Better days lie a long way ahead

opinions

January 28, 2012 - 12:00 AM

Wednesday the 17 members of the Federal Reserve Board – men and women from all parts of the United States who make the assessment of the U.S. economy their primary concern – said they expected the U.S. business scene to improve very gradually for the next two years and were therefore planning to keep interest rates at near-zero at least through 2014.
This is, I suspect, exactly what those who would replace Barack Obama in the White House wanted to hear. Unemployment, the governors guessed, would stay above 8 percent this year and is likely to be around 6.7 percent at the end of 2014. Jobs still would be hard to find three years from now and businesses still would be looking for customers.
And things could be worse than that, they said, if Europe can’t get a handle on its sovereign debt problems.
Mitt Romney, Newt Gingrich and Rick Santorum have all been blaming the sorry state of the economy on the Obama administration. He’s the boss. What happens is his fault. They have the full support of the Republicans in Congress, who not only have railed against the administration from dawn to dusk for the past three years, but also have turned down its proposals to kick-start the economy.
Well, not quite true. They did pass the payroll tax cut in December, but only for two more months. That issue will be on the firing line again next month.
In November the voters will decide whether the Republican decision to work against the administration on economic recovery to make Obama look ineffective was good politics. It will be surprising if the president and his supporters don’t ask the same question in a more pointed fashion twixt now and Election Day.

INTERNATIONAL economists and other students of the economy such as the 17 Federal Reserve governors, say the world’s economy tanked because of a public and private debt load that became unsustainable. Some of that debt was created in the U.S. housing market by cynical lenders who sold over-priced houses to under-financed borrowers and then created bonds with those worthless mortgages.
Some was created by financial institutions that issued insurance coverage on debt which was far beyond their capacity to redeem if the debt went bad. Add to those, private debt created by families throughout the western world that wasn’t backed with adequate collateral but was issued anyway by go-go credit card companies and banks. Cities, counties, states all added debt by the trillions by underfunding lavish retirement programs.
That mountain of debt is being whittled down. Families here and abroad are beginning to save again. Governments around the globe are cutting back. The fundamentals are improving. But nobody thinks a full recovery is just around the corner. We’ll get to better days, but at the end of an uphill, muddy road.
It wouldn’t be good politics to say these things in a campaign debate. It would only be the truth.

– Emerson Lynn, jr.

 

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