US bailouts prevented 1930s-style Great Depression say economists

[CHIMO]

To Washington conservatives they were egregious examples of "big government" overreach, but the White House's economic stimulus and bailout policies have saved 8.5m jobs and averted a further slump of 6.5% in US economic output, according to a study by two influential economists.

An in-depth modelling exercise by Moody's chief economist, Mark Zandi, and a Princeton University expert, Alan Blinder, paints a bleak scenario of a 1930s-style Great Depression if the US government had enacted none of its $1.7tn (£1.3tn) programmes to avert a financial meltdown.

Using historical statistical relationships and a focus on the government's impact on narrowing credit spreads, the pair found that the downturn would have continued into 2011, with unemployment peaking at 16.5% rather than last year's actual high of 10.1%.

They believe US gross domestic product would have slumped by 7.4% in 2009 and by 3.7% in 2010, producing a "peak to trough" decline of 12%, rather than the anticipated 4%. Starved of demand, shops and employers would be cutting prices and wages.

http://www.guardian.co.uk/business/2010/jul/28/us-bailouts-prevented-1930s-style-great-depression

[notesdev]

1. Amazing

The bailout pumpers have been out in force recently, almost as if coordinated. The smell of desperation fills the air...

[doc03]

3. You don't believe TARP and the Stimulus saved us from

having a far worse recession?

[notesdev]

5. Not at all

It briefly kicked the can down the road while making the root problem - too much debt - that much worse.

Temporarily saved the stock market, but most of that is owned by the top 1% to begin with. For average people all this stimulus means is more debt.

For a trillion dollars we should have done something productive.

[doc03]

6. I don't think so and I think most economists would agree

with me. You don't think the Stimulus saved jobs and put people to work either? So you pretty much agree with the Tea Party I guess.

[notesdev]

8. "most economists" totally missed the downturn to begin with

So I don't put much stock in consensus nonsense... especially when there are such large financial interests involved.

Following the crowd in this economy leads you right off a cliff. Just ask all the people who believed that housing could never go down.

[TheWatcher]

13. It's interesting to watch people come unhinged when all you are guilty of is shedding light on

Reality.

I'm finding that a lot of people that still buy into the Propaganda buy into it because they do not have the ability to handle any other "reality" than the one they desperately want to believe in.

It doesn't really matter how much evidence is conjured that completely contradicts what the "consensus" spews through endless Propaganda sound bytes. The country as a whole has become so weak, soft, and cowed that they cannot deal with anything other than "happy think". They will willingly buy into ANYTHING that feeds into this paradigm, and viscously and hostilly attack anything that seeks to separate them from or intrude upon it.

It doesn't change the underlying reality that exists of course, but that doesn't matter.

They will willingly defend and even FIGHT for the very Criminals and Policies that are destroying them, rather than face or acknowledge they even exist.

These days, if you disagree with ANYTHING that is "happy think" you are immediately branded a terrorist, a disruptor, a Republican, A Tea-Partier, or any other convenient intellectually dishonest label that can be conjured.

It's best to just ignore it and move on.

You can't reach people that would rather die for a lie than even tacitly acknowledge ANY Truth that is inconvenient for them.

[inna]

14. What's amazing is that most people actually believe propaganda.

I just don't understand how the majority of the population can be completely bamboozled and taken advantage of and be so oblivious.

It's pretty darn clear what's going on (I'm re-reading Chomsky right now, he's been describing all this for decades... And btw, I CANNOT wait to read his new book! Even Chomsky must be a little shocked by now.)

....

[ixion]

12. No, it made a bad situation worse

Just like if you're broke and you pay your bills with a credit card. You stave off the issue short term and make it worse long term.

It's not micro-economics, it's a macro issue.

[Kolesar]

2. This is good news...eom

[jody]

4. Makes sense, instead we'll have a 2010s-style Great Depression. What has changed is an economy that

was moving rapidly from agriculture and rural lifestyle to an urban industrial based lifestyle.

Today we have an economy that is rapidly moving from a self-sufficient nation that used other nation's resources to one that must compete for labor and resources in a global market in which the US has very few competitive advantages.

[customerserviceguy]

7. I agree, conditionally

Clearly, with Rethuglican leadership supplied by Bushco, we had no way of quickly separating the deserving from the 'not worthy' when the bailouts were done. But after the fact, we can still identify and punish the guilty, but I don't see an ounce of energy being expended in that direction by our President or his advisors.

Are we better off to have had a general bailout that unfairly rewarded the jerks as well as well as the victims? Historians will make that decision, since the Justice Department is leaving hands off of it.

[Taitertots]

9. The lack of an agricultural break down is a much larger factor

The bailout was meaningless compared to the lack of dust bowl level agricultural destruction.

[Crazy Dave]

10. I thinks extended unemployment benefits and social security did more

Giving banks and their CEOs didn't do shit. It's Americans spending the money they have that does. If a trillion dollars would have been invested in Americans in the form of extended and continued benefits and help with their utilities we'd see a different outcome than we are now.

[inna]

11. Thank you Dean Baker (an honest economist) for addressing that crap:

http://www.huffingtonpost.com/dean-baker/economists-tell-the-masse_b_667691.html

It is amazing that angry mobs have not risen up and chased all the economists out of the country. While the greed of the Wall Street gang provided the fuel for the bubble, the economists played an essential role as enablers. This was most directly true for economists in policymaking positions, like Alan Greenspan at the Fed.

It was Greenspan's job to stop the housing bubble. A competent and honest Fed chair would have recognized the bubble by 2002 and taken whatever steps were necessary to rein it in. And we should be 100 percent clear, in spite of all the song and dance about how the financial reform bill will prevent another bailout, the Fed absolutely had all the tools needed to stop this disaster. They just lacked either the competence or the integrity, or both.

But the economists in policymaking positions are just the beginning. There are thousands of macroeconomists across the country, in government, academia and private industry who track the economy as a full-time job. It is actually a well-paid job, with many drawing six-figure salaries and big name types getting close to $1 million a year. Given the high pay for this profession, it was reasonable to expect that they would be able to see something like the $8 trillion housing bubble that eventually wrecked the economy when it collapsed. But you can count on your fingers the number of economists who raised warnings about the housing bubble. The rest either did not see it, or didn't think it worth mentioning.

Remarkably, no economists seem to have lost their jobs for this failing. Unlike dishwashers and custodians, economists are not held accountable for the quality of their work. ... Now, the economists are back telling us that we should be thankful that Congress and the Fed enacted the TARP and the other programs that saved Goldman Sachs, Citigroup, and the rest from bankruptcy.

~snip~

Blinder and Zandi have constructed an absurdly unrealistic counterfactual and told us that the TARP was much better than this absurd scenario. This is like saying that people who don't eat chicken will starve to death. Under the counterfactual that people who don't chicken don't eat anything else either, they certainly will starve to death.

But that is not a serious analysis of the benefits of eating chicken, and Blinder and Zandi have not given us a serious analysis of the benefits of the TARP. This "it could have been worse" line should be flushed down the toilet. The reality is that greed and incompetence created an entirely unnecessary disaster. Tens of millions of people are still suffering from its consequences. And the Wall Street boys and the economists who are responsible for the disaster are all doing just fine.

People should be really angry about this and a silly study that might be used to tell them otherwise should just make them angrier.

[inna]

15. "People should be really angry about this and a silly study that might be used to tell them otherwis

"People should be really angry about this and a silly study that might be used to tell them otherwise should just make them angrier."

well, that corrupt ridiculous little study had exactly that effect on me, but... i must be in minority. :shrug:

[Name removed]

16. Deleted message

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[sendero]

17. Guess what..

.. morons, this shit is NOT over yet, not by a long shot.

If I were you I'd keep my mouth shit lest the REST OF THE WORLD find out I'm an idiot.

The bailouts did two things.

They shifted vast amounts of wealth from the working class to the bankster class. And they delayed the inevitable for a few years.

[CanonRay]

18. Not prevent, only delay

It's still coming, IMHO