How Bad Can It Be?

Here's an interesting post by Daniel Gross at Slate magazine. His post is from January 24 and is on the dismal economy:

Companies, homeowners, and money managers willing to quit rather than fight is both a symptom of the nation's deep economic woes and emblematic of the challenge the Obama administration faces. More than a mere "economic crisis" is facing Barack Obama. Our "Yes, We Can" president is going to have to fix a "No, We Can't" economy. In his inaugural address, Obama noted he was taking office "amidst gathering clouds and raging storms." That's almost an understatement. The macroeconomic numbers have been simply horrible, with job losses mounting, sales data plummeting, and the already frayed safety net coming undone. Several states' unemployment funds are in danger of being depleted. The crisis has rendered the last several years something of a lost decade. By the end of 2008, stocks had fallen back to where they were in 1997. Household net worth dropped from its peak of $62.6 trillion in the third quarter of 2007 to $56.5 trillion in the third quarter of 2008, below the level of 2005. The economy is losing jobs at an appalling rate.

The following is the part that disturbs me. He nails it by pointing out the Obama -- unlike the Herbert Hoover-esque Bush who created and perpetuated this mess -- needs to come charging out the gate with policies and programs that will re-instill confidence and get the economy moving:

The challenge for Obama is twofold: dealing with the crisis of confidence and dealing with the crisis of economic reality. If housing doesn't stop imploding, the confidence businesses (i.e., credit) won't recover. But without the return of confidence, the credit markets will plunge further into dysfunction, hampering a recovery in housing and in every other industry. Through word and deed, Obama can try to exhort Americans to remain in the game. When Franklin D. Roosevelt entered the White House, he declared a bank holiday, putting a brake, for the moment, on the process of creative destruction. But FDR's most powerful tool may have been his rhetoric of reassurance, expressed so clearly in his fireside chats.

...

But some words can carry weight, especially if Obama manages to do what Bush and his colleagues have failed to since the problems started in the summer of 2007: to declare a comprehensive set of principles and plans and follow through on them. "If you want to restore confidence, we have to stop improvising," says Desmond Lachman, resident fellow at the American Enterprise Institute in Washington, D.C. A strategy is emerging.

The AEI, American Enterprise Institute, is a right-wing "think" tank. I hate those pseudo-economic watering holes for paid-off sycophants. But the above point is correct. And, sadly, I don't see the firm direction and urgency coming from Obama that will turn around the psychology of this slump.

I'm becoming increasingly pessimistic. This depression has got me depressed. I thought the last 80 years saw advances in economics and the better education available to everybody meant that politicians would understand the economics. I now see that I was foolish. The same idiotic mistakes of the 1930s are being reproduced. We are marching downward into the cesspit of stagnation, deflation, and depression and the leaders have failed to lead. Worse, they don't seem to understand the need to lead and they haven't gathered around them the people with ideas and understanding that would guide us out of the mess. Instead politics as usual, spin, smoke-and-mirrors, and ideology are still paramount while everything slides into a numbing darkness that will take a decade, maybe more, to recover from. A tragedy!