Amity Shlaes, writer for the Washington Post, fan of free markets, and critic of FDR, thinks Phil Gramm was right on the money when he said in his comments to an interviewer with the Washington Times:
"You've heard of mental depression; this is a mental recession," he said, noting that growth has held up at about 1 percent despite all the publicity over losing jobs to India, China, illegal immigration, housing and credit problems and record oil prices. "We may have a recession; we haven't had one yet. We have sort of become a nation of whiners," he said. "You just hear this constant whining, complaining about a loss of competitiveness, America in decline" despite a major export boom that is the primary reason that growth continues in the economy, he said.
Anyone surprised that this opinion was shared, at least initially, on Fox News?
Not me. Among other reasons, this right-wing support for Gramm's "Straight Talk," as they call it (I wonder if he's a "maverick," too), is based on the fact that economists define a recession as two consecutive quarters of negative growth, and apparently that hasn't happened, yet.
So, is the recession all in our pointy, whiny, liberal heads?
Well, no, not really, but that would be a stupid question to ask--after all, it was Gramm who used the word "recession" in the interview first. Some might say this has the appearance of a 'straw man' argument, meant to be knocked down. After all, whether the U.S. economy has suffered two consecutive quarters of negative growth really isn't what most Americans are worried about, is it? Especially when the numbers can be massaged as they have been. Weren't those stimulus checks we recently got specifically meant to provide short-term relief?
But unfortunately, we've got many more important concerns (e.g., mortgage crisis, job loss, trade debt, deficits) than whether our economy is currently at the end of two shrinking quarters. I've seen Gramm accused as just being oblivious to the problems we non-ultrarich are having and he quite probably is, but he chose his words with care. Summarized, he said, "Some economic yardsticks look good, or at least don't look too terrible." But if Gramm knows anything at all, he knows banking. That being so, I can't believe he's unaware of facts like these below--facts straight from the Federal Reserve and yesterday's headlines:
http://research.stlouisfed.org/...
So when did that off-a-cliff plunge in the non-borrowed reserves end? I'm afraid it hasn't--it's still going down. For a close up of the last five years:
What's going on here? The non-borrowed reserves are negative! Oh, wait, the banks do have reserves (good), but those reserves are all borrowed from elsewhere (kinda bad). So where did those borrowed reserves come from? Why, they came from the Fed, which is actually doing something useful in this regard, but look below at exactly how historically unprecedented this magnitude of lending is:
http://research.stlouisfed.org/...
What do you know, I guess those securitized mortgages actually had some risk to them after all. Who knew? No problem though, so long as the banks don't start failing, then we're--oh wait, they are failing. Crap.
Coincidentally, it was Tuesday that Fed Head Ben Bernanke recommended that Congress give a regulator the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Sounds like a plan, Ben.
Say, wasn't there some guy who was largely responsible for deregulating "capital, liquidity holdings and risk management practices" in the first place? Golly, seems to me it was you, wasn't it, Mr. Gramm? In fact, as I recall you were not only responsible for the Gramm-Leach-Bliley Act (1999) that gutted Glass-Steagall, but also responsible for the so-called "Enron Loophole" in the Commodity Futures Modernization Act (2000) that gave us the gaming of California's electricity market and helped us toward $4/gallon gas. From all of us whiners, thank you so much for your leadership in that. It'll toughen us up nicely.
You were possibly right about one other thing, Mr. Gramm, if by a loss of competitiveness you meant we're not as competitive as you. It would never have occurred to most of us to do to the country what you did and certainly we're not so competitive that we would hesitate to give credit where it is properly due. This recession you've said we may have some day soon, it's not in our heads--we, poor whiny schlubs that we are, weren't capable of thinking it up. But you did and, believe me, we won't forget it.