Tuesday Links

http://delong.typepad.com/sdj/2009/11/chance-of-great-depression-now-5.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+BradDelongsSemi-dailyJournal+(Brad+DeLong's+Semi-Daily+Journal)

For 2 1/4 years now I have been saying that there is no chance of a repeat of the Great Depression or anything like it–that we know what to do and how to do it and will do it if things turn south.

I don’t think I can say that anymore. In my estimation the chances of another big downward shock to the U.S. economy–a shock that would carry us from the 1/3-of-a-Great-Depression we have now to 2/3 or more–are about 5%. And it now looks very much as if if such a shock hits the U.S. government will be unable to do a d—– thing about it.

We could cushion the impact of another big downward shock by a lot more deficit spending–unemployment, after all, goes down whenever anybody spends more (even though sometimes falling unemployment comes at too-high a price in rising inflation), and the government’s money is as good as anybody else’s. But the centrist Democratic legislative caucus has now dug in its heels behind the position that we cannot undertake more deficit spending right now because we have a dire structural health-care financing proble afrer 2030. The Republican legislative causes has now dug in its heels behind the position that the fact that unemployment is 10% shows not that policy earlier this year was too cautious but rather that it was ineffective. And the Obama administration has not been able or has not tried to move either of those groups out of their current entrenchments.

We could cushion the impact of another big downward shock by recapitalizing the banks again. But the failure of the Fed and the Treasury in the aftermath of Lehman to grab a share of the upside from its capital injection and purchase operations for the public in the form of warrants means that there is no coalition anywhere for a repeat or anything like a repeat of propping-up the banking system: the right thinks it is an unwarranted intervention in the free market, the left thinks that it is a giveaway to the undeserving and feckless superrich, and the center is bewildered because it is an enormous and poorly-structured intervention in the market, it is a giveaway to the undeserving and feckless superrich, and the optics are terrible.

So if another big bad shock hits the U.S. economy, what could the Obama administration possibly do?

“DH, like me you mock the maligned G-train yet actually like it, no? ”

Yessir!! I love the G!!

I’m sure that all of the Goldman, JPM MS and C management pay far more taxes than Brad & Angelina as well.

Taxes that trickle down to feed those at the public trough.

…A few weeks later, then-Treasury secretary Hank Paulson – Blankfein’s predecessor – force-fed Goldman $10bn from the troubled asset relief programme (Tarp). Eight other large financial institutions received another $115bn. Slowly but surely the acute phase of the crisis passed. In June 2009, Goldman paid back its $10bn, along with $318m in dividends and an above-market $1.1bn for the government’s warrants in the bank. In all, American taxpayers got a cool annualised return of 23 per cent on their Goldman investment.

The point of the article is that Brad & Angelina are unusually generous. Should compare the average Hollywood star to the average Wall Street CEO to be a fair comparison.

Even then I’m not sure it really matters how much they give to charities. It doesn’t reflect much either way on how they do their jobs.