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Department of Obvious Questions

By TChris, Section Economy
Posted on Sun Jul 05, 2009 at 09:43:06 AM EST
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Joe Biden told an interviewer that the Obama administration "misread how bad the economy was." The obvious question: How is that possible? The crappy state of the economy was clear to the rest of the (non-Republican) country, as was the need for an aggressive stimulus package. Only now is the administration realizing that the economy is really really bad?

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    Department of Obvious Questions | 48 comments (48 topical)

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    Wow (5.00 / 4) (#2)
    by andgarden on Sun Jul 05, 2009 at 09:59:06 AM EST
    On top of the fact that that's a really dumb thing to admit politically speaking, wasn't anyone in the administration reading Paul Krugman?

    Another example of Joe's (5.00 / 3) (#7)
    by MO Blue on Sun Jul 05, 2009 at 10:19:08 AM EST
    "foot in mouth disease."

    Krugman wasn't he the economist that all the "A" list blogs turned on when he dared to criticize Obama's policies during the primary. Maybe the administration chose to believe what they read there rather than pay attention to what Krugman was saying.

    Parent

    But andgarden (5.00 / 2) (#29)
    by Militarytracy on Sun Jul 05, 2009 at 11:51:05 AM EST
    Everybody knows that Paul Krugman said the things he said because he hated Obama :)

    Parent
    They met with Krugman ... (none / 0) (#33)
    by Robot Porter on Sun Jul 05, 2009 at 02:18:02 PM EST
    didn't seem to help.

    Parent
    Joe Biden, ladies and (none / 0) (#37)
    by mg7505 on Sun Jul 05, 2009 at 02:56:02 PM EST
    gentlemen. He's doing his part to bolster the economy by keeping Jay Leno, Conan, and dozens of political observers stocked with jokes (and jobs).

    Does anyone know if Krugman was tapped/considered for any administration jobs? I would rather have him than [insert neo-conservative Wall Street insider currently making the nation's economic policy here].

    Parent

    Hell wasn't (none / 0) (#41)
    by cal1942 on Sun Jul 05, 2009 at 04:14:18 PM EST
    anyone in the Administration giving this even the most cursory thought.

    Didn't have to read Krugman to know that the economy was going to tank big time.

    Unemployment was rising, some people had been out of work so long that their unemployment benefits had run out, the contruction industry was flat out dead, monetarists had run out of weapons, etc., etc.

    There were NO PROSPECTS on the immediate horizon.  When that's the case matters WILL get worse with the prospect of freefall.

    Just about everyone else, save the usual suspects on the right and many of today's dull witted economists including the slow witted crowd in the administration, knew that this was going to be just plain awful.

    When the administration made one third of the recovery package tax cuts and caved on assistance to states and cities that pretty much ended any hope that the package was anywhere near adequate to stop the slide let alone move forward.

    That they seemed to attempt to "tailor" the recovery package to a fixed prediction of misery tells us all we need to know about the Administration's mindset.

    Parent

    Yup, as soon as PK identified this (5.00 / 2) (#3)
    by andgarden on Sun Jul 05, 2009 at 10:00:34 AM EST
    as a liquidity trap, he could tell us the scary things we needed to know.

    He said we needed a $3T stimulus. And now I fear we'll never get that. After all, the stimulus "failed."

    Uh, (none / 0) (#17)
    by bocajeff on Sun Jul 05, 2009 at 11:35:28 AM EST
    where would the 3T come from? Printing it? Also, there are a lot of economists who are saying the opposite of Krugman - are they right also? They'd have to be at this point in time.

    Parent
    It's called deficit spending (5.00 / 2) (#21)
    by andgarden on Sun Jul 05, 2009 at 11:39:26 AM EST
    It's what you do when you're caught in a liquidity trap.

    I think the economists who disagree with Krugman are clearly wrong. Their policies would leave us stuck in a deflationary spiral.

    Parent

    This is a situation we will spend (5.00 / 1) (#23)
    by Militarytracy on Sun Jul 05, 2009 at 11:41:09 AM EST
    our way out of, or we won't until we can't deal with it anymore and then we will choose to.

    Parent
    bocajeff and his Hooverite friends (5.00 / 2) (#25)
    by andgarden on Sun Jul 05, 2009 at 11:42:35 AM EST
    want to crucify us on the cross of a low deficit and strong Dollar.

    Parent
    It's tough because this is one (none / 0) (#28)
    by Militarytracy on Sun Jul 05, 2009 at 11:48:28 AM EST
    of those situations where regular old school economics will not bring about a remedy before our economic infrastructure blows up.  It is hard to have a strong dollar though after we blow ourselves up, which without FDR style programs that will recreate the job and wage base, is where we are headed.

    Parent
    Cute (none / 0) (#39)
    by cal1942 on Sun Jul 05, 2009 at 03:38:01 PM EST
    William Jennings Bryan riff.

    Parent
    Printing 3T (none / 0) (#34)
    by Wile ECoyote on Sun Jul 05, 2009 at 02:27:47 PM EST
    dollars will certainly avoid a deflationary spiral.  Inflationary spiral would be the term.

    Parent
    People who are worried about inflation (none / 0) (#35)
    by andgarden on Sun Jul 05, 2009 at 02:41:12 PM EST
    right now are quite dangerously misinformed.

    Parent
    People who have no (none / 0) (#49)
    by Wile ECoyote on Mon Jul 06, 2009 at 06:56:26 AM EST
    problem with 3T being printed for a new stimuli when the current stimulus has only had 10% allotted of its funds have serious problems.

    Parent
    Choices were made (5.00 / 2) (#26)
    by MO Blue on Sun Jul 05, 2009 at 11:46:20 AM EST
    Instead of giving the banks trillions so that they could maintain their obscene salaries and bonus, the money could have been spent on a stronger stimulus package that might actually put more people to work.

    Parent
    Maybe the Obama administration (5.00 / 4) (#4)
    by MO Blue on Sun Jul 05, 2009 at 10:06:46 AM EST
    needs better advisors on the economy. Krugman would be a good candidate.

    Not enough experience or homework by Obama to determine whether or not he is getting good advise? Definitely a indication that Obama needs to put forth stronger legislation at the get go rather than minimal policies that are going to be watered down by Congress.

    I'm thinkin they need some (5.00 / 3) (#5)
    by Militarytracy on Sun Jul 05, 2009 at 10:10:20 AM EST
    better economic advisors but I'm also thinkin that they need some better legal and military advisors as well.

    Parent
    All Obama needs is to (5.00 / 5) (#6)
    by MO Blue on Sun Jul 05, 2009 at 10:13:02 AM EST
    increase the number of Republicans in his administration. That will fix all the problems. {snark}

    Parent
    AMEN! n/t. (none / 0) (#24)
    by sallywally on Sun Jul 05, 2009 at 11:41:54 AM EST


    Parent
    Optimism is a great thing (5.00 / 4) (#8)
    by Militarytracy on Sun Jul 05, 2009 at 10:21:10 AM EST
    When a situation can be remedied through an application of optimism I'm all about it too, and such situations do exist.  Our new president  misreads many situations at the moment as those that an application of optimism can remedy.  I suppose this IS a price we will pay for electing such a small amount of past experience.....and yet, Obama is terribly cautious + intelligent and as long as he had a Senate to hide behind he wasn't ever going to have this personal weakness this obviously exposed.  Acting as a President though, it will be exposed for exactly the weakness that it is when a leader can't accurately judge such situations.

    Are you kidding me? (5.00 / 4) (#14)
    by Anne on Sun Jul 05, 2009 at 10:31:57 AM EST
    The All-Star Obama Economic Advisory Team "misread" how bad the economy was?  What, were they so far inside the bubble of their own infallibility that they could not hear the chorus of voices - Krugman's among them - that were warning how bad it was?  And urging a much bolder stimulus to pull us out of it?

    Gosh, I guess that plan to restore the banksters to their formerly fat and happy selves wasn't really the answer, was it?

    I can only imagine that in another year, Biden will be expressing dismay that the administration misread the health care reform issue, too.

    Sorry, Joe - no there's no excuse, and candor doesn't cut it here.

    That is what makes me mad. (5.00 / 3) (#15)
    by Cards In 4 on Sun Jul 05, 2009 at 10:50:54 AM EST
    Obama and Biden act like the state of the economy was a big surprise. They were both senators in D.C. before the election with a lot more power to correct things than the corner grocer.  Somehow they had access to all the information they needed and still managed to ignore it.

    Unless they are willing to admit that they weren't doing their job from 2005 on because they were too busy running for president they should just admit they screwed up and not that "everyone" did not understand the depths of the problem.

    Parent

    Biden's desire for (5.00 / 2) (#18)
    by Militarytracy on Sun Jul 05, 2009 at 11:35:36 AM EST
    bankruptcy "reform" also helped this situation along.  When it began to "appear" that defaulting on loans was going to be more difficult, the financial industry became even more comfortable making "bad" loans.

    Parent
    Actually you have it backwards (2.00 / 0) (#36)
    by jimakaPPJ on Sun Jul 05, 2009 at 02:47:22 PM EST
    If the lender thinks it will be easy for the borrower to declare bankruptcy and not pay the lender will be much more cautious.

    The bad loans happened when the banks started to believe they could always package the bad with the good and sell it to someone else.

    Parent

    Wow do you need to catch up with (none / 0) (#42)
    by Militarytracy on Sun Jul 05, 2009 at 04:21:00 PM EST
    current reality.  Your annointed leaders, that have now blown themselves up politically and socially, actually made it more immediately excessively profitable to make a loan...almost any loan...than to actually get paid back for the loan.  My advice to you, read more/proselytize less.

    Parent
    Advised reading (none / 0) (#43)
    by Militarytracy on Sun Jul 05, 2009 at 04:25:28 PM EST
    Read up on the mathematical equations that were used to distinguish the risk of loans and how "bankruptcy reform" changed those....and then became part of the fouled, unregulated, ponzi system of greed that destroyed our economy, our retirements, just about everything.

    Parent
    A place to start (none / 0) (#44)
    by Militarytracy on Sun Jul 05, 2009 at 04:32:47 PM EST
    here

    Parent
    Another decent read (none / 0) (#45)
    by Militarytracy on Sun Jul 05, 2009 at 04:57:15 PM EST
    here

    Explaining how it appears that bankruptcy reform has been part of the subprime meltdown.  Due to bankruptcy reform, credit became cheaper because the risk in making loans was supposed to have become less due to it but...consumers can't withstand economic shocks due to bankruptcy reform either.

    Parent

    Hopefully just Biden in mouth disease (5.00 / 1) (#16)
    by pluege on Sun Jul 05, 2009 at 11:17:47 AM EST
    striking again. It would be more discouraging for the Obamadmin to say they misread the economy when plenty of the most credible economists in the world were telling them how bad it was and that their stimulus was too small, than for them to just admit that their judgment was wrong because it had too much political calculation and not enough economics.

    According to AP, VP Biden also sd. (5.00 / 1) (#31)
    by oculus on Sun Jul 05, 2009 at 12:20:32 PM EST
    U.S. won't stand in the way of Israel responding as it sees fit to Iran.  

    Parent
    To me, it seems the Obama admins. (5.00 / 3) (#19)
    by oculus on Sun Jul 05, 2009 at 11:37:42 AM EST
    would prefer to think about something besides the economy now.  President is shocked at the depth of the unemployment problem, but will concentrate on Russia this week.  

    Even if it is just foot in mouth disease, (5.00 / 1) (#20)
    by sallywally on Sun Jul 05, 2009 at 11:38:49 AM EST
    I'm not sorry to hear it said. I wish Obama would follow through with the implications of this, even if he doesn't admit it - still bring in better advisors like Krugman. Boy, I wish he'd get rid of Geithner, Summers,etc.!

    James Robertson (2.00 / 0) (#13)
    by jarober on Sun Jul 05, 2009 at 10:26:32 AM EST
    The state of the economy has been obvious to anyone who's been paying attention since about 2006 or so.  Heck, some of the smarter people on the libertarian end of things (Glenn Reynolds comes to mind) were saying that the Republicans would get shellacked if they didn't figure it out.  They didn't (figure it out) and they did (get shellacked).

    The same thing will happen to the Dems, if not in 2010, then in 2012.  Their problem is going to be the debt and the unsustainable nature of it.  It will do them no good to yell about how it was bad when they came to full power in 2008; the problem is that so far, they seem mostly focused on making it worse.

    Whether health care reform or climate change bills are good ideas or not matters a whole lot less than whether we can afford the current mix of spending.  We can't.  Either Democrats figure out how to cut back stuff we don't need (maybe some of the overseas bases we have?  Why not leave North Korea to South Korea, China, and Russia, for instance?)  Something's got to give though.

    Bravo (none / 0) (#54)
    by Slado on Mon Jul 06, 2009 at 04:10:48 PM EST
    The debt in unsustainable.  It was when the crisis started and adding more is no way to get you out of the whole.

    The idea that some would think a 2nd or bigger stimulus would work shows how out of touch with fiscal reality they are.  

    Krugman is always going to be right because he's never going to be for what the Obama administration does so he'll always be able to live in the academic world and comment on how things would have been better if you listened to him.

    We are repeating the mistakes of Japan.  

    Reason TV

    The truth is our economy was broke from easy money and greed.  Obama should have used his political capital to prepare us for the short term pain and the eventual recovery that would have resulted from not bailing out GM, the banks etc... anymore then our buddy GW had done before Obama was even elected.

    Instead he doubled down on the failed policies of GW.  You herd right.   Obama is more of the same.   More debt and more wateful spending.

    Amazing how many people where so excited to get rid of GW and get more of the same (a lot more) from Obama.

    Now that it's not working they think even more gov't and debt is the solution.

    Amazing

    Parent

    So instead of WORM, (none / 0) (#11)
    by MO Blue on Sun Jul 05, 2009 at 10:24:48 AM EST
    we are now playing WJRW.

    Duh - would you mind translating? (5.00 / 0) (#22)
    by sallywally on Sun Jul 05, 2009 at 11:40:18 AM EST
    My brain isn't up to figuring it out today!

    Parent
    WORM (none / 0) (#30)
    by MO Blue on Sun Jul 05, 2009 at 11:51:24 AM EST
    stands for "What Obama Really Meant."

    WJRM would stand for "What Joe Really Meant."

    Parent

    Thanks. n/t. (none / 0) (#52)
    by sallywally on Mon Jul 06, 2009 at 10:56:32 AM EST


    Parent
    Give me a break !!! (none / 0) (#27)
    by samsguy18 on Sun Jul 05, 2009 at 11:47:48 AM EST
    Obama has spent most of his adult life running for something...........He is the ultimate politician. This is the first job he's held where he might actually be held accountable. Here in Chicago he had many protectors who had a vested interest in his career.  "The Great Pretender's"
    habit of prefacing every speech with the fact he inherited this mess is becoming very annoying. Maybe he can appoint another Czar!

    The fact is (5.00 / 0) (#50)
    by BobTinKY on Mon Jul 06, 2009 at 08:46:04 AM EST
    Obama did inherit this situation after 8 years of the worst leadership in American history.

    It will take time, alot of time.  Reagan's Keynesian fix (massive deficit spending on DoD) to the early 80s recession took 2-3 years to bear fruit.  

    Hopefully there will be more stimulus on projects more long lasting , needed and with better returns than DoD.

    Parent

    Wrong on all counts (2.00 / 0) (#55)
    by Slado on Mon Jul 06, 2009 at 04:13:57 PM EST
    Keynes doesn't work.

    Obama inherited not only GW's failed policies but 29 years of bad fed policies practiced by administrations before GW.

    The mistake has been the same clowns have advised previous presidents and this one to monkey with the money supply and fund unprecedented debt that is unsustainable.

    Obama has simply taken the failed policies of GW and doubled down on more of the same.

    Keynes works in the classroom and not in practice.

    This stimulus is proof positive.

    Parent

    The Economy Was Sabotaged (none / 0) (#32)
    by Sumner on Sun Jul 05, 2009 at 02:14:38 PM EST
    The global economy has been blown out by design. We can know this because, more than simply foisting change-ups on his various political promises, (which arguably null-and-voids the social contract), President Obama deliberately misdirected and argued against looking at the past, (in order to gloss over this nation's war crimes, thereby obstructing justice and making himself complicit and hence tainting his pardon-power in the matter). He said he was going to focus on forward-thinking.

    And yet those prognosticators with the spot-on accurate records, will tell you that it is precisely by looking at the past, that we can know how we came to be where we are now, and how we can rather accurately predict the future.

    Need more proof of this concept? Read Carroll_Quigley_-_Tragedy_And_Hope.pdf and/or watch "A Short History of Psychological Terror".

    This is just depressing <n/t> (none / 0) (#38)
    by FreakyBeaky on Sun Jul 05, 2009 at 03:04:07 PM EST


    Seems to me VP Biden is lying (none / 0) (#40)
    by Democratic Cat on Sun Jul 05, 2009 at 03:56:17 PM EST
    I think the more likely explanation is that they knew how bad it was but didn't want to have a fight in Congress. So they got was was fesible without a serious political fight, even though they knew it wouldn't be enough.

    This doesn't make me feel any better than I would if I thought the VP was telling the truth. After all, what kind of a health care bill do you think this strategy will get us?

    Yes, unfortunately (none / 0) (#46)
    by weltec2 on Sun Jul 05, 2009 at 06:05:45 PM EST
    he's not as influential as Milton Friedman, and Uncle Milty is dead.

    default swaps one can see (none / 0) (#48)
    by joze46 on Mon Jul 06, 2009 at 05:49:57 AM EST
    Dark Avenger makes a pretty good argument and the link also helps explain the financial dilemma we are in. I thank him for that. Simple and straight forward, it appears the Wall Street guys are scared. Its inevitable Black Monday is around the corner, the real question is when the collapse will happen.

    After reading more about this thing called credit default swaps one can see big business is skipping forward in an unregulated market la dee daa with out risk? It's all so funny, but horrible. These's sort of business or better called experiments like measuring the hydrogen or helium content with spectrum analysis with reference to a distant star system light years away, and then buy insurance for my observations. This is getting funny, because Carl Fredrick Gauss also introduced this stuff a few decades ago. Gauss unknowingly is more likely the father of fascism.  Whats not funny is the question about the basic bell curve method, is it insurable? No.

    Knowing about this stuff as insurance against default, this stuff has no business risk? Since that is the basic idea it appears too good to be true. We all know the simple saying about that. If it's too good to be true then it not true.  

    Credit default swaps have insurance in case of default. Non payment...???
    This is what jumps out at me in the link.    

    "It is similar to insurance because it provides the buyer of the contract, who often owns the underlying credit, with protection against default."

    Hay folks, if I went to a bank and asked them for the insurance against default for my home loan they likely would laugh at me. I could just picture the loan officer just laughing at me saying what do you mean you want me to eat the loan if you loose your job? Yep. The loan offer would likely say you must be freaking crazy. Yet, it could be pointed out now J.P. Morgan has been doing this since nineteen ninety seven in over the counter unregulated trading. So what does this tell us?

    Most of those in this market don't know whats going on. The bell curve Sullies are about to bring in the Gong show of "it isn't that bad"... don't sell your stock before me, but because of further technical difficulties our transmitters will be shutting after midnight everyday with all business programming revised to country western music with the latest new craze of line dancing. Called the polynomial two step.    


    Department of Obvious Questions | 48 comments (48 topical)

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