Isn’t it nice to hear just one voice of sanity amongst the insane?
Amid all the political and media hysteria, national output has declined by less than one-half of one percent. In fact, it may not have declined even that much– or at all– when the statistics are revised later, as they very often are.
We are not talking about the Great Depression, when output dropped by one-third and unemployment soared to 25 percent.
What we are talking about is a golden political opportunity for politicians to use the current financial crisis to fundamentally change an economy that has been successful for more than two centuries, so that politicians can henceforth micro-manage all sorts of businesses and play Robin Hood, taking from those who are not likely to vote for them and transferring part of their earnings to those who will vote for them.
For that, the politicians need lots of hype, and that is being generously supplied by the media.
~~~Much as we may deplore partisanship in Washington, bipartisan disasters are often twice as bad as partisan disasters– and this is a bipartisan disaster in the making.
Too many people who argue that there is a beneficial role for the government to play in the economy glide swiftly from that to the conclusion that the government will in fact confine itself to playing such a role.
In the light of history, this is a faith which passeth all understanding. Even in the case of the Great Depression of the 1930s, increasing numbers of economists and historians who have looked back at that era have concluded that, on net balance, government intervention prolonged the Great Depression.
The politicians are using this “crisis” as not only a means to micro-manage, but to gain more power:
Modern Washington owes its very existence to the 1929 crash, which occasioned a vast expansion of the federal government under President Franklin D. Roosevelt. A legacy of the increase in federal power during that era, largely undiminished during a 28-year electoral backlash against big government, is that Washington became Wall Street’s principal rival when it came to running the world. Which wielded more power—the financial markets or the government? Uncle Sam had the world’s largest military, but Wall Street had all that goddamned money.
~~~For Wall Street, a way of life may be coming to an end. For Washington, a new era of government activism has already begun. Treasury Secretary Henry Paulson, after presiding over an unprecedented sequence of receiverships, bailouts, and liquidations, is urging Congress to commit up to $700 billion to unfreeze the credit markets. The CEOs of once-powerful investment banks will be called down to Congress and subjected to humiliating questions. Journalists will sign six-figure contracts to write books about the events of what is already being dubbed “Black September.” Think-tankers will hold conferences to fight over the proper role government should assume in the new financial world. The Washington Post—which, like all big-city dailies, has been experiencing some circulation difficulty—will sell more papers than it would otherwise. Presidential candidates are already demanding, and will probably receive, curbs on CEO pay as a condition of restoring liquidity to Wall Street.
~~~…On Wall Street, financial crisis destroys jobs. Here in Washington, it creates them. The rest is just details.
And just as Obama said he “will hit the ground running,” so is the next act in this power struggle:
Together, the programs from the Federal Reserve and the New York Fed aim to dump $800 billion in additional funds into the struggling U.S. economy, more than Congress approved in October for a bailout of the nation’s banks and Wall Street firms.
What’s another 800 billion or so right?
Sigh….
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