The Recovery Myth

by: Paul Rosenberg

Sun Jun 28, 2009 at 15:45


For all the talk of "green shoots", even the oxymoronic "jobless recovery" is almost certainly mythical, according to those with broader time horizons.  For example, Martin Wolf, author of a mid-month (June 16) Financial Times article "The recession tracks the Great Depression".  It begins:

Green shoots are bursting out. Or so we are told. But before concluding that the recession will soon be over, we must ask what history tells us. It is one of the guides we have to our present predicament. Fortunately, we do have the data. Unfortunately, the story they tell is an unhappy one.

Here's the four-part graph accompanying his article:

Wolf draws directly on the work of Barry Eichengreen and Kevin H. O'Rourke, whose June 4 article at Voxeu.org, "A Tale of Two Depressions", carried this into note:

This is an update of the authors' 6 April 2009 column comparing today's global crisis to the Great Depression. World industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better. The update shows that trade and stock markets have shown some improvement without reversing the overall conclusion -- today's crisis is at least as bad as the Great Depression.

The problem, of course, is that no politicians are talking this frankly about how bad it is, and since they aren't talking frankly, they aren't laying the groundwork for continuing and expanding the sort of robust policy response that's needed.
Paul Rosenberg :: The Recovery Myth
Regarding Eichengreen and O'Rourke's work, Wolf writes:

The bad news is that this recession fully matches the early part of the Great Depression. The good news is that the worst can still be averted.

First, global industrial output tracks the decline in industrial output during the Great Depression horrifyingly closely. Within Europe, the decline in the industrial output of France and Italy has been worse than at this point in the 1930s, while that of the UK and Germany is much the same. The declines in the US and Canada are also close to those in the 1930s. But Japan's industrial collapse has been far worse than in the 1930s, despite a very recent recovery.

Second, the collapse in the volume of world trade has been far worse than during the first year of the Great Depression. Indeed, the decline in world trade in the first year is equal to that in the first two years of the Great Depression. This is not because of protection, but because of collapsing demand for manufactures.

Third, despite the recent bounce, the decline in world stock markets is far bigger than in the corresponding period of the Great Depression.

The two authors sum up starkly: "Globally we are tracking or doing even worse than the Great Depression ... This is a Depression-sized event."

And that is the great unspoken truth that has Versailles whistling past the graveyard.

Wolf goes on to note that our policy response is better than during the Great Depression, but he doesn't point out that the improved response is much more a result of structural realities (built-in social welfare provisions, particularly in Europe, for example, and central bankers who aren't named Greenspan) rather than executive or legislative decision-making:

Yet what gave the Great Depression its name was a brutal decline over three years. This time the world is applying the lessons taken from that event by John Maynard Keynes and Milton Friedman, the two most influential economists of the 20th century. The policy response suggests that the disaster will not be repeated.

Profs Eichengreen and O'Rourke describe this contrast. During the Great Depression, the weighted average discount rate of the seven leading economies never fell below 3 per cent. Today it is close to zero. Even the European Central Bank, most hawkish of the big central banks, has lowered its rate to 1 per cent. Again, during the Great Depression, money supply collapsed. But this time it has continued to rise. Indeed, the combination of strong monetary growth with deep recession raises doubts about the monetarist explanation for the Great Depression.

"[R]aises doubts about the monetarist explanation for the Great Depression"?

Ya think?

Finally, fiscal policy has been far more aggressive this time. In the early 1930s the weighted average deficit for 24 significant countries remained smaller than 4 per cent of gross domestic product. Today, fiscal deficits will be far higher. In the US, the general government deficit is expected to be almost 14 per cent of GDP.

But, of course, the US deficit is anything but well-crafted to fight the depression.  Bank bailouts instead of WPA projects does not a good policy response make.

All this is consistent with the conclusions of an already classic paper by Carmen Reinhart of the university of Maryland and Kenneth Rogoff of Harvard.

I've written about Reinhart and Rogoff's work before, for example, in "In Which I Come Out As A Conservative." and "Hundred Days: Four Major Political Themes".  They compared the current crisis to a collection of other large financial crises, with suitably sober conclusions about the length of time it would take for recovery to occur.

Turning now to Eichengreen and O'Rourke, here are the original of the four charts that Wolf combined into one, which makes them easier to read.  The relatively insignificance of the "green shoots" is particularly visible, along with the probability of a long, hard slog still ahead of us:

Here are some other charts from their paper:

Figure 3. The Volume of World Trade, Now vs Then:

Figure 5. Money Supplies, 19 Countries, Now vs Then:

Figure 6. Government Budget Surpluses, Now vs Then:

And some specific groups of countries.

Large European countries (click on image to enlarge):

Small European countries (click on image to enlarge):

Non-European countries (click on image to enlarge):

Collectively, all the above point to a very long, painful period ahead, something that no one in the Obama Administration or the Democratic Party as a whole is doing anything to help prepare the American to face.

This cannot end well.

Tags: , , , , (All Tags)
Print Friendly View Send As Email
The Recovery Myth | 36 comments
Yes (0.00 / 0)
1) Martin Wolf was a formidable opponent when he was a cheerleader for unfettered (neo-liberal) globalization, but his columns now are a joy to read both for his changing viewpoint, as well as his lucid, tightly constructed thinking. Last week, EuroTribune was trying to get him to go the last mile by calling for high taxes on the wealthy (to stave off speculatory bubbles).

2) This is why I shy away from the "triumphalism" that seems to permeate progressive blogs as well as the Democratic party in general. We've clearly been through a watershed moment...but what exactly will the new tide bring? As you pointed out yesterday, past re-alignments were not always in total (as 1932 was), and as people like Krugman point out, one can make a very plausible economic case that the new era will not resemble the one we are told is on the way.

And that's just another reason why I believe it is important to push hard for policy change NOW, because we don't really know what is around the corner. I will not listen to the siren calls of those who say we are in a long trend of progressive dominance, and so we should be patient and accepting of slow incrementalism (Crowley in the Guardian is only the latest offender in this regard). A casual observation: most people who say this have been "in the biz" for 20 or 30 years, and as a result probably have low expectations/demands for change.

The Democratic party could end up like Labour (4.00 / 2)
Labour was voted in 1929 after the market crashed. Despite inheriting the mess,Labour were still blamed for the economic crisis because they came into power at the beginning of it. The British people didn't care that they inherited the problem. In 1932, Labour was out of power. They were in the wilderness for 14 years. I think if the Democrats don't do anything then they may end up like the Labour party. People make the mistake to compare Obama's situation to FDR but he at least came into power 3 years after the Depression where it clearly shows that he inherited the mess. This is not really true with Obama.
[ Parent ]
That is a great point (0.00 / 0)
You had the national governments of Stanley and Baldwin, followed by Chamberlain, who I've heard actually set the foundation for the welfare state that Attlee then built upon.

Thanks...that's a great point.

[ Parent ]
Sorry, Ramsay McDonald (4.00 / 1)
and Stanley Baldwin, not "Stanley & Baldwin". I had to go back and look that one up...it's been awhile, LOL.

So I personally am not forecasting gloom and doom for the world, and neither is Wolf or Krugman or Buiter for that matter. But I think some of these top minds are saying "Hold on, we could very well be in for a bumpy ride for years to come."

And it certainly would seem that way.

[ Parent ]
What! We're Supposed To Learn From Furriners! (0.00 / 0)
I don't care if they are Brits, what with the special relationship and all that.

Did GW listen to Tony Blair?

Of course not!

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
Absolutely Agree! (4.00 / 2)
The Repubs are COUNTING on continued economic disasters, and a failure by the Dems to pass key legislation to fix this mess.  They are going to actively work to make this situation worse.  Over the next two and four year election cycles, it will be much easier for the Repubs to blame the Dems for this mess, or lack of any recovery.  This is their whole game plan in a nutshell.

I'm not blaming Obama for this mess, I know it's not his fault, but he needs to start handing out these trillion dollar bailouts to the people that count:  the voters.  So far, we've watched him spend multi-trillions of dollars on the finance system that created the mess, and pass stimulus legislation that gives bucks to large companies.  Not much has translated into help at the voter level.

Universal single payer health care is the next item that looks like it will become a insurance company boondoggle rather than real reform.  We're experiencing a jobless recovery that going to leave tens of million of ex-middle class voters out of work, out of their home, without healthcare, and madder than hell.  It will be easy to convince them to blame the Dems.

[ Parent ]
You Just Smacked The Nail Upside The Head, Pardner (0.00 / 0)
The Repubs are COUNTING on continued economic disasters, and a failure by the Dems to pass key legislation to fix this mess.  They are going to actively work to make this situation worse.  Over the next two and four year election cycles, it will be much easier for the Repubs to blame the Dems for this mess, or lack of any recovery.  This is their whole game plan in a nutshell.

Now if only you could get someone to pay you $50,000K a speech, they actually might even listen to you for a while before soberly deciding ignoring you.

But, since you're saying it for free....

Well, not so much.  They'll just go straight to the ignoring you part.

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
when i read this (0.00 / 0)
I find myself convinced by it. But then I read something like this:

http://www.dailykos.com/story/...

and I find myself equally convinced of the opposite. Then I scratch my head and say "I dunno."  I hope the things that were done in 2008/2009 which were not done in 1929/1930/1931 will have prevented a great depression repeat.

Bonddad Isn't An Economic Historian (4.00 / 2)
The things he's talking about are short-term indicators.  And things are looking up short-term.  But this is not your father's recession, it's your grandfather's Great Depression, which means that false dawns are to be expected as the long decline continues.

We could luck out and avoid all that.  It is theoretically possible.  But not very likely.  We're set to stop stimulus spending, when Obama's already admitted they underspent on the original.  The states are going to be cutting their budgets for some time now.  There's a whole new wave of foreclosures coming, and there's all sort of bad debt the banks are holding onto, just hoping it will turn good somehow.  With consumers over-leveraged, and trying to pay off their debts, no one's sure just where the long-term demand to drive a sustained recovery is supposed to come from.

Other than that, Bonddad looks to be on solid ground.

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
Here is the truth (0.00 / 0)
In any election you will see trotted out models that purport to predict election results.  In general they aren't very good, largely because elections don't happen often enough to allow for generalizations to work across time.

Stop for a second and consider: there are fewer recessions of the order of magnitude that we are in now than there are elections.  You can argue there have been two data sets since 1933!!!

I know a fair amount about economic modeling.  These models simply don't have enough data to confidently predict the future given the circumstances that we find ourselves in.  Was the stimulus too small?  This is not a question you can answer definatively with data.

I think Wolf is full of shit.  Why? Because in 1930 the World was hamstrung to an absurd gold standard that caused the monitary supply to collapse.  In fact, it has been pretty well demonstrated that the sooner a country left the gold standard in the 30's, the sooner it recovered.

Contrast this with the Fed of today, which can't print money fast enough, and with the decision to keep the banks solvent (which was not done until early 33). Or the decision to pursue fiscal stimulus (the deficit to GDP ratio is exploding) and there is no way to argue that the policy response in any way resemebles the response in '29.  

There are two central questions that the models cannot answer, though, and these questions will determine if Democrats are able to build a lasting majority:
1.  Has the job market been permanently altered during the last 10 years in such a way as to render monitary and fiscal expansion useless as a means to create jobs?  
2.  Is the recent rise in long term rates a result of the market's belief that growth will be returning, or is it the result of worldwide concern about the US's ability to pay back the money it owes?

I am very concerned about question 1 (I think the job market has fundementally changed as a result of globalization) and only slightly less worried about the answer to question 2.  If long term rates are rising because the world no longer believes they will get their money back, than additional stimulus may not be possible.

By the way, Wolf's diagrams's are misleading for the US.  In the US M2 went from 47 in '29, to 46 in '30, to 41 in '31. US Monitary Supply never went up after the crash.  

[ Parent ]
Three Points (0.00 / 0)
(1) Do we have a small data set?  Sure we do.  Which is why I first pointed, months ago, to the study by Reinhart and Rogoff, which drew on a larger data set of major financial crises in single economies.  The main purpose here was different, however.

(2) Wolf's main point, and that of Eichengreen and O'Rourke, is to get the global comparison right--and that comparison is to the Great Depression.  The world-wide fall in economic activity is comparable so far, there is just no denying that.  Which also implies that signs of recovery may be misleading, as were signs back then.  

(3) Do we have a better policy response?  Absolutely, and the analysis shows this as well.  But (a) no one knows if that will get the job done, (b) everyone knows it could have been better, and (c) everyone knows there are more problems down the road (another wave of mortgage bankruptcies, who knows how many toxic assets, crippling effects of slashing state budgets, just to name three biggies).  Particularly here in the US, the policy response was too restrained on at least two counts--the failure to think big enough in terms of what we are facing, and the continued influence of neoliberal ideology.

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
You are (0.00 / 0)
badly misreading the data.

No major economist agrees with you about the US going into a Great Depression.  Not Krugman, not Stiglitz.  I know of no leading economist who thinks this is the Great Depression, or that we are heading into a Great Depression.  Krugman has explicitly argued that the policy response has avoided a Great Depression.  

As I noted in response to your earlier article, the comparisons to other countries was misleading.  Comparing the financial crisis in the Phillipines to the United States is to compare apples and oranges.  The data isn't similar, in large [art because of the dollar and the flexibility it gives the United States.

This case is unique.  Historical parallels are interesting, but they are all easily distinguishable on their facts - which was my main point.  

Anyone who has been involved at economics at any level for any length of time learns a fundemental lesson: humility.  

[ Parent ]
You Are (0.00 / 0)
badly misreading what I wrote.

I didn't say we're in another Great Depression.  I said that what we're going through--as a global economy--is comparable to the Great Depression.  And while we've certainly managed to slow the near-free fall that the economy was in when Obama took office, the danger remains that there will not be a full recovery for many years, which is precisely what made the Great Depression so devastating.

Most people don't realize, for example, that the nominal GDP returned to 1929 levels as early as 1936, yet no one would seriously argue that we had recovered by then.  This is the same situation we face today.  If the state governments weren't slashing their budgets, millions more weren't facing foreclosure, and the banks weren't sitting on untold amounts of toxic assets, then I'd say that your worries expressed in your original comments really were the only ones out there, and I would be suitably worried, but not deeply troubled.

As it is, I can only regard us as living in a fool's paradise right now, since there is such foreseeable trouble ahead.

Finally, there actually is serious talk going on right now about the possible end of the dollar as the reserve currency.  Even if it being the reserve currency magically means that our housing market will recover faster, the dollar no longer looks like its magic will last forever.

Your attacks on me would have more credibility if I weren't citing specific problems--state budget cuts, coming foreclosures, toxic assets--to support my larger point, and if you weren't simply ignoring them.  The problem is not simply that such problems exist--bad as they are in themselves--but they are still being so blithely ignored.

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
The Greatest Obstacle to Averting a Depression (4.00 / 3)
is that government in the U.S. is largely controlled by business and financial interests rather than the citizenry, via the campaign contributions these interests make to elected representatives.

So even though the statistics that Paul cites show the U.S. heading towards a depression, along with most of the post-industrialized world, voters can not force legislation through the system that will make the course corrections that are needed to avert a depression and protect their livelihoods.

Now that business and financial interests have used their control of the political system to basically bleed the U.S. Treasury dry, to the tune of $12.8 trillion, it matters little that a growing majority of voters embrace progressive values and reject the bailout policies of the current administration and Congress.

They cannot even elect representatives who will enact their values into law because of the dominance of the two major political parties by these special interests.

To save themselves and the country from the plutocrats now running it, U.S. voters have to throw off the yoke of the two party system the plutocrats control by building a new majority-led third party, as I have suggested earlier.

 

hmmm (4.00 / 1)
wouldn't some of those "business and financial interests" be interested in economic recovery so they could sell more widgets and get even richer?  
[ Parent ]
Their Primary Concern at the Moment (4.00 / 2)
is using the Obama administration and the fake Dems in Congress, whose campaigns they financed, to get their hands on as much money from U.S. taxpayers as possible to tide THEM through the coming lean years.

They long ago forgot that no economy can survive if ordinary people have no buying power.

If they had any vision of larger goals than self-enrichment, they would not have destroyed the real U.S. economy and the banking and financial system with predatory derivatives like the subprime mortage-backed securities.

[ Parent ]
I'm Very Sympathetic To Your Intentions And Goals (0.00 / 0)
But you face the same problem that Bonddad does: history.

Where in history has a third party emerged in the manner you are hoping for?  If none (there are none that I know of), then what makes you think this time can be different?

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
Glad You Asked that Question, Paul! (4.00 / 1)
It gives me the chance to call attention to an Internet invention of mine, The Interactive Voter Choice System, which progressive voters could use to create a third party unlike any party that has ever existed.

You can read all about it in a piece I wrote in a recent essay, entitled How U.S. Voters Can Get Control of Government.

Now that pretty much all else has failed and we, the people, are headed into a depression that we cannot stop because we do not control our elected representatives who have betrayed our interests, we have to change the system itself. The easiest way to change the system is to create a third party that can rid us of the dominance of the two major political parties whose elected representatives have brought down the economy and allowed financial predators to destroy the banking and financial system.

Fortunately, web inventions, including my own, make this possible, as I explain in some detail in the links above.

Voters can use my invention to set their policy agendas and build political networks, coalitions and winning voting blocs around shared agendas. They can use their networks, coalitions and blocs to throw the current crop of rascals out of office and replace them with their own candidates who will enact their agendas into law.

I have spent many years studying political systems around the world and I am increasingly convinced that the two party system in the U.S. is the cause of most of our problems and the greatest impediment to resolving them.

You might wish to read my comment earlier today entitled Dean Could/Should Start a Third Party?

Seems to me Howard Dean is the best suited, best positioned and most capable person to get the ball rolling, provided that new web inventions like mine are used to give voters the tools they need to control a new party from the get go.

[ Parent ]
My Point Is (4.00 / 1)
I've got to look more closely at what you've done, but my point is that it's generally far easier to take over an existing party with a vibrant reform movement than it is to start a third party.  And since my limited understanding is that what you're talking about is voter empowerment, this applies equally to either strategy.

However, I feel that I owe you as more considered response, which will have to wait for next weekend.  This is just my initial take, given that I've thought about and researched such matter of and on for several decades now.

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
You Make a Very Valid Point (0.00 / 0)
I think it is very important to ask that question, namely, whether it is easier to "take over an existing party with a vibrant reform movement" than it is to start a third party."

And compare working within the existing party structure to starting a new one, with specific reference to web inventions like mine. BTW, I initially conceived the idea for my invention at a Meetup to support Howard Dean's presidential primary bid.

I have been working on it for the past five years, during which it has evolved considerably into a mechanism that voters can use either to take over an existing party or start a new one.

The more I see Obama moving to consolidate his control over the Democratic Party using social networking techniques, the less I think a vibrant opposition reform movement can take over the Democratic Party with Obama at its helm.

My invention also uses social networking technology, but as I point out when I critique Obama's Pre-Election Web Strategy and Obama's Post-Election Web Strategy, I think it is best for voters to use social networking technologies independently of existing parties, candidates or incumbents.

(See also my section entitled Transforming Web 2.0 Social Networks into Political Networks.)

Obama and his operatives claim they have started a new social and political movement. But, as I point out, movements usually are started from the bottom up rather than the top down, as Obama clearly did when he co-opted existing social networks of young Millennials.

The important thing to do right now is to figure out how political entrepreneurs and technologists can pool their ideas, resources and inventions to empower voters to call the shots, leaving it to them to decide whether they want to work inside existing parties or outside them.  

 

[ Parent ]
I Promise To Study This More Carefully (0.00 / 0)
I agree with a lot of your analysis, as I'm sure you already know.  I've always believed that people need to organize outside party structures first in order to then organize within them.  This would go for third party organizing as well as organizing within the Democratic Party, however.

It's natural for folks to organize by issue affinities first before joining into anything larger, such as a political party.  I think that remains true no matter what else they may do.  Another point is that limiting the power of money must be similarly important whichever route is chosen.

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
The Interactive Voter Choice System (0.00 / 0)
would nullify the power of money in the electoral process because it would empower voters to:
  • Directly set their policy priorities across the board and publicize them in nationwide public opinion polls, whose results can be disaggregated down to the local level;

  • Identify and contact like-minded voters with similar policy agendas so that they can join forces to build political networks, coalitions and winning voting blocs of any size at local, state and federal levels;

  • Use their political networks, coalitions and winning voting blocs inside, outside or across party lines to run and elect representatives at all levels of government whom they can hold accountable for enacting their policy agendas into law;

  • Use their political networks, coalitions and winning voting blocs to rejuvenate existing political parties or build new political parties.

Since this invention will produce a high degree of convergence between voters' policy agendas and electoral candidates' policy agendas, candidates will no longer be dependent on campaign contributions from business and financial interests to get their message out.

The dominance of campaign financing and legislative decision-making by special interests will come to an end because electoral candidates and incumbents seeking re-election will no longer have to sell their votes to financial and business interests in order to get elected.

[ Parent ]
voter choice system (0.00 / 0)
I read the links in your posting yesterday. This system could be a game changer for us. Looking foward to Paul's take on it, but it looks good at first glance. Thank You!

Government by organized money is no better than government by organized mob..... FDR
[ Parent ]
Out could argue that the rise of the populists (4.00 / 1)
Scared the main parties to adopt progressivism.  
[ Parent ]
. (0.00 / 0)
But, of course, the US deficit is anything but well-crafted to fight the depression.  Bank bailouts instead of WPA projects does not a good policy response make.

It doesn't really matter where the money goes unless you're arguing that there is a liquidity trap somewhere (and either way, you don't magically solve liquidity traps by avoiding making sure the banking system is sound).

This thread is sort of muddled. The american economic system isn't made to distribute money in an equal fashion, so it doesn't really make sense to think that a different response isn't going to end with the money going back to the top anyways. This idea that giving people money that will be spent on corporations that give the money to banks is somehow more progressive than giving money to banks is silly. Either way the economy is what it is.

I'm not going to argue about whether there are greenshoots or not, since it's not like the stimulus is going to kick in less in the coming months (the opposite is true), but I find it hard to understand just what idea you are getting to about the response.

More Ignorance Parading As Wisdom (0.00 / 0)
It doesn't really matter where the money goes unless you're arguing that there is a liquidity trap somewhere (and either way, you don't magically solve liquidity traps by avoiding making sure the banking system is sound).

It absolutely does matter where the money goes because of (1) the multiplier effect--how much bang-for-the-buck you get from your government spending, which can vary by at least a factor of 2 to 4--and (2) the impacts on long-term expectations, both domestically and abroad.

This thread is sort of muddled. The american economic system isn't made to distribute money in an equal fashion, so it doesn't really make sense to think that a different response isn't going to end with the money going back to the top anyways. This idea that giving people money that will be spent on corporations that give the money to banks is somehow more progressive than giving money to banks is silly. Either way the economy is what it is.

Spoken like a true Republican!

The difference is, 30+ years of common experience tells us that trickle down doesn't.  

I'm not going to argue about whether there are greenshoots or not, since it's not like the stimulus is going to kick in less in the coming months (the opposite is true), but I find it hard to understand just what idea you are getting to about the response.

Alas, your inability to understand is not my fault.  Que "Serenity Prayer" on track 5.

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
. (0.00 / 0)
It absolutely does matter where the money goes because of (1) the multiplier effect--how much bang-for-the-buck you get from your government spending

How much use you can get out of a dollar before it ends up in Scrooge Mcduck's moneybin matters, but not in the grand scheme. Either way the recovery ends up looking the same because recovery is necessarily getting back to the way things were.

2) the impacts on long-term expectations, both domestically and abroad.

Why do the expectations matter if the system is still geared in the way it is? We may have different expectations but Scrooge is still the richest duck in Duckberg.

It's not the fact that trickle down doesn't work, it's the fact that you seem to be unable to understand that the money ends up on one side either fucking way. Republicans get to lie to people to defend the status quo, apparently democrats just close their eyes and pretend more food stamps makes the fundamental problem go away.

[ Parent ]
. (0.00 / 0)
Or to bring it back more to my point, the reason the charts refer to money supply and fiscal spending when determining response is that the money is going to settle in the same place every time. We can stimulate demand in the meantime while the banks get rich again, but in all reality the end game is banks getting rich again. The end game is a full stock market, the endgame is capital moving freely.

Decrying a policy response that acknowledges that reality is foreign to me.

[ Parent ]
Your Ignorance Is APPALLING (0.00 / 0)
America's GDP got back to 1929 levels (real, not nominal GDP) by 1936.  It's unemployment didn't get back to 1929 levels until WWII.  But the stock market didn't get back to 1929 levels until 1954.

As per usual, your babbling has nothing to do with reality.

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
. (0.00 / 0)
The new deal was a pretty shitty recovery. And it was shitty because no one took care of the banks in the beginning. There were no federal reserve money bombs, no large deficits. The industry didn't just have to recapitalize, they had to literally rebuild because the response was so slow in the first place.

I don't know if I'd place the new deal was being exemplary of what we will go through. If we are wrong with our response now (as in, if our recovery truly tracks the great depression), then it isn't just monetarism that's gone wrong (which already happened in the 80's) it's Keynesianism too.

[ Parent ]
. (0.00 / 0)
I mean just what the fuck are you talking about, GDP got to 1936 levels THEN FELL AGAIN WHEN THE GOV PULLED BACK, because government production is not the end game of a healthy economy. You can paper over things, or you can get to the point. The point is a healthy banking system, and healthy stock market. The in-between is whatever.
[ Parent ]
The Fix For One Failed Arguement Is Piling On 4 or 5 More (0.00 / 0)
Interesting.

The new deal was a pretty shitty recovery. And it was shitty because no one took care of the banks in the beginning.

Actually, that was the very first thing FDR did.  The banking holiday.  Closed all the banks, then reopened the good ones.

DO you even know what decade all this happened in?

What century?

"Senate passes expanded GI bill despite Bush, McCain opposition"

[ Parent ]
Look at wealth distribution curves (4.00 / 1)
they have varied enormously, both historically and internationally.  So I don't get your argument about inevitability at all.
[ Parent ]
There Is No Argument There (0.00 / 0)
[ Parent ]
Additionally, (4.00 / 1)
when the unsustainability of the current system became known, oh, about 5 decades ago, Nixon made a choice:

He very cleverly switched us to a debt based system to mollify the white working class, while he simultaneously blamed whatever clues to the crumbling facade of prosperity on blacks and intellectuals.

The fact that the people elected a black man named Hussein 7 years into the War on "Terror", should have been a clue to Obama that he actually had to bring real change!

Not just "red + blue = purple" bullshit rhetoric!

FDR! Not Compassionate Conservatism!

This is why it is imperative for the P.Rosenbergs of the world to somehow, someway get this into the noggins of the "Social Liberals" who know nothing about what is happening in the real world.

con't...

And what is happening in the real world? (0.00 / 0)
The real subprime crisis: subprime psyches.

People are breaking down.

They haven't the moral fiber or the conditioning to weather hard times.

This time they did the unthinkable and elected a black man named Hussein.

What will they do next if Hussein fails them? I.e. once people realize this won't be fixed without true suffering?

A HARD right turn.

Obama could have inoculated us against his by explaining the dire nature of what faces humanity in the 21st century, instead of praising Bernanke (sic) and leading people to believe that somehow, someway we can go back to the way things were.

We can't.

And those who gain the people's trust with promises will face hell if those promises don't come to fruition.

Why?

People are stewing in a nihilistic sauce created by rapidly changing technology and the breakdown of previous Creation Myths.

The more fanatical a fundamentalist, the more you know his soul quakes with the certainty that there is no God. Hence the brutality of these "believers", for whom we are collateral damage in their war against the Void.

With 7 billion people depending on a dwindling supply of resources just to get by, it's time to put out the hurricane flags, not prepare for a day at the beach.

President Obama, are you listening?

The Recovery Myth | 36 comments
Donate to Open Left









QUICK HITS

Friends of the Earth thanks the OpenLeft community for the ideas you generate and your contributions to the progressive movement.

blog advertising is good for you
blog advertising is good for you
LIBERAL INSTITUTIONS
STATE BLOGS
SEARCH

   

Advanced Search

Home | RSS/XML Feed | Register | Contact

  © OpenLeft 2007-2009, Powered by SoapBlox