Last week on CNNFN there was an article about two guys who were making more than 100k a year ago and are now learning how to live on half of that. This, in typical CNN fashion, was their way of saying how bad things are. And look, I feel sorry for people who've had their salary cut in half, although to be honest, one guy worked for WaMu, and is probably lucky he's got a friggin job right now. The other guy was a mortgage broker, which again, is not exactly the type of job you'd expect to survive a real estate meltdown.
By the way, making more than 100k made those two guys rich according to the Census Bureau. Taking 50% pay cuts makes them middle class. This my friends is unfortunate for those folks, but is it historically horrible?
Then yesterday, Paul Krugman, who admittedly has one one more Nobel Prize than I do, tells us we are on the edge of the Great Depression. Now he, and a lot of other really smart people have been saying things are close to the Great Depression, for a while now. My concern is that speaking statistically THINGS ARE NOTHING LIKE THE GREAT DEPRESSION - AT ALL.
I mean things are bad - really bad from the baseline we came down from. Unemployment is higher than it's been in almost thirty years. Household wealth has been slashed; people don't feel secure; we are still in the middle of an expensive war. Here in the Midwest manufacturing is getting hurt and farming is not rocking the house.
But really the Great Depression? Does anyone in the developed world have 30% plus unemployment? And near as I can tell there are no bread lines, Hoovervilles, or anything approximating the Great Depression in the US right now.
So as a public service I'd like to sponsor a contest to name this economic downturn. Should we call it the Not So Great Recession? Should we call it the Really Well Reported Real Estate Blow-up? Should we just call it, the Wooden Stake in the Reagan Revolution? I'll be tallying the entries and arbitrarily choosing a winner, which I'll forward to all mainstream media outlets, or at least the ones that are still publishing on a daily basis.
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Krugman's essay raised a number of very serious issues, some of which Fundman has addressed. But there is another, perhaps more important, way in which this Not-So-Bad-Depression (or whatever historians are going to end up calling it) bears no relation to the G.D. As both Anna Schwarz and Robert Higgs point out (from very different perspectives) the problem in 2007/2008 was NOT a lack of liquidity. There was, and remains, plenty of money sloshing around. The problem was/is that the banks had/have too many bad (or "toxic" as Schwarz terms them) assets. Thus, again to quote Schwarz, the Fed is "fighting the last war" (i.e., the "war" of 1929) which did indeed involve a liquidity crisis.
ReplyDeleteThe reason why this is so important, is that Krugman (and many others)see this recession as a way to act on their necrolatrous fascination with J.M.Keynes. This is very dangerous stuff indeed.
Schwarz's interview can be found here:
http://online.wsj.com/article/SB122428279231046053.html?mod=special_page_campaign2008_mostpop