OK, we’ve had a couple of years of the remedy that the Merchants of Pain prescribed for Europe, and we’re just getting underway with our own masochistic shackling. Let’s check in and see how well the torture is working.
First, what was all this agony supposed to accomplish? Well, the EU suffered the same symptoms that we did, brought on mostly by the unindicted financial potentates of Wall Street. That is, near collapse of the entire world economy, resulting in the death of many banks, collapse of the housing market, and soaring unemployment. Anything else? Guess that covers it, more or less.
Europe was wiser than we were. They almost immediately instituted an agenda they were sure would avoid killer inflation and thereby restore the economy. It’s sometimes referred to as the pain cure.
Wow. I guess that worked. Inflation in Europe is now under 1%, about the same as interest rates. Of course, it was never high enough to be a serious threat to begin with, briefly rising to 4% in 2008, so we have to wonder why they did what they did. OK, that’s Europe. How about inflation here at home. Well, so far this year it has varied from 1.63% to 2.68% in March. Skyrocketing, eh? Do we all remember the days of 12% inflation? It would seem that inflation never was a significant threat if you didn’t know better.
Of course, last year Wall Street decreed that everything was all right, and once again awarded themselves multi-million-dollar bonuses for their wise and wonderful work. So the housing market must be OK again, right?
Well, no. Optimists in Europe are saying that housing is recovering, but it will be a long and slow process. In Germany and some other countries, many people are bypassing high mortgage payments by renting. But Europe didn’t seem as bad as the US to begin with. How are we doing?
California is still a disaster area. Home values are so low that many people are “under water”, that is, they could not sell their house for what they owe on it. Of course, that doesn’t matter unless you want to sell it. Or you have to. Or you want to buy one. Mortgage lenders are not in the mood to loan, and will refuse to loan if they think the buyers’ offer is above the value of the house, even though the value of the house may have dropped by a hundred K in the past six months. The rest of the country isn’t in much better shape, and there are large swaths of some cities that are vacant. Seen the pictures of Detroit, Bulldozer City?
But surely the mortgage rates are sky high. Well, not exactly. At the moment they are a bit above 4%, which is very low. Pretty much record low. Of course, the rate doesn’t matter if banks won’t loan money.
Not so good so far, either in Europe or at home. How about unemployment? Surely the European austerity steps have had time to make a difference. Well, no. European unemployment remains stuck at record rates. It dropped to just under 10% Europe-wide this month, but rates vary from lows around 5% in countries with a strong social safety net to Spain’s resistant 18%, with youth rate at 40%.
And at home? Well, we’re about the same as before, and about the same as Europe, just under 10%, and projected to remain the same for the rest of the year. Wages are not even keeping up with inflation. Worse, many of the new jobs being created are for low wage with no bennies.
How can we summarize all this?
In my abundant wisdom, and with the extensive assistance of my secretary Ms Google, my conclusion is that all of the pain that European Wise Persons have inflicted in order to put the economy firmly on the path to recovery have, after two years or so, failed.
But surely the steps we are taking here at home will do the job, won’t they?
Probably not, Bruce. They are pretty much the same steps the Europeans took, with the addition that the real motives of American conservatives have nothing to do with the current economic condition, and everything to do with honoring their unproven items of faith, particularly the idea that teeny government is best.
As Paul Krugman, Joseph Stiglitz, Robert Reich, and virtually all of the other actual smart guys (as opposed to people like me), have said repeatedly, the fortunes of the middle class are what determine the economic health of the nation. We are firmly on track for exactly the declining conditions we and the EU are experiencing, because the austerity programs we are instituting will do practically nothing to bring in more tax revenue. The reasons are that we are squandering vast sums on ill-advised wars, huge tax cuts for the very rich, and we allow corporations to pay no taxes at all, or a very small part of the national tax revenue. Meantime, we’re in the process of selling off all of the hard-earned good stuff that gave us three or four decades of the most vibrant economy we ever had, following WWII.
The doctor says he can’t even elicit a knee-jerk with his reflex hammer, not to mention that the patient appears to be sinking into coma. Maybe we should consider trying a different cure.