The Monster Awaits

I hesitate to bring this Post from Menzie Chinn because it is so Wonkish that Graduate Students in Economics will undoubtedly have to revert to the Books, simply to keep up with the argument. Everyone knows that I possess a God-like power to misinterpret almost anything, so I always fill in the gaps with totally irrelevant trash which befuddle even Those who wrote the Original from which I translated. Menzie Chinn’s basic thesis states that many Economists did warn of the instability of the financial sector, but were simply not Conversant with the models necessary to explain the situation (hmmm, I wonder Who he could be talking about?). I happen to agree with George Akerlof about the looting process entailed with a withdrawal of regulation. Do not worry if you do not understand such models well, it has never bothered me; actually, it has never come back to bite me in the Butt. The Point We are both trying to make is that a number of Economists expressed high worry about the functioning of the economy through the Years; it is just that no one had the Time to work through the material adequately, so We came upon the Stoplight having not fixed the brakes, or removing the slack from the Accelerator pedal.

Was Our own bubble just that, a bubble? Paul Krugman and Dean Baker think so. I do know that the levels of Productivity claimed in the good Years was mainly Bull, the levels reached was simply gained by pouring more Money into the Prices for such services. This fact is countered, though, by a very poor European Work model, with productivity flows varying widely by the Day of the Week; it reminds of the old Detroit adage of never take a new Car built on Monday or Friday. I cannot see how Europe could possibly have matched the American model, even though the later was very much hyper-inflated.

Paul Krugman here tries a little derision at Ben Bernanke’s ‘Green Shoots’. It is quantitative fact that Bernanke must see those ‘Shoots’, or be crucified! The rest of Paul’s Warning should be heeded carefully. We are at the Place where the other Shoe traditionally drops, and no defensive stability is yet solidly in place. Unemployment will consume our lives for months and months still ahead, probably only canceled with the retirement of the Baby Boomers–still really a decade off in real terms. There will be a rebuilding of the industrial sector, but one which is functionally the opposite of labor-intensive. Millions of new Jobs will be created, but millions more will be destroyed, while the really Good Jobs will be held by long-term Employees; who will not surrender their positions gracefully. The Retail sector will come back, but without the free-spending attitude of putting off repayment until One can afford it because of better Wages in the future–they will not appear. We are in for a long haul–and it is a Downsize of the economy. lgl