Why 2009 Will be Worse than 2008

We are not out of the woods yet

Jeff Taylor | January 2, 2009

Whew. Now that 2008 is in the history books, $8.5 trillion in federal bailout money is in the pipeline, and bold leadership is set to take command, Americans can all breathe a little easier, right?

Uh, no. The unhappy fact is that 2009 is almost certain to feature more economic hardship than the year that preceded it. President-elect Barack Obama may think he has steeled himself and his administration for this outcome, but three major factors argue against Obama truly being prepared for what's to come.

Insane expectations. It was no mistake that Vice President-elect Joe Biden was dispatched to try to dampen surging overseas expectations that the Obama presidency will quickly reverse American actions around the globe. But a similar threat lurks domestically, where the federal government under Obama will be expected to correct every dislocation from the confused Bush years—all while providing free health care and full employment.

Most telling is the continued misunderstanding of the role that Obama's Treasury chief pick, Tim Geithner, has played in the Bush bailouts from his current perch at the New York Federal Reserve. Geithner has in every way possible functioned as a loyal member of Hank Paulson's Goldman Sachs army, seeking to reverse market judgements on bad investments with billions in federal cash. Why anyone would expect substantially different policy from an Obama administration with Geithner in place escapes me.

The one exception to this is at the Federal Reserve, where Ben Bernanke might end up as the poster-child for economic malaise, giving Obama license to show Bernanke the door. If nothing else, this could buy Obama time and reset the clock on his honeymoon. But otherwise, without some sort of dramatic gesture to placate the public, by late spring the euphoria over Obama's inauguration could give way to a crushing let down.

State and local implosions. The coming spring will also prove crucial as many states and localities write their budgets. These are the same entities that came hunting for roughly $200 billion in federal “stimulus” handouts via thousands of make-work projects.

The real trouble, however, lies in the hundreds of general funds, enterprise funds, pensions, and health care plans which are skirting the edge of bankruptcy right now. The nearly $3 trillion market for state and local debt remains in flux with the certitude that borrowing costs will creep up by about 50 basis points for all but the most well-insulated jurisdictions.

For many others, 2009 will bring a cruel ratcheting effect when reduced revenues from the slowing economy, coupled with increased investor and analyst wariness, combine to reduce debt ratings. This will further push up the cost of borrowing, which will then further strain revenues. Tax hikes might help, but only at the cost of further depressing business activity.

For that reason, the federal government will once again be called on to bail out insolvent operations—but this time it will be cities, counties, and maybe even a state or two.

Incidentally, this process may have a profound impact on winnowing the field of Republican statehouse superstars who might be in a position to challenge Obama in 2012. If Sarah Palin, Bobby Jindal, or Mark Sanford watches their state circle the drain in '09, you can pretty much write them off as a serious candidate in a time of economic strife. Conversely, should a governor truly rise to the occasion by shrinking the cost of their operations while maintaining services, they would jump to the front of the line.

Addled economics. When otherwise smart people start talking about the positive effects of inflation, we've entered desperate times. Let's walk through the root cause of America's housing bubble, which is widely held to be at the epicenter of America's 2008 economic meltdown, to see why inflation can only compound our economic woes.

Given this reality, income will be at a premium in 2009. Rising unemployment has already started to batter income levels. But real income can also be impacted by rising inflation, which leaves fewer dollars available to pay for things like mortgages.

In effect, those pundits pushing the inflation solution do not advocate jumping off the fake-wealth-via-permissive-lending treadmill, they just want Americans to run faster to get nowhere.

Already we see that when policymakers debase the currency with zero short-term interest rates they provoke a market response. Long-term interest rates, led by the benchmark 30-year fixed mortgage, inched up last week. This is exactly what you would expect as lenders realize that the dollars they will be getting back will have less—perhaps much less—purchasing power than the ones they are lending out.

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Shadow Of The Past|1.2.09 @ 3:06PM|#

slightly off topic -- more TSA/airline foibles as 9 Muslims are removed from a flight and not allowed to book another flight for commenting that their seats were near the jet engine.

Travis|1.2.09 @ 3:13PM|#

Bernanke looks like he's crying in that picture.

|1.2.09 @ 3:17PM|#

but three major factors argue against Obama truly being prepared for what's to come.

You forgot to mention Il Duce's incredible illiteracy in economics - that should be the greatest obstacle of all.

Kolohe|1.2.09 @ 3:23PM|#

The one exception to this is at the Federal Reserve, where Ben Bernanke might end up as the poster-child for economic malaise, giving Obama license to show Bernanke the door.

Bernanke can't be replaced as chairman until Jan '10 and can't be removed from the Board until 2020

Nick|1.2.09 @ 3:23PM|#

One thing that I have a thin hope on for Obama's admin: while he is tainted from voting on the bailouts as a Senator, his administration has an opportunity to halt the moral hazard created by the Bush administration - by ending the direct bailout process. Once the Bush admin started, they didn't really have the moral standing to stop as more companies came rushing to them. Obama hasn't developed an executive precedent yet, so I hold a very thin hope that he realizes this and can use it to end the moral hazard. He's a savvy guy for the most part and changing course against the Bush precedent would make him popular in circles he hasn't reached yet, while being unlikely to hurt him with his base either. But my hope IS incredibly thin. I think McCain would have been more likely to end the moral hazard than Obama will be...

|1.2.09 @ 3:30PM|#

Wblockquote>Why anyone would expect substantially different policy from an Obama administration with Geithner in place escapes me.

Don't you know? Haven't you been keeping up with the news? It's change we can believe in! Duh.

The one exception to this is at the Federal Reserve, where Ben Bernanke might end up as the poster-child for economic malaise, giving Obama license to show Bernanke the door.

Oh please oh please oh please oh please oh please no more ponies just boot bernake oh please oh please oh please!

I hereby resolve in 2009 to preview my posts...

|1.2.09 @ 3:40PM|#

While Taylor's prognostications seem plausible, we should remember just how many variables there are in aggregate economic performance. Cycles happen, so we could catch a cyclical break in 09. Even with bad government actions, innovation and resilience could win the day in 09.

|1.2.09 @ 3:41PM|#

Kolohe,

A president can remove a Fed board member for cause.

Reinmoose|1.2.09 @ 3:51PM|#

If Obama does nothing other than put Bernanke out of a job, I will be happy for a short while.

I like this post. The inflation point is spot on, imho.

BDB|1.2.09 @ 3:53PM|#

I am all for showing Bernake the door, too. Could he bring back Voelker for fed chair?

|1.2.09 @ 3:53PM|#

Bernanke looks like he's crying in that picture.

We can only hope, because his tears would be so yummy and sweet.

|1.2.09 @ 4:02PM|#

I happen to know that Bernanke is using telepathy in that picture to communicate with John Edward, his psychic adviser.

Kolohe|1.2.09 @ 4:08PM|#

Pro Lib-
Yes, legally he can. but

1) It's going to be difficult to show 'cause'.

2) It's a political minefield of the type Obama has shown some adeptness at avoiding. For instance, he can replace Patrick Fitzgerald for any reason whatsoever, (and will replace nearly all of his peers), but will that happen?

3) Obama seems temperamentally disinclined to change things up before their usual time of running their course, and even sometimes after. Look at how he's kept on Gates, despite running for two years against US Defense policy. (or for that matter, to a lesser extent, putting Hillary at state)

And fwiw, Bernanke is the least bad guy in all of this. He was dealt a crappy hand at the end of the Greenspan era. He may have misplayed some cards, but even people like Delong say that they would have made mostly the same decisions with the information at the time. Yeah, him raising rates was one of the proximate causes of the bubble bursting. But what else was he going to do? The alternative would have been a further devalued dollar and a spike in overall inflation as the core inflation numbers spilled over more then they did. And now, the only thing to do is to lower rates; that's the only tool he has. He's not going to raise them. (and with the spread between eff and target for most of the quarter prior to the most recent rate cut, a tool that hasn't been useful even if he used it earlier, or not at all.)

|1.2.09 @ 4:08PM|#

I thought he used Edward as an economic advisor. You know, to teach him how scam all of us. I'm getting a name...T...T...

TARP! TARP!

|1.2.09 @ 4:13PM|#

Episiarch,

He uses him for all sorts of sordid purposes.

Kolohe,

I'm not talking about tomorrow, I'm talking about two years from now if the economy remains stagnant. You can bet he'll remove the Fed chairman then. . .and for "cause". Otherwise, he might as well start putting elephant wallpaper up in the Oval Office.

|1.2.09 @ 4:23PM|#

I'm sorry Jeff, but did you use the phrase "otherwise smart people" to refer to Steve Chapman? I'm generally in agreement with your points here, but that error is so egregious it oozes FAIL over the whole thing.

Kolohe|1.2.09 @ 4:26PM|#

Pro lib-
In that case I agree. Regardless of what happens, Obama will replace Bernanke for someone else when his term expires in Jan 2010. (and he doesn't need cause to do this; it's part of the normal political accountability process that the Pres has this discretion.) But the article implied that Obama could jettison Bernanke earlier to 'reset the clock on his honeymoon', before 'a crushing let down' in late spring. That is quite different, and quite a bit more serious than politicizing the Justice dept when those attorneys were fired. The loss of even the facade of the politically independent fed would be a disaster.

|1.2.09 @ 4:30PM|#

Is that when Bernanke's term ends? My two-year example was a bad one, then. However, although the removal power for "independent" commissioners isn't always an easy power to wield, it's a whole lot easier if Congress goes along.

In my mind, the big issue about the Obama administration is whether or not he and Congress will work well together. I sure hope not, but I expect distressing levels of cooperation the first year.

economist|1.2.09 @ 4:32PM|#

I drank too much over Christmas and New Year's. This isn't what I want to see when climbing out of my bottle. I'm going back.

|1.2.09 @ 5:38PM|#

Bernanke looks like some old lady just walloped him in the nuts with her purse, for destroying her life's savings, in that photo.

If only...

|1.2.09 @ 6:11PM|#

his administration has an opportunity to halt the moral hazard created by the Bush administration - by ending the direct bailout process.

Sure, he has the opportunity to do the right thing, but will he? There are snowballs in hell eagerly awaiting the news.

-jcr

Douglas Gray|1.2.09 @ 6:14PM|#

The latest announcement is possible layoffs at MICROSOFT to the tune of 12,000-15,000 people.........these folks generally have more to spend, so less spending for them...doesn't look good

Lefiti|1.2.09 @ 8:57PM|#

Look on the bright side. This economic crisis probably spells the end of cowboy capitalism of the market fundamentalist variety. You guys are fucked. But then you've always been fucked.

|1.2.09 @ 9:16PM|#

This economic crisis probably spells the end of cowboy capitalism of the market fundamentalist variety.

Not hardly. It just means that as the USA sinks into a socialist quagmire, Singapore will become the center of prosperity.

-jcr

Lefiti|1.2.09 @ 10:27PM|#

John C. Randolph,

Your head is so far up your ass that there may be no hope for you. Can you see a stream of light through your navel?

|1.2.09 @ 11:33PM|#

This economic crisis probably spells the end of cowboy capitalism of the market fundamentalist variety.

The US has a free market? First time I hear this.

Lefiti|1.3.09 @ 12:01AM|#

Francisco,

There has never been a completely free makret, but that doesn't stop market-fundamentalist zealots from worshiping the market and believing that all government intervention is bad.

|1.3.09 @ 3:50AM|#

OK, Lefiti, please submit your 5 year plan ASAP.
I'm sure you know how to manage us out of the mess the previous economic planners created.
Point 1 will involve fixing central bank monetary policy.
Point 2 will involve reforming Fannie and Freddie.
Point 3 will involve fixing the entire auto industry.
Point 4 will involve filling the $50 trillion hole in the Social Security system.
Point 5 will involve finding the money to make good the government's promises on the $65 trillion medicare program.
And, don't forget to keep all those Treasury bondholders happy...can't let Uncle Sam's credit rating plummet, borrowing money might come in handy over the next few years.

Shalom P. Hamou|1.3.09 @ 4:47AM|#

Sorry! Quantitative Easing Won't Work

In a Liquidity Trap although Saving (S) is abnormally high investment (I) is next to 0.

Hence, the Keynesian paradigm I = S is not verified.

The purpose of Quantitative Easing being to lower the yield on long-term savings it doesn't create $1 of investment.

It does diminish the yield on long-term US Treasury debt but lowers marginally, if at all, the asked yield on savings.

This and other issues are explored in my tract:

A Specific Application of Employment, Interest and Money
Plea for a New World Economic Order

Abstract:

This tract makes a critical analysis of credit based, free market economy, Capitalism, and proves that its dysfunctions are the result of the existence of credit.

It shows that income / wealth disparity, cause and consequence of credit and of the level of long-term interest-rates, is the first order hidden variable, possibly the only one, of economic development.

It solves most of the puzzles of macro economy: among which Business Cycles, Stagflation, Greenspan Conundrum, Deflation and Keynes' Liquidity Trap...

It shows that no fiscal or monetary policy, including the barbaric Quantitative Easing will get us out of depression.

A Credit Free, Free Market Economy will correct all of those dysfunctions.

The alternative would be, on the long run, to wait for the physical destruction (through war or rust) of most of our productive assets. It will be at a cost none of us can afford to pay.

A Specific Application of Employment, Interest and Money
http://www.17-76.net/interest.html

JLM|1.3.09 @ 9:39AM|#

This was worth reading just for the (not so subtle) jab at Chapman. Does Reason get some sort of a federal grant for employing him?

|1.3.09 @ 10:19AM|#

For people to afford houses without the housing market completely collasping, the income of the average American needs to rise. The way you do that is to constrict the labor supply.

That mean mandatory E-Verify for a US job. Cutting back on H1B work visas and changing the tax code to make offshoring work less profitable.

Business has enjoyed profitable years and can afford to pay more for labor. The alternative is massive inflation like in the 1970s which will hurt business even more.

|1.3.09 @ 10:42AM|#

2009 will start with the disaster that will be the Obama innaguration. I pray I am wrong, but I think it is going to be Katrina 2. You could have 4 million, cold, hungry, pissed off people on the national mall with traffic gridlocked preventing any aid.

There are so many worse case scenerios. What if a flash granade goes off and people stampede thinking they are under attack? What if someone takes a shot at Obama and the rumor starts that he has been killed? What if there is a blizzard that morning and people are stranded? What if, God help us, there is a suicide bomber or two or a Mumbai style attack. If you are a terrorist, you don't have to kill that many people. You just have to do enough to stampede the crowd and 100s could be trampled. These kinds of crowds show up in Meca every year during the Hadj and scores of people are trampled. Huge crowds are extremly volitile and dangerous. On top of that the DC government is one step above the New Orleans government. God help us all.

VM|1.3.09 @ 10:42AM|#

EDWEIRDO: pour toi...

:)

The Wine Commonsewer|1.3.09 @ 11:00AM|#

Listen Balko, I've had about enough of your negative vibes!

|1.3.09 @ 11:06AM|#

to remove Bernanke for cause: #1. Did a very bad job. I know. It is not PC to remove for that cause these days. Call me old fashioned.
One potential happy outcome of this would be if the congress decided that it needed to put the Federal Reserve Board in a smaller pen. It could even be a campaign issue in '10.

The Wine Commonsewer|1.3.09 @ 11:10AM|#

Unfortunately, I think Jeff Taylor is on the money. I don't see a collapse like some of my other libertarian friends do (those who are stockpiling shotgun shells, glass jars, and gold) I just see the US sliding into a sort of malaise (Jimmy Carter style). Many of us will be okay, technology will continue to outpace the government's ability to fuck us dead, but some people are going to suffer and it won't likely be those who deserve to suffer.

The other thing is that GWB has presided over the funeral of what we used to think of as America. When he took office there was a little hope of a resurrection. Today there is none. We can day dream about a constitutional republic until the cows saunter on back home but it will never happen. We've crossed the point of no return so buck up boys.

|1.3.09 @ 11:13AM|#

Since it is New Years I'm going way out on a limb and make a wish. Remember, WAY out on a limb.
I wish that homeowners with troubled mortgages can, when the mortgagee can't be determined due to the repackaging, slicing and sale of said mortgage may quit paying the mortgage and exert common law squatters rights on their own property. All they would have to do is show that they pay their property taxes to prevail.
Poof! End of housing crisis. Pisz on the banks.
p.s. I don't have a mortgage.

|1.3.09 @ 11:16AM|#

Wino. Can I call you that?
What happens to your scenario of tech back stopping the U.S. economy if the currency goes belly up? Surely you don't think we can pump in the trillions of paper credit notes without some kind of repercussion?

Lefiti|1.3.09 @ 11:28AM|#

Malto Dextrin,

Five year plan?? There's a universe between current U.S. government internvention in the economy and Soviet five year plans. You're a fucking halfwit.

VM|1.3.09 @ 11:32AM|#

Lefiti -

what are some things you think should/shouldn't be done, how do you think the economy will react, and can you estimate a time frame? (goes for everybody who confidently has a "solution" to this - analysis pls!)

And for zod's sake, what do you recommend for getting rid of those tricky holiday leftovers?

Some Guy|1.3.09 @ 11:36AM|#

In 2009, market forces will punish the human hubris that peaked in 2008, setting the stage for a brighter tomorrow.

Seems to be greatly underestimating the supply of hubris. In 2009, we'll be missing the days when we were only handing out $350B at a time...

|1.3.09 @ 12:13PM|#

Why did housing prices embark on a rocket-ride straight up in recent years? Because banks created an unlimited supply of ready buyers at every price point. How did they do that? By lending money to people without the income historically required to pay back a mortgage of a given size or, in many cases, of any size.

It's a nice, simple theory, but the problem is that several European housing markets experienced house price inflation as great or greater than that in the U.S. Some of the countries (Spain, Ireland, the U.K.) had price run-ups that absolutely dwarf what happened in the U.S. What factors explain simultaneous housing bubbles in all these markets? Doesn't seem like the answer can possible be "sub-prime lending abuse in the U.S." So I've come to regard those lending abuses as a symptom (and at most a minor contributing factor) to the housing bubble. The manic lending and house flipping occurred because there was a bubble, not the other way around.

|1.3.09 @ 12:46PM|#

Sadly, the Wine Commonsewer is right on. We have witnessed the death of our constitutional republic. There is no constitutional basis for the power grabs of the socialists in Washington, but none stand against it.

I look for escalating crises and a cycle of emergency "action" from the government throughout 2009. Like Atlas Shrugged, things will slowly devolve, leaving paniced masses demanding more action--all the while knowing instinctively that the government can't really fix anything but will punish more and more the successful to suport the failing.

The road to serfdom is before us, and 60 million Americans voted to give more power to the entity that's enslaving us. The govt in all its forms is dwarfing private activity, and 2009 will not roll any of that back. God help us all.

Alice Finkel|1.3.09 @ 1:03PM|#

Tommy, you may be right. Now, being right plus $5 will buy you a cup of coffee at Starphucks. Besides being right, you've got to do something about it. Something smart. Can you do that, and what might it be if you could?

|1.3.09 @ 2:05PM|#

Lefiti,

Your comments are goofy, but I chalk them up to the fact that you're still in mourning because you were recently laid off from your barista position at "Che's Chai." Please accept my heartfelt condolences.

However, given your obvious qualifications, I'm sure if you shoot an e-mail to Obama he'll set you up with a mid-level position at either Treasury or Commerce once he's finished "lowering the seas" and bringing "peace in our time."

|1.3.09 @ 4:35PM|#

Lefiti said:

Five year plan?? There's a universe between current U.S. government internvention in the economy and Soviet five year plans. You're a fucking halfwit.
________________________

If he's a halfwit, you're a nowit. All the problems Dextrin listed are very real, a financial sword of Damocles hanging over the head of this country. Do you have solutions? Or are you interested in blaming the other team?

I eagerly await your explanation of how FDR and LBJ's welfare programs are somehow the fault of the right.

Paul|1.3.09 @ 4:51PM|#

Cycles happen, so we could catch a cyclical break in 09.

If you could transmit that message to the highest officeholders in the land, we'd all appreciate it.

Lefiti|1.3.09 @ 5:31PM|#

In a year or two the U.S. will look more like Europe, and you half-wit right-wing market worshipers will be even more of a small coven of marginalized cultists than you are now. Fucking zombies.

Lefiti|1.3.09 @ 5:53PM|#

Teetering between Keynes and Friedman By Robert Skidelsky
(excerpt)
The neo-classical revolution held that markets were much more cyclically stable than Keynes believed, that the risks in all market transactions can be known in advance, that prices will therefore always reflect objective probabilities.
Such market optimism led to deregulation of financial markets in the 1980s and 1990s, and the subsequent explosion of financial innovation that made it "safe" to borrow larger and larger sums on the back of predictably rising assets. The just-collapsed credit bubble, fuelled by so-called special investment vehicles, derivatives, collateralized debt obligations and phony triple-A ratings, was built on the illusions of mathematical modelling.
Liberal cycles, historian Arthur Schlesinger believed, succumb to the corruption of power, conservative cycles to the corruption of money.
Both have their characteristic benefits and costs. But if we look at the historical record, the liberal regime of the 1950s and 1960s was more successful than the conservative regime that followed. Except for China and India, whose economic potential was unleashed by market economics, economic growth was faster and much more stable in the Keynesian golden age than in the age of Friedman; its fruits were more equitably distributed; social cohesion and moral habits better maintained. These are serious benefits to weigh against some business sluggishness.

Douglas Gray|1.3.09 @ 6:13PM|#

Jeff is probably right. What Obama is proposing is basically to try to do what Japan did; coddling businesses and workers, bailing out banks, as opposed to letting market forces work things out. The results will be the same for us as for Japan; a prolonged slump.

The Wine Commonsewer|1.3.09 @ 6:32PM|#

Wino. Can I call you that?

Sure. I've been called worse. Lots of people call me TWC.

What happens to your scenario of tech back stopping the U.S. economy if the currency goes belly up? Surely you don't think we can pump in the trillions of paper credit notes without some kind of repercussion?

No, I don't. As a rule we innovate faster than the government can catch up, which will offset some of the disaster brewing. I'm not seeing roses and rainbows, but we've a long way to fall before we get to 1937, but it is a shorter ride to 1979 (which wasn't nearly as hard on us as the depression).

I guarantee nothing but so long as there are surly teenagers with orange pants, lip rings, and cellphones welded to their misshapen ears wandering the malls, we're okay. Sort of. Once the frivolous is gone, then you better look out.

|1.3.09 @ 6:35PM|#

Lefiti,
Learn to read. You are at reason.com , NOT the dailykos.

The US is well on its way to becoming Europe. Thanks to twits like you.

Curiously, you still have'nt given one reasonable way to face the problems that we have today - other than the magic shibboleth of " government intervention". it is precisely their intervention which has lead to the current situation.

Enjoy your US of Europe, commie.. sorry, homie.

|1.3.09 @ 7:21PM|#

Indeed, all the talk of deregulating or reregulating markets misses the simple yet essential point that the serial bailouts of 2008 were designed to avoid market consequences for bad investments.

Thanks for that point. The market WAS doing exactly what it was supposed to, until the government came along and said "Oh no, we can't let Goldman Sach's fail!" and decided to bail everyone out. Ostensibly because not bailing them out would cause "a deep recession".

So, we bail them out, and we get a deep recession anyway, and everyone's like "this proves government intervention works, and free markets don't!"

But we didn't actually gave the market a chance to work. The market needs it's feedback mechanisms, and the government just decided that the feedback was too painful, so they cut it off before it could have any effect.

If we let these banks collapse, you can bet it would be a long time before anyone traded in complicated derivatives without knowing what was backing them. But if we're going to just short-circuit the market every time it tries to spank us for doing stupid shit, then you can't blame the market for the consequences of people doing stupid shit.

Lefiti|1.3.09 @ 7:31PM|#

What you fucking halfwits don't realize is that we have elections so that people smarter than us can make economic decisions that will benefit everyone. All we have to do is elect really smart and benevolent people to make those decisions. Which is so easy because those people use the color blue to identify themselves and call them selves 'Democrats', meaning they stand for democracy, which means rule by the people, or in other words "the common good". See, someone that calls themself a Democrat is really saying they stand for the common good. And all we have to do is elect people who have the greater good in mind.
But you halfwits are too dumb to understand such obvious facts about reality.

Lefiti|1.3.09 @ 9:53PM|#

"..it is precisely their [governments'] intervention which has lead to the current situation."

Your IQ doesn't reach room temperature, does it, Nagarajan Sivakumar?

|1.3.09 @ 10:03PM|#

Lefiti,
If you don't mind a question from the proletariat. Who gets to define the "common good"
You? Me? Rush Limbaugh? Nancy Pelosi? Any person that we "fucking halfwits" might elect?

If everyone votes on the "common good", does that mean that the majority gets to vote on your rights versus theirs?

|1.3.09 @ 10:08PM|#

That entire post was so godawful stupid as to become a parody as monumental as the great Tony Hendra's definition of democracy. To wit: the combination of two Greek words, demos, meaning "the people" and kraeteins, meaning "cretins"-"the people are cretins".

It is absolutely amazing what partisanship does to the mind. Trust me, I used to be this partisan when it came to a blind loyalty to all things Bush and Republican. That ended long ago. Probably about the time he decided to have a War on Terror without paying for it. What is amazing is that our friend Lefiti here sounds like he's ready to join the March on Rome or somesuch nonsense. It's that entire ethos that makes the whole Obama Regime so different. It's like, the Obama plan is a three step process:

1. Vote For Me
2. Give Me Your Money
3. Strength Through Joy.

Really, if you read Lefiti's post in the original German, it's much more texture to it, especially the part about blue people being Democrats. That's up there with the Nichomachean Ethics.

It makes one want to go to You Tube and run that Downfall Parody again.

|1.4.09 @ 1:24AM|#

There has never been a completely free makret, but that doesn't stop market-fundamentalist zealots from worshiping the market and believing that all government intervention is bad.

One can worship the market? Somehow, I find that odd, considering the Market is just the name one gives to the network of trades and transactions everybody makes. What I believe these "zealots" (as you call them) worship is freedom.

As you stated, there is not a truly free market, which translates into we are not truly free - yet. Unless you seem to find a problem with people being free, I do not see your objections on one of the many manifestations of that freedom, namely the Market.

Or maybe, you do not want people to be free - is this accurate?

|1.4.09 @ 1:29AM|#

What you fucking halfwits don't realize is that we have elections so that people smarter than us can make economic decisions that will benefit everyone.

You mean you cannot be smart enough to make those decisions yourself, yet you can be smart enough to KNOW which person can make those decisions for you and vote for him? Isn't that a contradiction?

|1.4.09 @ 1:32AM|#

See, someone that calls themself [sic] a Democrat is really saying they [sic] stand for the common good.

And you automatically believe him.

And all we have to do is elect people who have the greater good in mind.

And you can know his true intentions because he said he has those intentions. The possibility that the self-proclaimed Democrat may be lying cannot cross our minds?

oncogenesis|1.4.09 @ 2:55AM|#

we have elections so that people smarter than us can make economic decisions that will benefit everyone

I know it's only the 3rd day of a new year, but I believe we can safely declare the search for Best Troll of 2009 is over.

|1.4.09 @ 11:53AM|#

Who doesn't think the economy is going to continue contracting during 2009 with consequent increases in unemployment and general hardship? That doesn't mean that by the end of the year things are not going to start to turn around. Despite the strictures aimed at Geithner, he and Paulson along with Bernanke have essentially stabilized the financial system. The evidence is there in all sorts of ways, Libor spreads, increasing credit availability. Mortgage rates are going to be at 4.5-5% in the spring and as well as spurring refinancings they are going to give the housing market a shot in the arm. It's not a silver bullet but it's progress. Obama is going to pass a huge stimulus program that IS going to stimulate economic activity whatever the naysayers believe. Republicans in congress are not going to stand in the way because it would be political suicide. He's also going to pass huge bills covering regulation of the financial industry and overhaul of healthcare. And again there will be only toke resistance from Republicans. The effect of all this. By the end of 2009 or the end of the first quarter of 2010 the economy will have started to turn. This is the economic reality. I'll leave others to draw the political conclusions.

Lefiti|1.4.09 @ 3:22PM|#

You fucking halfwits can't even tell the difference between the spoofers and the real me!!!

|1.4.09 @ 3:37PM|#

Otto, you're looking at things incorrectly. The manipulation of the interest rate to almost zero is nothing more that an attempt to stimulate borrowing, but not LENDING - this is what the Keynesians just don't get. You cannot entice lenders to lend with what amounts to a price control (the interest price is a price); when you have price controls, you will have shortages. Saying that the mortgage rate will be 4.5% doesn't mean people will be able to borrow at that rate; you will have the same problem (if you assume that liquidity is the problem).

Il Duce's stimulus program will only make things worse by hobbling private capitalist investments, through crowding them out of materials, labor and capital goods necessary to restart the economic process. Instead, most of the government investment will be thrown into infrastructure projects of dubious value.

This "investment" will make it seem as if economic activity is improving, but only because GDP lumps government expenditures with consumer expenditures as if the former was productive, leaving out (with Keynesian convenience) capital goods generation, supposedly to avoid "double entry", as if economics was the same as book keeping. The government will be able to continue fooling people into believing that there's economic recovery through the manipulation of economic metrics and information, conveniently issued by the government.

It is more likely that the overall economic picture in 2009-2010 will be much worse for everybody, especially if Il Duce's stimulus program is approved.

|1.4.09 @ 3:39PM|#

You f... halfwits can't even tell the difference between the spoofers and the real me!!!

That's because nobody cares, Lefiti - you're irrelevant.

|1.4.09 @ 4:07PM|#

Who gets to define the "common good"

No controversial govt action is for the common good, because it wouldn't be commonly considered good. Locking up rapists and murderers and stopping foreign invasions are the "common good", because you can get 95% support for that.

Different people have different values and different relative weights for conflicting values (i.e. freedom vs. security, to whatever degree those can conflict). What is 'good' to you may not be 'good' to me, and thus not the "common good".

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