1115.org

Fed chief: Recession ‘probably’ will end this year – USA Today (3/15/09):

America’s recession “probably” will end this year if the government succeeds in bolstering the banking system, Federal Reserve Chairman Ben Bernanke said Sunday in a rare television interview.

White House: Economy still has ’strong’ underpinnings – USA Today (3/15/09)

The economy is fundamentally sound despite the temporary “mess” it’s in, the White House said Sunday in the kind of upbeat assessment that President Obama had mocked as a candidate.

Obama’s Democratic allies pleaded for patience with an administration hitting the two-month mark this week, while Republicans said the White House’s plans ignore small business and the immediate need to fix what ails the economy. After weeks projecting a dismal outlook on the economy, administration officials — led by the president himself in recent days — swung their rhetoric toward optimism in what became Wall Street’s best stretch since November.

During the fall campaign, Obama relentlessly criticized his Republican opponent, Sen. John McCain, for declaring, “The fundamentals of our economy are strong.” Obama’s team painted the veteran senator as out of touch and failing to grasp the challenges facing the country.

But on Sunday, that optimistic message came from economic adviser Christina Romer. When asked during an appearance on NBC’s Meet the Press if the fundamentals of the economy were sound, she replied: “Of course they are sound.”
[...]
Just a week ago, White House Office of Management and Budget director Peter Orszag declared that “fundamentally, the economy is weak.” Days later, Obama told reporters he was confident in the economy.

Bernanke is a piece of work, isn’t he? The recession isn’t going to end this year under any plausible circumstances. “Bolstering the banking system” is a nice goal, but nothing, not one word, out of the administration demonstrates that they have any idea of how to do that. In fact, they seem to be really fond of currency bonfires, just like their predecessors.

But it’s the abject hypocrisy (and mixed messages depending on who happens to be speaking) on the current state of the economy on the part of the Obama administration that is most troubling. Obama and his surrogates, plus the entire liberal commentariat, went to town on McCain’s economic happy talk. The more we learn about the practical operation of the U.S. economy, the worse it looks. Pouring hundreds of billions into broken banks and insurers only serves to display exactly how much of a black hole into which we’ve been pulled. The exposure of mega frauds like Madoff and Stanford have further undermined trust, and have people wondering how many like them remain undiscovered. Even the honest money managers and advisors lost tons of cash for their clients because didn’t see the current stock market crash coming, so it’s unclear how much retail investors will pile back into the market, even if it recovers. The pain of losing half of your retirement account doesn’t go away overnight. These factors will be a drag on the economy even after things start to look up, and it’s hard to imagine the “fundamentals” without retail investors.

Happy-talking the economy now (or suggesting that it’s a good time to buy stocks as Obama did earlier this month) is an order of magnitude worse than when McCain did it last fall – it was at least a possibility then that some sun would sneak into the forecast. Obama and his team of idiot economic advisors (I’m mostly talking about Summers, Geithner, and Bernanke — I hate dragging Romer into this — but she made her own bed here) know that only pain is on the short-to-intermediate horizon, and that’s the best case scenario.

There’s a bigger problem in all of this, and it’s the idea that there are any fundamentals left in the U.S. economy at all. Short of hitting some kind of cosmic jackpot like discovering that we are living on top of an isolated, yet endless supply of exportable clean energy, things are going to change for the worse in this country. The growth of our economy and the rise in our standard of living (if, unlike me, you’re comfortable granting that premise) is due to cheap commodities, easy credit, and faux financial alchemy. Since Helicopter Ben and whatever Rubinite stooge Obama picks as his successor will be destroying the dollar to cover debts from the the poorly constructed stimulus, the days of cheap commodities are quickly coming to an end. Easy credit will likewise take a hit due to risk tolerances at banks, and the same inflation that will send commodities soaring. Which leaves us with the masters of the universe on Wall Street. Either they are reigned in by effective legislation and oversight, in which case they won’t be driving the economy anymore, or there isn’t any new regulation, and they just blow up the economy again just as soon as things start looking up. Since there seems to be no will on the part of Congress or the Obama administration to fix even the most glaring (and simple) problems on Wall Street like the absurd excesses given to criminals and called ‘bonuses,’ it seems pretty clear which way the wind is blowing.

I don’t even know exactly what Obama and his goons mean when they talk about fundamentals. They might be prioritizing LIBOR, TED, and the Dollar Index and other synthetic numeric representations of what they think represents economic fundamentals. But Americans have grown accustomed to the American Dream prism of economic fundamentals. They want to be able to buy a big new house, put a flat screen in literally every room, buy a car for every driving-age family member, and do it all right now. This ideal is not compatible with the current de-leveraging, and as I wrote above, credit will either be reigned in or it won’t. If it is, no more conspicuous consumption for the vast majority of Americans, and if it isn’t, then the next crash is right around the corner. I don’t envy being in the position of having to stave off grave and growing pessimism, but that’s the job for which Obama campaigned. The hypocrisy of slamming McCain, and then following his lead the second it became their economy, is distressing. The thought that they either don’t get that massive structural changes are coming, or are unwilling to talk about it, is much worse. The American Way, as practiced over the last 30 years is unsustainable, and the sooner people figure that out, the better our odds of remaking it into something that works. Doesn’t seem that Obama, under the sway of Summers and Geithner, is the appropriate messenger.