Dead Cats Bouncing
One of the best and most refreshing changes established by the Obama Administration has been its reliance on intellectuals, scientists, and experts rather than lobbyists and ideologues. Across a broad swath of federal departments, pragmatism seems once again to be valued. Unfortunately, with the world economy imploding, Obama continues to rely on the advice of corporatist insiders, and their advice is predictably corporatist. There also seems to be a bit of myopia going on.
On Saturday, Joan Walsh warned Obama supporters not to be taking credit for the previous week's slight market rally:
As someone who has repeatedly defended Obama from GOP efforts to blame him for the current crisis and to deride the "Obama economy" only 55 days into his presidency, I think the administration could be playing a dangerous game. Live by the week's economic news, die by it as well. If the Dow dives next week, or retail spending dips again, does that mean the stimulus failed?
Right on cue, Vice President Biden then weighed in:
"Consumer confidence is slightly up. The market is slightly up," Biden said. "It'll go down again, but the people are beginning to figure out that the president's got a plan and he believes we can work our way through this."
Nouriel Roubini has been warning that there may be "dead cat bounces," or "bear market suckers rallies," and there's no reason to think the latest is anything else. Which means that Biden should maybe be a little more circumspect about taking a day trader's view of a one week market rally.
Nobel Prize winning economist Joseph Stiglitz, last week:
"We need a larger and better designed stimulus," Stiglitz said at a press conference in Geneva.
"The responses of governments are too small, too slow," he said.
Nobel Prize winning economist Paul Krugman has been saying the same, for at least a month. Last week, he wrote:
So here’s the picture that scares me: It’s September 2009, the unemployment rate has passed 9 percent, and despite the early round of stimulus spending it’s still headed up. Mr. Obama finally concedes that a bigger stimulus is needed.
But he can’t get his new plan through Congress because approval for his economic policies has plummeted, partly because his policies are seen to have failed, partly because job-creation policies are conflated in the public mind with deeply unpopular bank bailouts. And as a result, the recession rages on, unchecked.
O.K., that’s a warning, not a prediction. But economic policy is falling behind the curve, and there’s a real, growing danger that it will never catch up.
Today, he warns that Europe could be facing years of deflation and depression.
The bank bailout continues to be nothing but a taxpayer funded gift to the miscreants who created this disaster. Krugman, Roubini, and Stiglitz all have been calling for nationalization of the banks. Given that they were three of the few to predict the current economic disaster, you'd think that someone might want to pay attention to them. And they've even been joined in their call by the king of free market corporatists, Alan Greenspan. But the Obama Administration continues to hesitate. And take credit for the bouncing of dead cats. Are the Republicans worse? Of course. But this isn't about being better than the Republicans. It's about saving the world. Maybe literally.