By Marshall Auerback
Yves Smith at Naked Capitalism was asking some of us why Wall Street has not been heard from on the perils of default over the government shutdown issue. If you recall, in 1995 the Street did warn of its perils. Is this the final evidence of the failure of Obama’s ‘appeasement’ of the Street?
Here are my thoughts. It’s a mixed bag. You have guys like Stanley Druckenmiller advocating precisely that – a default – in order to rein in spending. Druckenmiller advised Newt Gingrich to adopt this strategy in 1995, (showing equally exquisite judgement).
And you probably have others who say you can make the payments via the money in tax accounts and just gradually shut down other parts of government. Pat Toomey has been big on this approach, and he’s backed by the political club for growth.
Then you’ve got the Wall Street Rubinites, who are probably counselling the other way. And I suspect a bunch of them are making this known to Boehner as well.
The most amusing (sick?) thing for me right now is that it is the Democrats which are now racing to become the party of austerity, offering up all sorts of cuts in Social Security, Medicare, and a bunch of other entitlements. If only they could only get those "irresponsible" Republicans to agree to some tax hikes as well (and thereby really deflate the economy into the ground and get an even bigger deficit).
It’s a joke.
For the last two years, it has been my assumption that Wall Street had so given up on George Bush and his failures by 2006 at the latest. They needed someone like Obama to come in and stabilize things politically and give the sheep some razzle-dazzle about ‘hope and change.’ Well, Obama played his part and is now expendable.
It is also possible that Obama could simply be the latest chapter of the Yankee-Cowboy War, i.e., the fight for dominance between the northeastern branch of this country’s owners (centered on finance) and the Texas-southwestern energy extraction-oriented branch (think of a line of right-wing oil billionaires from H.L. Hunt to the Koch brothers).
Obama was and remains close to Wall Street via Geithner, Summers, Rubin, et al. Given that there is a strong mutual cultural antipathy between the Yankees and the Cowboys, it is not surprising that the "populist" outrage against Obama (well funded by Dick Armey and other front groups working for the Texas energy interests) has such a tone of viciousness. By contrast, the Wall Street crowd tends to be socially liberal. Although the bottom line is that in economics – which is what counts – both groups are predators.
The rest of us, we’re just caught between two rival groups of oligarchs, with nothing in it for us.