you demonstrate that you are trustworthy, a member of the team. (Those who got things right all along, on the other hand, might be dubbed “premature market skeptics”—people who doubted the consensus before the consensus acknowledged it was all right to doubt.)
The Cleveland Fed inflation estimates, based on financial market data including the interest rate spread between ordinary and inflation-protected Treasury bonds, show expected inflation of 1.4 percent per year over the next ten years. So, if Shlaes knows about an inflation bomb that the young guns on Wall Street can’t see, she has the opportunity to go make a ton of money in the bond markets.
Inflation isn’t nearly as mysterious as Shlaes makes it out to be. Milton Friedman is on point here: “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” If inflation starts to get out of control, all the Fed has to do is contract the money supply.
For example, Bloomberg View’s Amity Shlaes argues that Friedman would counsel Bernanke not to combat deflation and depression today. Actually, she goes further, claiming that Bernanke has essentially betrayed Friedman’s legacy by embarking on quantitative easing. This is like saying that Paul Krugman has betrayed Keynes’ legacy by advocating gobs of government spending.
And O’Brien shows that Friedman argued that Japan should embark on the very same securities purchases Bernanke has.