58 Days

Our economic house of cards continues to fall. Citigroup is next, they say.

Daniel Gross argues that we’re not reliving the Great Depression all over again:

Ironically, the differences between the two eras can be summed up in a few sound bites. The world of 1929-33 was one that lacked shock absorbers such as Social Security and deposit insurance to insulate people from economic disaster. In the 1930s, some of the world’s largest economies—Germany, the Soviet Union, Japan, and Italy—were run by leaders hostile to the very notion of market capitalism. Today, U.S.-style market capitalism is under assault from self-inflicted wounds, and Germany, Italy, and Japan (Russia, not so much) are working with the United States to cope with a common problem. Back then, we were cursed with a feckless Federal Reserve, and a wealthy Treasury secretary, Paul Mellon, saw the downturn as a force for good. “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” he said. “People will work harder, live more moral lives.” By contrast, today’s Federal Reserve chairman, Ben Bernanke, is a student of the Great Depression, and the wealthy Treasury secretary, Henry Paulson, wants to provide liquidity to stocks, farmers, and real estate. A final difference: After the 1929 crash, the nation had to wait more than three years for a president who simply wasn’t up to the job to leave the scene. This time, we’ve got to wait only two more months.

Paul Krugman says Gross is missing the point.

The reason we’re making analogies with the Great Depression — and the reason I’ve come out with a new edition of The Return of Depression Economics — is the collapse of policy certainties. In particular, the Fed’s sudden impotence — its inability to cut rates any more, because they’re essentially zero — is a very real parallel with the Depression, and necessitates drastic responses.

Now, if all goes well the Obama stimulus plan will head off the worst. But that will be precisely because we understood that the current crisis is, indeed, like the Great Depression in important ways. Only those who learn from history can hope to avoid repeating it.

Barack Obama is doing what he can from the sidelines to keep the crisis from getting worse. Bubble Boy, on the other hand …

Bush, meeting with international leaders in Peru, warned against government intervention in free markets after weeks of overseeing one of the largest government financial interventions in U.S. history.

Many pundits argue that the nation can’t afford to keep Bush in office for three more months, because we need effective leadership now. Good luck with that. We’ll be lucky if he doesn’t chain himself to the Resolute desk on Inauguration Day, forcing the Secret Service to saw the priceless antique apart and carry him out of the White House.

So the ship of state will continue to float along aimlessly for the next, what, 58 days? Tom Friedman writes,

Right now there is something deeply dysfunctional, bordering on scandalously irresponsible, in the fractious way our political elite are behaving — with business as usual in the most unusual economic moment of our lifetimes. They don’t seem to understand: Our financial system is imperiled.

The Bushies haven’t shown any inclincation to govern responsibly lo these past seven years and ten months. And now Friedman is upset? I guess the loss of billions of dollars of his wife’s wealth got his attention.

Today, bloggers on the Right are hysterical about the impending Obama Administration, which will combine the worst elements of Franklin Roosevelt and George McGovern. Some bloggers on the Left are already certain that the Obama Administration will be the same old entrenched Washingtonian politics-as-usual Big Fat Zero, and maybe it will. I’m making no specific predictions about what he will or won’t do. Maybe he’ll surprise us. Maybe he won’t. We’ll see.

In the meantime, I see little else to do but keep breathing.

10 thoughts on “58 Days

  1. deeply dysfunctional, bordering on scandalously irresponsible, in the fractious way our political elite are behaving

    A proclamation from the pundit who cheerled an aggressive war with the flippant philosophy of ‘Suck. On. This.’

  2. Paul Mellon? Bzzzrt! Paul Mellon was the horse breeder. Salon-boy means his father ANDREW Melllon. Paul Melon was 23 in 1930.

    HA! HA!

  3. Grr, Slate I mean, not Salon. Whatever was I thinking? More substantively I guess, I wonder if we could practically move the transfer of power up and how far.

    I know you can’t announce a shadow government during an election campaign because it’s illegal (you are promising people political jobs before you are in a position to give them) and while there might be unofficial agreements if Obama took over on Nov. 5 he probably wouldn’t have had the staff or time to get the people he wanted (he wants the wrong people, of course but…). Sure he might do that during the campaign, but it’s hard to ask someone to take time out of campaigning to do something that requires so much more time and effort.

    I think there has to be some time between transitions though perhaps we could move it up to January 2? It’s not a huge boost, but something in me rebels against forcing it on someone too soon, or during the holidays of Thanksgiving–>New Years.

  4. The world of 1929-33 was one that lacked shock absorbers such as Social Security and deposit insurance to insulate people from economic disaster.

    And what if you’re not eligible for Social Security, and are living a hand to mouth existence…like yours truly? Although, I am reassured knowing that the FDIC will cover my whole $16.00 dollars if the banks go belly up…it puts my mind at ease.

  5. Conservatives have spent some effort dissing FDR & the New Deal over the years. For most folks the argument has been under the radar. Central to the economic recovery, as Obama has announced, is jobs. As FDR did, Obama is going to create labor-intensive projects, roads, schools & infrastructure.

    The Repbs claim that these projects in the 30’s did not help and they extended the depression. In their reality, FDR got ‘lucky’ with WWII and that got us out of the depression. (Ask them why we are going into a depression while we are in the 6th & 7th years of 2 wars if wars are so good for the economy.)

    The Republican philosophy has been VERY low prime interest rates – easy credit – and global competition to keep American wages down. Stagnant wages put a damper on inflation which is the frequent adverse side effect of a hyper-stimulated economy.

    Obama is going to redirect middle-class tax breaks and gov’t sponsored job creation. Straight out of the FDR playbook. If the Republicans oppose and it passes AND if the recession subsides, then the GOP is doomed for decades. Because the perception – firmly entrenched – will be that the GOP caused the depression & the Democrats fixed it.

    So expect a mainstream debate about FDR this year. The GOP is going to try to do a major rewrite of history which they will try to sell to the voter as part of their opposition to the economic plan.

  6. Today, bloggers on the Right are hysterical about the impending Obama Administration, which will combine the worst elements of Franklin Roosevelt and George McGovern.
    Don’t forget Jimmy Carter. Any Democratic President is a Jimmy Carter clone until proven otherwise (according to the Right).

  7. Vast sums of money can move around the globe in an instant, unlike the 1930s. At this moment, dollars are pulling away from the periphery of the world economy, and back toward the core – resulting in a strengthening dollar. This ability of money to move instantly is why Paulson was forced to adopt the British plan of buying shares in the banks – if he didn’t follow suit, dollars would have left the US for safer banks overseas. And so 58 days is an eternity in the electronic age we find ourselves in.

  8. One more thing, when people talk infrastructure, sure you have a number of construction companies and their assigns that will have jobs, but most people don’t work in construction, we have a majority of a service economy and people don’t do nearly as much “hand” labor so to speak, manufacturing etc. so how much do direct measures actually help?

  9. …and to think Bush was jettin’ all around the county a few years ago, makin’ global warming worse, on his social security reform bamboozle. One wonders where people would be today if he’d met with any success. It’s one of those ..”what if” questions…Oh I forgot, junior has never been successful at anything in his entire life…including managing the US economy…I wonder if that sits in poppys’ craw..

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