8 thoughts on “Why the US recovery is so weak — in 2 slides

  1. “In the absence of NIRA, FDR’s dollar devaluation program would have in rapid recovery…”

    It was more than just NIRA. The New Deal was an all out assault on private enterprise that didn’t end until FDR kicked the bucket.

    • The crash was caused by a huge explosion of liquidity created by the Fed in the second half of the 1920s. Had Hoover done the same thing as Harding and let the market liquidate malinvestments there would have been no Great Depression.

  2. Wow, analysis FAIL

    “However, the much more severe financial crisis of late 2008 and early 2009 was caused by sharply falling asset prices (stocks, commodities, real estate) which mostly resulted from falling NGDP expectations, not foolish subprime loans.”

    And falling NGDP expectations? CAUSED BY THE FINANCIAL IMPLOSION RESULTING FROM SUBPRIME EXPOSURE AND INSUFFICIENT CAPITALIZATION. This also fed increased panic selling, and sharply falling asset prices.

    Poor analysis.

  3. If you stopped a thousand people on the street, maybe one could tell you what NGDP is. (And for the record, I see the Fed making slooooow headway on that velocity thing even now.)
    The same thousand people can tell you what Freddie and Fannie are, what happened to the equity in their homes, and even describe in general terms the global shock of waking up to trillions in suspect MBS paper.

    • Exactly, that is precisely why you should never ask questions, and go on your merry way, allowing government to do as it pleases, whenever it pleases, and however it pleases.

      Asking questions, especially of Eric Holder, can get you into too much trouble, so just don’t do it.

      And for the record, we really don’t give a shit what you think about “that velocity thing.”

      • A brave band of Austrian economics students traveled to the Alps in 1915 to defend the homeland against Italian invaders, armed only with hand grenades. Alas. it ended badly. The Italians pulled the pins and threw the grenades back.

  4. Great blogging.

    Yes, the ECB, BoJ and Fed have been too tight.

    I attribute this to the fact they are public agencies, and thus immune to “creative destructionism.”

    The central banks can follow the wrong policy, but they are not run out of business by better central banks.

    All three central banks developed “mission statements” in the 1970s and 1980s, and then have exalted those missions ever since, developing rhetoric and posturing to go along with the mission. They are zealots–if you think no, think about what the BoJ has done since 1992. Wrecked the island economy to keep inflation at zero, or even below. Finally, they are changing.

    Fighting inflation is the exalted mission. The speeches given about inflation often ring with moralisms, and vaunted virtues.

    Now we have a generation of central bank “true believers” who have been developing arguments for zero inflation or very low inflation for 40 years.

    But is moderate inflation the end of the world? Gee, the US economy expanded nicely from 1982 to 2008, with varying rates of inflation, When Volcker left office, inflation was in the 4 to 5 percent range, and people thought he had won the war.

    Now, name one central banker who will say, “You know, 4 percent inflation would not be so bad.”

    I would vote for a new set of central bankers…but. guess what? Central banks are independent.

    Oh, this is another fine mess you have gotten us into…

    Every public agency has to be sunsetted every once in a while….

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