Monday, April 20, 2009

Recession Progress? Not Really

If you still aren’t sure Washington is putting this recession behind us, watch Elizabeth Warren’s video interview…and you will really be worried.

RGE Monitor suggests that even if we are moving out of the recession, “recovery may well be very sluggish because synchronized global recessions and those accompanied by financial crisis tend to be severe and forestall quick recoveries.” That raises two questions:

  1. What are we doing to pull ourselves out of the global recession?
  2. What are we doing to resolve the financial crisis?

Globally, the poor are being left to fend for themselves, unless one thinks that the G20 decisions were truly substantive. That will create an even softer underbelly than existed before. With global disparity already rising and many countries decaying rather than developing even before the recession, this seems a dangerous route to recovery.

As for Wall Street, bailouts without reform would seem to leave us right where we were a year ago once the bailout funds have been used up. Or, will they continue endlessly, at the cost of turning middle America into a third world society?

But don't take my word for it....

Evidence about Global Problems

Krugman on China:

Two years ago, we lived in a world in which China could save much more than it invested and dispose of the excess savings in America. That world is gone.

Yet the day after his new-reserve-currency speech, Mr. Zhou gave another speech in which he seemed to assert that China’s extremely high savings rate is immutable, a result of Confucianism, which values “anti-extravagance.” Meanwhile, “it is not the right time” for the United States to save more. In other words, let’s go on as we were.

That’s also not going to happen.

The bottom line is that China hasn’t yet faced up to the wrenching changes that will be needed to deal with this global crisis. The same could, of course, be said of the Japanese, the Europeans — and us.

And that failure to face up to new realities is the main reason that, despite some glimmers of good news — the G-20 summit accomplished more than I thought it would — this crisis probably still has years to run.

Evidence about the Financial Crisis

Elizabeth Warren on reliability in government:

if we don’t keep the American people as part of the conversation, the decisions that will get made, will not be the decisions that are best for them.

Elizabeth Warren on transparency:

There has to be absolutely clarity….You’ve got to be able to believe the numbers…Once you’ve lied to a market, it needs it [clarity] ten times over….I want to look at the stress test.

Can you believe that the Treasury Department does not want the TARP Oversight Panel to see the stress test? What are they hiding?

Elizabeth Warren on fraud:

She points out that Japan lost a decade because government regulators and financial managers were “close,” while Sweden “fired the managers.”

I fear that right now we are much closer to the Japan end of the scale.

Krugman on Ireland:

If, as some of us fear, taxpayer funds end up providing windfalls to financial operators instead of fixing what needs to be fixed, we might not have the money to go back and do it right.

Stiglitz on the bank bailout:

The people who designed the plans are “either in the pocket of the banks or they’re incompetent.

No comments: