After waiting about a year too long to admit that the country was actually in a recession, financial analysts are now rushing to declare it over—with the politicians and the press not far behind. In another example of the upbeat rhetoric I wrote about earlier this week, the Washington Post this morning suggested that some “tentative signs of strength” in the banking sector, along with small gains in the Dow, could offer “at least some hope that the darkest days of the recession could be ending.”
To be fair, the Post also acknowledges that unemployment rates are still rising, and could pass 10 percent this year. But they give the final word to a Standard & Poors analyst who declares, in a triumph of Orwellian Newspeak, “Less weakness is the new strength.” (Many of these same “analysts,” of course, were the folks who told us that the bubble would never burst.)
As Obama huddles with his top economic advisors today, the administration is also promoting a sense of what Agence France Presse describes as “shy optimism” about the economy. At an Economics Club luncheon yesterday, Lawrence Summers acknowledged that there were “still substantial downdrafts” in the economy–which is how he describes more than half a million Americans losing their jobs every month. “But you also have to see that there has been a substantial anecdotal flow in the last six to eight weeks of things that felt a little bit better,” he added.
There are plenty of others, however, who refuse to add their voices to this “anecdotal flow.”
I wrote earlier about former top regulator William K. Black, who thinks banks are in even worse shape than we know, and believes the upbeat prognostications are part of a “cover-up” designed to stir pubic confidence, prevent panic, and keep the lousy, fraudulent banks afloat.
Then there’s George Soros, who on Monday declared that “the banking system, as a whole, is basically insolvent.” According to a Reuters report:
Soros, speaking to Reuters Financial Television, also warned that rescuing U.S. banks could turn them into “zombies” that draw the lifeblood of the economy, prolonging the economic slowdown.
“I don’t expect the U.S. economy to recover in the third or fourth quarter so I think we are in for a pretty lasting slowdown,” Soros said, adding that in 2010 there might be “something” in terms of U.S. growth.
Even if the banks are, unsurprisingly, feeling a bit less peckish after feasting on government cash, that’s a false marker by which to measure recovery—which can’t possibly take place while the American people are still losing jobs by the millions.
After hearing last week’s unemployment figures, Robert Reich wrote in his blog that we have passed recession and are into a depression–maybe not as bad as the Great Depression, but plenty bad enough. “Every lost job has a multiplier effect throughout the economy,” he points out. And it’s unemployment, not the prospect of bank failures, that creates the “broader anxiety” that keeps people from spending money, which in turn leads to more job losses. Reich believes the government should stop fooling around with Wall Street, and instead put all its resources into Main Street jobs.
On Monday, the New York Times asked an assortment of economists whether they believed in the increasingly optimistic forecasts. James Galbraith insisted that “the most important current economic fact remains the loss of 600,000 jobs every month,” and there can be no talk of recovery without job growth. As for the upbeat rhetoric, he said:
Compulsive optimism, otherwise known as grasping at straws, is habitual for some economists, especially if they are selling public policy or common stock. But it is also dangerous, destroying credibility and discouraging action. Repress it.