Endless Unstoppable Flows of Bad Ugly Stuff That No One Seems To Be Able To Do Anything About

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.

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4 comments on “Endless Unstoppable Flows of Bad Ugly Stuff That No One Seems To Be Able To Do Anything About

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  1. The best way for the Amateur Economy watcher to get a handle on what’s happening is the old fashioned Ben Franklin list,in which we take account for the pros&cons of an issue,and after listing those,make a decision based on the list. For the economy,I would suggest a variation of this,and list what is expanding,and what is contracting in our nation’s fiscal realm.


    Contracting:Assets at the Household level/70% of GDP

    Expanding:Foreign Sovereign Funds
    Contracting:American Industrial Job Base

    Expanding:Statistics that make our economy look better.
    Contracting:Factual Statistics/unemployment,GDP,Tax Revenue etc.

    When we complete our Economic Ben Franklin list,will we determine if our economy is improving,static,or Contracting?

  2. CK: “the cloudy ominous unstoppable confusion of it all”


    Anybody who says they know what’s going t0 happen doesn’t.

    Reminds me of this from the 70’s (or at least he 70’s I inhabited).

  3. Sometimes there isn’t a course of action more effective than patience.

    In BP’s case the rapid fire improvised attempts to shut down the well have failed; and control of it will have to wait the completion of the relief wells in a couple of months. At least BP’s failed attempts have not exacerbated the leak.

    The “stimulus” package and TARP, on the other hand, have probably exacerbated the economic problem. We would all have been better off if the Feds had simply let the banks crash, intervening only to the extent of giving the FDIC enough to cover the insured individual accounts.

  4. Can’t disagree with the aftermath, but the history of that particular platform is so ‘checkered’ and I’m being charitable, that one wonders
    how any other result could have occurred. To say that BP is not a good corporate citizen is a gross understatement

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Noted & Quoted

TV pundits and op-ed writers of every major newspaper epitomize how the Democratic establishment has already reached a consensus: the 2020 nominee must be a centrist, a Joe Biden, Cory Booker or Kamala Harris–type, preferably. They say that Joe Biden should "run because [his] populist image fits the Democrats’ most successful political strategy of the past generation" (David Leonhardt, New York Times), and though Biden "would be far from an ideal president," he "looks most like the person who could beat Trump" (David Ignatius, Washington Post). Likewise, the same elite pundit class is working overtime to torpedo left-Democratic candidates like Sanders.

For someone who was not acquainted with Piketty's paper, the argument for a centrist Democrat might sound compelling. If the country has tilted to the right, should we elect a candidate closer to the middle than the fringe? If the electorate resembles a left-to-right line, and each voter has a bracketed range of acceptability in which they vote, this would make perfect sense. The only problem is that it doesn't work like that, as Piketty shows.

The reason is that nominating centrist Democrats who don't speak to class issues will result in a great swathe of voters simply not voting. Conversely, right-wing candidates who speak to class issues, but who do so by harnessing a false consciousness — i.e. blaming immigrants and minorities for capitalism's ills, rather than capitalists — will win those same voters who would have voted for a more class-conscious left candidate. Piketty calls this a "bifurcated" voting situation, meaning many voters will connect either with far-right xenophobic nationalists or left-egalitarian internationalists, but perhaps nothing in-between.

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Understanding Trump’s charisma offers important clues to understanding the problems that the Democrats need to address. Most important, the Democratic candidate must convey a sense that he or she will fulfil the promise of 2008: not piecemeal reform but a genuine, full-scale change in America’s way of thinking. It’s also crucial to recognise that, like Britain, America is at a turning point and must go in one direction or another. Finally, the candidate must speak to Americans’ sense of self-respect linked to social justice and inclusion. While Weber’s analysis of charisma arose from the German situation, it has special relevance to the United States of America, the first mass democracy, whose Constitution invented the institution of the presidency as a recognition of the indispensable role that unique individuals play in history.

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[E]ven Fox didn’t tout Bartiromo’s big scoops on Trump’s legislative agenda, because 10 months into the Trump presidency, nobody is so foolish as to believe that him saying, “We’re doing a big infrastructure bill,” means that the Trump administration is, in fact, doing a big infrastructure bill. The president just mouths off at turns ignorantly and dishonestly, and nobody pays much attention to it unless he says something unusually inflammatory.On some level, it’s a little bit funny. On another level, Puerto Rico is still languishing in the dark without power (and in many cases without safe drinking water) with no end in sight. Trump is less popular at this point in his administration than any previous president despite a generally benign economic climate, and shows no sign of changing course. Perhaps it will all work out for the best, and someday we’ll look back and chuckle about the time when we had a president who didn’t know anything about anything that was happening and could never be counted on to make coherent, factual statements on any subject. But traditionally, we haven’t elected presidents like that — for what have always seemed like pretty good reasons — and the risks of compounding disaster are still very much out there.

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