Letters to the Editor
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So where does the giant unofficial illegal drug economy fit into this picture?
Oh sorry I forgot -- this is Salon -- we're supposed to pretend that doesn't exist and has no economic implications for anyone, right?
Right.
I know that after the Depression got going, Americans were quick to rethink the economics of Alcohol Prohibition.
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Clobber me now or clobber me later?
This "let them take it on the chin now and things will be better later" refrain from economists always pisses me off. We know what is happening now, we have no way to know what is going to happen 2 years from now. This idea that we somehow must suffer now for the good of the future is just bs. The ones that need punishing are the ones that get people to buy into debt and subprime mortgages, not the ones that get drawn in my their human nature and lack of sofistication. Good old fashonned consumer protection is a laugh in the US right now.
What these tough love pronouncements usually end up meaning is that when the little guys take in on the chin now, the big guys will do better later.
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Silenced
That's your solution for the economy? Legalize drugs? Well, if I'm ever looking for (inadequate) simplistic answers for complex problems, I know where to turn.
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Mr. Leonard, you write:
"It is hard to have a rational discussion with those who embody and express the views of a nation that is in denial."
With all due respect, I think that you and Mr. Buiter are in your own state of denial. Americans save money? With what, pray tell? The things that make a decent life for Americans of modest means - access to health care; a secure, dignified retirement; education for their children; the occasional odd vacation - have been systematically stripped away from the average American by the likes of the well-cosseted such as Mr. Buiter. Keep in mind that most Americans pay more than half their incomes in taxes and "user fees" - which is just a fancy way to describe more taxes. And don't get me started about the net worth of most Americans, other than to say that it doesn't exist. Mr. Buiter does not live in a country where thousands of people die prematurely because the government is too busy spending money on weapons that kill people than provide a basic level of care to every citizen.
The American economists who supported the stimulus know that a catastrophic meltdown in the economy would most likely result in another New Deal - and they are at least trying to forestall the worst until after the November election. The economists in the US know they have profited from the collapse of the middle class, and a commitment to restoring the middle class is going to come out of the top ten percent of wealth - exactly where most of them are. Finally, they, unlike Mr. Buiter, know that Americans might not have health care, a secure retirement, etc, but we do have guns - lot's of them. Given the power of the internet and the violent nature of Americans, it would not be unexpected if newly unemployed and homeless men decided to take matters in their own hands. Mr. Buiter should spend some time in small town America.
In a state of denial, indeed.
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There is a reason to "clobber me now"
Look, the reason (some) economists feel like taking the lumps now is that in these situations taking your medicine now is generally less painful than in the future. It isn't a question of where we will be in 2 years time, it is a prediction that reflating a bubble, say, as a means of dealing with short-term economic pain in the long run.
There were quite a few voices (especially outside of the US) complaining that Greenspan was inflating a housing bubble to get the US out of the aftereffects of the dot com bubble. And you know what? They didn't know what was going to happen in terms of when, but they were pretty right on as far as the consequences.
A bigger recession back in the early 2000s might have helped to correct some of the imbalances we have--e.g. a huge current account deficit that is financing our lack of savings. Borrowing from other countries to finance asset bubbles is not sustainable--and the longer it continues the worse the readjustment will be.
So the question to me isn't "why not now?" it is more "why not 7 years ago?"
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Save what?
The problem is, our macro consumer economy is based on selling stuff other countries make. How we get money into our economy is a big question if we're going to stop borrowing it. At the household level, most of us middle classers can't save jack. I'm at the bottom of the top 25% for income, and once I've paid by relatively modest morgage, heat, gas, my $200 car payment, insurance and groceries, there just ain't that much left over. I'm honestly not sure where the hell we go from here.
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Lynx that's not exactly what I said
But since you're into making simplistic assumptions based on very little evidence, I guess it would be pointless to discuss the issue with YOU.
We're having to shut down state parks and beaches in California by the way.
Do you think marijuana eradication is a luxury that we can still afford?
Hey, let's fly giant helicopters filled with highly flammable fuel over tinder dry forests to look for pot.
And let's keep doing that no matter how the price of helicopter fuel goes up.
Sure, that sounds like a fiscally wise thing to do right now!
How many beaches and parks do we have to close to afford it? How many rangers do we have fire? How many environmental studies have to be shut down because the rangers have been fired?
Let's look at what else we're doing:
We're spending billions and billions of dollars to keep the price of opium as high as possible, right? That is our strategy, basically.
But who enjoys the positive benefits of the increased price of opium?
The Taliban in Afghanistan.
And we're spending billions and billions of dollars to fight them!
So we spend billions of dollars to make them rich, and then we spend billions of dollars more to fight an enemy that gets richer every day.
Does that sound like good economic policy in a global recession?