This post isn’t really about the BP oil disastrophe – not that anyone yet seems quite sure how much of a disastrophe it is, even politically. This post is just here to ask whether the cloudy ominous unstoppable confusion of it all is becoming a metaphor for our times.
Consider economic matters:
As reported last week, something somewhere between amazing and irrelevant has been going on with M3 – the quantity of money, all the dollars in all bank accounts. Quantity of money is an economic indicator once followed closely by mainstream economists, but nowadays hardly discussed except in the contrarian grottos and far by-ways.
The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.
Monetarists don’t believe that a “proper” recovery can occur in such circumstances, and don’t believe that stimulus programs of the type favored by Obama’s Keynesians can help. What both camps agree on, apparently, is that the mid-term outlook is beginning to cloud over. In the article linked above, UK Telegraph economics writer Ambrose Evans-Pritchard gives the following summary of confusion and self-contradiction and fear and loathing at the top:
Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to “grit its teeth” and approve a fresh fiscal boost of $200bn to keep growth on track. “We are nearly 8m jobs short of normal employment. For millions of Americans the economic emergency grinds on,” he said.
David Rosenberg from Gluskin Sheff said the White House appears to have reversed course just weeks after Mr Obama vowed to rein in a budget deficit of $1.5 trillion (9.4pc of GDP) this year and set up a commission to target cuts. “You truly cannot make this stuff up. The US government is freaked out about the prospect of a double-dip,” he said.
The White House request is a tacit admission that the economy is already losing thrust and may stall later this year as stimulus from the original $800bn package starts to fade.
So, promises to deal with the deficit against calls for a new spending package… As mentioned in the linked article, the monetarists believe that repeated stimulus shots are what Japan tried – to no great effect. The serious Keynesians believe that boosting aggregate demand – during a time of high unemployment and apparent danger of a deflationary spiral – is absolutely essential, but that Obama et al have been far too timid. Since Obama can’t create political capital as easily as Bernanke can create money, the tendency of the system to muddle down the middle takes over.
The optimists remain optimistic that the Big Muddle will work well enough, always has before, eventually… but they mostly don’t live in and around the Gulf of Mexico or in Europe.