The horizon is not so far as we can see, but as far as we can imagine

Obama, Congress and Bernanke did not save the world from a Great Depression

Sorry, they simply did not. The baseline IMF forecast before the bailouts and before the stimulus bill tracks almost exactly what happened.

The bailouts were an actual net drag on the economy.  Instead of cleaning up banks balance sheets, they allowed zombie banks to continue to exist, banks which are crippled when it comes to lending.  In order to make sure these banks can pay down their bad debts, the Fed not only had to take on huge amounts of their paper at par when it was worth 20 cents at most, it has had to lend to them at concessionary rates, pay extra interest to them, and let them leverage that to make obscene profits from what lending they are doing (why did your credit card rate go up, that’s why?) and from trading on a captive market.

As best I can figure the stimulus was large enough to counteract the negative effect of the bailout.

The net, is a wash.

Furthermore, there were far, far more intelligent things which could have been done.  The crisis was, as the tired phrase goes, also an opportunity to break the power of monied interests, so that ordinary Americans could prosper again and could reclaim their government.  The stimulus was an opportunity to restructure the US economy to allow real, widespread growth in the future.

Both those opportunities were wasted, and they were wasted by Obama.  TARP would not have passed without him, and once he was in power he could have demanded that Bernanke do as he commanded (break the banks) or step down, if Bernanke wouldn’t, he could have easily impeached him.  The stimulus was his stimulus.

Obama, Congress, Bernanke, Geithner, Paulson—none of them saved anybody except the banks and the rich from apocalypse.  I understand that partisan Democrats want to pretend Dems saved the world, but they did no such thing.

(Addendum. See Rosenbert here (h/t Sean-Paul):

There are classic signs indeed that the recession in the U.S. ended last summer — output, sales, etc. But the depression is ongoing and the reason we say that is because real personal income, excluding handouts from the government, has barely budged. In fact, real organic personal income is nearly $500 billion lower now than it was at the peak 16 months ago and this has never occurred before coming out of any technical recession. It is a depression, as the chart below attests — that is the trendline for real household incomes, until the government comes in to top them off with handouts, subsidies and extended jobless benefits . . .

Real consumer spending is up $200 billion over the past 16 months and everyone believes we have a sustainable recovery even though organic income is down almost $500 billion. Think about that for a second because once the stimulus wears off, and with a 10% deficit-to-GDP ratio and concerns surfacing everywhere about sovereign credit risks, there is little out there to support future growth in consumption.)


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  1. marku

    Steve Benen was on this as well, I thought about leaving a snide comment, but thought what’s the point.

    Reading this sh!t is bad for your blood pressure and mine.

    What really annoyed me was that the reaction to TARP was the clearest example of participatory democracy I had seen recently in this country. Hundreds of thousands called congress, 99-1 against it and it passed anyway. At that point I figured there is no point in voting anymore. The bastards are just going to do whatever the lobbyists tell them to.

  2. DupinTM

    Booman Tribune also just said the same, and had the gall to include snark against any progressives who said otherwise! It’s almost as if they’re getting some kind of… how to describe it… orders, perhaps of a marching kind.

    I swear, with this and the big news leak about Obama muzzling the Oil Spill size (and telling off scientists willing to quickly and accurately measure the true gallons/day rate), it’s hard to believe the relatively good news about financial reform. Given the too-late nature of these other problems, I sure wish Byron Dorgan’s true legacy stand on finreg (aka the Not-Dodd) would include a Tobin tax to soothe my anxieties.

  3. Ian Welsh

    There are some decent financial reforms, they are not sufficient. Few independent econobloggers worth their salt think otherwise. Many polibloggers think so, but frankly, who cares what people like Booman think about economics and markets?

  4. David H.

    What marku said. There is no connection between constituents’ desires and representatives’ votes, from the president on down. Good thing we voted in that hopey changey (sorry) asshole. He’s taken that (broken) democratic concept to a whole ‘nother level.

    Democracy is dead. Long live democracy.

  5. Well said.

    What are they saving? The positions of power for the guilty, the power structure for those who continue the grand rake off, and some time as though this will all blow away and we’ll just forget. The corporate media (aka PR department for the powers that be) are doing an adequate job of obfuscating. Their story line has just enough people persuaded to prevent a full scale revolution and will, if they’re true to form, buy just enough time for a cataclysmic event (the oil eruption?) that will pose a real enough threat to the the global population to divert attention from their crimes. The fools who rule us are part of a grand conspiracy of idiocy that effortlessly, without much (if any) communication by the various actors, diverts attention from real problems and solutions. This is “The Happy Birthday of Death.”

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