Economists Say Intervention Prevented a Depression

[babylonsister]

http://politicalwire.com/archives/2010/07/28/economists_say_intervention_prevented_a_depression.html


July 28, 2010

Economists Say Intervention Prevented a Depression


Two leading economists "wielding complex quantitative models" say they have proven that the federal government's "sweeping interventions to prop up the economy since 2008 helped avert a second Depression," the New York Times reports.

In a new paper, they "argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration's fiscal stimulus program, the nation's gross domestic product would be about 6.5 percent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation."

[ixion]

1. 'Staved off' or 'postponed' or 'delayed' would be more appropriate than 'prevented'

because the source of the meltdown remains very much in play.

We've not seen anything yet, in my opinion.

[AlabamaLibrul]

2. Oh boy. I'm so glad that we didn't enter a depression.

Sure had me fooled, what with tens of millions unemployed, wages being slashed, and hours being cut. The only reason this thing isn't being classified as a depression is because it's only affecting the little people, not the CEOs and owners of the world this time around.

Oh, never mind...

[babylonsister]

5. What's your definition of a depression, and are you an economist?

Just possibly it could have been much, much worse, and this is coming from someone who is still unemployed.

[jtuck004]

18. One doesn't have to be an economist to have worked all their

lives for hard-earned money only to see it paid to a bunch of Wall Street con-men (and women), all the while waiting for the trillions of dollars transferred to the Federal Reserve's hidden-from-view balance sheets, assets which were already devalued and for which they paid 100 cents on the dollar of American taxpayer money, assets which will not be settled for years, and all at a still to be determined cost to.......wait for it.........the American taxpayer.

If anyone remembers, it was that "your not a "whatever"" "you can't understand our models" "you have to pay us to stay here even though we have evaporated 20% of the American economy, 15 million jobs, and a still to be determined number of mortgages, all in the name of bets on which way the wind blows in the market". On paper that had NO underlying assets - they were just betting slips.

People need to quit making excuses for these crooks and put some people in jail.

And although one doesn't have to be an economist to know when they are having smoke blown up their ass, there are any number of
economists, former managing directors of Bear Stearns and Goldman Sachs, and professors of economics that back up all of these
views.

I know people want to support their candidate (every other choice is worse, I firmly believe that) but if you can't be honest with your friends there will be more than just 1 in 5 families who can't buy food this year. And I would sacrifice anyone to quelch that.

[jpak]

21. So, are you blaming Obama for TARP and the Great GOP Recession that he prevented

from becoming the Great Depresion?

If you are

you are wrong

[jtuck004]

29. Do you want yor question answered? Or do you just want to make

blanket unsubstantiated statements?

Waste of my time...bye

[AlabamaLibrul]

20. Am I an economist? Not by trade or diploma.

I have enjoyed a fair bit of reading on financial markets and the economy through the years.

My definition of a depression would be high unemployment and deflation, the textbook definition. The only reason we aren't in a "depression" according to economists, and by the definition of inflation vs. deflation, is the intervention that is cited in the article. In other words, spending of tax dollars. It's certainly not natural growth.

My interpretation of this current economic hellhole as a depression is one of meaning to the average person (including this unemployed person), not one borne out by the semantics of professional fortune-tellers based on two numbers, one of which is easily manipulated as simply as a check is written or a printer quietly whirrs along.

[nadinbrzezinski]

35. Actually depression is very technical

and involves GNP growth, or rather contraction over a few quarters going over a certain percentage.

We fit the defintion, currently, of a deep recession, but we never entered a depression.

Also by the VERY TECHNICAL definitions of all those terms we are already on the way out of that recession, we could still go back into it... and as they say... Keynseian economics worked once again.

I personally am happy as pie that we never actually experienced a depression. A deep recession is enough.

Yes, words have specific meanings, and I like precision in the language. But if you think an official unemployment rate of close to 17% (meaning it would be close to the 30%) is the same as the current 9.5% (See second number probably close to 15%), if you think these are equivalent... please say such.

This is not a definition on who is affected.

By the way, here is a free clue from history. Lean times are bad for workers. Times of plenty are good for workers. Been like this oh for ever. And lean times always place a downward pressure on jobs...

[dixiegrrrrl]

37. Hey, cuz. Welcome to DU.

:hi:

[jtuck004]

3. I rec, but it stays 0. Why would one use their time like that? Anyway...

In this research I am just amazed...

that Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, did a study and found
that the "bailout" plans orchestrated by Ben Bernanke, a current Fed. Reserve Chairman and former Princeton
professor averted another "Great Depression", JUST LIKE BEN BERNANKE SAID IT WOULD. He did this by creating
an economic model with assumptions he designed and, by golly, it worked out just like it was designed to work
out. Who could have predicted this?

And they are supported by no less than Mark Zandi, chief economist at Moody’s Analytics, from a company
that for the past decade has presided over a ratings-for-remuneration racket for hedge funds whose actions
have done more to undermine the economic structure of this country, vaporize the jobs of 15 million or more
people, and leave millions of people without a home. A company so bad that specific sections of the recently
passed financial regulations legislation were written to target their bad actions.

I would never have predicted such a result from their work. You?

[jpak]

7. Good news that Obama's economic policies worked is not welcomed by "some"

situation normal

[jtuck004]

12. Wasn't Obama. It was Bernanke, Geithner, and Government Sachs

Unless of course you want to lay the responsiblity for the continued unemployement of 15,000,000 Americans and the under-employment of 15,000,000 more at Obama's feet, and I am not willing to do that.

Because this "plan", now $15 trillion, has primarily been used to re-inflate banks and the shadow-banking "off the books" hedge funds and others. Their business is up 600% in 2010.

He is listening to the wrong people.

[jpak]

16. Senator Obama vote for TARP - which saved the US financial system from collapse & is being paid back

with up to 10% interst.

PRESIDENT Obama's Stimulus Package passed by the Democratic majority House and Senate save millions of jobs.

sorry to burst yer bubble - but them's the facts

yup

http://2.bp.blogspot.com/_mupm2BmIjtc/S7ZwZRn4mFI/AAAAAAAALQY/9adN70fVUAU/s1600/chart+jobs.jpg

[jtuck004]

27. I'm sure that will come at great comfort to the 1.5 million people who will

lose their home this year. Or the 2 million that have received notices and can expect to lose theirs next year. Or the 15 million people who don't have jobs. Or the other 15 million who can't make enough to pay the taxes to support the teacher's jobs, the firemen, the police officers, the state employees and other unions who are being let go because of municipal bankruptcies and inadequate state budgets.

I am darn sure it is very comforting to the kid who cries because they ate on Friday at the school lunch program and know that their next meal will be on Monday in the same program, because their mom can't earn enough for food.

Nobody doubts whether the stims helped - whether they averted a depression remains to be seen. They may have just delayed it.

I noticed the chart is conveniently cut off in March of 2010, after the government hired a bunch of temporary census workers. The rest of us have to live in today, however, and here is some data from today - 125,000 nonfarm jobs lost in June 2010. I realize it would have been hard to make that next statement, but manipulating the data as the above chart tries to do proves my point. Nothing changes...

And even my number doesn't tell the story - what will happen by Christmas? What will the trend show. I don't care what anyone thinks - what I care about is the data, and we won't know that for 6 more months.

Want more numbers from today? Here is what TRAPTARP morphed into? $9.1 trillion set aside to make these crooks rich. And sitting on the books at the Federal Reserve are TRILLIONS of dollars in worthless complex commercial mortgage transactions. It will take years for those to be sorted out, all paid for by taxpayers. Money that could have been used to rebuild manufacturing and jobs. I don't think he came up with the ideas, but since your post seemed to think it was important, every one of these programs since TARP has been under Obama's presidency, his direction, not just a vote as one of a bunch of senators. All put together by the Republican Federal Reserve chairman that Obama appointed.

We will see what happens come the elections. I am not so sure that I want voters to remember who did this. Sitting on the curb outside of their repossessed home while the hedge fund gal drives by in her limousine.

One should be careful what they wish for...and my bubble is fine.

[jpak]

31. Who do you blame for this? Obama?

really?

http://2.bp.blogspot.com/_mupm2BmIjtc/S7ZwZRn4mFI/AAAAAAAALQY/9adN70fVUAU/s1600/chart+jobs.jpg

[jtuck004]

32. Gosh, do you even bother to read anything?

Blaming is a game for children. Not interested in that frame. So figure it out from the post.

We need to figure out a plan to get 30 million people employed or re-employed, would start at about a $trillion

We need to get our manufacturing rebuilt for the 21st century. Would likely cost $ 5 to 10 trillion

We need to match China's effot in starting the largest public works program in history. They began in 2009 building aqueducts to bring water to their cities for $62 billion. We need a WPA or CCC program to revive our infrastructure.

We need to start an alternative energy program so that China, who has already built and has in operation polysilicone plants, doesn't just steamroll us into the ground as they become the world leader in these technologies, which include solar power and the future of computer chips.

We need to increase demand so business can put their excess capacity to work and hire people. $priceless

Why focus on China? They went from $500 billion in 1980(ish) to nearly $5 trillion today. In about 30 years. 30 years from now, if we continue to focus on this small stuff they are entirely likely to eclipse us. Something tells me nobody really wants that.

The rest of that nonsense about who did what and who's to blame is all nothing except FAUX News garbage.

[jpak]

34. U sed this "every one of these programs since TARP has been under Obama's presidency"

yup

[AlabamaLibrul]

33. It's intellectually dishonest to say anyone with a grim view on the economy blames Obama. (eom)

[Leopolds Ghost]

38. No one could have predicted such a prediction from these esteemed private officials!

[jpak]

4. Let the whining begin!

:evilgrin:

[jpak]

6. more from the report....

http://thehill.com/blogs/on-the-money/801-economy/111357-study-government-response-to-crisis-staved-off-new-great-depression

<snip>

But it also concluded the stimulus raised GDP in 2010 by about 2 percent and held the unemployment rate 1.5 percentage points lower than it otherwise would have been, adding 2.7 million jobs to U.S. payrolls.

Without any of the policies, the authors concluded real GDP would have fallen by 7.4 percent in 2009 and a further 3.7 percent in 2010. Instead, GDP fell by 2.4 percent in 2009, and is expected to expand by 2.9 percent in 2010.

Without the financial policy responses but with the stimulus, the two authors argue the recession would only be winding down now. Real GDP would have declined by 5 percent in 2009 under that scenario, they argue.

The effect on employment without the policies would have been disastrous, according to the report, with unemployment peaking at 16.5 percent and a federal deficit surging above $2 trillion in 2010 and $2.6 trillion in 2011. The authors said that with corresponding deflation in prices and wages, those conditions would have resembled the Great Depression of the 1930s.

<more>

this is what a lot of teabaggers hate to see...

http://2.bp.blogspot.com/_mupm2BmIjtc/S7ZwZRn4mFI/AAAAAAAALQY/9adN70fVUAU/s1600/chart+jobs.jpg

[Pirate Smile]

10. It says a lot about DU right now that it is a struggle to get news like this onto the Greatest Page.

[jpak]

13. Yup

:shakinghead:

[ixion]

19. Indeed. It says many here on DU don't buy into patently obvious propaganda

and I find that refreshing from the throngs who do.

[TomCADem]

23. Odd That Fox News Talking Points Attacking Obama Is Not Seen As Propaganda, But Pro-Democratic...

...Stories are derided as propaganda. Glenn Beck spouts off about how the Stimulus will cause hyperinflation, but if you post a story here saying that the real threat is actually deflation and supporting President Obama's calls for unemployment benefits, it is called propaganda.

Ironic how Fox News suddenly becomes the voice of liberal truth.

[kenfrequed]

30. nonsense

And I call 'false analogy' on that one, or hells... maybe even false claim.

Here at DU, most of us liberal progressive sorts aren't talking about 'inflation' or 'deficiits.' That is a complete mischaracterization. We were infavor of a bailout, we just wanted the bailout to be for people losing their homes and not for the damned banks.

Fox news and the right wing establishment never advocated in favor of helping out the people, liberals did. Fox was muted about its whining agsint bailing out the banks and if their commentors were pressed on it they slithered away. They got in a tizzy whenever financial assistance was offered to actual product producing companies (like cars) where stipulations were attached to force them to produce certain products.

[jpak]

8. kick

n/t

[Romulox]

9. So that means that there were TWO Depressions coming?

Because one of them seemed to have gotten through anyhow. :hi:

[jpak]

11. the economic data is not your friend

nope

[Romulox]

14. Indeed it is not, because it shows there is misery for working Americans.

Only a ghoul more interested in a so-called "chess match" than in human suffering could consider these economic data "their friend".

Yep! :hi:

[jpak]

17. Bush created this human suffering and the GOP is deepening the pain - not Obama

and not the Dems

good luck with the fairy tales!

:hi:

[Subdivisions]

15. The fact that the underlying issues that caused the depression have

yet to be resolved is not your friend.

What will happen when the momentum of all that stimulus stalls? Right back down we will go, that's what.

[canoeist52]

22. Who were these two economists?

For what it's worth...


"The paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody’s Analytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years."

[LeftHandPath]

24. Ding ding ding...

These 2 'economists' are employed by the empire.

Most economists in the US are employed, or are trying to be employed, by the criminals at the Federal Reserve.

Believe what they say at your own peril.

We are in a depression now, and its getting worse. I know it, you know it, and every 'economist' knows it. But the game requires them to build false confidence, so that us sheep keep buying crap we dont need, with funds we dont have.

[babylonsister]

39. Which economists do you believe, only the ones that

claim we're already in a depression and going down?

Sorry, I'd rather have some faith than see doom and gloom in everything. And I didn't know Princeton was not part of 'the empire'. :crazy:



http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=433x391409
Study: Government response to crisis staved off new Great Depression

[TomCADem]

25. Alan Binder, Paul Krugman, Mark Zandi....

When you ignore the partisans, economists across the political spectrum agree that President Obama's policies helped stave off a depression. Still, most folks have an agenda, and will attack the truth with right wing talking points.

Even critics on the left, speak in terms of wanting MORE of President Obama's proposals like stimulus, financial regulation, and unemployment benefits, rather than less. I don't see critics on the left pushing for deregulation.

[jpak]

26. liberal Democrats

for what it's worth

yup!

[gauguin57]

28. Don't know about that. I'm pretty depressed about the whole thing.

So, it didn't prevent a depression.

[Scurrilous]

36. K & R

:thumbsup: