B is for Bankruptcy

The economic plague which began in 2008 and has swept the planet is not finished with its decimation of national and state economies yet.   Greece and other European countries still may be crippled by its effects and the 28 June 2010 issue of TIME reports the next phase in the United States is going to be what happens to individual states as the economic plague grips them (New York and California both in budget crises have economies far larger than Greece).   The massive influx of federal money into the economy has given the U.S. a huge debt well into the future, and yet may not have been enough to stem the weakening effects of the world economy on state and local governments.   Thirty one states anticipate a budget shortfall in 2011 of 10% as compared to their 2010 budgets leaving them with a projected $55 billion debt.

David von Drehle wrote a few comments in the Time  magazine article which I will quote:

All kinds of real estate dreams can go up in smoke in hard times

When times were good and the future seemed bulletproof, all sorts of grand ventures were floated on waves of debt. No one cared, because everyone planned to be richer when the bills came due. The arbitrageurs of leveraged derivatives, the cash-strapped subprime home buyers, the government grandees issuing bonds and boosting pensions — all were versions of the same doom-shadowed figure. Only if the bubble burst would the bills become unpayable. How did so many people forget all at once that the bubble always bursts?

Ahh, yes, and they say Christianity promises only pie in the sky – the states all banked on a miraculous Shangri-La future forgetting that meanwhile they still had to survive on this earth, and that “tomorrow never comes.”

It also is notable (to me at least) how often and to what extent real estate plays into economic and banking woes and collapses.   Real estate is linked to those false expectations that the future promises that when it comes we all will be richer, and then everyone banks on that dream.   It is also amazing the extent to which the U.S. economy relies on real estate sales and value to drive the economy – we always are relying on “the American DREAM” to build our economic present and future.  Why are we then surprised time and again  to wake up and realize we were living a dream, but now reality says the debt is due?

Tales of lavish retirements for relatively youthful public servants have been making a lot of headlines lately. The New York Times reported that some 3,700 retired New York State public employees earn more than $100,000 a year in pension payments, including a former policeman in Yonkers at the ripe old age of 47. California’s pension poster boy is a Bay Area fire chief who, at 51, was collecting more than $241,000 a year in retirement pay.

See the NY TIMES article, “In Budget Crisis, States Take Aim at Pension Costs” for more information on this crisis.

In sun-drenched San Diego, meanwhile, a grand jury probing that city’s troubled finances found a recurring practice of skipping required payments to the city’s pension fund while simultaneously awarding ever more generous pensions to public employees. Legal? Apparently. Prudent? Nope. A once solvent system is now billions of dollars in the red.

The amazing thing is people seem to forget that the future turns into reality, and when that reality doesn’t match what we were banking on, how unprepared we are for reality! 

The great reckoning of 2010 took us years to create and will be years in the fixing. It’s not as if the economic crisis isn’t plenty painful already. In government, as in life, there are cuts that injure and cuts that heal. As they continue to slog through the wreckage of the Great Recession, state and local leaders have a challenge to be surgeons rather than hacks and make this era of crisis into a season of fresh starts.

To what extent the economic problems were caused by economists mis-guessing  where things were headed is no doubt going to be debated in years to come.  I found interesting (and I can’t deny his writing style is entertaining as well) David Freedman’s “The Streetlight Effect” in the July/August 2010 issue of DISCOVER MAGAZINE.  Freedman is addressing the issue of why there is so much dubious science, and uses as his metaphor of explanation the old  joke about a drunk searching for his lost keys where the streetlight is, rather than where he lost the keys.  “Researchers tend to look for answers where the looking is good, rather than where the answers are likely to be hiding.”

Freedman examines research in several fields including physics, medicine and economics and the resulting claims by “experts.”   The relevance to this blog? 

“In 1992 a now-classic study by researchers at Harvard and the National Bureau of Economic Research examined papers from a range of economics journals and determined that approximately none of them had conclusively proved anything one way or the other.  Given that dismal assessment—and given the great influence of economists on financial institutions and regulation—it’s a wonder the global economic infrastructure is not in far worse shape. (Of course, scientific findings that point out the problems with scientific findings are fair game for reanalysis too).”

Remixing Lawrence Lessig’s REMIX

I read Lawrence Lessig ‘s  REMIX: MAKING ART AND COMMERCE THRIVE IN THE HYBRID ECONOMY  to learn something about copyright law and what constitutes “fair use” of material.  I am specifically interested in what this means for blogging, though probably the issue of biggest concern in our society is the file sharing of movies and music done by so many today because the Internet has made it so easy to do.  Not being much of a consumer of contemporary media, my interest in Lessig is certainly not mainstream. 

I really did enjoy his book and learned a great deal about the issues and problems which the electronic age has caused regarding copyright and fair use.  Lessig’s thoughts on how to reform law and culture in the electronic age made sense to me.  His use of the metaphor comparing a RO culture (read only) to a RW culture (read write – taking cues from modern electronic equipment) shed a lot of light on the topic. 

I intend in this blog  and the next to do a bit of amateur creative remixing – taking from his book an idea that was not his main purpose but which intrigued me to ask a rhetorical question about America’s war in Iraq.   Lessig is writing about the limits of government regulation in dealing with many issues and specifically as it might apply to government efforts to regulate the copying and creative use of copyrighted material (Lessig favors regulation on the use of copy but not so much on the copying itself).  He draws an example from America’s war in Iraq, which is what got me thinking about how Bush led us to war.   What follows is related to what became a mantra for conservatives in advocating smaller government and the deregulation of so many aspects of the economy.   On 20 January 1981, Ronald Reagan said:

“In this present crisis, government is not the solution to the problem, government is the problem.” 

The anti-government attitude was in some ways a mix of 1960’s anti-establisment thinking with laissez-faire capitalism and conservative small government thinking.  It gets embraced in varying ways by Americans of all political stripes (from government should stay out of our bedrooms and leave sexual and reproductive decisions to individuals to government should not run the health care industry thereby socializing 17% of the economy (GDP); and on the other hand from both sides wanting government – legislative and judicial – to support and champion their causes and issues).

Lessig’s rhetorical question, which is not the main subject of his book (“This is not a book about Iraq.” p 282), made me wonder about what was the supposedly conservative Bush administration thinking when it invaded Iraq?   Lessig asks:

What reason was there to think that government power could succeed in occupying and remaking Iraqi society?

… I’m talking about everything that would obviously have to be done after the invasion – from security, to electric power, to food supplies, to education.  It was as if those at the very top simply assumed that the government could do all those things, without ever asking whether that assumption made any sense. (p 281)

The very philosophy supposedly influencing the conservatives was a distrust of the government to do anything right.  So why did they believe they could remake and run a whole society?   If government was not the solution to America’s problems why did they believe that the U.S. government could readily make right Iraqi society?

Of course the question might be faulty.  It is possible that they actually never thought much at all about rebuilding the country they were about to destroy because they saw themselves as only destroying “the government” and didn’t take into consideration that the whole Iraqi society would be the “collateral damage” in such a war.     Or perhaps they assumed in their Reaganesque thinking that since only the government is the problem, eliminate the government and the society will do just fine on its own – vastly underestimating that the total removal of government would push the people toward nihilistic chaos.  (One need only think about the scenes in New Orleans after Hurricane Katrina once it was apparent that the government had vacated the city leaving only flood waters to check people’s activities).

“A parent, an army, a government: they all must be certain that their devotion to truth does not blind them to the consequences of their actions.  There’s only so much a government can do.  Where we find that limit, we must then find other means to the legitimate end.” (p 287)

Next blog:  The War on Digital Piracy: A Cynical Response?

The End of Excess Not the End of the World

timemagI enjoy reading in general, but really enjoy it when I read something I really appreciate.  Kurt Anderson’s article in the  6 April 2009 edition of TIME magazine, The End of Excess: Is this Crisis Good for America?, I found particularly enjoyable.   I liked the style and the content, the seriousness and the humor, the wonderful use of metaphors and imagery,  besides which there are so many lines worth quoting.   Anderson’s look at America’s economy compares the last quarter century’s years of self destructive and unsustainable economic behavior to an addiction.  He proposes the formation of a “Bubbleholics Anonymous” to get us back on the right track.  BA would have a three-step program:

  • Admit that we are powerless over addiction to easy money and cheap fossil fuel and living large – that our lives had become unmanageable.
  • Believe that we can, individually and collectively, restore ourselves to sanity and normal living.
  • Make a searching and fearless moral inventory of ourselves and be entirely ready to remove our defects of character.

A call to repentance for sure, but Anderson also says: “The new America must be about financial temperance not abstinence.”  The solution is not in excess in the opposite extreme but in moderation, something Americans have forgotten about in the last 30 years.

reaganobamaAnderson sees the excess as having begun with the Reagan era.   Back then, I favored a balanced budget, but many conservative Republicans kept telling me a balanced budget was neither necessary nor a good thing.   Reaganomics claimed debt was a good thing to keep the economy growing which a balanced budget would not do.   Now, in the midst of economic collapse I read that a balanced budget is the wrong thing, we need to increase the national debt and to keep spending to get the economy going.   The economy goes up and down but a balanced budget is never in vogue – so how can we ever have limited government?

Anderson cites some statistics reviewing the past 25 years:

From 1980 to 2007, the median price of a new American home quadrupled; meanwhile the median household income has been on a steady decline for about 10 years.   

The Dow Jones industrial average soared from 803 in 1982 to 14,165 in 2007.

Americans spent ever increasing amounts of their disposable income to service their debts – climbing 35% in this time period.  In 1982, Americans saved 11% of their disposable income, by 2007 it was less than 1%.   But who cared as Americans saw their 401(k)s and their homes ballooning in value? 

Meanwhile in this same time period adult Americans became on the average 20 pounds heavier today than their same age counterparts of 30 years ago.

Anderson notes each of the decades since the 1960’s have been given a name, and he asks what should the 00’s be called – the aughts?  Considering his statistics, probably they should become known as the “ought nots.”  We turned the decade into decadence. 

The past thirty years became a time of entitlement thinking in America.   And while conservatives fault liberals for fostering this thinking (socialism!), the reality is prosperous Americans embraced entitlement thinking themselves:  excess of every kind was an entitlement – they were entitled to spend as much as they want, to earn as much as they want, to waste as much as they want, to create as much waste as they want.   These were entitlements – bigger cars and bigger debts and riskier investments.   No one cared how their excesses impacted anyone else.  Think about Eve in the garden eyeing the forbidden fruit. “So when the woman saw that the tree was good for food, and that it was a delight to the eyes, and that the tree was to be desired to make one wise, she took of its fruit and ate, and she also gave some to her husband who was with her, and he ate” (Genesis 3:6).   It all looked good to her and for her; she forgot only that everything she did affected everyone else around her in addition to her relationship with Adam and God.  That is the same entitlement thinking that has led to destructive, greedy and self centered entitlement thinking in America.

Some today fear that our current effort to correct the excesses of the past 30 years is the imposition of big government and socialism on America.   They claim the proposed policies are a rejection of living by personal responsibility.  But where was that personal responsibility in the age of excess which led to the collapse of the economy?   So many embraced soaring profits, skyrocketing housing prices, investment bubbles and unprecedented investment gains as entitlements.     How many politicians and financial professionals truly advocated personal responsibility and have come forward and taken responsibility for the economic collapse and their role in it?   Now when accountability is proposed, none want to be accountable and take personal responsibility for what happened.  The time of excess has ended.  Will we be wise enough to embrace moderation as the norm for economic policy and recovery?

Anderson remains optimistic:  “This is the end of the world as we’ve known it.  But it isn’t the end of the world.”  He sees an America that does many things incredibly well, and though the new world order which is emerging will be different, Americans are adaptable and entrepreneurial.   If we sober up and don’t return to our entitlement thinking, we will have a saner society.

The Birth of Economics

Many years ago I read a quote which was parody of the First Chapter of John’s Gospel.  It read something like:

“In the beginning was the word.

And the word became print.

And they called it a lie.”

For some reason I attribute the quote to Jonathan Swift, but I couldn’t find it in a quick online search, so I’m not sure who said it or where I read it as it could be Monty Python for all I know.

What brought the quote to mind was my continued effort to read some things so that I can try to grasp how the economic collapse happened.  As I noted in a previous blog there is plenty of blame to go around but few willing to accept that blame.

Economics is an interesting study.  I mean people talk about theology being confusing, pie in the sky, or man made or nonsense which leads some to become atheists.  But if there is a faith based “science” it is economics which conjures up all kinds of schemes, fake heavens and hells, false gods, and is based largely in opinions of people who do not have to base their theories in any experience or reality.  All they have to do is imagine it, no divine revelation is necessary.  I wonder if there are a-economists, like theology’s atheists, people who simply don’t believe in economists or their theories at all?

I think TIME and NEWSWEEK magazines have been taking turns lining up the usual suspects for who was responsible for the economic crash.  WHO’S TO BLAME: WASHINGTON OR WALL STREET?  asks one NEWSWEEK debate article.     TIME’s HOW AIG BECAME TOO BIG TO FAIL also provides a handy dandy chart answering, “Who’s to Blame?”  I made my own suggestion for cleaning up the mess – have each political party and each of the professions and government agencies which contributed to the mess take a serious look at themselves alone – stop looking at or blaming anyone else and clean up your own house.

I did find the 21 March 2009 NY TIMES article When Deficit Isn’t a Dirty Word a bit helpful.  I have been ever doubtful about the goodness of national debt – even when Reaganomics made it a positive idea.  Robert Franks acknowledges the value of the national debt is difficult to comprehend but he offers some explanation about when and why a national debt serves a purpose.  He ultimately concludes it is what the money in the debt was used for which determines whether it is a good thing or not.  Unfortunately he feels the huge debt run up during the Bush presidency was bad debt and largely a loss for the country.  Now we are faced with the need for even greater debt to get the economy running again.  He notes that Herbert Hoover made the mistake of trying to balance the budget at the very time when government spending was needed to help the economy.    I probably would end up being a Hoover myself as I still feel most comfortable with a balanced budget.  [BTW, in 1815 there were an estimated 8.4 million Americans and President James Madison in his Annual message to congress said the national debt (due to the just concluded war with Great Britain – of 1812) was $120 million.  Which meant each American owed about $14.50 to eliminate the national debt.  According to USA TODAY, when President Bush’s term came to an end in January of 2009, the national debt was about $10 Trillion, which meant each American owed about $30,000.   But hey, we just came through the biggest and longest economic boom party ever thrown so we all should expect to have to shoulder the cost of that party, right?  Or wait a second, if there was so much prosperity, how could there be such a huge debt?]  And of course President Obama’s plan is going to increase the debt, but it’s all for more prosperity, so why worry?

But really, will the Geithner-Obama plan work?  Again there is plenty of opinion to go around  (see the NY TIMES’ editor’s opinions) but it still is hard for me to find comments that offer hard evidence for where we will land if we follow this plan.  Plenty of criticism is offered, but as I’ve said before a plan so large offers a huge target for naysayers, but rarely do I see them offer SPECIFICS of an alternative.  But maybe that is exactly what economics can’t do.  Economists seem best at imagining all the things that can go wrong with a concrete but can’t offer a concrete alternative, or they are good at ignoring all the things that might go wrong with their theory and offer it up void of any specifics or critical analysis.    (Would we let architects put up buildings based on abstract theories rather than on sound engineering?  NO, but we will let economists build the economy in this way).

A few facts I noticed –

  • 1) More writers seem to be accepting of or talking about some form of progressive consumption tax, especially when it comes to oil use. I will admit this seems wise to me.
  • 2) Though there has been a lot of outrage over the million dollar bonuses paid to the very AIG executives who bankrupted their company, and nearly the planet, the truth is the outrage is only because these people failed miserably. But I feel a bit of outrage over how much they were paid in bonuses even if their pyramid schemes had succeeded. At least on that point I found Justin Fox of TIME to agree with me (The Upside of Anger). He offers as an alternative to trying to get back all the bonuses from the AIG losers, to cast a much wider net and impose a retroactive tax (he says 50%) for the past four years on the execs from any financial institution that receives bailout money. He thinks it would make all financial execs keep a much closer eye on what is happening everywhere in their companies.
  • 3) Bill Saporito pointed out in his article HOW AIG BECAME TOO BIG TO FAIL that the $165 million in bonuses which is a lot of money, pales to the $170 BILLION which AIG has received in bailout monies. He says we need to be more concerned about that huge bailout than about the bonuses, which may be a real distraction but are “small potatoes” when compared to the whole disaster. What was going on in AIG and in the world economy would make an economist lose all faith in his theories and conclude that economics is not founded in facts or anything real. Saporito does pin a lot of the blame on the President of AIG’s Fianancial Products Joseph Cassano for the AIG disaster. One of Saporito’s best lines: “Cassano said in August 2007 that he couldn’t imagine a situation in which AIG would ‘lose one dollar in any of these transactions.’ He was right. AIG didn’t lose a dollar; it lost billions of them.”

When the word became print, economics was born.   I used to think that only in blogging can you get away with having no facts but still having strong opinions.  But economists were doing the same thing long before the Internet was born.

Back to Basics: If it Seems to Good to Be True, It Is

“a $1.2 trillion subprime-mortgage market, a $62 trillion unregulated, nontransparent credit-default-swap market, $50 billion private-equity buyouts of cyclical companies, hedge funds going public-seem, on their face, to be irrational, silly nonstarters.”  (Daniel Gross)

The worldwide economic collapse is just too big to ignore, even though I can’t begin to explain it.   I look at the above dumbmoneyquote from Daniel Gross, author of DUMB MONEY: HOW OUR GREATEST FINANCIAL MINDS BANKRUPTED THE NATION and though he is writing in English, outside of understanding he is talking about an unimaginable amount of money, I don’t really know what the terms he uses mean.   Even less do I understand how the economic meltdown occurred, seemingly overnight. 

Gross in his 9 March 2009 NEWSWEEK article “Reining In Bubbles So They Won’t Pop” (an adaptation from his book) says part of the problem was (is?) that

too many elements of our financial system and money culture were procyclical. Which is to say that built-in features of our economic operating system-government policy, private companies, the media, popular culture-functioned as accelerators rather than brakes. Once a hot money trend gets going, everybody wants in.

In other words our economy was geared for plunging into and inflating every economic bubble that should appear.  Who is to blame for this?  Gross writes:

There’s plenty of blame to go around: poor regulation, eight years of a failed Republican economic philosophy, Wall Street-friendly Democrats who helped stymie reform, misguided bipartisan efforts to promote home ownership, Wall Street greed, corrupt CEOs, a botched rescue effort, painfully fallible central bankers.

The result of these economic policies?

The implosion of the dumb money economy-housing, insurance, real estate, the auto industry-has erased much of the economic progress of the decade. By the end of 2008, stocks had fallen back to where they were in 1997.

So what should we have learned through this economic collapse?

There is nothing acceptable about what happened. This crisis was not a random, once-in-a-lifetime thing that fell out of the sky. It was a manmade product that turned out to be immensely toxic and damaging. And we’ll be paying for the cleanup for a long time. We can and should get angry. We should also get smarter.

Warren Buffett in the same issue of NEWSWEEK (“Our Country Has Faced Far Worse Travails”) also thinks we need to get smarter about the economy and he cites many of the same problems as Daniel Gross did to explain the economic crisis. Buffett also offers a little painful lesson about what he admits is a needed strong and swift government response to the crisis.  We are going to get smarter, but this is what we are about to learn:

Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome after-effects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.

Buffet does offer one piece of very down to earth advice as a lesson learned:

Home purchases should involve an honest-to-God down payment of at least 10 percent and monthly payments that can be comfortably handled by the borrower’s income. That income should be carefully verified. Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective. Keeping them in their homes should be the ambition.

Buffett’s own company, Berkshire Hathaway, has followed his advice, and apparently is doing  better than many other companies.  I don’t know how many times I’ve heard the warning about get rich quick scams: “If it seems too good to be true, it invariably is.”  Too bad those who were leading us into financial disaster had the pyramid scheme attitude: “if it seems too good to be true, put all your money into that bubble.”

The Insecurities and Exchange Commission

When it comes to the Stock Market, analysts have often pointed to particular events as being the “cause” of the Market’s rising and falling.  Even without any evidence as to these influences, analysts continue to explain the Market’s daily “fortunes” by mentioning one event or another which they think explains the day on Wall Street.  And though some have pointed out that the analysts actually don’t agree as to what events have what effect on the Market, there is a strong sense that the Market is often driven not by hard economic news but by intangible and unpredictable psychological factors. 

This week’s plunge on Wall Street is being described as apparently the result of such psychological factors, for example in the New York Times by Vikas Bajaj in his 7 Octoberber 2008 Forget Logic, Fear Appears to Have Edge.   The precipitous fall in the market according to him has become almost a herd behavior.

In his article, Bajaj has an interesting description of what motivates people when it comes to investments.  Here is what he writes:

Fear is an immensely powerful force, perhaps more so than greed, said Andrew W. Lo, a professor at the Massachusetts Institute of Technology who has studied investor behavior.

Scientists who have studied the brain function have found that the amygdala, the part of the brain that controls fear, responds faster than the parts of the brain that handle cognitive functions, he said.

“Fear is a much stronger motivational force,” Mr. Lo added. “The loss of $1,000 has a much bigger impact than the gain of a $1,000.”

He cites a series of groundbreaking experiments in the 1970s by psychologists Daniel Kahneman and Amos Tversky. In one test, they asked students to choose between a sure bet of $3,000, or an 80 percent chance of winning $4,000 (meaning there was a 20 percent chance of winning nothing). Most students said they would take the $3,000.

The same question, framed differently, asked them if they would rather lose $3,000 or accept an 80 percent chance of losing $4,000 (with a 20 percent chance of losing nothing). In this case, they said they would take the riskier bet.

In other words, they were willing to take a bigger risk to avoid losing money than they were when they stood to make more money.

As the study shows when it comes to making big profits people tend to be cautious, but when the risk of losing money is at work, people throw caution to the wind and are willing to take riskier chances and risk bigger losses to try to beat the system.

The activities of investors in the Stock Market seem to closely parallel what actually happened in the banking industry.  Stock Market investors are greatly influenced by rumor and beliefs about things rather than basing their investing decisions on actual fact or hard evidence.  In turns out to be a belief based system – it is not the facts but what people believe about the facts that matters.  This is exactly what caused the banking/lending/home value crisis – much of what was going on in the lending industry ended up being based not upon real cash value but upon what people believed about land values and the economy.  This is as true for individuals as for institutions, except that the instritutions are operating on a grander scale – the hundreds of billions rather than the thousands.  The financial system ends up being based on rumor and beliefs, not upon any audited bottom lines.  It is more like a faith system than a financial system, but populated with people who are as likely to be skeptics as believers.   Maybe it is ironic that the U.S. dollar has printed on it – “In God We Trust” for the amoral financial system is ultimately not based on anything more than the ephemeral get-rich-quick (aka, greed) phantasmagoria of investors and brokers.  Some may think they are dealing in the real world of insured “securities,” when in actuality they are dabbling in the insecurities and superstitions of the human psyche.

“In God We Trust”: Especially When Money is Our God

I wonder if it is irony that America places the words “In God We Trust” on our dollar bills but not on congressional or senate bills?  The world’s greatest capitalistic nation, trusts money and economic growth as if these things were an all good God.  At times we don’t seem to distinguish between wealth and God – they are an equal good in our experience, and we will trample on a lot of ethics, and look away from a lot of morality, in order to pursue the ominpotent dollar and the divine prosperity we believe it gives us.   For example greed, one of the seven deadly sins, is seldom railed against in prosperous America and sometimes is euphemized as “profit”.

Marketplace commentator Robert Reich in his 6 August 2008 “A Contest Between Two Capitalisms” offers us something to think about as he compares and contrasts the phenomenal and unprecedented growth of the Chinese economy and its “authoritarian capitalism” with the faltering U.S. economy’s democratic capitalism, using the Olympics as a metaphor:  the Chinese Olympic games versus the American Olympics: our upcoming presidential election.

For years, American policy toward China assumed that trade and economic growth would generate a large Chinese middle class, and this middle class would demand democratic reforms. … We thought capitalism and democracy went hand in glove. They don’t.  … But when it comes to civil and political rights, China today is where it was almost two decades ago at the time of Tiananmen Square.

Authoritarian capitalism works wonders if all you care about is getting ahead economically and being able to afford more stuff. … Democratic capitalism should win in the end because it responds far better to what people want — not only as consumers but also as citizens. Yet right now it’s not so clear. The Chinese economy is booming while we’re in deep trouble. Eighty percent of Chinese are optimistic about the future but only 20 percent of Americans say this nation is on the right track.

In terms of this big contest, you might think of our upcoming presidential election as our own Olympic games. It will showcase to the world how well democratic capitalism still works.

Maybe a question Reich should ask is whether Americans themselves are not so addicted to getting ahead and getting more stuff that they will be willing to trade the freedoms democratic capitalism affords for the wonders authoritarian capitalism delivers?   Will Americans sacrifice their ethics and religious beliefs to embrace philosophies that can deliver greater economic prosperity?   Have profit and wealth in fact become our gods?  Maybe atheists do not have to fear “In God We Trust” on money, for maybe the money itself is our God.