Hard News by Russell Brown



Hopes for the presidency of Barack Obama were always bound to be inflated -- he entered office with more ghastly problems on his plate than any president since FDR, and probably more than that. He is trying deploy a new foreign policy at a time when his economy is in a crisis for which the possible solutions actively militate against each other.

He's not getting much help. While the news media ask straight-faced why Obama hasn't solved a crisis that took decades to manifest in the couple of months he's had in the job, movement conservatives, back from their fresh personality imprints, have returned to the paranoid style, which is getting them some mileage.

Terence Corcoran in the amusingly wingnutty Canadian paper The National Post (the current lead on its website is headed 'Conrad Black Defends Friend Ann Coulter') is asking Is this the end of America? Probably not, he thinks, but that's no thanks to the socialists in the White House and Congress, whose "[e]xpansion of government spending, plunging the U.S. into unprecedented deficits, is without parallel."

Unless, I guess, you actually examine the trends of the last eight years …

But you have to get down into the comments to appreciate the true level of paranoia at play: "The plans are in motion to remove this man and his administration as well as the evil virus infecting Congress," declares one revolutionary. "Is it just me or does anyone else see the clammy, self-serving hand of Freemasonry in all of this mess?" mutters another.

So that's just the crazy people. Trouble is, Obama can't catch a break from his own team. Paul Krugman's withering analysis of Tim Geithner's bank bailout plan has the liberals in dismay too.

I'll go with Rod Oram's answer to a question on the topic at his recent Drinking Liberally talk: the US Treasury needs to bite the bullet and nationalise a few of these banks, rather than just throw the money at them.

Hell no, says tech guru Douglas Rushkoff: let the economy die. Let 70 to 80% of American banks go down: "Yes, unemployment would rise as hundreds of thousands of formerly well-paid brokers and bankers lost their jobs; but at least they would no longer be extracting wealth at our expense."

Rushkoff doesn't pause to consider the far larger part of the productive economy that would die on the vine, unable to obtain the credit that lets it do day-to-day business. Airlines that wouldn't fly, goods that wouldn't ship. Maybe you'll get a brave new world, free of corporate leeches, out the other end, but … um, you guys try it first, okay?

Notable lately in the annals of madness: Michael Lewis's extraordinary Vanity Fair story on the way Iceland was led by a Freidmanite former Prime Minister into a suicidal culture of financial gambling that has left it broke. It's like mid-80s New Zealand with the considerable added fizz of Icelandic machismo.

Also in Vanity Fair: Niall Fergusson on the nature of the crisis, and how even with Obama's $700 billion stimulus …

… what we’re going to see will look very disappointing, because we’ll be comparing it to the recovery of the sort that we used to see. In a traditional post-war recession, there would be a shock; the Fed would cut rates; there would be some kind of fiscal stimulus; and the economy would quite quickly recover.

The reason that won’t work this time, and this is the key point, is that the whole U.S. economy became excessively leveraged in the last ten years. The debt burden, as a proportion of G.D.P., is in the region of 355 percent. So, debt is three and a half times the output of the economy. That’s some kind of historic maximum, and those debts aren’t going away.

The only long-term solution, says Fergusson, is for the United States of America to walk away from its debts. That, of course, would have some mighty implications too.

So it's not hard to sympathise with anyone tasked with political and economic decisions in the present environment, including our own Prime Minister, who was fairly elusive in his interview with Guyon Espiner on the debut show of Q+A yesterday.

The nine-day-fortnight idea has shrivelled rapidly to the point where it might, at some point, help support about 20,000 workers -- that's down from the 100,000 being touted at the Jobs Summit, and the take-up has yet to pass zero. Putting the fourth week of annual leave up for grabs is a miserable solution, and the national cycleway is looking like a silly boondoggle -- especially when Auckland lost functional urban cycleways last week, along with the regional fuel tax. In Opposition National would have been flaying such an idea.

National is caught up in its messaging -- while Australian commentators rewrite the Wall Street Journal profile of John Key, holding him up as the saviour of neo-liberal economics, National is also trying to reassure the public that it's doing something at home. I do hold out some hopes of clarity from Bill English, but at present, there's little sense of structure and a great deal of political marketing wrapped around irrelevant ideas.

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