Friday, August 05, 2011

Two Things To Tell

What a day yesterday was. There’s just too much to keep up with. Even though I was rained out on the picture taking, I had so many things to write I never caught up.

There are two things I have to draw your attention to before they get any staler. (Because Monday could be a big day too. Watch Europe.)

The first is something I heard on Wednesday morning -- from a Tuesday afternoon podcast. I haven’t heard this view put quite this way anywhere else. It’s from Hedi Moore the New York bureau chief for Marketplace. So think back, the debt-ceiling deal was just done.

Past the debt crisis -- what now?

”KAI RYSSDAL: I offer, as we get started today, two statistical representations of the debt limit debate just mercifully brought to a close. First of all, the Dow Jones Industrial Average. Down 265 points today, almost 2.2 percent. Also, the 10-year T-note. The yield on the benchmark Treasury fell today down to 2.61 percent. Crazy low, but a big vote of market confidence.”

”RYSSDAL: So we got the deal; everything's set and fine. But are we better off now than we were like 48 hours ago?

MOORE: Well the good news is, we're better off than we were four months ago, when we first started debating this. But the question is: how well off are we going to be starting now? The whole debt ceiling debate made us look dysfunctional; we all know that. But just because it's over doesn't mean we're going back to our regularly scheduled programming. We're a different country now. Everything that Congress has decided is that we are going to enter a period of belt-tightening, right? Economists called it "austerity." And this is the first time that we're really entering austerity in a really long time. So when you look at it from the point-of-view of Wall Street, of investors who buy Treasury bonds, who make decisions on whether to buy into the U.S., we're no longer that great, big expanding power. We're now a power that is contracting...”

That really hit me. The United States of America -- the greatest world power in history, the world’s only remaining superpower, leader of the Free World, the world’s largest economy is “contracting”. The implications are huge. Our economy is 2 1/2 times the size of China’s. It’s almost as big as the entire European Union put together (and they’re really contracting.) The world didn’t force us to contract. Nobody can push us around militarily -- not even close. The world is still begging us to take their money and keep it safe.

Nope, none of those things have forced us to contract. We just decided to contract. We just up and decided to stop borrowing money to fuel our growth because our balance sheet looks bad at the moment. Like we’re not in the biggest financial crisis in 70 years. Like our finances won’t look a lot better when we get the economy in gear again. We just rolled over and gave up.

The phrase “Awaken the Dragon” keeps coming to mind. I don’t know why.

Thing two is about (who else?) Krugman. But it’s a real twist. Or at least I thought so. Krugman pointed it out on his blog but the real story is over on David Frum’s site. Frum (in case you didn’t know) used to be the economic speech writer for George W. Bush.

Were Our Enemies Right?

”Imagine, if you will, someone who read only the Wall Street Journal editorial page between 2000 and 2011, and someone in the same period who read only the collected columns of Paul Krugman. Which reader would have been better informed about the realities of the current economic crisis? The answer, I think, should give us pause. Can it be that our enemies were right?”

You need to read the whole thing. Trust me on that one. Just keep in mind that Frum is the latest version David Brock. I realize I should probably welcome him like the Prodigal Son, but I’d rather he’d “seen the lightbefore he’d enabled such a destructive Administration. Having said that, there’s nothing quite like a reformed sinner.

Don Brown
August 5, 2011

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