May 12, 2009

Elizabeth Warren on Charlie Rose

Elizabeth Warren appeared on Charlie Rose last night.

Warren has lately appeared in many places (here's a new link to an unedited Planet Money full interview, and even "Tech Ticker"), which is encouraging, as she is talking of the most important situation/issue facing the country: the increasingly impossible situation of the middle-class squeeze. Unlike many prominent commentators though, Warren has real insight into some of the causes (another couple of fundamental causes and also solutions are a significant part of the book I've been writing). Instead of only being a raised voice or trying to present an economic ideology though, Warren gives non-ideological insight, and actually pinpoints some of the real causes.

So what happens when a clear, non-ideological mind like hers faces the labyrinth of money and influence and interests that is the TARP and the current situation? It's a fascinating moment in American history.

She cut through the fog to say the heart of the problem is indeed what's happening in the American family. This is true in that there were forces that pushed families into the choices they made, which in combination with choices banks and nations made (for instance the Chinese monetary policy of holding down their currency value) helped create this situation and outcome which is now threatening a world-wide depression.

I think she's right we have to address the problems faced by American families (specifically the problems of families with kids), of which there are several pieces, in order to be able to solve the big economic problems. For instance, banks' continuing troubles flow from continuing loan defaults (on mortgages and credit cards and auto loans, etc.) But the start and base source of loan defaults is from the middle class squeeze, which preceded the recession, and even if the recession eases will still keep banks in trouble and at risk, crimping normal lending.

Warren has superior insights versus many popular opinions. For instance, contrary to the popular perception of families buying fancy houses they could not afford is the bigger, far more widespread reality of a larger number of families that brought very average houses which were expensive and which they could not afford because they were competitively bidding up house prices in locations with good schools, which appear key to a successful life for their kids. Instead of getting sidetracked by the appearance that many "average" houses in newer areas are bigger than houses used to be, Warren cuts through the fog and pinpoints what's really happening: competitive bidding to be inside good school districts, whether in newer neighborhoods, or old. Small, 1950s era houses in the East have been bid up right along with the newer houses in the South.

That's an insight. Warren's insight.

That's a clear pinpointing of the real situation.

Fixing the big economic situation finally comes down to several specific problems, some complex, some quite simple. The insight is to be able to figure what really matters and what is more a side issue. There are even some simple problems that really matter, in addition to some complex problems (complex for instance are such as fixing banks or the situation of education and competition for schools). So in addition to talking about complex problems, Warren also talks sometime of simple problems. Credit card deregulation in the 70s and 80s for instance leading to the current unsustainable, theft-like practices. Sometimes to fix an engine you need to fix several things, and you have to fix them individually, even the smaller issues. So even with a major fix like a timing belt, you might still have to fix a relatively simple problem like a bad spark plug wire.

Warren has found some of the trouble other mechanics did not, and that makes repairs easier.

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