Visions of doom -- or glory?
Talked yesterday to Sen. Bob Casey following the hearing on the bailout.
Visions of doom -- or glory?
“It’s Our Money” began a few months ago as a way to get people even a little bit interested in the city budget. We chose our name as a reminder of why it’s important…as in “Yo! It’s our !@#($#%&* money!”
Fast forward a few months, and we’re all talking about ‘mortgage backed derivatives and parsing every sentence from the Treasury secretary.
Thanks to the national economic crisis, the “it’s our money” pronouncement has never been more relevant, as we all prepare to kiss $700 billion goodbye without being able to read the fine print.
That’s why until further notice, we’ll be focused primarily on the national economic crisis, especially as it relates to the city. Here are some good blogs we’re reading:
- Eschaton - Local blogger Duncan Black combines political commentary with economic analysis.
- Calculated Risk – A former corporate executive gives his take on financial news.
- Beat the Press – Dean Baker comments on media coverage of economic issues.
- Grasping Reality with Both Hands – Berkley Professor Brad DeLong comments on economics and public policy.
Meanwhile, despite my many conversations this week with smart economists from around the country, I wish someone would explain:
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How an entire complex economy can collapse in a matter of days, as Bush is suggesting if the Paulson Plan doesn’t get resolved?
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Are we talking about the collapse of the economy or the collapse of Wall Street? If only wall street collapsed, how much of the actual economy, which still includes productive workers producing things, goes away? I know that credit is the grease that keeps the economy moving, and that’s what Wall Street has provided, but wouldn’t new credit markets naturally open up to replace the old ones?
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If we are this close to Armageddon, why do we still have to see ads for new cars, Axe aftershave, and trailers for “Choke?”
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And what does Armageddon actually look like? Does it happen overnight? Do we all wake up without jobs? With no banks? And if there are no banks, does that mean I no longer pay my mortgage? If I don’t need money to pay the mortgage, and the cereal in my cupboard lasts as long as I think it will, why do I need a job anyway?
Which leads me to the big question: is Bush painting a picture of disaster because the actual alternative -- a culture that is not based on over-caffeinated consumerism but slower people living quieter lives with only the basics to keep them happy -- what he’s really trying to avoid? There could be many upsides to an economic meltdown; maybe they just don’t want us to know about them.
What’s your worst fear picture of Armageddon?
The biggest mistake the administration had made is in characterizing this squarely as a Wall Street bailout. In fact, we're not so much talking about an economic collapse in a matter of days (though the short-term damage, to 401k's and our ability to create jobs, is huge). The real problem is declining confidence in the economy and choking off of loans. This would have a direct effect on all of us, from Wall Street to Broad Street. Here's the deal. The economic problems have made it hard for lenders to know whose loans are good (that is, which ones will be repaid). That's making them reluctant to lend to anyone: to department stores buying goods to the holiday shopping season, to automobile manufactures churning out cars . . . to anyone. As it is, we're sure to see much higher unemployment. If we don't stem the tide, the job loss will be huge. New credit markets can't be expected to pop up to replace the staggering Wall Street collapse. The economic problems are rippling around the world. Investors, from Beijing to Oklahoma City, have to have confidence they're going to get their money back. No confidence, no loans. Everyone is still running ads, of course. In some cases, they already paid for them. In other cases, they're borrowing to try to create business. But this can't happen forever. Armageddon? It wouldn't be everyone deciding one morning to dig a hole, pull in some bottled water, and but aluminum foil over their heads. Thanks to (gasp!) government, it's not going to mean long lines in front of banks as they fail. It's more likely to look like shrinking savings for retirement, much higher unemployment, difficulty in creating new jobs for high school and college grads. We've partied on too long on borrowed money, We need to get our tastes back within our budgets. But it's been the borrowing that's sustained the economy for a long time. Pulling back could mean a lot fewer jobs. And less leadership for America in world affairs.— Don Kettl- This comment sent to me: It is entirely logical for the market to tank when President Bush tries to soothe it. He has been wrong about or has lied about every major issue for nearly 8 years. It is entirely rational for the market to look where he points, and then go in the opposite direction. Economists used to talk about “jawboning” – the phenomenon that a President could make the economy stronger simply by saying that it was going to get stronger. JFK could do it, but when Nixon tried it, post-Watergate, the economy turned down. Known liars are not going to be able to soothe anything. He should shut up and get out of the way – as should Senators McCain and Obama. David L. Crawford, Ph.D. President, Econsult Corporation— sandyshea
