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The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending.
larry summers, director,white house economic council
and there you have it, folks--laid out in a reuters opinion piece this week for all the world to see by the economist and former treasury secretary whose opinions have held more sway over two of the last three administrations than any other single individual--the neo-keynesian strategy reduced to its essence.
i want you to go back and re-read the above quote--maybe a couple times--and sit with it a minute, see how it plays in your mind. and then i want you to indulge in a little wordplay with me--imagine just for shits and giggles we take that quote and strip it of its specificity, like this:
The central irony of [a] is that while it is caused by too much [b], it can only be resolved with more [b].
and then substitute for the phrases "financial crisis" "and "too much confidence, too much borrowing and lending and too much spending" the cause-and-effect pairing of your choice. i'll give you a couple to get you started:
the central irony of lung cancer is that while it is caused by too much smoking, it can only be resolved with more smoking.
or how about
the central irony of flash-flooding is that while it is caused by heavy rains, it can only be resolved with more heavy rains.
see where i'm going with this? with the possible exception of a hangover, i defy you to come with any [a] caused by [b] which can be resolved by shoving more [b] at it.
yet these-these economists would have you believe that their dismal science is the exception to the rule, and that fixing the mess for which they themselves are in no small part responsible requires that humanity suspend its critical faculties and blindly believe the above bullshit.
and as much i'd love to deride and dismiss larry summers as nothing more than a common dumbass for not only the above statement but many others as well, i'm afraid i can't--because, far from being stupid, this guy has long enjoyed the well-earned distinction of being the smartest guy in most any room he chooses to enter. in fact, all these guys who espouse this bullshit are smart--krugman, rubin, bernanke, all of 'em.
so how could this legion of geniuses possibly justify something so counter-intuitive as the above, you ask? simple: they learned it in the best schools in the country at the knees of the generation of economists that preceded them. and where did those guys get it? that's simple, too--all this "spend our way to prosperity" nonsense derives from one great, shining, deliberate lie.
3 comments:
Oy vey.
The problem with Larry Summers quotation and your very good send-up of the quotation is that it misses an intermediate step.
1. Too much confidence, too much borrowing and lending and too much spending created a bubble;
2. Financial crisis ensues and then credit dries up -- not just for bad mortgage risks but for everyone. Even big companies cannot get routine credit to keep their day to day business operations running smoothly. It is a complete meltdown of the financial system and a complete lack of confidence in it any more.
In short, a panic situation was created where people were motivated by emotional fear;
3. To solve the current financial crisis (really the reaction to the too much borrowing, too much spending, and too much confidence), we need more borrowing, spending, and confidence.
The correction was a massive over-correction. That is the problem.
So, as best I can explain it, that is what Summer meant. It is what Krugman and all the other public economists mean when they excoriate the conservatives and free market types.
I was watching CNN and Steve Forbes actually blamed the financial crisis on the Fed. The Fed?
The financial crisis was caused by the excesses of the free enterprise system. It seems to me that capitalism unfettered with little or no regulation is what lead to liar loans and massive fraud.
So the solution is not more free enterprise -- as Forbes would have you believe -- it is really better regulation of the economy and markets.
Hmm, how about "the central irony of having a closet too small to hold are your clothes is that while it is caused by spending too much money, the only way to solve the problem is by spending more money."
Too girly?
(I can tell you I would not use Larry Sommers as a cat box cleaner.)
noblesavage: intermediate step, my ass. add all the intermediate steps you want, rob--they still won't make the core idea less stupid.
babe: very good, and thanks for playing--and did you like how i tinted larry slightly green?
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