UC Berkeley Economics Prof Grades the Recession, Gets an F Himself
Via SFGate, UC Berkeley economics professor Barry Eichengreen rates the recession (we'll bite our tongue for now):
Report card - U.S. government handling of Great Recession: Issued by Barry Eichengreen, professor of economics and political science at UC Berkeley and research associate of the National Bureau of Economic Research:
-- Monetary policy: A-. Fed "pulled out all the stops," cutting interest rates, implementing alphabet soup of programs to begin unfreezing markets. But (the previous administration) missed the housing bubble, and everything that went with it.
-- Fiscal policy: B+. $787 billion stimulus package vital to prevent further vaporization of private wealth. Was it enough? Probably not, but the best the government could do given "political constraints." The high unemployment rate doesn't mean it's failed.
-- Housing policy: B. Various devices employed. House sales have picked up. But lots of homeowners remain underwater. Loan modifications target far from being achieved. Prospects: "cloudy."
-- Banking policy: F. The $75 billion additional capital banks like San Francisco's Wells Fargo & Co. were told to raise was not enough to get them to sufficiently reopen the credit spigot. "Unwillingness to bite the bullet and properly recapitalize the banks likely means we'll have a 'credit-less recovery,' " i.e., a weak one.
-- Major concern: "Double dip" - a second-half decline as unemployment remains high, house prices continue to fall, consumers don't spend as hoped, and companies cut back once more on investment and production.
Ummm, I'm going to have to give Mr Eichengreen an F simply for offering up such an easy A for our boys at the Fed. Monetary policy A? Seriously?
Monetary policy has, to date, relied on exhausting the expansionary tools available leaving the Fed limp and shooting blanks into a market that might be getting a tad fed up with the shenanigans (no pun intended). And even if one were to reluctantly admit that the Fed has thus far performed well given the circumstances, there is only a tiny bit of trouble ahead (hopefully Mr Eichengreen gives the Fed a more realistic grade for next semester).
Naturally, we are told this could be a "jobless" recovery. To that I say WTF? The jobs we do have are thanks to struggling small business, the clairvoyance of a few clever business owners who chose reality over the buzz of the talking heads (remember kids, guys like Dennis Kneale are paid to issue "hope and confidence", not "the truth"), and our giant lumbering behemoth of government.
Ok, so the stimulus is trickling through (again, or so we are told) but the math is disturbing, if not unadulterated fantasy:
House Democrats this week credited stimulus road and transit projects with creating or sustaining nearly 50,000 jobs. But a close look shows the estimate suffers from what’s become a common malaise in the stimulus world: fuzzy math.
Interviews and spot checks with states that provided job counts to the committee uncovered some glitches, in particular a reliance on raw head counts — which tend to inflate the numbers by giving full- and part-time jobs the same weight — and by counting the same workers two, three or four times.
One way around the problem is to use what’s known as full-time equivalents — the hours worked on stimulus projects divided by the hours in a typical work week (43 for construction jobs). By that measure, the stimulus provided the equivalent of a mere 9,920 full-time jobs since March, when the first projects broke ground. But that’s probably shortchanging things — after all, even part-time work is a job.
Well I think we've learned what magical math can accomplish through this mess, haven't we?
So what happens when these stimulus "jobs" dry up (many current projects have been abandoned to make way for this song and dance we apparently call "recovery", putting people to work long enough to complete infrastructure then *poof*) and real GDP (not the manufactured kind we are all too familiar with) contracts further?
Let's hope monetary policy is then revised to a D, but let's be real here, it's always an F for FAIL to me.