Stop! You’re Giving Me the Blues
How should the United States pull itself out of this current state of (economic) depression?
November 20, 2008
Early this year, in January, when I told people in conversation that the economy was going to fall off a cliff, they scoffed at me for being alarmist. “The underlying economy is in good shape,” they said. “The fundamentals are strong,” they asserted. “China, India and the others will provide an engine for growth,” they pointed out.
Well, as time passed, these sunny optimists fell by the wayside one by one. And then, they reemerged as doomsayers — not your everyday, run-of-the-mill doomsayers, but all-wise, all-seeing, “the-end-is-nigh” doomsayers.
“This is the worst I’ve ever seen it” they state somberly. “This could be another Great Depression,” they note wisely. “Do you know how bad it is in Europe and Asia?” they ask knowingly. It is as though by saying that things are really, really horrific, they get extra credit for their wisdom. (“My list of reasons for the economic meltdown goes to 11!”)
The U.S. Secretary of the Treasury began an op-ed in The New York Times recently with the words, “We are going through a financial crisis more severe and unpredictable than any in our lifetimes.” Of course, there was more than a little bit of “cover my ass” in this pronouncement from the nation’s bailout-demanding, Lehman-abandoning, credit-default-swap-fearing Treasury Secretary, but it solidly registered as part of the zeitgeist anyway. (Note to Hank: Not exactly confidence-inspiring.)
Of course, there is more than a bit of truth in all these somber pronouncements. Today’s headlines scream, “lowest level since 1959,” “largest decline on record” and “biggest drop since 1980.” (And now there are pirates all over the place, too!)
But, hello, they don’t call it a depression for nothing. It is depressing. And the more depressing talk that flows from the mouths of the supposed authorities, the grand pooh-bahs of policy and finance, the more depressed people become. The less they spend, the more they hoard. The less they invest, the more they panic.
In other words, early warnings of the perilous state of global debt markets have given way to a broad-based consensus of negativity — through which another Great Depression is becoming a self-fulfilling prophecy.
Get over it, America!
Barack, repeat after me: “The fundamentals of the U.S. economy are strong.”
Gordon, please repeat: “We’ve seen the worst of the financial crisis.”
Sarko, écoutez et répétez: “Il n’y a aucune deluge.”
Right now, the global economic trajectory is headed downward into the abyss. We are at the moment of maximum fear, having fully acknowledged the frightening interactions that precipitate a powerful economic downturn. By all appearances, there seem to be no braking mechanisms to impede the fall. And the headlines are bound to grow worse as companies begin announcing layoffs with rat-a-tat-tat earnestness.
Economic leaders need to come up with a better story line than they have so far. The election is over, so there’s no one to call them out on offering up rosy scenarios. Even so, public skepticism needs to be acknowledged.
Instead of fretting about a recession, policymakers need to recognize its inevitability and say so. Been there, done that. In ’81, in ’91, in ’01 — and now in ’09. No big deal. It happens.
And then policymakers, who have fallen hopelessly behind the curve in preventing this downturn, need to forget about prevention — and turn their full attention toward orchestrating an effective recovery.
Pick a month like April and time a global stimulus on the order of 2.5% of G-20 GDP to start falling from the skies like manna from heaven — say, on April Fool’s day.
Make sure credit markets are fully functioning on that day, even if it requires instructing banks to ease lending practices. Use the intervening period to aggressively restructure deadbeat industrial sectors like autos.
And start talking about the recovery now. Talk about it far and wide, shout it from mountaintops. Let people know that morning in 21st century America occurs at 6:22 a.m. EST, April 1, 2009.
And then everyone should just shut up — and get back to work.
Been there, done that. In '81, in '91, in '01 — and now in '09. No big deal. It happens.
Barack, repeat after me: "The fundamentals of the U.S. economy are strong." Gordon, please repeat: "We've seen the worst of the financial crisis."
Start talking about the recovery now. Talk about it far and wide, shout it from mountaintops.
Obamanomics: The View From Down Under
November 19, 2008