We were NEVER in a recovery

This morning, I received an email from the brilliant and humble economist, Richard Wolff, author of Capitalism hits the Fan. Using one simple chart from the EPI (the non-partisan Economic Policy Institute in DC), he elegantly and concisely describes why that which the media tends to refer to as a recovery, has never felt like a recovery to most of the people in this country. 

I constantly rant and write about the fact that the main economic condition of individuals has never recovered (or in other words, banks who got trillions of dollars of back-up don't like to share), so the notion of talking about a 'double dip' recession is illogical. His piece shows that only certain corporate profits (and hence, their stock prices) regained some ground. This has translated into a few positive GDP figures (though in true political shell-game fashion, these keep being revised downward) which in turn have been used by Obama, Geithner, Bernanke, and others vested in their own egos, to justify the bailouts, subsidies, Treasury Department and Fed actions in 2008 that apparently saved us from some even more horrific fate. Yet, every measure of daily economic life: housing, jobs, health care per cost, personal bankruptcies, etc - has only shown deterioration since. 

Here's his piece. What do you think?

Comments

[Gene Siadek]

Nomi,

I tend to agree. The great deceit of "modern" econimics is trying to explain from a macro sense - impossible. All ecomomic theory should be based from the individual. A friend thought ecomomist were like weathermen. Actually, they are worse; at least weathermen can look outside and tell you if it's sunny or raining.

[Matt B]

Gene, there were indeed people who warned/predicted this around 2004. It was not hard at all. This latest bubble and collapse are easy to explain with macro theory. Interest rates, reserve ratios, and leverage. The cherry picking of a few indicators to claim recovery is more like micro-economics.

Most economists can look out the lending window and tell you it looks dark and stormy.

[Justin Miller]

Matt,

I think you give economists a little too much credit. Most have been trained in Keynesian based Economics and only see what they've been trained to see which isn't much. The study of Economics is based on assuming people make the most rational decisions when faced with different choices and that markets are efficient. I think we've all learned this is not the case.

Economics never see a storm coming because they're not trained to see it. They never see a problem until it's too late and then they just follow basic flowed monetary policies that do nothing to address the underlying problems and instead, only make matters worse. With the exception of a few economists, like Nomi's friend, most Economists are puppets and either lack the ability to accurately asess the severity of a recession or are too dependent on a particular institution or government agency to honestly express their opinion.

[Matt B]

Justin, there were economists who saw it, and other economists heard their warnings. You just didn't see them on CNN and CNBC. There are always debates over monetary policy, so it is not accurate to generalize economists as some homogeneous group, although the majority are probably just as you said.

http://rwer.wordpress.com/2010/05/13/keen-roubini-and-baker-win-revere-award-for-economics-2/

http://www.spiegel.de/international/business/0,1518,635051,00.html

http://www.pbs.org/wgbh/pages/frontline/warning/interviews/stiglitz.html

These articles take your view though:

http://www.boston.com/bostonglobe/ideas/articles/2008/12/21/paradigm_lost/?page=4

http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html

It is more a matter of psychology and human nature than economics. People believe what they want to believe; and many people in business, economics, and finance were taken in by the latest new-age version of "think and grow rich" such as that taught in "The Secret." The news media reinforced it by filtering out anything negative towards unrestrained consumer spending, as they need to support their advertisers. Universities rushed into the "New Economics" that claimed modern managed economies can now go only up.

[Justin Miller]

I'm not disagreeing with you. I just didn't agree with your last statement. You said "Most economists can look out the lending window and tell you it looks dark and stormy."

I simply stated the opposite is true - "They never see a problem until it's too late and then they just follow basic flowed monetary policies that do nothing to address the underlying problems and instead, only make matters worse. With the exception of a few economists, like Nomi's friend..."

Perhaps you misstated your the final sentence in your initial comment. If so, than that would explain why we are basically in complete agreement.

[Justin Miller]

Nomi,

replica watches = spam.

=)

[Re: Rick Wolffe]

Rick Wolffe is a declared Marxist, and thinks that the Soviet Union was on the right path, if only Stalin hadn't relied on centralized bureaucracy. Wolffe can be brilliant, but is a *little out there.*