Cartoon By Mr Fish (Harper's Magazine Online, August 7, 2009)
MSNBC's Economics reporter Dylan Ratigan occasionally posts at The Big Picture, the market / financial blog operated by Barry Ritholtz.
Ratigan effectively stood beside the shiny, new Financial 'Reform' legislation and lifted his hind leg in an Op-Ed piece on Ritholtz' blog, entitled "Wall Street Reform: Politicians Lie, Media Applauds, America Suffers":
It means that the same people who brought you these horrible changes — rising wealth discrepancy, massive unemployment and a crumbling infrastructure – have now further institutionalized the policies that will keep the causes of these problems firmly in place.
Meanwhile, all involved in the facade try to pretend that this should be considered a success because, gosh, real financial reform is just too hard and those crafty banksters will just outsmart us anyhow... Real and lasting financial reform is actually quite easy to implement — and the last time we had a crisis of this magnitude, we kept the banksters in check for 70 years.
And I believe as we head towards election time with leaders whose only plan for creating new jobs is a few more workers manicuring soon-to-be even bigger Bankster bonus-fueled estates coupled with a few more government handouts, this lesson will be learned once again.
At the same time, Economist Paul Krugman writes in the New York Times that the central bankers of today are getting it terribly wrong -- and that the result will be to drag out the legacy of the Go-Go, 'Lil' Boots' Bush years (i.e., the slow destruction of what's left of America's Middle Class) for another decade.
In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer.
But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.
In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.
Krugman noted in another column this past Friday that central bankers and conservative politicians (primarily in Britain and Germany), determined to create long-term stability by reducing budget deficits, to cut government spending and to reduce stimulus to their economies; are short-sighted and foolish.
...So saying that we need to focus on the long term, and not worry our little heads about trivial short-term issues like the highest long-term unemployment rate since the Great Depression, may sound like wisdom — but it’s actually folly...
[John Maynard] Keynes had it right:
But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that, when the storm is long past, the ocean is flat again.
The future will probably be composed of (1) high unemployment; (2) home prices continuing to decline as their value "resets"; (2) tight credit; (5) wages are flat for those who have jobs -- expect 2-3% increases at best for up to ten years.
And, unless no one notices, in the wake of financial uncertainty, no money to spend on public projects to replace infrastructure, climate-related shortages in power and water, comes political instability -- abroad, certainly, but here in America as well.
And when the gap between those who did so well, and those who continue to suffer is large enough, there's a lot that can happen.
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