Stimulus. Stimulus. Stimulus. Stimulus. Stimulus. Stimulus. Stimulus. Stimulus. Stimulus. Stimulus. Stimulus. Stimulus. Stimulus. Stimulus. Stimulus.
ITEM - Be Afraid. Be Very Afraid.
The economy is very bad. No doubt about it. But how does this recession compare to past recessions? Last week a graph was released by the office of Speaker of the House Nancy Pelsoi that was truly frightening:It was widely distributed across the blogosphere, particularly favored by left-of-center blogs. Frankly, you couldn’t design a graphic that would better serve to instill fear about the state of the economy. In fact, it was apparently designed to do just that, by truncating the left scale to emphasize the difference in the three compared recessions, using absolute unemployment numbers rather percentage of the workforce, and pretending that history began in 1990.
The following graph offers a somewhat broader perspective, comparing all recessions in the modern era (since 1946), expressed as an unemployment percentage.
H/T to Marginal Revolution for the graph.
The green bar is the current recession. No doubt, this is a bad one. About in the middle of pack as far as recessions go. The graphic points out an interesting aspect of recessions. They all end. And, surprisingly, they didn’t all need a trillion dollar stimulus bill from the Feds to end them. In fact, all of them combined up to now did not need a trillion dollar stimulus to end. McQ and QandO has a few more charts that show the same thing. A bad, but not wildly extraordinary recession. Worst than most, but not as bad as others we have weathered since WWII.
It is incumbent on our Federal government to help cushion the blow for those Americans devastated by this economic contraction. That includes unemployment extensions such as are in the stimulus bill. If there are infrastructure projects that we know we really need, like upgrading the electric transmission backbone, and repairing dangerous bridges, there is certainly a case to be made to do the projects now and cushion the recession impact. Fine. I’m on board. The operative word being “need”.
But to spend a trillion dollars, just for the sake of spending a trillion dollars, because some economists and politicians have an unproven dogmatic ideological belief in Keynesian theory, or - more likely - using unproven Keynesian theory as an excuse to load up a porker the likes of which we have never seen before - strikes me as batshit insane.
Nancy's graph served its purpose and helped the President sell us on the fear of a pending catastrophe so great we really need to be stampeded into the largest spending bill in the history of the United States. That the financial disaster is so great we really should not care that there is massive spending in this bill for projects that we do not need and will not actually stimulate the economy (translation of “the bill is not perfect“). That the impending crisis is so monstrous, that we cannot afford to take the time to make sure our money is not wasted, thereby guaranteeing, that we will waste more money with this bill than any other bill in history.
ITEM - Last fall's banking crisis was also so frightening that Congress did not have time to carefully consider the $700B TARP bill before throwing that money at Wall Street.
And here is one congressman explaining exactly why it was so frightening, in yet another meme that took the blogosphere by storm this week.
One problem with Congressman Kanjorski's entertaining story. It was not quite true.
The part that grabbed everyone's attention, was Kanjorski claiming that there was a two hour $550 billion drawdown in money market funds last fall, essentially a "run on the bank" and that the global economic system was within 24 hours of complete collapse. This story has been used in blogs as justification for Congress abrogating their responsibility to carefully consider and debate how our money is raised, allocated and spent. Oh… and also for some gratuitous bashing of free markets. One example:
“For those of you who didn’t realize how dire the situation was (even though I implored you to take it seriously) I hope this video will make it crystal. If our banking system failed and it set off a chain reaction around the world, our credibility would have been TOAST… Letting the market work would have literally resulted in almost a complete unraveling of our way of life. Imagine if you had woken up the next day and discovered that your debit card, your credit cards… none of them worked. It would have been catastrophic.”
I thought the story was a bit fishy when I suddenly started seeing this clip all over. Why is it that the only source is one Congressman in an obscure CSPAN video clip? Where was the substantiation from… well… anyplace else? How is that anything so big and dire could take place last September, and nothing leak out about it until now? My suspicion was correct.
Kanjorski and the Money Market Funds: The Facts
“With the Kanjorski Meme still spreading (see Ben Smith, Andrew Leonard, Moldbug, and more), I think I’m finally able to squash it with some hard figures: there never was a $500 billion outflow from any asset class in the space of a couple of hours or even weeks, and the Fed never shut down or froze any money-market accounts. This is not the first time that Kanjorski has made these allegations. But first, it’s worth going through the timeline…
on September 24, Kanjorski held a hearing on Capitol Hill with Treasury secretary Hank Paulson… Kanjorski is clearly fishing here: he’s talking about anonymous newspaper reports and vague “conversations” and anonymous Wall Street “friends”, and basically asking Paulson to confirm his suspicions. Which, naturally, Paulson doesn’t do, because the suspicions weren’t actually true. That said, however, Paulson’s being-polite-to-the-Congressman answer doesn’t explicitly say that Kanjorski’s numbers are false. After that, we didn’t here much more about this meme until Kanjorski resuscitated it on C-Span, this time citing the Federal Reserve as his data source, and beefing up the numbers for good measure…
…This is all, frankly, fiction, and it’s not clear where most of it came from, although maybe Kanjorski’s “friends” on Wall Street are the same people as Michael Gray’s sources at the New York Post. Thinking back to that crazy week it’s easy to get details wrong, especially when you’re speaking off the cuff on a call-in show. But let’s stop treating it as though there’s any substance to it. Please.”
So Kanjorski “misremembered” his sources as he told and retold the story over time, and as a consequence, bad reporting from the New York Post is given new life on the Intertubes.
That was indeed a very bad week for the financial sector. But there was no retail panic in money markets, no $550B drawdown in a couple of hours and the worldwide financial system was not 24 hours from collapse. Good story though. Kanjorksi enjoys telling it.
There are still questions and lessons to be learned. My question: To what extent did the Treasury Secretary and the executive branch permit misinformation and fear to be used to panic the Congress into abrogating their responsibilities to the American taxpayer and pass a very bad bill with very little consideration?ITEM - The Stimulus Bill just passed the Senate.
Beyond this, I cannot add much to my last post on this subject. I just think it is worth pointing out that none of our representatives in either the House or the Senate actually have any idea whatsoever about what is really in this bill. It is impossible for anyone to have read the final version that was voted on today. The final 1,000+ page bill was given to the legislators at 9:00 AM this morning, and passed tonight.
What a hairball. Your government in action.
ITEM - Carnivalingus
Some recent collections of high quality blogging punditry:
- Cousin Jack presents The Carnival of Ohio Politics Rule #154 hosted at Ohio Politics Carnival.
- Jenny presents The 4th Carnival of Modern Liberty hosted at Yorksher Gob.