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Weekly Wrap: The slowdown of the global economy
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Fortune Magazine's Leigh Gallagher and the New York Times' Catherine Rampell wrap up this week's biggest business stories.
On what can be done for the U.S. and global economy:
Catherine Rampell: My main solution would be fairy dust. But you know, it's a very sticky situation. Pretty much everywhere at this point. I mentioned Europe and the United States, but there are also concerns about China and other places in the developing world. In the United States, the main objectives that I hear a lot of economists talking about are things that include more government intervention in the economy, whether that means subsidized employment -- which would never happen. Or tax breaks or whatever, but like you said: politics.
Kai Ryssdal: It's got to be the Fed, right, Leigh?
Leigh Gallagher: I mean at this point, yes. Although the Fed has said 'No, we're not going to do anything right now, which of course angers those on the right and on the left. And I think it's actually reassuring that he said that this week. Our economy is anemic but there is a recovery happening. Even things in housing are looking a little bit better; autos -- there are some signs. But the problem is this global slowdown. At first it was just Europe but now we're seeing signs that China, India and Brazil are slowing? That's like -- what?
For more analysis, listen to the full audio.
Your analysts and moderators infuriate me. They are always trying to squeeze out some stupid joke from the conversation. Catherine's "fairy dust" comment particularly angered me. This is true about almost any segment no matter how serious the subject. The policians in other countries do not have the answer for us nor do we for them. I usually just shrug this off. Today I reached the saturation point.
The answer to many of our woes would be very simple. Ask the people who daily are greatly affected by these decisions or lack of decisions. I am affected daily at the pump. But big oil still gets subsidized and makes gigantic profits. I am affected daily at the bank when there is a $0.50 overdraft and I get charged $35.00 to cover it. Homeowners are affected daily by cold hearted mortgage companies who only offer problems not solutions. The large institutions are only interested in punative responses to a person in finacial trouble. That makes a lot of sense. When the hole they are already in is deep, dig it deeper. Punish them more for losing their job, not being able to find another or getting sick with a life threatening illness. Punish, punish punish. Laugh, laugh, laugh. That's the answer. What a bunch of idiots in ivory towers laughing at the peons.
My complaint is these (explative omitted) people always point out some "higher authority" as a reliable source for the upturn or downturn in the economy be it domestic or global. NO ONE EVER ASKS THE AVERAGE CONSUMER OR AMERICANS WHO ARE THE RECIPIENTS OF THESE UNILATERAL DECISIONS MADE BY "DO NOTHING" UNCARING, UNSYMPATETIC POLITICIANS. THEY EXPECT THE AMERICAN PEOPLE TO ENDURE THEIR PERPETUAL MISSTEPS UNTIL THE NEXT ELECTION CYCLE DURING WHICH NOTHING WILL CONTINUE TO GET DONE.
I was pretty put off as well. Seems like the commentators are more casual observers parroting the sounds they heard someplace else rather than expressing and supporting a particular opinion.
Regarding the source of solutions to these problems, I don't think you can ask an ant i nthe Amazon river basin what the answer is to global warming. The ant just does his thing collecting dung as part of this large system, but doesn't understand how the whole ecosystem operates.
These other concerns about the price of gas, or bank fees, or what happens when you stop meeting the terms of a mortage contract you pretty much have to operate as a wise consumer. Don't use banks that have high fees, or don't use them at all if they aren't paying any interest but just impose fees. Buy a car that burns less gas, or live near work and ride a bike. The more money they print, the more expensive everything will get.
I think you're looking in the wrong place for compasion if you're execting it from a random public or private organization. It's never been the proper role of government to fix your problems, it was always just in place to let you solve your own problems with your own resources. To prevent others from taking your property without your concent. Unfortunately populist politicans win votes by making promises to take from one group of people and give to another. They don't have anything to give that they haven't first taken from someone else.
Most of the time I see a story that claims that QE has been ineffective and that the FED is "out of ammunition", the claim is accompanied with absolutely no evidence. Not that it's ever easy to prove what policies over a given couple of years caused what changes in the economy. But, if QE2 was not responsible for the growth spurt that lasted up until the last month or two, what was? There has been less fiscal stimulus than there was a couple of years back and if it were really that effective, wouldn't our growth and inflation rates already reflect the gaping budget deficits we've been running since 2003? The other stimulative FED policy, low short-term interest rates, could, of course, finally have had some effect. Either way, the notion that the FED (or the ECB, for that matter) is "out of tools" and can do no more is ludicrous. Unlike any other government agency, it has a printing press and can purchase any assets it likes. The fact that it has stashed most of its newly printed currency in a banking system that is reluctant to do anything with it doesn't change that. The FED could, if it chose, buy up $10 trillion worth of gold tomorrow and cause 1970s style inflation overnight! Or, it could do nothing, or anything in between. One might debate the wisdom such stimulus (the case for more inflation is obviously stronger in the EU, which is already halfway off the cliff at this point), but the claim that the FED "can do no more" is a gross misunderstanding of the awesome power that a central bank has for both good and evil.
The point was made that the Fed is out of ammunition in the context of the question: What can the Fed do to HELP the economy. There are lots of things that they can do to damage the long term outlook for the economy, and creating inflation is one of the biggest, but their isn't much they can do to help, aside from standing down.
We have so many people invested in this most recent house of cards, they'll do anything to keep it erected. The proper answer was to never created it in the first place. And now that it's been assembled, we shouldn't destroy what left of the real economy to keep the scheme going.
It's like a parent trying to "grow" their 18 year old children that haven't achieved a height they've arbitrarily decided they should have to be successful. They could hang them by their feet at night, but that would cause hemoraging. Or they could feed them artificial human growth hormone, but then they'd get cancer in their 20's. They could put them in a device that pulls on their arms and legs, but then they'd end up with hip displasia. Or they could just accept that they stop growing in height after they're done with their teen years and stop torturing them even when people are screaming "Do something!"
