Deconstructing 'Recession 2008?'

I spent an hour yesterday listening to three economists (Brad DeLong, Mike Mandel, and William Beach) discuss our current plight. I found their insights compelling. Areas of agreement, included:

• Don't look to the US Government for effective Fiscal Policy Help — particularly in an election year
• Don't look to the Fed to ease much pain since they are pretty much helpless in the face of a faltering US housing market (See Krugman too)
• Best we can do is to see both borrowers and lenders share the pain, with some pain (how much?) shared by the rest of us

The forum was hosted by Dave Iverson (a different, more erudite Dave Iverson) and aired on KQED, NPR, San Francisco. It's well worth an hour of your time, if only to get better acquainted with Brad DeLong's longer-than-a-post reflections (but skip the questions and answers). From Delong's Grasping Reality…

KQED | Forum: Recession 2008? [Jan. 11]

http://www.kqed.org/.stream/anon/radio/forum/2008/01/2008-01-11a-forum.mp3

Host: Dave Iverson

Guests:

• Brad DeLong, professor of economics at UC Berkeley
• Mike Mandel, chief economist for BusinessWeek
• William Beach, senior economist and director at the Center for Data Analysis at the Heritage Foundation

Comments

[bailey]

Throughout this housing debacle way too many Economists have demonstrated shortsightedness & shallow thinking. The only thing we learn here is, the self-interested rationalizing continues. Thanks for providing the punchline:
"Best we can do is to see both borrowers and lenders share the pain, with some pain (how much?) shared by the rest of us." "Some pain"?
What about the longterm Economic cost to our kids & grandkids from the FED's decision to penalizing savers? How much support do Wall Street and our no-equity leveraged non-recourse borrowers deserve?
When will MacroEconomists express the slightest concern the FED's cowtowing to Wall Street in our debt ladened times is itself a tremendous risk?
And, while I'm on this rant, when will we hear someone address last year's $33 Billion Wall Street's bonus payout when discussing our housing dilemma. Is there no one out there who will argue it's time we turn on the lights?

[Dave Iverson]

"What about the longterm Economic cost to our kids & grandkids from the FED's decision to penalizing savers? How much support do Wall Street and our no-equity leveraged non-recourse borrowers deserve?"

We are a pretty pathetic bunch here in the US. TOO greedy on wallstreet. Too stupid and sheeplike -- "keeping up with the Joneses" no matter what the long term risk -- on mainstreet. And way too far in debt (on average) as individuals/families.

"When will MacroEconomists express the slightest concern the FED's cowtowing to Wall Street in our debt ladened times is itself a tremendous risk?"

I think some MacroEconomists are -- finally -- beginning to express said "concern".

"And, while I'm on this rant, when will we hear someone address last year's $33 Billion Wall Street's bonus payout when discussing our housing dilemma. Is there no one out there who will argue it's time we turn on the lights?"

I think there are many who wish more "accountability" might be wrung from the Wall Street players. But that isn't likely since "we the US gov.", as you Bailey know only too well, relaxed all the checks and balances put in place after the Great Depression. Checks and balances will be rebuilt in time, but for now too many have already played the Woody Allen card: "Take the money and run".

We'll have to wait and see just how many banking and finance firms topple as dominos fall. Too bad it's the shareholders, not the managers and brokers who are going to feel the most pain.