The Biggest Economic Nonsense Since the Great Depression

An otherwise interesting Washington Post front-pager on “What Went Wrong” claims the current situation “has erupted into the biggest economic crisis since the Great Depression.”  On the contrary, that honor surely goes to 1980-82, with 1973-75 as a close runner-up.

This may indeed be the biggest postwar financial crisis, but that is a very different thing.

The biggest postwar financial crisis so far was the S&L collapse of the late 1980s, when nearly 3000 financial institutions were closed.  But the impact  of the S&L debacle on the real economy was minor at best (the economy grew by 2.9% a year during that “crisis”).  The stock market crash of 1987 inspired many hysterical predictions but no recession at all.

An economic crisis implies a deep and prolonged drop in real output and employment, not just another routine recession.  To describe current conditions as a worse economic crisis than 1980-82 is fanciful nonsense.

I’m from the Government, and I’m Here to Help You, Whether You Want It or Not

This story says a lot about who most wants bank bailout money, and why:

Community banking executives around the country responded with anger yesterday to the Bush administration’s strategy of investing $250 billion in financial firms, saying they don’t need the money, resent the intrusion and feel it’s unfair to rescue companies from their own mistakes.

But regulators said some banks will be pressed to take the taxpayer dollars anyway. Others banks judged too sick to save will be allowed to fail.

The government also said yesterday that it will guarantee up to $1.4 trillion of private investment in banks. The combination of public and private investment is intended to refill coffers emptied by losses on real estate lending. With the additional money, the government expects, banks would be able to start making additional loans, boosting the economy… .

Peter Fitzgerald, chairman of Chain Bridge Bank in McLean, said he was “much chagrined that we will be punished for behaving prudently by now having to face reckless competitors who all of a sudden are subsidized by the federal government.”

At Evergreen Federal Bank in Grants Pass, Ore., chief executive Brady Adams said he has more than 2,000 loans outstanding and only three borrowers behind on payments. “We don’t need a bailout, and if other banks had run their banks like we ran our bank, they wouldn’t have needed a bailout, either,” Adams said.

“Pressed” how, exactly? One wonders. But common sense suggests two strong indicators that money is being misallocated. The first is when it goes to an institution with a track record of failure. The second is when it’s being urged on a recipient who does not even want it. It seems that we’re faced with one or the other now.

Media Bias - Proven!

The other day, my colleague Michael Cannon published a fun little Briefing Paper entitled “Does Barack Obama Support Socialized Medicine?” In it, he gives the provocative label, “socialized medicine,” a sensible meaning and examines where some important people stand on it. Worth a read.

There were a couple of lines in it that I thought were particularly interesting:

In April 2008, the Urban Institute held a public forum titled “What Is Socialized Medicine and Is It Relevant to Health Care Reform?” where scholars dismissed claims that Obama’s and similar plans would move America toward socialized medicine. The New York Times, the Associated Press, and National Public Radio have all run ostensibly objective stories with the same purpose. Of those organizations, only the Associated Press bothered to solicit input from anyone who thinks such claims are valid.

Awwwwwwwww. Did Michael not get a call from reporters when we thought he was supposed to? Pooor baaaaby! And welcome to the club, bud!

But today I spent some more time reviewing Mr. Cannon’s work: to wit, this blog post about Paul Krugman.  His post links to this NPR story on the debate. I’m not all that big on reading, so I skipped down to the audio highlights and listened to a segment from each of six speakers chosen by NPR. And do you know what I heard?

Twenty-nine seconds from one advocate of socialized medicine. Forty-one seconds of a second advocate of socialized medicine. And twenty-four seconds from a third.

Not very much, you say? That’s our hyper-kinetic, media-saturated world. But get this:

The other side’s three advocates - Cannon among them - got fourteen seconds, twenty-one seconds, and fourteen seconds respectively.

The longest clip given to advocates of freedom is shorter than the shortest clip given to advocates of socialized medicine, and the total time given to socializers is just shy of double the time given to keepers of the flame of liberty.

Media bias! Proven! At least - according to the weakest possible standards of proof. …But still, ya gotta wonder.

Lots of Red Ink Looms for Chávez’s Venezuela

A study prepared by the Deutsche Bank estimates that Venezuela needs the price of oil to stay above $97 per barrel in order to pay for government expenditures. Yesterday, the barrel of West Texas Intermediate Crude Oil at Nymex closed at $81.19.

If the troubled global economy keeps pushing the price of oil downwards, Hugo Chávez’s Bolivarian revolution will be in serious trouble.

President of Honduras Calls for Drug Legalization

It seems that there is a growing trend in Latin America to openly challenge Washington’s war on drugs. Yesterday, Manuel Zelaya, president of Honduras, openly called for the legalization of drugs as a way to tackle drug-trafficking violence. The venue for Zelaya’s plea couldn’t be less welcoming: a ministerial summit of the UN Office of Drugs and Crime.

However, Zelaya is not alone in Latin America. In Argentina, the current government of Cristina Fernández is promoting the decriminalization of drug consumption. In Mexico, where drug related violence is tearing the country apart, the PRD, the biggest opposition party, has also openly called to legalize drugs. And this is not just a left-leaning phenomenon. Felipe Calderón, Mexico’s conservative president, has recently proposed decriminalizing small amounts of some drugs, including cocaine and marijuana.

There are several factors that explain why Latin American leaders are now calling for a different approach to the U.S. international war on drugs. First, the left-leaning governments that don’t enjoy good relations with Washington are less concerned with upsetting it. Second, drug-related violence and corruption are reaching highly disturbing levels, especially in Mexico and Central America and are overwhelming law enforcement authorities. In Guatemala the local army recently admitted that there are portions of the country’s territory under the control of local cartels. Washington’s war on drugs is threatening the stability of these democracies.

However, another important factor is that many Latin American countries are now less susceptible to punishment from the United States, thanks in part to free trade agreements. A decade ago, all Latin American countries but Mexico depended on unilateral trade preferences to export to the U.S. market. Upsetting Washington could represent losing these preferences. Today, 11 Latin American countries have implemented (or are in the process of implementing) permanent trade agreements with the United States that ironically gives them more stability in their relationship with Washington.

As Ted Galen Carpenter recently explained in an op-ed, the stakes are too high for stability and security not only for Latin American countries but also for the U.S. Let’s hope that more leaders in the region raise their voices against the failed international war on drugs, and call for sensible policies such as drug legalization.


Michael Barone on “The Coming Liberal Thugocracy:”

In September, St. Louis County Circuit Attorney Bob McCulloch and St. Louis City Circuit Attorney Jennifer Joyce warned citizens that they would bring criminal libel prosecutions against anyone who made statements against Mr. Obama that were “false.” I had been under the impression that the Alien and Sedition Acts had gone out of existence in 1801-‘02. Not so, apparently, in metropolitan St. Louis. Similarly, the Obama campaign called for a criminal investigation of the American Issues Project when it ran ads highlighting Mr. Obama’s ties to Mr. Ayers.

These attempts to shut down political speech have become routine for liberals. Congressional Democrats sought to reimpose the “fairness doctrine” on broadcasters, which until it was repealed in the 1980s required equal time for different points of view. The motive was plain: to shut down the one conservative-leaning communications medium, talk radio. Liberal talk-show hosts have mostly failed to draw audiences, and many liberals can’t abide having citizens hear contrary views. …

Corporate liberals have done their share in shutting down anti-liberal speech, too. “Saturday Night Live” ran a spoof of the financial crisis that skewered Democrats like House Financial Services Chairman Barney Frank and liberal contributors Herbert and Marion Sandler, who sold toxic-waste-filled Golden West to Wachovia Bank for $24 billion. Kind of surprising, but not for long. The tape of the broadcast disappeared from NBC’s Web site and was replaced with another that omitted the references to Mr. Frank and the Sandlers. Evidently NBC and its parent, General Electric, don’t want people to hear speech that attacks liberals.

Read the whole thing. Conservatives are not well-positioned to lodge complaints. Especially McCain.

Today at Cato