Almost unbelievably, the way being charted to revive the economy is to reinflate the bubble

February 5, 2003 2:11 PM

Almost unbelievably, the way being charted to revive the economy is to reinflate the bubble When you're on a permanent war footing, it's worth being reminded, stupid, that it's all about the economy. A lengthy piece.
posted by skellum (23 comments total)

Bush = Recession
posted by the fire you left me at 2:21 PM on February 5, 2003

Bush = Recession


Please explain how this is all Bush's fault.

Thanks in advance
posted by H. Roark at 2:24 PM on February 5, 2003

well, I'm not saying it's ALL his fault, but he IS encouraging deficit spending. for your amusment
posted by Nauip at 2:33 PM on February 5, 2003

Please explain how this is all Bush's fault.

Maybe he was pointing out correlation rather than causation.
posted by goethean at 2:45 PM on February 5, 2003

Was the CEO of Enron Ken Lay ever arrested? Charged? investigated?
posted by CrazyJub at 3:02 PM on February 5, 2003

Lets try it this way:
Reagan=recession
Bush=recession
W. Bush=recession

Now for bonus points, what do these three politicians have in common?
posted by elwoodwiles at 3:27 PM on February 5, 2003

Reagan=recession
Bush=recession
W. Bush=recession

Now for bonus points, what do these three politicians have in common?

More indicted staffers than all other presidential administrations combined?
posted by Ty Webb at 4:02 PM on February 5, 2003

*shakes head*

Hey, the recession's been over for a year already.
Look at the ISM's manufacturing indexes have been going up for the past year.

Short translation: Manufacturing orders are up. Manufacturing purchasing is up. Manufacturing lead time is going up, which means that our current manufacturing capacity is being used to a fuller and fuller extent. Not only are orders up, but import AND export orders are increasing at a faster and faster rate over the past few months. Manufacturing prices are also increasing, and we're rapidly approaching the point where these price increases are going to have to be reflected in consumer price indexes... so all those articles you're reading about deflation are wrong.
The only thing that isn't up is employment, but job shrinkage is slowing and will probably be back in the black (more jobs being created) in the next six months.

So, for those of you who haven't gotten it yet...

THERE IS NO RECESSION RIGHT NOW. THERE IS NO RECESSION BEING CAUSED BY THREAT OF WAR WITH IRAQ. YOU'RE BEING MISLED BY PROPAGANDA AND YOU AREN'T SEEING ACTUAL DATA. Clear enough? This recent recession was caused by overstocking due to Y2k fears, and it's taken a while for industries to work down their excess inventories. There were fears of a double-dip recession, but it hasn't happened.
Everyone in the supply management industry is waiting for the government to catch up with what we've known for a year.

Now would you stop this idiotic "My presidential party's economy was bigger than your presidential party's economy" bullshit?
Thank you.
posted by SpecialK at 4:25 PM on February 5, 2003

Will work for food.
posted by LouReedsSon at 5:22 PM on February 5, 2003

Short translation: Manufacturing orders are up. Manufacturing purchasing is up.

Do you have statistics on this? Because my experience is that raw material prices are up, raw material prices are going further up due to speculation about oil prices due to the potential war, and orders are significantly down. In fact, 400 of 3600 people in the company I am thinking of (HUUUGE company; vinyl, plastics and rubber compounding, specialty resins, etc) were laid off last month.

War or rumors of war usually boost the economy; This war is bashing the economy. The man can't even warmonger right. And warmongering isn't nice very to begin with.
posted by Shane at 5:28 PM on February 5, 2003

shd be "very nice"
posted by Shane at 5:30 PM on February 5, 2003

SpecialK.. if only a single index were all we needed to predict the future. There are thousands of indexes to look at and there is no clear picture. For every positive report there is a equally negative on using the same set of data.

The article posted for this thread is a good one. It takes a while to read but recommend if you have the time. It puts economic forecasting on the big time scale across the globe and has some interesting historical facts. THanks for posting skellum.
posted by stbalbach at 6:32 PM on February 5, 2003

The headline here makes me furious. The bubble deserved to be busted. The economy isn't really in recession it's just going back to normal. What we have to worry about is people thinking there's nobody but crooks running the companies and their cronies looking out for them. That's the sort of thing that leads to whole countries going down the tubes. If the Bush administration doesn't step down hard on the Enron's and Arthur Anderson's of the last decade I think we could well end up as the next decade's Argentina.

Money represents honor. If there is no one defending the honor of our marketplace at the highest levels it could all come crashing down in a way no one wants to experience again.

(Which is my histrionic way of saying I don't know what to make of Robert Brenner's interpretation of events. Too many big words or something.)
posted by wobh at 7:30 PM on February 5, 2003

Money represents honor.

Oh. Oh dear.
posted by stavrosthewonderchicken at 7:45 PM on February 5, 2003

My mother represents honor! Don't say a bad word about her or I'll...I'll...I'll.....we were poor, so poor! - what was money? we never saw any...........but we were principled.

SpecialK - sounds like a Keynesian gov. war purchasing, deficit spending, economic indicator boost to me. I imagine that the ISM manufacturing index includes military manufacturing?
posted by troutfishing at 8:07 PM on February 5, 2003

I expected to find something interesting to read, but the article is just a personal agenda (read about the author at the bottom of the page). Moreover, the author uses only the arguments, time frames and indicators that are convenient to his point of view. Several common-sense (IMHO) examples:

In terms of the standard measures - growth of output, capital stock, labour productivity and wages, as well as the level of unemployment - performance in the supposedly sensational five-year period between 1995 and 2000 barely matched the levels [which levels? average? max? min?] achieved in the 25-year period between 1948 and 1973. The growth of labour productivity, the most important indicator of economic dynamism, was a full 20 per cent lower. [again, lower than what?] Taking into account the whole business cycle of the decade from 1990 to 2000 [why stop at 1990?] and not just the five good years at the end, the average annual rate of growth of GDP per person was a meagre 1.6 per cent, compared to 2.2 per cent for the hundred-year period 1889-1989.

…………..

With the so-called 'reverse Plaza Accord' of summer 1995, the US Government therefore agreed with its Japanese and German counterparts to drive up the dollar.

This agreement constituted a turning point in the evolution of the world economy. It reversed the dominant economic trends of the previous decade and, in a crucial sense, prepared the way for every major development of the next five years: the decline of US profitability, the historic equity price increase, the stock market-led economic boom - and the crash and recession that have followed. [I do not believe in only one major cause affecting the economy. While one can always invoke a butterfly effect for every event, that is not the standard reasoning in economics]

….. Greenspan, far from seeking to control the bubble, actively encouraged it. He not only welcomed the enormous increase in liquidity resulting from the influx of foreign money and his own reduction of interest rates, but also refused to raise the cost of borrowing from the beginning of 1995 until mid-1999 [20/20 hindsight] (aside from a lone quarter-point rise in early 1997) or to raise the required margin on share purchases to discourage speculation. [on the funny side, I remember an article few years ago blaming Greenspan for the "end of the growth" due to his pessimistic 'irrational exuberance' "personal opinion"]

Do not get me wrong, the article should not to be dismissed entirely, but every affirmation and logical step should be scrutinized.
posted by MzB at 9:35 PM on February 5, 2003

Wow. Great post!

The most harrowing statistic (as a work-techie myself):

During the same period [Dec 2000 to present], the [telecom] industry laid off more than half a million workers - 50 per cent more than it had hired in the spectacular expansion between 1996 and 2000. By comparison, the car industry took two decades to reduce employment from 1.5 million to 732,000.

While there is certainly work to be had for those talented enough to stand out from the crowd, that's a mighty big crowd to be standing in! I feel bad for people just graduating with IT degrees.
posted by Civil_Disobedient at 10:25 PM on February 5, 2003

Lets try it this way:
Reagan=recession
Bush=recession
W. Bush=recession

Now for bonus points, what do these three politicians have in common?

I thought I knew what you were getting at, but then I realized you must have accidentally deleted the first line, which blows the correlation:

Carter=recession
posted by obfusciatrist at 10:31 PM on February 5, 2003

Oh, and SpecialK:

On manufacturing:

Since the first quarter of 2000, manufacturing employment (measured in hours) has been reduced by a stunning 13.8 per cent. The overall effect has been a powerful downward spiral in which pressure on prices resulting from overcapacity has led to falling profitability, which has issued in falling investment, making for rising unemployment and bankruptcies and, in turn, reductions in demand that have fed back into falling prices and profitability, and so on.

On "My presidential party's economy was bigger than your presidential party's economy" bullshit":

"Under the watchful supervision of Robert Rubin, who, having been CEO at Goldman Sachs, was made Clinton's Treasury Secretary in 1993, the already disintegrating barriers between investment banks, commercial banks and insurance companies - originally erected by the New Deal, in response to the 1990s-style excesses of the 1920s - were obliterated.

The climax came in April 1998 when Travelers Insurance, owners of the investment bank Salomon Smith Barney, merged with the commercial bank Citicorp to form Citigroup, in direct defiance of the still valid Glass-Steagall Act, the pivotal piece of New Deal legislation regulating finance. These giants were clearly confident that the Government would sanction the merger - and with good reason: Citicorp donated $4 million in campaign contributions during the 1996 and 1998 electoral cycles. The finance, insurance and real-estate industries spent over $200 million on lobbying during 1998 and donated another $150 million in the course of the 1998 electoral campaign.

I can't believe you read the entire article and missed this very anti-Democratic Party point.
posted by Civil_Disobedient at 10:33 PM on February 5, 2003

It's not just Bush's fault, because it is Clinton's, & the Democrats', fault as well. Both parties have been responsible for the economic decisions that led to the bubble of the late 1990s, and to the overall redistribution of wealth to the already very wealthy over the last 15 or twenty years.

Excess capacity, or overproduction, is a classic problem of capitalist economies, identified by, yes, Marx in the 19th century. Large-scale expansion is fueled by profits that themselves are fueled by lowering the price of labor--which has happened worldwide, with manufacturing shifting away from the US and Western Europe to Mexico, Indonesia, China, etc, where workers are paid much less. But the global effect of all this is that workers/consumers don't have enough income to buy all the stuff that is being produced--hence, a crisis of excess capacity.

"Fordism" is the name for the policy that attempted to overcome this dilemma in the mid-20th century. By paying his workers more, Henry Ford insured that they would be able to afford the cars they were making---thus fueling long term expansion at the price of reduced immediate profits. Fordism fell out of favor in the 1970s, which is a big part of why rates of growth have been smaller for the last thirty years, despite technological revolution, As Brenner's article shows, the current recession is largely a matter of events catching up with the shell game of increasing immediate profits by impoverishing the work force which is also a mass of potential consumers.
posted by Rebis at 10:38 PM on February 5, 2003

Rebis - I generally agree with your points. Krugman of the NYT, and George Soros too, have recently warned of deflation. Will an invasion of Iraq make things better or worse?

Did you know that Henry Ford got a medal from Adolf Hitler (pre-WW2) for service to the Reich? Ford was quite a charactor - deeply sympathetic to and supportive of German fascism, virulently anti-semitic, and also strongly populist, with a deep (I'd say) grasp of economic fundamentals. The newly emerging strains of neo-fascism around the world (especially in the US, and I don't mean the "Aryan Nation" and their ilk, either) lack the economic populism which was one of the better parts of Ford's inclinations, and just about the only postive element of Hitler's political agenda. (by the way, I recently read that, between Ford and GM, the two produced, at their German subsidiaries, about 65% of the vehicles used by the German Wermacht during WW2!)

The accelerating death of the US middle class was covered recently in this Mefi thread. Here are some of the highlight links:

"OK - for all of you MEFIers tickled and outraged by Ed's post on the Death of the US middle Class, here are some official (and some less official) stats. My claim that "the bottom 80% of Americans steadily lost ground since 1967 relative to the top 20%" is supported by the US Census Bureau, on page 16 of the PDF file, "Money Income In the US - 2000".

The L Curve is far more graphically descriptive, though

By the way, there is some (empirical) research arguing for a correlation between unequal income distribution and political instability. The IMF concurs with this view. (See also) I would suggest that the US 2000 Presidential Election was the beginning, for the US, of a period of inequality driven political instablity -- that is, if we continue to refuse to acknowledge this correlation.
posted by troutfishing at 7:45 AM on February 6, 2003

Great link Nauip, thanks.

Meanwhile, "the Treasury Department warned today that the government would hit its $6.4 trillion debt ceiling around Feb. 20, and it urged Congress to increase the authority to borrow.

"The request was made as deficit projections have continued to increase. The move is likely to set off a battle, with Democrats' seizing the opportunity to accuse President Bush and his party of flawed fiscal policy."
posted by homunculus at 10:25 AM on February 6, 2003

Don't worry. Be happy.
posted by troutfishing at 7:54 PM on February 6, 2003