Victor Davis Hanson: The "Depression" for Us Idiots

pajamasmedia.com ^ | March 17, 2009 | Victor Davis Hanson

[Tolik]

I confess I don’t know all that much about the theory of economics, and have done some unwise things in the strict financial sense the last thirty years—remodeled an ancient family farm house that will never be appraised at what was sunk into it, both farmed and rented out a 40-acre Thompson seedless vineyard whose returns usually did not pay the property taxes, irrigation taxes, infrastructure upkeep, and depreciation—and in unthinking fashion kept up my modest monthly 401(k) contributions through the height of inflated Wall Street stock prices. I could go on, but will leave at that.

My point? Many of us who have little abstract financial or economic sense are nonetheless baffled about the bad news from the economic front—and the inability of so-called experts to clarify issues. Let me list some troubling items.

1. 1984 Redux. I feel like Winston Smith in Oceania, confused about all the doublethink coming out of Washington. Great Depression—no Great Depression. Recession for years; its end at the end of this year. Signing statements bad; signing statements good. Fundamentals hardly strong; fundamentals really sound. Earmarks terrible; 8,000 wonderful. Bush’s $500 billion deficit reckless; Obama’s $1.7 sober and judicious; Iraq horrific and the worst whatever; Iraq suddenly quiet, democratic, and hopeful; highest ethical bar in an administration ever—Richardson, Daschle, Killefer, Solis, etc. cannot meet the lowest; Guantanamo a Stalag; Guantanamo open for a year, pending the recommendations of a “task force”; Guantanamo a torture place for unlawful combatants; Guantanamo a nice place without unlawful combatants; Obama not to be blamed for massive collapse of stock prices since November; Obama to be praised for modest gains last week. At some point, someone in the media must be getting embarrassed that they are all working at the Ministry of Truth.

2. Stimulating the Stimulated. I am also confused the various stimuli, bailouts, and guarantees. We all support some type of federal guarantees for some banks, lest like a house of cards they start falling seriatim.

Yet, I have not seen signs yet (unemployment, deflation, crashing GDP, etc.) that we are in the Great Depression, or even close to the hard times that supposedly will last “for years” as warned by President Obama. Are there not self-correcting mechanisms and natural stimuli at work that simply are ignored by the media and the administration in this madcap race to socialism?

Cf. hundreds of billions saved, both collectively and by the government, when oil prices crashed from $147 a barrel to around $40; billions more were saved when 6-month U.S. treasury notes, sold to finance the debt, crashed to about a half-a-percentage point in interest (allowing us free use of money, given that what we pay out is less than the rate of inflation); then there are the preexisting stimuli, given that Bush left with a $500 billion annual deficit.

Before we charge our grandchildren with another $3-5 trillion in aggregate debt over the next four years, cannot we take a deep breath, stop the hysteria, and let these stimuli have a chance to work—on the real chance we are in a 1981-3 serious recession, but hardly at 1929-41 Great Depression?

3. We all work at the DMV now. But debt is not the only problem. When we expand the percentage of government-controlled GDP in the overall economy far about 20% to near 40%, the change-over will guarantee for generations that we have less productive workers, not subject to the pressures of supply and demand of the private sector? We learned out here that even in our near $40 billion meltdown that California in extremis continued to hire new employees, and gave raises to state workers as it went broke. As someone who farmed for well over a decade and was a professor at a state-run institution for 21 years, I can attest that the government cannot approximate the market. I met many farmers who would have been delighted to have state-guaranteed jobs and very few government workers who would have preferred to be self-employed. I’ll leave it at that. But the DMVing of the economy is a terrifying thought.

4. Madder than Hell—and? There is a populist anger out there, hard to calibrate exactly, but growing nonetheless. Here’s what I think people are saying: Wall Street gets bailed out, despite billions that the masters of the universe skimmed off. Meanwhile our retirement accounts are crashed. Then the government bails out those ‘homeowners’ who failed, often due to their own greed and foolishness, not those who played by the rules: so default on your over priced home that you should have never bought, and the fed is there to bail you out; put away $1,000 a month in your 401(k)—and tough luck.

No new taxes of course for “all of us” except the evil “them,” but rumors still somehow abound that health care benefits will be taxed, carbon emissions will be taxed, and even veterans will pay for their care via private accounts before drawing on VA resources. And why would not Obama resort to more bait and switch to pay for a $3.5 trillion budget—when that proverbial evil 5% simply does not have the wherewithal to make up for the 50% who pay no federal income tax at all?

This growing unease is a weird sort of prairie-fire populism, focused on both Wall Street and  still more the government. (Who is worse, the AIG execs that praise capitalism, then want federal handouts to ensure their bonuses, or the incompetent and unethical  government who feeds them the cash (”hope and change”?)—or we the poor fools who will keep working to pay for all this?

Where it all leads I don’t know. But Team Obama does itself no good when it nominates grandees like Daschle, Geithner, Richardson, etc. who suffer the additional wage of hypocrisy that all tax-dodging and insider-profit-making egalitarians earn. There grows the perception that as a Roman demagogue—try Catiline—Obama is intimate with the lower classes and equally so with the hyper-wealthy of Hollywood, Wall Street, and America’s richly endowed families, with whom he navigates so well, but does not have a clue about the middle-classes, the clingers and bible-readers and gun-owners that are a world away from both the Daschles and the Kerry-Kennedy clique, and the bread-and-circuses world of Rev. Wright.

5. Madoff Mysteries. A lot of us are confused about the Madoff meltdown. How did a man in his 60s fake millions of records and thousands of accounts, without a legion of enablers? Surely, twenty, thirty, or more, entire teams no doubt, must have been needed to perpetuate the scam? Most of us cannot even keep track of a few government forms—much less run a Ponzi scheme on our own to defraud thousands out of billions.

Second, was the loss really that famed “$50 billion”? Surely that figure is the zenith of the aggregate inflated accounts, factoring in the phony 10% and above annual returns the past few years. Given that Madoff started in the 1990s (by the latest), and given that these accounts were doubling every seven or eight years at these mythical rates of return, isn’t it more likely that the real losses are $20-30 billion? By that I mean, if someone put in $1 million in 1990, and got a normal, but very steady and impressive 3-5% return, he might now have closer to $2 million rather than the artificial $4 million?

Third, in all Ponzi schemes there is a sort of static pool of money that the schemer enjoys. E.g., a new billion comes in this week to pay the phony 10% return for the already duped others. As long as the market climbed and thus people had no worries about their money, Madoff got new eager takers—especially due to his brilliantly diabolical self-construction of being reluctant, diffident and having to know Bernie to “get in”.

The meltdown came when that one proverbial person woke up after September 15 and thought, “Hmmm, 10% on my money was great these years. But even Bernie may have losses and it’s time to get out.” Once he tried and failed to liquidate his winnings, the news spread like fire and the pyramid went up in smoke.

And yet, and yet, where still is that mythical pot that surely was sorta static for Bernie’s own use? Granted he stole the new Paul to pay the old Peters, but there was still a capital core gaining interest somewhere under his control whose size was beyondeven  Madoff’s ability to spend? Even if only $10-20 billion can be found, it may be enough to give many 75% or so of the original money they invested (Their losses cannot ethically be calibrated at assuming a Madoff’s annual 10% return: just because their “statements” said that, doesn’t make it true). The feds surely will subpoena all the principle participants, and search the off-shore and Swiss accounts of his family and associates where many billions unspent must rest.

In an odd way, the fact that the money was simply rotating (while it gained interest in bank accounts?) may have been about what Wall Street was doing with our 401(k)s—not really earning anything, just counting on each day’s new infusion of payroll cash deductions to keep the sham up, and ensuring more got in than got out of the market. In Madoff’s case if his core theft fund was in cash, let us hope there is something for all those whose trust he so deplorably shattered.

Bottom line: Never in the last half century have so many had so little trust in their financial institutions, Wall Street, the Congress, and the government. I have about as much faith that my retirement portfolio statement is accurate or based on real information as I do that the executive and legislative branches will do tomorrow what they promised today.

I don’t know whether to be more upset at the woman in front of me at the Selma food market on Monday, who, with I-pod in hand, pulled out her welfare food-stamp credit card to buy quite a sumptuous cart of groceries, or the AIG whiz who trumped her 1000x in taking a bonus for running his company into the ground. The former is a petty con-artist but in your face; the latter is toxic and lethal and quite dangerous, but abstract and distant.

God help us all!

 

[Tolik]

    Victor Davis Hanson Ping ! 

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[Loud Mime]

I keep thinking of Oceana.

Combining VDH and Orwell is just too much!!!!!

Thanks for your work, Tolik.

[MuttTheHoople]

The last time real “Hope and Change” was tried in Washington, the Republican Party won congress in 1994. We had mixed success, but it was derailed by the same leftist crypto-Fascists who want “hope and change” now by calling it “Radical” and “Extremist”.

[Tolik]

http://corner.nationalreview.com/post/?q=NmE0MTY3YWMxYzI3ZWM1OGUyZWMzOGQ1ZjRhNTMzYWQ=

Friday, March 13, 2009From Catastrophe to Not so Bad?   [Victor Davis Hanson]

Washington is by nature an hysterical place. (Remember those who chest-thumped the fall of Saddam’s statue only soon to claim they never supported the war?)

Still, it is quite striking that in the space of a mere 50 days, Obama & Co. have gone from “We are in 1932 and things are getting worse—unless” to “Things are not as bad as we think,” with choruses from the likes of Larry Summers on the dangers of talking down the economy and sowing fear. This is one of the most schizophrenic moments in recent memory. What in the heck is going on?

a) Premeditation: Talk of the Great Depression was necessary to enact a massive spending bill with a $1.6 trillion deficit; then, once the European-like spending was in place, it was important to flip, drop the gloom and doom, and talk up the economy for the midterm elections to come.

b) Panic: After trashing the rich, Wall Street, the banks, George Bush, etc., promising massive new tax hikes, and shrilly forecasting the likelihood of impending near-depression, Barack Obama was quietly taken aside by his advisers (in response to the worries of now-troubled liberal financial icons) and told to cut it out—lest he create such a climate of financial uncertainty that we really do get the hard times of the 1930s. So he stopped on a dime and suddenly 1981, not 1932, is the new frame of reference.

c) Chaos: No one is in charge; things are made up and cobbled together as we muddle through each day. When the market dives, and banks totter, like the proverbial headless chicken, the inexperienced administration darts about as if we were doomed. Then, with a mere couple of days of good news from Wall Street, or the announcement that a few banks are okay after all, or that GM doesn’t need more handouts right now, suddenly we get “Things are not so bad.”

Or is at all of the above?

03/13 07:21 PM

 

 

http://corner.nationalreview.com/post/?q=ZTczNDU5M2YyNTExNWJjNGE2YmI5Nzc3ZWVhOGFlYmU=

Monday, March 16, 2009

Making Orwell Proud   [Victor Davis Hanson]

Guantanamo is still open, but there are no longer "enemy combatants" there (Perhaps the name of the camp can be changed next?). The old campaign snicker that a naïve McCain really believed that a then-stronger economy is "fundamentally sound" is now the new Obama gospel about a far weaker one. There are to be no more earmarks in spite of 8,000-plus new ones. A $3.6 trillion-dollar budget is proof of commitment to financial responsibility; the remedy of Bush’s borrowing profligacy is to increase the deficit from $500 billion to $1.7 trillion. Bush’s signing statements bad; Obama’s signing statements good. An end to lobbyists in an administration ensure there are over ten; the highest ethical standards mean the nominations of Daschle, Richardson, etc. The changing meaning of words really does trump memory and reality itself.

03/16 10:13 AM

 

 

http://corner.nationalreview.com/post/?q=NDExY2ZmMzQ5MWViNWJmNDBjZDczYzAwNDBlMTYxMDc=

Monday, March 16, 2009

Casting the First Stone . . .   [Victor Davis Hanson]

I am mystified by Barney Frank's desire to recall the AIG execs' bonuses, not so much over the idea that corporate-welfare recipients should not have grandstanding demagogues chastising them for their hypocrisy, but rather the notion that someone of Frank's ethical past would play Old-Testament railing prophet. Quite aside from his former partners (the gigolo fellow who used Frank's facilities for illegal activities, and the other boyfriend Herb Moses — self-described as part of the "congressional gay-spouse caucus" — who, as an exec, was helping to make Fannie policy at the very time Frank was voting on its appropriateness), Frank received more than $40,000 in campaign contributions from the bankrupt Freddie and Fannie, despite his own role as supposed fiscal watchdog on the House Financial Services Committee.

A modest suggestion? Let us agree on the following: No more corporate fat cats partying, jetting, and bonusing around after their tottering companies got federal cash; and all congressional-people and senators who took any contributions from any corporate or quasi-government entity that is a recipient of federal bailout money, must pay that money back, plus interest, to the government. After all, as in the Madoff mess, these congressional-people usually got the cash at a time when their benefactors were already in trouble, albeit hiding their fraudulent or unethical practices through cooked statements and high living. So please, Representative Frank, Senator Dodd, and all the rest — give back all that campaign cash to our government, and then in silence endure what you helped to conceive.

03/16 01:07 PM
 

 

[Senator_Blutarski]

How about VDH as the Chair of the Republican Party? At least we’d have a coherent message...

[yefragetuwrabrumuy]

People who have lived through a terrible, catastrophic event in their lives sometimes embrace a philosophy of living “day by by”, figuring that they can just press on and things will work themselves out.

This can work, if it’s just you, and you have what you barely need to survive, and are willing to stay at that level for a long, long time.

It doesn’t work so well if you have others reliant on you, or if you ever want to lead a better life for yourself and your family. This takes prior planning, a lot of it, and a close examination of the “opportunity costs” in your life and finances.

Opportunity costs are a principal of economics at all levels. In short, it means that if you have a dollar in your pocket, you can spend it on one thing that costs a dollar, or something else that costs a dollar, not both. You can have one thing you want, or something else you want, and it’s your choice to make. But you *have* to choose, and you *can’t* have them both.

Now imagine the utter red-faced, screaming tantrum you would hear right now, if the federal government was told the same thing.

Instead of just having one dollar in their pocket, the federal government this year should have something over two trillion dollars of tax revenue, for them to spend as they see fit. But for decades now, they have spent more money than they bring in, and this has put the country very deeply in debt.

Because it is such a severe problem, Washington has become like some people who have lived through severe, catastrophic events. That is, the federal government is pretending to live “day by day”, ignoring the enormous problem it has created for us all.

And I mean this in a very literal sense. For example, eventually the government is supposed to pay out dozens of trillions of dollars to Social Security beneficiaries. A wise government would have never promised them nonsensical future rewards in the first place. But having done so, a wise government should have scrimped and saved to build up a huge reserve of money to cover that immense debt.

But our government did neither. In fact, it spent the money people paid in to Social Security as soon as they paid it, and on other things that the government wanted. For them, living “day to day” meant that as long as they paid the people who had to be paid right then, everything was okay. It was not.

As an analogy, the US federal government, after an orgy of drinking, is now lying in its own filth, disheveled in the gutter. It is still so drunk that it neither knows nor cares that it is incapacitated, and is shouting out to passerby to join it in a drink, from its empty bottle of rotgut whiskey. The US government has hit bottom, but it doesn’t know it yet.

Little does it know that its bartender has had enough and is no longer going to let it run up its tab—in fact is going to demand payment on its tab. Nobody else in the bar is going to loan it money, either. The binge is over.

And like an alcoholic, the federal government doesn’t want to quit doing what it wants, but the truth is that it will soon have no choice in the matter.

[Tolik]

He is a registered democrat. Leftovers of the party that had Scoop Jackson, Moynihan, Nunn and Zell Miller. You could have a reasonable debate on issues you disagreed with those people. I am sure JFK would feel quite uncomfortable in the Dem party now as well.

[Grampa Dave]

“I don’t know whether to be more upset at the woman in front of me at the Selma food market on Monday, who, with I-pod in hand, pulled out her welfare food-stamp credit card to buy quite a sumptuous cart of groceries, or the AIG whiz who trumped her 1000x in taking a bonus for running his company into the ground. The former is a petty con-artist but in your face; the latter is toxic and lethal and quite dangerous, but abstract and distant.”

About a week ago I was in a 15 item checkout stand in a grocery store.

Ahead of me was an Illegal Brood Breeder with 2 young kids tearing around with no supervision, one in the cart and another one coming in her hangar bay.

She was using her WIC* book to buy dozens of food items. The process takes time, and the clerk had to make enteries in the breeder’s book when so many items were rung up.

*WIC info http://www.fns.usda.gov/wic/aboutwic/

During this time the breeder was yakking on her Blackberry, at least it wasn’t an IPod, in non stop Cal/Mex.

When the process was over, she demanded that someone help her out to her car.

The hard working Mexican American clerk apologized to those of us in line.

A Mexican American guy, whom, I have known for years was behind me. He Told the clerk that was BS allowing that B$tch to check so many items, and she should have told the breeder to go to another line. Then he added, “BS like this in a few months might end up with blood in the street, and you had better hope it isn’t our blood nor our family’s.”

[happygrl]

I, too, am enraged at the leeches at both ends of the spectrum.

[GOPJ]

People who have lived through a terrible, catastrophic event in their lives sometimes embrace a philosophy of living “day by by”, figuring that they can just press on and things will work themselves out.

This can work, if it’s just you, and you have what you barely need to survive, and are willing to stay at that level for a long, long time.

For example, eventually the government is supposed to pay out dozens of trillions of dollars to Social Security beneficiaries. A wise government would have never promised them nonsensical future rewards in the first place. But having done so, a wise government should have scrimped and saved to build up a huge reserve of money to cover that immense debt.

But our government did neither. In fact, it spent the money people paid in to Social Security as soon as they paid it, and on other things that the government wanted. For them, living “day to day” meant that as long as they paid the people who had to be paid right then, everything was okay. It was not.

You totally "get it"...

[happygrl]

“BS like this in a few months might end up with blood in the street, and you had better hope it isn’t our blood nor our family’s.”

In other words, he's afraid that his "tribe" (Mexican-Americans) will bear the rage of other "tribes" because of the BS of the Illegal Breeders.

He is one of Us, and I have met many, many middle class Hispanic Americans who have HAD it with Illegal Invaders.

[thirst4truth]

And like an alcoholic, the federal government doesn’t want to quit doing what it wants, but the truth is that it will soon have no choice in the matter.

Great comments. I just don't think we are going to pull out of it. The government and financial institutions are so entrenched in moral corruptness, I don't think we can once again be the financial super power we were.

I am a Christian and one day Jesus Christ will return, Isreal will have a temple by then, the anti christ will be identified and the believers will leave this earth. No where in the Bible does it talk about a country like America. You can read about what China does in the end times, Russia, Persia, etc. no one has been able to pin point with complete accuracy where America is talked about in the Bible.

I believe that is because we are insignificant, no influence in the world, no financial or military super power just another struggling country like we are beginning to look like now!! Isn't that how the Dems want it? Save the earth, destroy America as we know it and remove any trace of God from our lives?

[oldbrowser]

Who is worse, the AIG execs that praise capitalism, then want federal handouts to ensure their bonuses, or the incompetent and unethical government who feeds them the cash (”hope and change”?)—or we the poor fools who will keep working to pay for all this?

This is really the bottom line. Whose fault is it? Whose going to have to clean it up.

It's our problem, our fault, and we need to stop complaining and fix it before it gets worse.

[Centurion2000]

bump

[dennisw]

Washington DC is a decadent imperial city same as Rome turned into. As such we are over taxed by them then our Representatives are forced to beg for scraps to be returned home via earmarks and pet projects. Life is fantastic there for everyone. There is no recession. Lots of parties and drugs and call girls. There is zero incentive for our representatives to get serious and solve problems because life is too nice for them. Dittos for their Congressional staffers and all the fatass do nothing Federal employees in the Washington DC area. 10% of Congressional staff is gay, so it has been reported. Affirmative action boobs and incompetents permeate our Federal bureaucracy in DC and throughout America

Washington DC is insulated from the chaos it produces whether it is Alan Greenspan’s easy money policy, Frank, Dodd and Maxine Waters shielding Fanny Mae from scrutiny or keeping our borders wide open

[Dionysius]

I’ve always wondered where Affirmative Action Anns and Andies did with their Urban Studies and Leftist Arts degrees after graduation. At first I thought that most of them were absorbed by companies to satisfy EEO requirements. Your post corrected that in my mind. The vast majority have ridden their preferences into the bureaucracy! There aren’t that many private company positions to go around. And now Obama is bringing them into the first lines of government. And as groups like ACORN increasingly become quasi-governmental institutions, a huge number of opportunities for them will open up.

[longtermmemmory]

according to Glen Beck, ACORN IS CONDUCTING THE US CENSUS IN SOME AREAS!!!!!!!

talk about guaranteed fraud.

[Billthedrill]

Overall that's one of the best pieces I've ever seen out of VDH. Too much to comment on individually, really, but I do think this is worth a repeat:

Here’s what I think people are saying: Wall Street gets bailed out, despite billions that the masters of the universe skimmed off. Meanwhile our retirement accounts are crashed. Then the government bails out those ‘homeowners’ who failed, often due to their own greed and foolishness, not those who played by the rules: so default on your over priced home that you should have never bought, and the fed is there to bail you out; put away $1,000 a month in your 401(k)—and tough luck.

Try cashing out of that 401(k) and you'll find yourself paying double for that homeowner bailout. Leave it in and you lose it. Cute.

However, elitists such as the bunch that has grabbed control of the Democratic party are not, as VDH points out, particularly in touch with the middle class. The middle class is a threat to them. It is inertia, it is difficult to manipulate, and it's been that way well before Marx ever identified the bourgeoisie as the principal roadblock to a socialist future. That which weakens the middle class strengthens their grip on power. This is, in effect, class warfare by other means.

And frankly it was much easier to conduct with the eminently blameable Bush in office. Now the people doing it are out front and they're squirming a little. They don't understand the middle class, and they don't like it, but they do fear it.

[Leisler]

A Scoop Jackson Democrat, JFK, or VDH are more conservative than the GOP/RNC.

The old Reagan quip( modified ), “I didn’t leave the Democrat Party, it left me......and took the GOP with it”