Saturday, July 03, 2010

Slouching toward a double dip

Slouching Toward a Double Dip or a Lousy Recovery at Best:
The economy is still in the gravitational pull of the Great Recession and all the booster rockets for getting us beyond it are failing. The odds of a double dip are increasing.
(I would say a double dip is almost inevitable.)

The irony is that had there been no bank bailout in 2008 and 2009, no large stimulus, and no extraordinary efforts by the Fed to pump trillions of dollars into the economy, we’d have had another Great Depression. And because it would have sucked almost everyone down with it, the nation would have demanded from politicians larger and more fundamental reforms that might well have lifted everyone, and set America and the world on a more sustainable path toward growth and shared prosperity...

No one in their right mind would have wished for another Great Depression, of course. But we seem to have got the worst of all worlds. The bank bailout, the stimulus, and the Fed brought us back from the brink just enough to dampen zeal for anything more.

I would quibble only with this statement:
Wall Street and the other biggest global banks, meanwhile, are making piles of money betting against government debt all over the world.
This statement seems contradicted by 10-year Treasury bonds below 3%.

It seems, however, accurate to note that bankers are exerting a lot of pressure — not just in the US but all over the West — to enact fiscal austerity; much as I despise capitalist politicians, they are usually not gratuitously evil. Why does the capitalist ruling class and the upper levels of the professional-managerial middle class see fiscal austerity and the resulting depression as being in their interest? Are they operating on pure habit?

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