Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Op-ed Warriors Defend the TARP Tax Payer Bank Bailout

Politics / Mainstream Media Oct 08, 2010 - 11:52 AM GMT

By: Christopher_Westley

Politics

Best Financial Markets Analysis ArticleConfession time: I still read newspapers the old-fashioned way, meaning the way my father and grandfather did, on paper, frequently at the kitchen table, and to the smell of a hot, Honduran coffee.


I have various reasons for not yet giving in completely to the digital delivery of news. The paper I read, the Birmingham News, is a good though not great paper, and although my cost of delivery has increased during the Great Recession, I consider its coverage of the state to be indispensable for my work in the areas of teaching and research.

It also runs Pearls Before Swine, one of the funniest comics in print today.

Nonetheless, for the News to improve in this most competitive era ever in the history of newspapers, it will have to address its editorial page, which has narrowed its focus over the last decade to a select group of establishment-right and establishment-left mouthpieces. Balance, apparently, is reading progovernment views from both sides of the ideological spectrum.

Any changes in this regard would have to involve dropping Froma Harrop, the syndicated columnist who also serves on the editorial board of the Providence Journal. The Birmingham News editors must believe that Alabamians need to know what this Rhode Island Red thinks about the welfare state, if only to balance out Charles Krauthammer's' views on the warfare state.

Hint: they are both pro-state.

I have written about Harrop before on Mises.org, after she wrote a piece laughing at fathers who question the morality of using full-body scanners on their eight-year-old daughters in US airports. In HarropWorld, if the state wants to do something to you or your family, and if it defines its actions as being for your own good, then it is good. End of discussion.

One action the state has defined as good in this sense has been its massive stimulus of billions of dollars, created out of thin air, into the economy to counter a painful correction process. This is a difficult argument to make indeed, given the talk today of unemployment seemingly stuck near the 10 percent range, to say nothing of growing concerns about a double-dip recession.

But this is why Frau Harrop matters to establishment thinking. She defends the nonobvious in the same way a devoted state sycophant in 19th-century Europe would deny that his emperor isn't wearing any clothes. In her case, she trots out an argument that, despite today's difficulties, the economy would have been in much worse shape today had the government not intervened in the correction process with billions of stimulus dollars. She writes,

Had Washington not taken any aggressive steps starting in 2008, the results would have been horrific. … Real gross domestic product would have fallen a "stunning" 12 percent, rather than the actual decline of 4 percent. Nearly 17 million jobs would have vanished, twice as many as the real count. And the unemployment rate would have peaked at 16.5 percent.

Her justification for these figures? It is a paper published this past summer by economists Alan Blinder and Mark Zandi, who argue that Washington actually saved our economic hides.

But any economist worth his or her salt who has read this paper would not want to bet the bank on its findings. For one thing, it presents only one simple model, which is scientifically unheard of when addressing something as complex as the US economy. Secondly, it doesn't even measure the effect of the stimulus on the macroeconomy. If you accept the single model (constructed by Zandi), you simply learn how the economy would have progressed today absent any interventions.

Third, the results of the simple model are, well, simplistic. In its first appendix, the authors indicate as much, by noting that interventions in market forces actually fed the crisis. They get no argument from me on that point. Bailing out Bear Sterns while letting Lehman fail, the two TARP votes, the incessant clamor about (nonexistent) systemic risk, and so on were all geared toward justifying bailing out Wall Street firms that found themselves on the wrong side of housing risk. Saving them fed into a climate of uncertainty that persists to this day.

But none of these factors were actually included in the model that Harrop so admires. If they were, we can assume that the results would not have endorsed Blinder and Zandi's preferred policy implications and would have, in fact, caused the results to lose statistical significance.

But we have seen efforts like this before, such as Blinder's New York Times op-ed extolling the economic benefits of a proposed Cash for Clunkers program (which I named "The 'I Hate the Poor' Act of 2009"). They serve a political purpose and then find their way down the memory hole. Meanwhile, no one seems to notice that the economic crisis ended with trillions of dollars of private debt being transferred to the public.

This is truly criminal, but Harrop, Blinder, and Zandi want the focus to be on how bad things could have been. Talk about blinders. I wish the Birmingham News wouldn't help them reach the light of day.

Now who took the comics page?

Christopher Westley is an adjunct scholar at the Ludwig von Mises Institute. He teaches in the College of Commerce and Business Administration at Jacksonville State University. Send him mail. See Christopher Westley's article archives. Comment on the blog.

© 2010 Copyright Ludwig von Mises - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in