Ed Driscoll

"Christina Romer: Our War On The U.S. Economy Must Continue"

Over at Reason, Tim Cavanaugh writes:

Christina D. Romer, the Berkeley economist who serves as chairwoman of the Obama administration’s Council of Economic Advisers, has a paper out [pdf] called “Back from the Brink.” It’s worth reading as a specimen of the kind of totalitarian logic establishments use to create the illusion of popularity and success for actions that in fact have been imposed by force and have not been successful.

As the title suggests, Romer’s argument is that the Federal Reserve and the Department of the Treasury succeeded in staving off an even Greater Depression that threatened to engulf the U.S. economy after the collapse of Lehman Brothers. Since there is no real evidence for this view, Romer relies heavily on gross domestic product, which may or may not have stopped declining. Strangely, in a paper committed to apple/orange comparisons between the 2000s and the 1930s (for example, Romer points out that credit spreads were more dire in 2008 than they were in 1929, without mentioning that Americans had a large positive savings rate in 1929 and a large negative rate in 2008), Romer points out that GDP grew rapidly in the mid-1930s. So how can GDP growth (which Romer believes will go positive again this quarter) be evidence that we’re not in a new Depression?

I am not arguing that we are in a new Depression, but consider that during the period Romer is discussing — with plenty of imagery about pulling back from edges of cliffs — personal bankruptcies have skyrocketed; credit for anybody not named Goldman or Sachs has been virtually non-existent; Fed chairman Ben Bernanke’s March reference to “green shoots” has become a national joke; and real estate, which was, is and will continue to be the heart of the decline, is still plagued by collapsing sales and rental markets, a cratering commercial real estate market, and a vast, still uncharted shadow inventory of defaulting mortgages.

This dispatch from Airstrip One puts an appropriately Orwellian spin on screwing a nation’s economy:

At the moment the UK is committed to cutting greenhouse gases by a third by 2020.

However a new report from the Tyndall Centre for Climate Change Research said these targets are inadequate to keep global warming below two degrees C above pre-industrial levels.

The report says the only way to avoid going beyond the dangerous tipping point is to double the target to 70 per cent by 2020.

This would mean reducing the size of the economy through a “planned recession”.

As opposed to the permanent recession that Europe’s economic policies had long since created.

All of which is proof that the Rendezvous With Scarcity painfully trudges on.