Sunday, February 22, 2009

Maureen Dowd on crisis management

Maureen Dowd's column in the New York edition of today's NYT focuses on the administration's approach to describing (and managing) our present economic state of affairs. She makes some interesting (and comment-worthy) points.

In reference to [former] President Bill Clinton's suggestions regarding President Obama's engagement with the American people (and, for that matter, people outside of America whom we expect to loan us a HUGE amount of cash):

Instead, he implies, the president’s warnings of calamity, designed to gin up support for borrowing and printing trillions to shore up the sagging economy, might actually be dragging down our already sagging self-esteem.

It's less self-esteem than it is perception and confidence. We make  decisions based on perceptions of the future. Given a choice between saving, investing [speculating?] in the market (equities or bonds), paying down the mortgage [cost avoidance], or spending, we consciously or unconsciously select between those alternatives based on what we think [feel?] will happen. The alarmist drum-beat of late appears to be a cynical attempt to defuse opposition to the $US 8,000,000,000.00+ deficit spending bill.

It’s hard to muster moxie with stocks shriveling, Chris Dodd talking nationalization, and Paul Volcker making Chicken Little sound cheery — “I don’t remember any time, maybe even in the Great Depression,” he said, “when things went down quite so fast, quite so uniformly around the world.”

Yes, the market has retreated. That's what a market correction does - the market was overpriced for a long time, propped up by massive government intervention and misregulation (e.g., unprecedented and artificially-low interest rates, loan guarantees, nationalized financial institutions, bail-outs). The market will stop dropping as soon as assets are perceived to be priced correctly - no sooner, and no later. Hand-wringing (by politicians or columnists) isn't helpful.

We dutifully cut back on Starbucks macchiatos, designer water and even Girl Scout cookies, but we keep hurtling down.

Strangely tone-deaf for Maureen Dowd. The complaint in the MSM (and amplified by the administration and the Congress) is that AMERICANS ARE HURTING! It isn't about fewer caffè lattes, or drinking [heaven forbid!] tap water, it's about all the people being thrown out of their homes by craven bankers. Isn't it?

Many Americans lost a paper fortune when the equity market's valuation fell. Some of that fortune will come back, and some won't.

Many Americans are now structurally or cyclically unemployed. Individuals in real estate, housing, and related industries will need to shift industries, at least temporarily.

Many Americans lost another paper fortune if they owned a home (particularly in the big housing bubble states: California, Florida, Nevada, Arizona, Colorado). People who thought that the tremendous run-up in housing prices was sustainable were foolishly delusional. Remember, we even had cable television programs dedicated to house flipping (note: this show is still running new episodes! What's with that?). What were people thinking? I can't know what they were thinking then, but now they're thinking about getting bailed out.

Two words come to mind: moral hazard.

While W. and Dick conjured an alternative reality about Iraq, our avaricious bankers created an alternative reality about our financial system. Now our busted trust is not so easily fixed.

Aha. The obligatory shot at President Bush and Vice President Cheney. BDS is tough to cure. Did "avaricious bankers" really create an alternative reality about our financial system? Did these "avaricious bankers" force us to think that a 100% increase in the value of a home over a period of just a few years was at all realistic or sustainable? I'm inclined to believe that it is the avaricious consumer who ran those home prices up, then vacuumed home equity out as quickly as possible, who is responsible for this mess as the interventionist and over-regulatory policies of our government.

In an Associated Press article headlined “Obama Plans Eclipsing New Deal Spending,” the Rutgers University political science professor Ross Baker notes, “Not surprisingly, people are wary of some very expensive proposals with no guarantee of success or even a high probability of how well they’ll work.”

Wariness = uncertainty, which leads to sitting on the economic sidelines. Note that savings rates have increased significantly -- that, and chipping away at the mountain of credit card debt racked up by profligate Americans, is a good thing. [Note: at the end of 2008, consumer credit outstanding was a whopping $US 2,596,000,000,000.00].

In The Times, Eric Dash reported that Wall Street is losing confidence in Washington’s vague and shifting plans, sending shares of bank companies plunging to new lows on Friday.

"Washington" = the administration + the Congress. "Washington" doesn't have plans; the administration and the Congress, on the other hand, have plans and interventionist policies. Shares of banks and bank holding companies are heading down to their real valuation. The sooner we get there, the better. Let's rip the metaphorical bandage off all at once, instead of prolonging the damage.

He spoke for those who want a pound of flesh. With the Wall Street bailout, Mr. Obama at least gave bankers a bit of the belt, and capped their pay. But homebuyers who wanted more than they could afford seem to be getting a free ride.

More moral hazard. Why on earth should we think that the federal government should be in the pay-setting business? This is poor political theater, and even worse public policy. The federal government has no business attempting to pick winners and losers in the marketplace. And while I'm at it, since professional sports teams are often subsidized by the public, shouldn't we cap those salaries?

Yet Obama is oozing empathy compared with his attorney general, who last week called us “a nation of cowards” about race.

I've ignored the AG Holder remarks -- he's stepping on the administration's news cycle (and message).

We need leaders to help us through our crises, not provide us with crude evaluations of our character. And we don’t need sermons from liberal virtuecrats, anymore than from conservative virtuecrats.

I agree.

In the middle of all the Heimlich maneuvers required now — for the economy, Iran, Pakistan, Afghanistan, health care, the environment and education — we don’t need a Jackson/Sharpton-style lecture on race. Barack Obama’s election was supposed to get us past that.

Whether or not we need a Jackson/Sharpton-style lecture, we're going to get it [routinely]. Witness the frivolous discussion over the NY Post cartoon this week (which also stepped all over the administration's message and killed another news cycle -- I wonder what would happen if President Obama told Reverend Sharpton to simply shut up).

1 comment:

Mo MoDo said...

Maureen Dowd does have harsh words for homeowners that overbought while the rest of us stayed within our means.