George Bush was rebuffed twice in the last month by Goldman Sachs' Chairman Henry Paulson while Treausury Secretary John Snow was left twisting in the wind; his imminent departure assured, but the date uncertain. Why would a great financier turn down the most important economic job in the world only finally yielding to the arm twisting of Bush, his former partner Josh Bolten and his close friend Don Evans? The answer lies in the curious disconnect between the Bush administration view of the Goldilocks Economy (not too hot, not too cold) and the real world that Paulson inhabits every day. For the last month Goldman traders have watched the dollar continue to drop against other currencies. At what point do the Asian central banks hesitate to bid strongly at each new Treasury bill auction that Goldman helps coordinate? At what point do they decide to diversify into Euro Bonds? Paulson knows that this would end the era of easy money and low interest rates that George Bush has been living on.
So now Paulson has agreed to his dream/nightmare job. He knows that the polls that say that 60% of the population believes the economy is in trouble despite the President's assurances to the contrary, actually mirror the fact that the gains of the past 4 years have gone to firms and their shareholders not to workers. Median family income continues to fall, while corporate profits soar. Paulson has another tough job as well. He believes that American corporations have to reduce carbon emmissions and that new opportunities can come to firms that are on the cutting edge of green technologies. But convincing the President and Dick Cheney of this might be his hardest sell. As I said in my last post we are heading into uncharted territory from an economic and cultural power point of view. We know only one thing. The world of open networks, free software and cooperative technologies can guide us through the storm, if policy makers assure that they will stay open and free.