Lesser Depression or Great Recession

by Byron on September 22, 2011

What’s the difference?  And if this is a depression, how is it known that this is a “lesser” depression?

Unfortunately, Joe and Jane Public care about nomenclature. But here is the part where I say, “Who cares what you call it, it’s just bad. Really bad. Terrible. Scary.”

But is it? Are things that bad? It doesn’t seem like it. Things aren’t good, no question. We are in, as Cullen Roche at PragCap (and others) like to say, a balance sheet recession. Consumers had and have debt they need to work off. And the government has debt that people think it has to work off.

And because people think there is debt that needs to be worked off by the US government, we get austere. “Don’t spend that money Obama! Don’t do your tricky stimulus tactics oh Bernanke!”

The republicans who wrote the letter to Bernanke are in part responsible for the past two-day selloff in equities. Why? Because Bernanke had to justify his position to the public and politicians of all stripes. He had to say, “significant” downside risks to the economy.

I’m not sure that he uses the word “significant” without the need to justify himself. Not even with Europe’s problems. Not even with China slowing.

There is no point to using that word without needing to justify himself. Formerly, one of Bernanke’s great characteristics was his ability to 1.) stay calm in the face of adversity and 2.) not to kowtow to anyone. That changed with the word “significantly.”  And the markets noticed.

And there’s a republican debate tonight. I’m sure, amidst the infighting, there will be solidarity in blaming the market’s woes on Obama.

Leave a Comment

Previous post:

Next post: