Confidence, Man!

You know where I'm going with this, if you're a regular reader of this blog:

-  First, a definition.  Confidence man: a person who swindles others by means of a confidence game.

-  Then, another definition.  Confidence game: a swindle in which the swindler, after gaining the victim's confidence, robs the victim by cheating at a gambling game, appropriating funds entrusted for investment.  (Definitions courtesy Random House Webster's College Dictionary).

Perhaps you're thinking of the sub-prime, hedge-fund, bonus-bailout crisis, and its similarity to above.  You wouldn't be mistaken.  You, me, we, everyone was had.  But just like Hitler had his Willing Executioners, Mr. Fat Cat had his acolytes, and they included elected representatives of the very people who were fleeced.  And before they were fleeced, they too went along with the snake oil salesmen - "after gaining the victim's confidence..."

Probably the best single article I've read so far on the origins of how we got where we are - and some ideas on how to right the wrongs - is in the current issue of Harper's Magazine.  "Infinite Debt: How Unlimited Interest Rates Destroyed the Economy," by Thomas Geoghegan, a Chicago labor lawyer, should be required reading by members of Vice President Joe Biden's Middle Class Task Force.  A key excerpt:

We dismantled the most ancient of human laws, the law against usury, which had existed in some form in every civilization from the time of the Babylonian Empire to the end of Jimmy Carter’s term, and which had been so taken for granted that no one ever even mentioned it to us in law school. That’s when we found out what happens when an advanced industrial economy tries to function with no cap at all on interest rates. Here’s what happens: the financial sector bloats up. With no law capping interest, the evil is not only that banks prey on the poor (they have always done so) but that capital gushes out of manufacturing and into banking. When banks get 25 percent to 30 percent on credit cards, and 500 or more percent on payday loans, capital flees from honest pursuits.

Geoghegan tries to help some of the victims of those payday loans and "free" credit cards, whose portraits should make even a cold-hearted banker weep.  Geoghegan writes that he had

a retired schoolteacher in my office the other day whose husband is deep into Alzheimer’s. The two had taken a loan for $1,700, somehow managed to pay back $3,000, and still they had not even begun to pay off the principal. That’s not uncommon...

Usury.  First outlawed (or at least capped) in Babylon.  Brought back in the Reagan era.  So much for "Morning in America."

This is the kind of practice that now must be documented, publicized, and eradicated.  The man to lead the way is "Mr. Confidence Man" - the original sense of "confidence," without the pejorative undertone - President Barack Obama.  No point in bailing out banks and financial institutions if the underlying foundations are rotten.  Usury, loan-sharking, but also union-bashing, must go.  Rebuilding the industrial base will be a full court press.

Obama is capable of providing a confidence boost to populations from Anchorage to Ankara, as we saw last week in his string of summits and international whistle stops.  If you think public diplomacy of the kind Obama practices is so much fluff, well, I have news for you: it can work wonders.  And it has its domestic equivalent, called morale-building.

If, as John McCain mistakenly (but understandably) said during the campaign, "the fundamentals of the economy are sound," then at least part of what we're up against is psychological.  Confidence builds confidence, and our President has plenty of reserves of that stuff.

Have a happy Passover and/or Easter, and watch for a return to posting in about 7 days.