Apparently, The Federal Reserve, the U.S. Congress, the European Central Bank, Germany, France, even China and Russia, have all decided that avoiding the runaway train that is the coming economic catastrophe is somebody else’s responsibility.
As much as I hate to admit it, it appears to me that the party is over. The runaway freight train could be easily stopped (see “The One Penny Solution to America’s Financial Crisis”) but no one has the balls to actually step up to the plate, say damn the next election, it’s for the good of the country and just do it.
It’s Really That Bad
Shortly after President Obama was elected, Christina Romer, who was the head of President Obama’s Council of Economic Advisers, warned Congress not to make the same mistakes that were made by Franklin D. Roosevelt when he decided too soon, to listen to small-government, panicky advisers and change from fiscal stimulus to austerity. By making that switch too soon, the recovering economy slid quickly back into the “Roosevelt Recession”. Unfortunately, Ms Romer’s good advice was ignored.
The most disheartening and depressing element to our current dilemma is that it’s all happened before…and not that long ago. We have a perfect road map for what NOT to do, and yet we continue to thumb our noses at fate and do them all over again.
In the spirit of doing everything that I can, as a simple man who knows all too well what is coming, I will re-tell history one more time in the hope that someone, somewhere will come to their senses and stop this runaway train before it crashes and so many people are needlessly hurt.
“Those Who Cannot Remember the Past are Condemned to Repeat It” – George Santayana, circa 1905
The number of serious economists that are comparing 2012 to the beginning of the Great Depression is growing at an ever increasing rate … I never would have imagined that the Great Depression and its causes and the protections that were developed because of it could be so easily forgotten or ignored.
It began slowly and almost unnoticed, with bank failures in Austria, a very small country in Europe(can you say G-r-e-e-c-e?). Austria’s government tried to intervene and rescue the banking system. However, the escalation in costs of the rescue put the government’s own solvency into perceived doubt. Just the perception of this small country’s bank problem should not have been enough to have a significant effect on the world economy, but the perception that resulted was the beginning of a panic that spread around the world like a flu pandemic.
Sound familiar? It should.
The key lesson of the Great Depression however, has more to do with the inherent danger of political policy of abandoning people or places in a predicament. By abandoning or ignoring the problem, the healthy European governments that could have helped Austria manage its problems hid like cowards. The Bank of France and the Federal Reserve, could have done much more to limit the damage. But nobody with the power to contain the crisis had the balls to do so; like today, the very people who could have and should have made the hard choices to stop this train from derailing chickened out and are trying to justify it now. No, they are doubling down on it now.
And it’s all happening again, in Europe and in America in astonishingly identical ways.
Look at how European leaders have been handling (or mishandling) Spain’s banking problems. They are in a full-blown depression already (see: “Austerity: The Real Euro Crisis Begins in Spain”). As I said back in February, on this site, Greece is done. Poke it with a fork. Spain is the big kahuna that should be getting the help AND the attention.
Spain is where the fate of Europe will be decided. Just as in 1931 Austria, Spain has troubled banks that urgently need more capital, but the Spanish government now, like Austria’s government then, faces questions about its own solvency. But Spain is the fourth largest economy in the eurozone. Spain is not Austria. Spain is not Greece.
It’s obvious that European creditor nations should assume some of the financial risks facing Spanish banks. But Germany undoubtedly hates this truism. The very survival of the euro dollar at stake, however, and it’s what MUST be done, however distasteful, because the alternatives are infinitely worse.
Northern Europe’s answer to lend money to the Spanish government, and command Spain that it must bail out its own banks is foolhardy, reckless and extremely short-sighted; not to mention the wrong strategy. Naturally, this solved nothing. It did nothing but put Spain’s government that much more in debt, making the European crisis worse now than ever.
Meanwhile Back At the Ranch
Before anyone makes the mistake of assuming that I’m saying the U.S. is any better, let me assure you that I am not saying that and the U.S is not handling it. The GOP is acting more irresponsibly than ever. Democrats are as spineless as ever. Unfortunately, Congressional Republicans seem to be consciously trying to sabotage the economy for political gain. Just as unfortunately, when this train derails I will be in a soup kitchen line while mumbling “I told you so”. The obstructionism, the GOP governors using laid off public workers to offset private job additions is tantamount to using Americans as Human Shields to sink President Obama’s re-election bid.
In my book-THAT’S GOP TREASON. GOP Domestic terrorism plain and simple.
And what about the Federal Reserve? The Fed has apparently decided to run and hide from Congressional Republicans as well. Being intimidated by the GOP is not only irresponsible, but potentially catastrophic to the entire economy.
Despite the Fed’s mandate to seek both price stability and employment stability, last week the Fed released its latest set of economic projections, showing that it expects to fail on both.
Ben Bernanke, the Fed’s chairman and supposed “expert” on the first Great Depression, has warned Congress repeatedly about the damage being done to America by the unparalleled intensity of our long-term unemployment. And yet, Bernanke inexplicably announces that it will be implementing some corrective actions, but anyone remotely familiar with the current conditions knows full well that the actions being proposed are woefully inadequate.
Just as in 1931, countries have the wherewithal to avoid catastrophe. Moreover, we have the advantage of knowing how and why depressions occur and how to stop them. But knowledge and resources do absolutely no good if those who possess them decline to use them.
It’s the almost universal abandonment of responsibility that fills me with a growing sense of trepidation.
The Extremely Un-Supreme Court
Citizen’s United could not have happened at a worse time. Business groups united with Republicans have already spent $235 million on television ads attacking the Affordable Care Act with abject lies and with aid of Willard Mitt Romney and his campaign. Meanwhile, the spineless Democrats and the Obama campaign have been astonishingly hesitant to tout the president’s biggest achievement and tell voters exactly how it will benefit them. The President’s campaign has broadcast no television ads about health care that I can find, except for one in Spanish.
That’s a lot of huevos to put in one basket.
The White House has been lackadaisical in one after another pitch from the beginning of President Obama’s administration. Beyond simple decency, the ACA offers a huge benefit to society as a whole, improving public health and reducing expensive emergency care that everyone pays for. But aside from a few pundits, the victory has been overshadowed by Republicans calling Chief Justice Roberts everything from a drug-addled fool to a traitor, while Congressional Democrats fiddle with, hell, I don’t know what they’re fiddling with.
If President Obama is interested in serving another term, it’s high time that the White House and the Obama campaign come together and start playing an aggressive offense, or anyone reading this post will likely be in the same soup kitchen line that I will be in a year, maybe two, from now.