Larry Summers on Friday 7/17:
To a questioner who spoke of global fears among investors in China and elsewhere about the ballooning United States debt, Mr. Summers countered that the “greatest risk” to long-term growth “would be sustained contraction” in this country. “Rescuing the economy has to be the first priority,” he added.
I keep wondering just what the "economy" that's getting rescued is.
Goldman Sachs, I guess.
Anointed US Money Wizard and Former World Financial Emperor Larry Summers defended the progress of the stimulus package in a speech yesterday, where he made the statement I've quoted above.
I'm no economist, and I'm probably just not smart enough to understand this stuff, but something really troubles me about the focus on financial institutions as though that's what the economy is or is measured by. I tried to figure out what portion of the GDP was represented by financial institutions and couldn't seem to find an answer, at least not one I could understand. On the other hand, I found that
Real gross national product -- the goods and services produced by the labor and property supplied by U.S. residents -- decreased 5.6 percent in the first quarter, the same as in the fourth.
-- US Dept of Commerce
Let me say that it does seem to me that the stimulus or bailout or something has lopped off the bottom of what could have been a complete nightmare, and turned it into just a recurring bad dream. So I guess that's good.
But it seems to me our economy should be measured by production of useful goods and services. Like stuff you can eat, stuff you can ride around in, stuff you can wear, and doctors, teachers, bus drivers, and tattoo artists. And plumbers; especially plumbers. Useful.
What doesn't seem of much real use to me are derivatives, credit default swaps, and short sales on commodity futures. This is the grist of some world I don't think I really live in. Somehow I suspect all the money that get's made that way has some immoral if not illegal underpinnings and ends up in the Cayman islands anyway. The fact that Goldman Sachs can make its employees filthy rich again isn't necessarily a positive sign for the economy I live in. I'm more interested in whether Home Depot is hiring, and whether restaurants are staying open.
There's a good measure: the economy will be picking up when there are more new restaurants opening than old ones closing down.