The wise minds at the BEA say the economy has turned a corner, posting GDP growth at a relatively robust rate (3.5%) in the third quarter, just like Ben Bernanke promised it would.
Still, the fact that we’re rising from rock bottom doesn’t tell us how long it will take to get back to where we were, or what the recovered economy will look like. For that, we need to dig deeper into the numbers, and, simply put, the picture isn’t pretty. Read the rest of this entry »
Before turning in for the night, I feel I ought to join the voices toasting the anniversary of Lehman’s collapse. I’ll leave serious analysis of where we are, and how much remains to be solved, to other bloggers and other days. My thoughts are more mundane.
Yesterday, when the President delivered Wall Street hotshots a lunchtime lecture about the need for regulatory and compensation reform, I noticed one thing: I was watching CNBC, and the market didn’t blink once during his address. In fact, it seemed to perk up during that half-hour (noon to 12:30), and stay up throughout the afternoon.
This morning, Ben Bernanke had a similar result when he addressed econo-wonks during the first half hour of trading.
That is not to say that Bernanke and Obama going on the conference circuit now has any real economic value, but simply to point out that the non-effects of their speeches show that we are all a lot less jittery, and that’s a good thing.
I know you’re all fed up with my approving quotes of right-wing critics but this one is too spot-on. David Frum said the above in a conversation with Daniel Drezner on Monday and I was listening to the dialogue while trying to formulate my thoughts on AIG’s bonuses, Cramer vs. Stewart and the administration’s financial plan; his quip tied it all together. Joe Scarborough (another rightwinger whom I generally deplore) pointed out the other day that the anger over each of these issues is grounded in a knee-jerk populism.
I am a populist. Not in the sense the word is often (mis)used, as a synonym for political pandering, but in its actual sense of being concerned with the needs of the masses. And I believe the only way to fulfill those needs is to increase growth for all. I’m not a supply-sider: I think government should use Keynesian spending models to spur that growth, and I think we need to heavily tax-adjust growth on the way up to make sure it’s broadly shared. But there’s just no way to have economic growth without benefitting some people at the top. Get over it.
Nobody will get out of their present economic rutt unless we bail out the banks and as the TARP legislation was written, the Treasury doesn’t have strong powers over how banks spend that money. For the record, I think that’s too bad, and that we probably should have included some clause on compensation when we passed this bill in the fall. But we didn’t. Those who are really riled up about this are whining over bonuses as a focal point for their general angst over bailing out banks.
Here’s the problem: neither Obama nor Geithner, nor Bush nor Paulson before them, has been able to explain how the financial system works or why it matters. Obama’s town hall today is a good example; he was spot on for the first 45 minutes or so, speaking about schools and health care (even I was sold), but when he tried to address the banks, he stopped making sense, even to the biz journos I was watching with, who spend all their time on this stuff. The people on the audience all had glazed expressions–it was clear he wasn’t communicating; it even seemed to me he didn’t understand the math himself–he kept confusing securities with derivatives. Before you crow that such matters are too complicated for the attention spans of ordinary political audiences, listen to the speech FDR gave before bailing out the banks of his day. The only contemporary policymaker who I think has spoken with such clarity is Ben Bernanke, both in his October speech and his 60 Minutes interview this past Sunday. Unfortunately, explaining policy is NOT Bernanke’s job; it’s the job of elected officials and the press. The only person in media I’ll credit with getting this one right is my friend Vikas Bajaj at the NYT.
It’s because elected officials and the mainstream media are doing such a lousy job that Americans are turning to info-tainment outlets like Jim Cramer for investment advice and Jon Stewart for political analysis. Jim Cramer has been wrong-wrong-wrong on many stock calls, but it was never the proposition of his show to be right all the time; it always depicted itself as bullish market propoganda for enthusiasts. By the same token, business journalists defending Cramer should watch their words: the only reason Jon Stewart had to take him on is because professional reporters beyond the elite/expert outlets, like the government, did not do a proper job explaining the financial markets to Cramer’s middle America audience.
The result is that firms like AIG have us in their palms. I’m reminded of the moment in Richard III, when Richard, self-described as “deformed, unfin ish’d” woos Anne, a woman whose first husband he actually killed. First, he tells her he wants her, so bad that’s why he killed her hubby and no one else will love her as he does. She’s flattered, but she hates his guts. So he hands her a spear and dares her to kill him in revenge; the moment she fails to do so, she admits she’s his. We have already failed to kill these banks, but it means all our whining about bonuses is wasted breath and they know it. Like Richard, they take the opportunity to adorn themselves with fineries and enjoy the license we have given.
The reality is that we do need the banks, but that we’ll have to regualte them more aggressively as we give them more aid. I for one would much rather our elected officials devoted their attentions to devising a plan for such aid, and explaining it, in real detail, than to righteous indignation. I am hoping that my peers in the media and I will then focus on dissecting and analyzing such a plan, rather than taking pot shots at one another. Until that happens, I suppose I’ll just curl up with Lawrence Olivier.
…is how the recession feels to many in media. The industry was hard hit even when the U.S. economy was booming, barely scraping together enough ads to keep the lights on, so the current collapse is a serious kick when we’re already down.
A telling sign: in trying to devise a forecast for media in 2009, I went out in search of the full range of experts, but there was no diversity in their views. The most bullish and bearish of analysts agreed that there’s aways to fall. Read the story here.
One interesting trend that emerged in those interviews is what Paul Krugman calls depression economics: there’s a moment (a tipping point, to borrow another economist’s phrase) on the way down where all the basic structures atrophy and what used to be prudent policy suddenly becomes dangerously stupid. ex: In boom times, saving is good, but in depression economics you want everyone to spend above their income to jumpstart growth.
In media, the conventional wisdom is that moving towards an advertising-based revenue structure from a subscription-based revenue structure represents progress. On the web, advertising is the only viable revenue structure, since consumers have demonstrated again and again that they aren’t willing to pay for content. But even in print, the explosion of media and the expansion of media companies happened when they were able to bring their newstand cost down to a mass-accessible price, and cover their own production costs through advertising. So this is longstanding conventional wisdom. In depression economics, however, when everyone else is so hard hit they stop buying ads, it’s the entities with subscription streams that do best. Fuddy-duddies like The Discovery Channel are apparently poised to make the big gains while big names like Disney will lose out.
It’s a compelling example of why we need more experimentation around media business models–the best practice is far from set in stone.
Once a month, the US government locks a bunch of Econ PhDs in a room to calibrate changes in employment, payroll, production and consumption. Today, the experts announced the results of their November gathering. Guess what? We’re in a recession, and we’ve been there since December 2007.
Well, duh. Americans have been feeling the hit for months.
But economists usually wait around for two consecutive quarters of negative GDP growth before calling a recession. That definition rests on the fact that production, consumption and income are interlinked: what a country makes must add up to what it buys. In theory, when GDP is rising, it should be because consumption (roughly 70% of the domestic product figure) is rising too. And when people consume more, it should be because their employers are making more and passing it on.
Gordon Brown may have saved the world economy. Whether he can save his own career is still an unknown:
Last week, Brown unveiled his plan to combat the credit crisis: a transfusion of capital into UK banks in exchange for stakeholding rights, new requirements on lending practices, and government guarantees on inter-bank loans. Watch him explain the plan here. After a month of US and European governments waffling over the correct measures to take, after an American bailout package that passed but remains unpopular and unimplemented, Brown’s plan just made sense. As of today, those same European and US leaders are signing on to follow Brown’s lead.
Given how disastrous Brown’s run as PM has been thus far, it’s hard to understand where this stroke of genius came from. Until you take the longer view. As new Nobel winner Paul Krugman reminds us today, Brown is the economic brains behind the British revival that Tony Blair so often took credit for. While Blair travelled the world winning new political allies for Britain with his charm, the man behind the New Labour economy was the old curmudgeon from the University of Edinburgh, a former Blair rival who was blind in one eye. Blair was the better politician, but his Chancellor of the Exchequer, Brown, was the policy wonk.
So when the uncharismatic Brown took over for Blair last summer, and had to face political–as well as financial–responsibilities, he self-destructed. Despite valiant attempts to rebrand himself, his poll numbers have gotten worse every month since he took office…until now. That he might turn those numbers around with a policy that effectively nationalizes the banking sector suggests the final undoing of the free-market Thatcherite proposals that Brown and Blair were elected to reverse in 1997.
The question now is whether these nationalization policies can have their real economic effect (can “trickle down,” to borrow a phrase,) in time for the next elections.
But that’s exactly what conservative Republicans are doing on talking head shows this week. Over and over again, when asked to explain how the bailout bill self-imploded yesterday, they cite “partisan bickering.” Frankly, I’m with Gail Collins on partisanship: it’s just part of the process. But even if you think, as did George Washington, that parties are a great evil, the phrase just doesn’t apply here.
Let’s review:
Bailout proposed by REPUBLICANS Paulson and Bernanke.
Bailout revised via negotiations with top Senate DEMOCRATS.
Revised bill supported by REPUBLICAN President Bush.
Passed by Senate DEMOCRATS and REPUBLICANS.
Dies in the House, 40 DEMOCRATS, 130 REPUBLICANS vote “no.”
The tension here, between supporters and opponents of the bill, has less to do with party allegiance than it does with who’s up for reelection: CNN reported today than 2/3 of “no” votes came from members in contested races this November. Despite the frozen credit markets and concerns about jobs and home loans, the plan just hadn’t won over most voters.
And if there IS an ideological line to be drawn between those who were for and against this bill, it’s not between Democrats and Republicans, but between conservative Republicans in the House (who made up the lion’s share of naysayers) and moderates in the Senate/the Executive agencies (who proposed and drafted the bill). Having brought DOWN a bipartisan bill by breaking with their own party, Congressional Republicans are now blaming partisan differences for the collapse of the plan.
Here’s what infuriates me most about this tactic. “Partisan bickering” is code for a belief that the governmental process is general is more of a problem than a solution to Main Street woes, and thus (as these conservatives belief) that we should reduce the size of government. To sabotage that process when it IS working, just so that you can claim on the talk show circuit that the process DOESN’T work is a cheap, base political ploy. In fact, it’s partisan politics.
Had a fascinating “aha” moment the other day about my new favorite TV show, AMC’s Mad Men. It’s all about sleezy ad guys in the early ’60s, at the moment when the old black-and-white print ads are about to be turned inside out by edgier copy and the rise of TV. The characters on the show work for an old agency and as they struggle to say afloat in a changing media world, they resort to the dirty and the deceitful.
Wonder why I find it so relevant today…
Compare the show to the last generation of workplace dramas and you’ll notice one key difference. In the 1990s, on shows like ER or West Wing (both of which I loved), there was a ton of misbehavior, BUT the top dog (Drs Carter and Ross at different times, President Bartlet) were good guys we could look up to. Everyone clawed their way to get up there, but the ones who really make it in America, the shows suggested, deserve it.
On Mad Men, the most notable feature is that the guys on top are often the worst of the batch. The head creative, and the protagonist, Don Draper, is guilty of identity theft, cheats on his wife and sexually assaults his mistress, Bobbie. If Mad Men had been made in 1998 instead of 2008, I’m convinced Draper would have been a nicer guy. The key is the state of the American economy:
In the 1990s, when the economy was doing well, workplace shows made the boss look good because people wanted to absolve any guilt about their greed or their success. Go back to the late ‘70s/1980s, however, when the economy was in a crunch, and shows like Dallas were all about sleezy power players, because people in economic distress want to feel justified in resenting those at the top.
Media like television are entertainment and big business, but they are also about tapping into a broader emotional zeitgeist, about turning what we believe into something aspirational, allowing us to reaffirm the values we already have. Advertisers do the same thing, which means Mad Men’s content and storyline function as an interesting commentary on the role played by the show itself. That kind of meta-narrative, the rich opportunities for analysis and debate, are my favorite part of the show. For a taste, check out the opening episode of Season 2, here.
