Obama is in a very difficult position, because it appears that the average American (and most of its politicians) have no real idea of just how atrocious their economic position is, and is going to get, or why. I will be very surprised if he even gets to try to do half of what he would like to do, right or wrong, because it just isn't going to be economically feasible for some years.
I have revised my position on the economy on account of the depth of the crisis being worse even than I had supposed (and I have always said this is potentially worse than the 1920s). That revision causes me to think that apart from sitting on our asses and hoping, public works are now the only alternative that can be tried that might work; and in that case, America has got the best President it could hope for at the moment, because he was so minded to go that way before it made sense. And thus despite being as wrong-headed economically as a man can be prior to this crisis, he just might be the man to do what fits the day.
We had better hope so. Doing nothing, economically, is certain to be very grievous at present. Public works, if they are got wrong, are the way to even worse than I have currently envisaged, because they increase debt, and debt, at the levels it exists today, is the heart and soul of the economic crisis; it is beyond comparison with anything that we have known.
Bluntly, America, and other countries that have behaved in the same way, now have decades ahead in which the repayment of former debt will dominate economics, OR, there will be an economic meltdown on a scale that few people can even imagine. To repay that debt, one must first have a sound economy; public works might enable that to be the case, and I can see nothing else that could do so at this point, since other approaches have already failed elsewhere. But that must be the point of public works; a sound economy, and thus the ability to repay debt.
Yet repaying that debt will squeeze 10% out of America's GDP each year for the next twenty years. How, if that is to be achieved, are any major spending programs of any kind to be achieved, other than those required to make the economy work again? It can't be done.
There are a limited number of futures.
- Sit still and let it hit. Repay debt for twenty years. Strike all aspirations during that period. - Public works revive the economy. Repay debt for twenty years with a functional economy in which people can live without too much pain. - Get public works wrong, and head for a future that is truly scary, in which the dollar collapses, and you repay your creditors in their currency practically forever, or, the entire basis of the dollar is redefined, and the country is sold off in a garage sale to your creditors, and you then live on their terms.
Pick. Those are the choices, and I think Barack has now seen that to some extent. I wish his electors had already done so.
Why? People are very ready to blame bankers, but the culprit is, as Barack rightly said, greed - whether he knows it or not, that greed originates in individuals ready to take and use loans that mortgage their future in a way that former generations knew better than to do, in the now provenly false supposition that the future will always be rosy enough to repay those debts in richer times.
That form of greed and, frankly, economic ignorance, has been the norm, and the banks have merely given the people what they wanted. I said this was a property bubble in 1995; see the graph of US debt versus GDP, and that's when the debt problem got worse than it had been in the 1920s. I was not to know that at the time, but it remained obvious to me that that was about the time where all economic sense was being thrown to the wind in pursuit of an arithmetically impossible dream; credit from cradle to grave.
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Date: 2009-01-21 04:00 am (UTC)I have revised my position on the economy on account of the depth of the crisis being worse even than I had supposed (and I have always said this is potentially worse than the 1920s). That revision causes me to think that apart from sitting on our asses and hoping, public works are now the only alternative that can be tried that might work; and in that case, America has got the best President it could hope for at the moment, because he was so minded to go that way before it made sense. And thus despite being as wrong-headed economically as a man can be prior to this crisis, he just might be the man to do what fits the day.
We had better hope so. Doing nothing, economically, is certain to be very grievous at present. Public works, if they are got wrong, are the way to even worse than I have currently envisaged, because they increase debt, and debt, at the levels it exists today, is the heart and soul of the economic crisis; it is beyond comparison with anything that we have known.
Bluntly, America, and other countries that have behaved in the same way, now have decades ahead in which the repayment of former debt will dominate economics, OR, there will be an economic meltdown on a scale that few people can even imagine. To repay that debt, one must first have a sound economy; public works might enable that to be the case, and I can see nothing else that could do so at this point, since other approaches have already failed elsewhere. But that must be the point of public works; a sound economy, and thus the ability to repay debt.
Yet repaying that debt will squeeze 10% out of America's GDP each year for the next twenty years. How, if that is to be achieved, are any major spending programs of any kind to be achieved, other than those required to make the economy work again? It can't be done.
There are a limited number of futures.
- Sit still and let it hit. Repay debt for twenty years. Strike all aspirations during that period.
- Public works revive the economy. Repay debt for twenty years with a functional economy in which people can live without too much pain.
- Get public works wrong, and head for a future that is truly scary, in which the dollar collapses, and you repay your creditors in their currency practically forever, or, the entire basis of the dollar is redefined, and the country is sold off in a garage sale to your creditors, and you then live on their terms.
Pick. Those are the choices, and I think Barack has now seen that to some extent. I wish his electors had already done so.
Why? People are very ready to blame bankers, but the culprit is, as Barack rightly said, greed - whether he knows it or not, that greed originates in individuals ready to take and use loans that mortgage their future in a way that former generations knew better than to do, in the now provenly false supposition that the future will always be rosy enough to repay those debts in richer times.
That form of greed and, frankly, economic ignorance, has been the norm, and the banks have merely given the people what they wanted. I said this was a property bubble in 1995; see the graph of US debt versus GDP, and that's when the debt problem got worse than it had been in the 1920s. I was not to know that at the time, but it remained obvious to me that that was about the time where all economic sense was being thrown to the wind in pursuit of an arithmetically impossible dream; credit from cradle to grave.