The Deregulation Disaster was worse than previously thought - Mark Zandi and Alan Blinder

[JohnWxy]

How the Great Recession Was Brought to an End(any emphasis (below) is my own__JW)

The U.S. government’s response to the financial crisis and ensuing Great Recession included some of the most aggressive fiscal and monetary policies in history. The response was multifaceted and bipartisan, involving the Federal Reserve, Congress, and two administrations. Yet almost every one of these policy initiatives remain controversial to this day, with critics calling them misguided, ineffective or both. The debate over these policies is crucial because, with the economy still weak, more government support may be needed, as seen recently in both the extension of unemployment benefits and the Fed’s consideration of further easing.

In this paper, we use the Moody’s Analytics model of the U.S. economy—adjusted to accommodate some recent financial-market policies—to simulate the macroeconomic effects of the government’s total policy response. We find that its effects on real GDP, jobs, and inflation are huge, and probably averted what could have been called Great Depression 2.0. For example, we estimate that, without the government’s response, GDP in 2010 would be about 11.5% lower, payroll employment would be less by some 8½ million jobs, and the nation would now be experiencing deflation.

When we divide these effects into two components—one attributable to the fiscal stimulus and the other attributable to financial-market policies such as the TARP, the bank stress tests and the Fed’s quantitative easing—we estimate that the latter was substantially more powerful than the former. Nonetheless, the effects of the fiscal stimulus alone appear very substantial, raising 2010 real GDP by about 3.4%, holding the unemployment rate about 1½ percentage points lower, and adding almost 2.7 million jobs to U.S. payrolls. These estimates of the fiscal impact are broadly consistent with those made by the CBO and the Obama administration.2 To our knowledge, however, our comprehensive estimates of the effects of the financial-market policies are the first of their kind.3 We welcome other efforts to estimate these effects.

Maybe the Deregulation Disaster was reined in and we avoided the Great Depression II, but we are still stuck in this REPUBLICAN DYSTOPIA.

...... A Sick Economy where High Unemployment causes spending to sink. Companies are afraid to hire new full time workers, preferring to use over-time and just adding part-time workers. So unemployment stays high, consumer spending remains low, and companies with lackluster sales see no reason to add workers or invest much in plant & equipment. Banksters, for their part, after gambling on Bundled Mortgages the value of which they didn't have a clue, now holding trillions in toxic assets, remain tight-fisted and are reluctant to make even short term loans to solid business accounts. NOw we are at risk of sliding into Deflation!

THE GREAT REPUBLICAN DYSTOPIA....the reward of letting the market police itself.

[jpak]

1. Republicans suck

the end

[JohnWxy]

2. you're a man of few (choice) words.

[deutsey]

3. Sounds like a winning campaign slogan to me. n/t

[Enthusiast]

7. I can't disagree. nt

[Hawkowl]

4. We've postponed a catastrophic collapse

But the collapse is continuing. Also, if Obama doesn't pull his head out of the rethuglican asses and completely disregard the "deficit concerns" and not only let the Bush tax cuts on the WEALTHY expire, but increase them substantially and use those funds to provide jobs and jobless benefits directly, we will have an ever increasing and slowly accelerating economic collapse that will be uniquely American.

Income and wealth redistribution. IT IS THE ONLY SOLUTION. Tax the money away from those who do harm and use it to employ people making and producing beneficial products and services to society.

[texastoast]

5. End the wars and save a trillion or so n/t

[Peregrine Took]

6. Amen! n/t