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Glimmers of Economic Hope: The Flip Side
As an optimist when it comes to our economic recovery, when it comes to our president succeeding—not failing—in his efforts to revive the economy and to set a new economic course for our nation, I have been highlighting the positive aspects of what I perceive to be a slow and difficult, but steady recovery.
Of course, the “doom and gloomers” have persistently continued to point to the negative aspects, to real or imagined signs that our economy is failing.
Others—and I would count the true experts among these—have reasonably argued that there are still dangers and problems ahead.
I realize that we still have a lot of work to do and that the road ahead is treacherous, but I also believe that optimism and confidence are vital to our recovery.
Today, two experts argue in a full page opinion piece in The New York Times that “The Economy Is Still at the Brink,” and challenge the optimism and confidence mindset:
Mr. Obama thinks that the way to revive the economy is to restore confidence in it. If the mood is right, the capital will flow. But this belief is dangerously misguided. We are sympathetic to the extraordinary challenge the president faces, but if we’ve learned anything at all two years into the worst financial crisis of our lifetimes, it is that a capital-markets system this dependent on public confidence is a shockingly inadequate foundation upon which to rest our economy.
The two experts, Sandy B. Lewis and William D. Cohan, say:
We have both spent large chunks of our lives working on Wall Street, absorbing its ethic and mores. We’re concerned that nothing has really been fixed. We’re doubly concerned that people appear to feel the worst of the storm is over — and in this, they are aided and abetted by a hugely popular and charismatic president and by the fact that the Dow has increased by 35 percent or so since Mr. Obama started to lay out his economic plans in March. But wishing for improvement and managing by the Dow’s swings are a fool’s game.
As one of those who has been “wishing for improvement and managing by the Dow’s swings,” I believe it is only right to point the readers to an eloquent and persuasive view of the flip side of this issue.
Through a set of questions, the authors challenge the president to ”find the flaws in the system, to figure out what’s being done to fix them and to get to the truth about the difficulties we face as we set out to restore the proper functioning of our markets and our standing in the world.”
Some of the more pertinent and incisive questions are:
** “Why is so much effort being put into propping up those at the top of the economic pyramid — the money-center banks, the insurance companies, the hedge funds and so forth…?”
** “Instead of promising the imminent return of good times, why isn’t Mr. Obama talking more about the importance of living within our means and not spending money we don’t have on things we don’t need?”
** “Why is the morphine drip still in the veins of the financial system?”
** “Is there to be any limit on bailouts?”
** “Why hasn’t President Obama insisted on public hearings over what happened during this financial crisis?”
** “Why are we not looking to change our current civil and criminal racketeering statutes, which are playing a perverse role in investigations of the crisis?”
But these are not just bombastic or contrived questions.
Lewis and Cohan not only substantiate their questions, but also—to varying degrees—provide ideas and make recommendations as to how to start addressing the issues and problems they bring up.
They conclude:
We are in one of those “generational revolutions” that Jefferson said were as important as anything else to the proper functioning of our democracy… We are 139 days into [Obama’s] presidency, and while there is still plenty of hope that Mr. Obama will fulfill his mandate, his record on searching out the causes of the financial crisis has not been reassuring. He must do what is necessary to restore the American people’s — and the world’s — faith in American capitalism and in our nation. Answering our questions may help us get back on track. But time is wasting.
As I mentioned, Lewis and Cohan, implicitly in their questions point to the answers, too. Please click here to enjoy this superbly objective and reasoned article.
Sandy B. Lewis founded S.B. Lewis & Co, a brokerage house. William D. Cohan is a contributing editor at Fortune and a former Wall Street banker. He is the author of “House of Cards: A Tale of Hubris and Wretched Excess on Wall Street.”
7 Responses to “Glimmers of Economic Hope: The Flip Side”
[...] set a new economic course for our nation, I have been highlighting the positive aspects of … Read Full Post: Glimmers of Economic Hope: The Flip Side – The Moderate Voice Adding Related Info:Jobless rate rises, but a ray of hope glimmers – Philiy.comEconomic data [...]
Yes they highlight a lot of the “dangers of optimism” that I have had as a recurring theme for many months now. Our economy has fallen because of massive structural imbalances and complete wastes of money for non-productive uses, and won't recover for the average person until we start using our resources wisely…which premature optimism makes less likely.
For example, while they focused on financial markets, the other aspect is that tons of foreclosures are being bought by flippers or potential landlords, but they are quickly finding out that there are no buyers and there is still too much of a glut in the rental market. This is starting to lead to secondary foreclosures, and in fact, the mortgages given in the last six months look even worse than the ones issued at the height of the bubble!
Obama really wields a double-edged sword here. Confidence is essential to the recovery of the economy. In that sense he has done very well in reassuring consumers. Confidence alone will not fix broken financial principles though, and unwarranted overconfidence when the underlying economics won't support it ultimately just makes things worse.
I know people will disagree but I feel Obama has focused way too much on the confidence aspect and much too little on economic responsibility, both as it applies to consumers and the government.
Mikkel:
Thanks for your comments.
I certainly include you in “Others—and I would count the true experts among these—have reasonably argued that there are still dangers and problems ahead.”
Yes, you have highlighted the problems, objectively and responsibly
DaGoat:
Your comments on “confidence” are well taken and appropriate. Thanks
I still remain an Optimist, albeit a little sobered by reasoned cautionary notes
Dorian
Yes I know. Really what is happening is very similar to last summer/fall. I had been convinced by others — and did some research and original thinking of my own — about what I thought would happen, but when it did the extent still seemed surreal. I also believed that the period we're in right now would happen, and that the complacency would contribute to the next down turn…but the cracks are growing so fast and are so obviously (to me) a direct cause of what I was worried about that it is making me question whether I'm just making stuff up.
I have to admit that on a personal level it's disheartening because I know several people that have made financial moves that will cripple them if they lose their jobs even temporarily, and their rationale was that the press and politicians said everything was in the clear. These weren't speculative money making ventures either, but purchases of convenience and pleasure that could have easily been delayed 6-9 months until we saw how things turn out.
I guess we'll see…I really hope I'm wrong.
To me “confidence” is a completely neutral term that describes a state of mind. You can be confident in folly or confident in success…
I would much rather have Obama focus on tying “confidence” to “perseverance.”
The problem of course is that our economic system is built on excessive consumerism and if we don't maintain it then we will be in “bad shape.” I put that in quotes because the system has made it so people are an illness from bankruptcy and can't afford to retire, and many have become debt slaves…so I'm not sure how things aren't that bad.
But if all of a sudden people start saving at the rates then did before 1985, then we'll have a recession that lasts for many years.
To me “confidence” is a completely neutral term that describes a state of mind. You can be confident in folly or confident in success…
Agree but for a plan to work people have to have confidence in it. To an extent economic swings are self-fulfilling prophecies. I think Obama is great at “selling” the plan, it's the plan itself I'm not so sure about.