Why the Government's Attempt to Instill False Confidence Will Backfire

[Pale Blue Dot]

The government is doing its best to try to "restore confidence" in the economy. Indeed, Obama's top economics advisors believe they can fool people into believing that everything is fine, and then the economy will recover.

And for that reason, defenders of the status quo think that it is important for everyone to keep quiet about how severe the crisis really is.

Are they right?

No.

As economist Irving Fisher pointed out (as recounted by economist Steve Keen):

Hobbled by this naive belief in equilibrium, the economics profession was as unprepared for today’s crisis as it had been for the Great Depression. Now that the crisis is well and truly with us, all conventional “neoclassical” economists can offer is the hope that the crisis can be overcome by a good, strong dose of confidence.

From Fisher’s point of view, such a belief is futile. In an economy with an excessive level of debt and low inflation, he argued that confidence was irrelevant–and in fact dangerously misleading, as he knew from painful personal experience.

In short, happy talk and fake confidence-building exercises don't work.

http://www.washingtonsblog.com/2009/05/restoring-false-confidence-will-not.html

Much more at the link.

[flyarm]

1. all one has to do is walk through a mall, any mall and see it empty..

and look in strip centers and see all the empty stores, with signs in the widnows begging for someone to rent the mepty space..or to see the grocery stores closing..i was at a strip mall yesterday and 2 wseeks ago 12 stores were closed, yesterday 16 were closed!! All my favorite shops are now gone..and more clsoing daily!

No one is being fooled!

[Pale Blue Dot]

2. Oh, lots of people are being fooled.

You don't need to look to far here on DU to see evidence of that.

[flyarm]

3. du is not reality..in the real world where I am no one is fooled..

foreclosures out number the not for sale homes ..a little store by me the owner told me people are coming in trying to barter for food!! The robberies in grocery store parking lots are out of control..on grandma's and grandpa's..

no there are no illusions here.

[DemReadingDU]

5. my family is still clueless

Seriously, they believe the propaganda that recovery is just around the corner, and the stock market always comes back. Of course, they pay no attention to me, but get advice from their professional stock planner who tells them the same propaganda. All college educated, have good jobs, expensive houses and cars. They are too busy with their jobs and family, or playing with their hobbies, or taking exotic vacations.

Even spouse, who sees me stockpiling and who sees big corporations shutting down and massive layoffs, believes that Obama has warehouses full of food for the hungry and will call out the National Guard if any unrest. I say to him that every town, city, state is being affected. How can Obama take care of everyone? He rolls his eyes, then says: Well, it hasn't affected me, still gets a pension. Besides, he says, what could he do.

I say to him to think what he will do when his pension is dissolved. Well, he says he won't have that money to spend. But how are the bills going to get paid if no pension income? He says, he will get social security. Then what will happen when Social Security is dissolved. No, he says that will never happen.

:eyes:

[ixion]

4. yep, I've seen many articles pontificating on how the worst is over

and we're all set for recovery, just not right now.

The truth, though, is that nothing has changed. The banks have yet to write down the real value of their assets, and option ARM loans are still resetting through 2011. Commercial property is no entering the meltdown phase, there continue to be job losses, rather than gains.

The big difference, really, is that the US has spent trillions trying to create a facade of confidence, which ultimately only makes matters worse and delays the inevitable.

[JohnWxy]

6. nobody is trying to say the Republican Deregulation Depression is almost fixed.

From Reuters report:

http://www.reuters.com/article/newsOne/idUSTRE5443G6200...


"Bernanke said that even when recovery takes hold, it is likely to be tepid and unemployment may not peak until 2010, although it would likely not climb into double digits."
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NOtice the words "when the recovery takes hold". - meaning we aren't in a recovery yet. That's not being deceptive or saying teh Deregulation Depression will be over tomorrow. It's no attempt to build false confidence. It is communicating. something after 8 years of the Cheney-Rove regime of propaganca and lies (Bush: Financial system is 'basically sound')is truly remarkable.

Notice he said: "unemployment may not peak until 2010". This is hardly painting a rosy picture. And it certainly is NOT saying we will be out of this REPUBLICAN DYSTOPIA OVERNIGHT.


These are the words of the Washington Post, (FYI: not part of the OBAMA administration):
"The April employment report, while dismal by conventional measures, is the strongest evidence yet that the recession is moderating; employers cut 539,000 jobs, the fewest since October. That, combined with other signs of economic progress lately, suggests that the chances of a Great Depression-style economic catastrophe have become more remote than they seemed just two months ago, and that forecasts that a turnaround will begin later in the year have a greater chance of coming true."

Let me direct your attenttion to the word "evidence" in the above quote. - they are referring to a fact. NOw if a member of the Obama adminsistration refers to this statistic they are reporting a fact. This is not "hype".

Referring to some facts recently reported such as that the latest unemployment numbers not as large as previous months, and saying the economic decline is slowing a bit (based upon objective measures) - is hardly saying tomorrow we will leave the Destruction of the Republican Deregulation Dystopia behind us. It will take quite a while to repair the damage done by deregulation and an economy built on credit rather than rising real incomes for most of the people. You can't have a healthy economy based on rising wealth just for the wealthiest in the nation.

I hardly think Bernanke, or Pres. Obama, or Geitner have tried to fool anybody. They have been tryig to start to rebuild the economic destruction of the REPUBLICAN DEREGULATION DISASTER and they are communicating to the public what they are doing. And they are telling us pretty accurately where we are. Polls show almost nobody expects the damage wrought by the Cheney-Rove administration to be repaired by this Thursday. In part, that's because this administration has been telling it like it is.

A few weeks ago they were accused of talking down the economy. NOw, when they mention that some of the signs are - less bad - you are trying to sell the idea that they are trying to deceive us - Bullshit. the deception that got us into this disaster occurred for 8 years in the Bush administration where a sick economy only looked acceptable because of overly expanionist monetary policy. Then there was the legislation that made trading in Credit Default Swaps (CDSs)(attached as a rider to the Omnibus Funding bill in the last days of the Clinton administration - virtually nobody in Congress even knew it was in there.) legal AND completely unregulated (see FORECLOSURE PHIL). This legislation set the stage for what has been called the bet that blew up Wallstreet.


WE KNOW ABOUT DECEPTION, WE JUST LIVED THROUGH EIGHT YEARS OF IT. THAT'S WHY WE'RE IN THE MESS WERE IN NOW. IT'S OBAMA'S AND THE DEMOCRATS' JOB NOW TO CLEAN UP THIS F--CKING REPUBLICAN MESS. THIS WON'T BE ANY EASIER AS THE REPUBLICANS ARE DOING EVERYTHING THEY CAN TO UNDERMINE OUR PRESIDENT'S AND THE DEMOCRATS' EFFORTS TO REBUILD OUR DAMAGED ECONOMY.

I AM PULLING FOR THEM TO SUCCEED. BUT POLLS SHOW ALMOST EVERYBODY KNOWS IT WON'T BE DONE OVERNIGHT.