Friday :: Mar 14, 2008

He doesn't understand


by Turkana

So, the economy's not doing too well. The New York Times summarizes:

Almost everything seems to be going wrong for the American economy at once. People are buying less, but most things are costing more. Mortgage rates are rising, the dollar is falling and prices of key commodities like oil are leaping from one record high to the next.

On Thursday, the dollar plumbed new lows against the Japanese yen and several other major currencies; the price of an ounce of gold jumped above $1,000 for the first time; and lenders raised home loan rates once again. Government figures showed retail sales fell in February as consumers cut back on cars, furniture and electronics.

Stocks fell sharply after the retail sales report was released early in the day, and a large investment fund said it was nearing collapse. The volatility that has defined the market lately continued unabated.

The Standard & Poor’s 500-stock index fell 2 percent in the morning, then rebounded partly in reaction to a report that said banks were nearing the end of subprime mortgage losses. It was up nearly 1 percent in the afternoon before paring that gain to close up 0.5 percent, to 1,315.48 points. The Dow Jones industrial average closed up 35.5 points, to 12,145.74 points.

A toxic blend of economic and financial developments is testing policy makers and lawmakers who are struggling to contain the slump brought on by the collapse of the mortgage market, a downturn that now looks sure to push the economy into a recession. Though current conditions are a far cry from the 1970s, resurgent inflation is raising the threat of stagflation — a condition in which unemployment and the price of goods and services both rise.

Which all sounds pretty bad. But Republican nominee-to-be Saint Maverick is on the case. As Paul Krugman noted, last month:

Take, for example, John McCain’s admission that economics isn’t his thing. “The issue of economics is not something I’ve understood as well as I should,” he says. “I’ve got Greenspan’s book.”

His self-deprecating humor is attractive, as always. But shouldn’t we worry about a candidate who’s so out of touch that he regards Mr. Bubble, the man who refused to regulate subprime lending and assured us that there was at most some “froth” in the housing market, as a source of sage advice?

And when McCain said it's not something he's understood as well as he should, he was, actually, offering a little of that old missing straight talk. Let's look at his own words, from the January South Carolina debate:

“I don’t believe we’re headed into a recession,” he said, “I believe the fundamentals of this economy are strong and I believe they will remain strong. This is a rough patch, but I think America’s greatness lies ahead of us.”

So, yes- it's fair to say that the economy is not something he understands. But it's nice that he thinks America's greatness lies ahead. That's a pretty bold and complicated conclusion to make after such a detailed and well-considered analysis. But he is reading Greenspan's book. And he will find he and Greenspan have much in common. For example, after having built a career as a deficit hawk, Greenspan signed off on Bush's tax cuts. And we know how well that worked out. And McCain also had the intellectual conviction and moral clarity to flip-flop on Bush's tax cuts. And McCain now sees making those tax cuts permanent as the balm for what ails us. Because the issue of economics is not something he's understood as well as he should.

Turkana :: 9:58 AM :: Comments (28) :: Digg It!