Friday, May 21, 2010

The Dismal Future

Because politicians aren't economists, they haven't been doing what is needed to prevent the grinding Great Recession from rolling on and on. While Obama may think he is a new kind of politician, he has surrounded himself by people who were instrumental in creating the financial crash, so they haven't been able to admit their mistakes and turn course and help get the US out of the Great Recession.

Here's a NY Times op-ed by Paul Krugman lays out the bleak future:
Despite a chorus of voices claiming otherwise, we aren’t Greece. We are, however, looking more and more like Japan.

For the past few months, much commentary on the economy — some of it posing as reporting — has had one central theme: policy makers are doing too much. Governments need to stop spending, we’re told. Greece is held up as a cautionary tale, and every uptick in the interest rate on U.S. government bonds is treated as an indication that markets are turning on America over its deficits. Meanwhile, there are continual warnings that inflation is just around the corner, and that the Fed needs to pull back from its efforts to support the economy and get started on its “exit strategy,” tightening credit by selling off assets and raising interest rates.

And what about near-record unemployment, with long-term unemployment worse than at any time since the 1930s? What about the fact that the employment gains of the past few months, although welcome, have, so far, brought back fewer than 500,000 of the more than 8 million jobs lost in the wake of the financial crisis? Hey, worrying about the unemployed is just so 2009.

But the truth is that policy makers aren’t doing too much; they’re doing too little. Recent data don’t suggest that America is heading for a Greece-style collapse of investor confidence. Instead, they suggest that we may be heading for a Japan-style lost decade, trapped in a prolonged era of high unemployment and slow growth.
Go read the rest of the op-ed. It is a good education about the current mess.

A guy like Krugman actually has a point of view and -- more importantly -- has a historical perspective, so he can point out how the public has been lied to again and again, how the public has been manipulated by big money interests. People need to pay attention to Paul Krugman.

Here's his sad assessment of the current situation:
It’s not that nobody understands the risk. I strongly suspect that some officials at the Fed see the Japan parallels all too clearly and wish they could do more to support the economy. But in practice it’s all they can do to contain the tightening impulses of their colleagues, who (like central bankers in the 1930s) remain desperately afraid of inflation despite the absence of any evidence of rising prices. I also suspect that Obama administration economists would very much like to see another stimulus plan. But they know that such a plan would have no chance of getting through a Congress that has been spooked by the deficit hawks.

In short, fear of imaginary threats has prevented any effective response to the real danger facing our economy.

Will the worst happen? Not necessarily. Maybe the economic measures already taken will end up doing the trick, jump-starting a self-sustaining recovery. Certainly, that’s what we’re all hoping. But hope is not a plan.
All I can think is that those people voting for the slogan "Change you can believe in!" didn't think they were voting for "A little change, maybe, if the right wing crazies don't terrify us into doing nothing!"

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