Time's Justin Fox, ever the master of nuance and balance, contemplated "the difficulty of manufacturing consent on the banking bailout" one week ago. His coda:
The media I consume are a cacophony of often diametrically opposed voices. And on this banking stuff, they tend to be sincere, thoughtful, disinterested voices. The disagreements don't follow partisan lines. It's not a dumb vs. smart thing. It's just that it's not obvious what the right answer is and the financial establishment which once had all the answers now has almost no credibility. So we all argue and argue and argue.
You could not ask for a better example of this principle than two reactions to the New York Times article on stress tests that I summarized in my last post.
Naked Capitalism's Yves Smith, who is never loath to ladle her contempt of the Obama administration in jumbo doses, read the passage in which the Times declared that Geithner "warned he would take a tough stance" on the banks, and declared it "tripe" before launching into a full-scale evisceration.
But then comes The New Republic's Noah Scheiber, who has done an awful lot of good reporting on economic policy making over the last year, and who reads the exact same passage and calls it "pretty encouraging news."
It sounds like Geithner has pretty realistic goals for the sale of the toxic assets: Get them off the banks' balance sheets so we can see how big the losses are and begin to recapitalize the banks -- possibly with private capital (I think it's unlikely that private investors will want to fill the hole, but worth a shot) and, failing that, with public money. There doesn't appear to be any delusion that the sale of the assets will somehow solve the problem itself, or about the value of the assets. Increasingly, the whole point of the exercise seems to be forcing the banks to come clean about this stuff.
All in all, very reassuring.
Fun stuff! Here's another example. On Monday, I linked to Barry Eichengreen and Kevin O'Rourke's column pointing out why, viewed globally, the current downturn is deteriorating at a faster rate than during the Great Depression. The authors were especially alarmed at collapse in world trade, because of "the prominence attached in the historical literature to trade destruction as a factor compounding the Great Depression."
But this morning, Businessweek's Michael Mandel looks at the amazing shrinking U.S. trade deficit, which has shriveled from an annual rate of $743 billion to $313 billion in just one year (February's trade deficit was a measly $26 billion!), and pronounces it "good news"!
A further fall in imports and the trade deficit will have several salutary effects. First, it will mean that the U.S. has to borrow less from overseas. Second, it will make it easier to fix the financial system, since banks and other financial institutions will not be funneling so much foreign money into the U.S. economy.
Third, and perhaps most important, it will become easier to see just what remains of our manufacturing base. I'm reporting a new story right now about how excess globalization, fueled by the credit bubble, distorted growth statistics in the U.S. and around the world.
Diversity? Thy name is the econoblogosphere.
Shares