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By Owen Paine on Tuesday October 6, 2009 10:06 AM

Let's take the Wayback to Tuesday, December 16, 2008. It's a snowy day in Chi-town, the day the now and future job drought was programmed into the fiscal mix; and as many suspected, yes. it was porker Larry Summers who done it.

And here I've been trashing poor tubs-of-fun Chrissy Romer -- oh the shame of it all!

In fact the titmouse-voiced gentle mountain Chrissy had calculated it way closer to Vickrey standards, in the run-up to that final internal stimulus debate:

[Romer] had run simulations of the effects of stimulus packages of varying sizes: six hundred billion dollars, eight hundred billion dollars, and $1.2 trillion. The best estimate for the output gap was some two trillion dollars over 2009 and 2010. Because of the multiplier effect, filling that gap didn’t require two trillion dollars of government spending, but Romer’s analysis... suggested that the package should probably be more than $1.2 trillion.
But the swinish blackhearted Larry Ziffle saw to it that didn't come close to happenin':
The memo to Obama -- detailed only two packages: a five-hundred-and-fifty-billion-dollar stimulus and an eight-hundred-and-ninety-billion-dollar stimulus. Summers did not include Romer’s $1.2-trillion projection. The memo argued that the stimulus should not be used to fill the entire output gap; rather, it was “an insurance package against catastrophic failure.
That "memo to Obama" was ground zero for the planned stagnation. Rationalizations followed, of course, and mile-thick ignorance helped, as it always does.

Foremost among those providing sweet reasons for intentional misery was, of course, our Wall Street wizard, Lardass Larry:

"... a package that was too large could potentially shift fears from the current crisis to the long-term budget deficit.... which would have an unwelcome effect on the bond market."
A complete recovery would be bad for.. the bond market?!?!

Care for a smoking gun, anyone?

Of course we could blame Larry, and that's good innocent fun, and quite right as far as it goes. But it's not the end of the story.

This is a guy with a track record -- a very consistent and well-known track record -- and he's the guy Obie chose to trust.

Comments (6)


op, read the article. Whole thing. Entirely non-critical, with many exciting "behind-the-scenes" moments.

I guess a lot of it is the sort of thing I expected, except there are no overt mentions of conspiring to further impoverish the working class. I don't fully understand why this article made me want to kill myself.


"there are no overt mentions of conspiring to further impoverish the working class"
no just keep em miserable
their own impotent fury

note your highly appropriate induced malaise :

"this article made me want to kill myself"


the crushing of the little amerikan spirits

fear of falling into the creditless jobless limitless vacuity

"but i gotta hold on to this soul-fuckin job or else i'll...."

no wonder raising to a towering indignation over dear roman
comes as a welcome diversion

harness jockey bobby blake
phil's spectre
now sharon's widower
serial moral salsa


"Of course we could blame Larry, and that's good innocent fun, and quite right as far as it goes. But it's not the end of the story.

This is a guy with a track record -- a very consistent and well-known track record -- and he's the guy Obie chose to trust"
on reconsideration
i withdraw that final comment

larry has morphed ...some
the era of rubinomics is past
now like
the dick morris of poli econ he is

the prick's playing the middle fairway
but thru a dog leg

yes he's a diffrent larry
just about as much different
as the present emperor is
from the last

flexible but not loosey goosey


al in all solid hind sight conventional wisdom
with bear characteristics
dressed as the vindication of a prophet

seems unexceptional inits narrative
save for the use of the word depression instead of stagnation
i write that off as the ususal
self promotional sensationalizing

note his key definitional summary:

" When debt is the real issue underlying an economic downturn, the result is a period of stagnation and short business cycles as we have seen in Japan over the last two decades."

hardly remarkable statement that eh ??
now comes the sweep of the self coronating
vast intellect:

" This is what a modern-day depression looks like – a series of W’s where uneven economic growth is punctuated by fits of recession. "

ie modern depressions aren't depressions
they're stagnations

more ??
"A recession is merely a period of recalibration after businesses get ahead of themselves by overestimating consumption demand and are then forced to cut back..."
merely ???

notice he refuses to highlight
the nominal wage governor
as fed policy cycle driver
co shaping
this process with the dollar's forex motions
the period of "great moderation"
in real wage growth 83-now

to continue:

" Recessions can be overcome with the help of automatic stabilzers
like unemployment insurance
to cushion the blow."
not so much overcome as shortened out put cycle wise
but not job cycle wise

relative national "expansion rate" based
trade balance improvement requires
unsynchronized recessions/recovories
and unequal rates
of contraction re expansion
but trade balances are not automatically adequate
nor are fiscal deficit increases
automatically adequate
even for recessions like the last three
where despite shallow recessions in ouput and fast recovery protracted
job market doldrums stagnation was de rigeur

"Depression is another event entirely."

indeed and a contained depression
as the levy people called our present
dynamics back in 91-93
is precisely because it is policy contained
not a depression at all
its a stagnation
ie a fairly conventional output "recovery" followed by slow growth
inadequate to restore
pre event employment rates in the medium term
" I am convinced that it is politically unacceptable to have the government propping up the economy "
sky hooked statement at least here
is this self evident ??
why ??

odd notion
"debt deflation"
does this mean debt induced deflation ??
a spontaneous market effect on product prices and wages as debt repayment more and more crowds out product purchases
if so say that or at least explain your quote
i think this is another misnomer for ...write down thru default
ie an ugly futile protracted interval
one that is utterly un-necessary
and grotesque because it must commence and cease prior..prior to any serious job market recovery
the article/post
leaves out the policy program that obviates all this
by squelching it with his
self eveident truth
fiscal deficits must remain inadequate for political reasons

who's political reasons one might ask??

" I must admit to having a preternatural disaffection for large deficits and big government "
his clincher cartoon

gag line explicated by a fudge query :
"Have we created an entire stimulus culture?"

then again there's his lucky seven spot:

7)"Needless to say, this kind of volatility will induce a wave of populist sentiment, leading to an unpredictable and violent geopolitical climate and the likelihood of more muscular forms of government"
has a certain lightness of touch
only a chicago school type could pen
i note the reference to posner

the piece is loaded with over sell and conventional "follow my bright star
to the pre hot blast warming room
at the door step to hades "

i hate
helium filled blubberings

the claim to foresight when it is
in fact hind sight

i'd like to see his writings from 2001-2005
before i call the cheka on him though

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