Thursday, August 18th, 2011

"Give Us Money or We'll Shoot This Dow"

Before the hilarious Morgan Stanley reportwhich says that we're "hovering dangerously close to a recession" and then says that "policy errors" have to do with their vote of no confidence in the U.S. markets, by which they mean "make us and/or give us much more money" and/or "don't cut government spending"—came the Goldman Sachs report, which put forward the idea of the U.S. economy being a plane, a plane that can stall, just like a real plane, if GDP growth is below 2%. One of their top two concerns? "US fiscal tightening." (In the end, just FYI, they put the possibility of a "new" recession at 1 in 3.) Basically we are in a weird position where, for maybe the first time, Republican talking points (if not actual Republican beliefs or actions) threaten Wall Street, which has, over the past few years, gotten everything it's wanted from the White House. (And will continue to do so, not that there's anything left to give.)

The funny thing in all this is that the ideas behind these economics are all, sure, made up. For instance, it's an largely agreed-upon principle, though I don't think necessarily a correct one, that if you gave everyone in America $1000 as a "stimulus," that it would be a real disaster. (Some would hoard; some would waste; some would pay down debt: and these mixed results would, overall, be "bad" for the economy.) Yet bank analysts also think that curbing government spending is a mistake… when really, much of what the government does is hoard, waste and pay down debt. And what do corporations do with direct "stimulus" moneys? Same thing, pretty much! They sure don't create jobs, we found out. The government doesn't do so well at that either. In the end, we'd be better off distributing actual money in actual human hands. At least half of it would get paid directly to big corporations anyway. (Like Citibank! And Visa!)

24 Comments / Post A Comment

johnpseudonym (#1,452)

Welcome, corporate overlords! I support your good work, my neighbor is the malcontent. Bankrupt him.

keisertroll (#1,117)

@johnpseudonym I'd rather welcome the ants.

hockeymom (#143)

What's the opposite of woot?

whizz_dumb (#10,650)

@hockeymom Bah? hoork?

keisertroll (#1,117)

@whizz_dumb Meh?

Astigmatism (#1,950)

The problem, Choire, is that curbing government spending usually takes the form of cuts to existing programs that have people working in them, and so lead almost directly to job cuts: e.g., cutting federal aid to states leads to cuts to education which leads to teacher layoffs. This was Krugman's point back in July: we've actually seen 1 million new private-sector jobs since Obama took office, but we've lost a half-million public-sector jobs, which has undercut any labor growth we've managed to eke out.

The odd situation is that Wall Street's interests are far more aligned with the Democrats and the middle class than they are with the Republicans right now, who've been co-opted by Tea Partiers with the head-exploding argument that the best way to create jobs is to destroy the economy first.

roboloki (#1,724)

you're saying we should buy gold?

theheckle (#621)

@Astigmatism Ah, but you're forgetting all the servers they're going to need at the Tea Parties once the Tea Partiers come to power. That's what their platform is right? 24 hour Tea Party People! Sort of the modern version of fiddling while Rome burns.

Lockheed Ventura (#5,536)

@Astigmatism @Astigmatism Wall Street is not aligned with the Middle Class. Wall Street, the Obama Administration and the American public want to pretend that the status quo (the last three decades of debt financed consumption) can continue infinitum if we just go into more debt. Guess what, it can't. Wall Street loves more debt because they own and finance the debt and make interest off said debt (both public and private).

The only way the economy can grow again is if we can properly price assets and corresponding debts to actual real world income streams which are low and getting lower….

dntsqzthchrmn (#2,893)

@Lockheed Ventura: The only way the economy can grow again is if we all believe and clap our hands.

Or, you know, find another way to think about wealth creation besides "unlocking value."

roboloki (#1,724)

@Lockheed Ventura you're saying we should buy gold?

Sabin Hinton (#8,850)

@Lockheed Ventura –

YES! This makes perfect economic sense.

Except of course it defies the principle of the "first to market". You're not going to convince anyone to seriously align prices according to real income. The first one to do will be devoured. The only way that this is going to end is a significant economic collapse which can only be delayed (The Great Recession)and not avoided.

LondonLee (#922)

Donald Trump was on GMA yesterday morning trumping (ha!) Rick Perry's jobs record in Texas. When George Stephanop-whatever pointed out that a lot of those were minimum-wage jobs Trump replied "Well people right now just want any job whether it's good or.." – and here he caught himself before he said bad — "..not so well-paying"

Yes, that's the future America. Take any shit for now and forever and stop complaining about it.

dntsqzthchrmn (#2,893)

@LondonLee: Pretty nice bonus of the debt economy — a permanently co-opted workforce. Finish off the unions and you've got yourself a 1000-year company store.

Doug Henwood (#6,729)

Actually, the big Wall Street houses have never been big austerity promoters. They mostly supported the fiscal stimulus package in 2009, and continue to say that the economy needs some sort of stimulus. The Wall Street support for austerity has come mainly from its own petty bourgeoisie (i.e., the Tea Partisans on a grander scale) – hedge fund and private equity guys, who have a social philosophy straight out of Ayn Rand.

coalbaron (#11,105)

Was there a picture of the attractive Vassar grad in Juggalo face paint on the cover of the Morgan Stanley report? That's how I'm picturing it.

stuffisthings (#1,352)

FYI, there's no such thing as 'wasting' money when it comes to macroeconomics. Doesn't matter if you spend it on a flatscreen TV, hookers, cocaine, dental work, or college — if it's getting spent, it's increasing aggregate demand, which is precisely what we need right now. Even 'hoarding' (or 'saving') is not necessarily bad, since banks can turn around and lend that money (or, you know, make insane speculative bets with it). It would probably be BETTER if we could spend a lot of money on things our country actually needs, like infrastructure, research, or education, but the important thing is that SOME money get spent on SOMETHING.

SeanP (#4,058)

@stuffisthings Yes. To put it even more simply, I don't think it's at all "largely agreed upon principle" that just giving everyone a thousand bucks would be a disaster. I think it was Keynes that (tongue-in-cheek) proposed as a stimulus measure paying people to bury huge wads of cash, and then letting other people dig them up again.

stuffisthings (#1,352)

@SeanP When I do an economic analysis of a development project my base case (for comparison) is just throwing the money out of a helicopter. I think people would be surprised how often this is more economically effective than, say, sending a USAID consultant on a $120,000 a year salary + expenses to 'train trainers' so a few hundred farmers can, potentially, some day, earn ten or fifteen dollars more per year… #teachamantofish

scrooge (#2,697)

@stuffisthings I guess you should be using #giveamanafish, then?

SeanP (#4,058)

Oh, and the link purporting to show that the "government doesn't do that [stimulus] so well either"? That leads to the Investor's Business Daily, which provides a few cherry-picked examples of problems relating to gov't investment in green technology, and uses that to write off the entire stimulus. Oooookay.

You know what would make a good stimulus? If the government just hired a bunch of fucking people to build roads, fix bridges, upgrade rail transport, etc, etc.

underscore (#11,529)

I'm pretty sure that the Australians did just give everyone a thousand dollars or so a couple of years ago as a stimulus.

They still have a functioning economy. I don't know if this proves anything.


Hmm. Later, if I can find my little ladder, I might get up on a really high horse about this.

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