Yesterday . . . and Today

Yesterday, all my troubles seemed so far away

Now it looks as though they're here to stay

Oh, I believe in yesterday.

Suddenly, I'm not half the man I used to be

There's a shadow hanging over me

Oh, yesterday came suddenly.

-McCartney/Lennon

This post is about two yesterdays, the one we enjoyed 2 years ago and that left suddenly, pre-economic downturn; and the one America did not enjoy in the 1930s.

Dr. Paul Krugman had a brief blog on the current economic banana as compared with the Great D.  Considering that the major forward-looking indicators of economic activity predict much worse to come (and then currently predict several months of scraping along the bottom), the argument that what we are experiencing is not a milder version of the Great Depression may be very optimistic.

As Krugman explains at the bottom, to find the percentage decline in manufacturing for each downturn, multiply by 100 (12% decline for now vs. 27% then).  

Two more quick points.  One:  Our economy is less oriented to manufacturing now.  The current massive declines in exports of manufactured goods out of Asia demonstrate that the U. S. decline would have been much worse now had we not outsourced so much manufacturing.

Two:  There was a major  spurt in manufacturing in the 1920s, similar to that of the 1990s. Manufacturing and "non-house" consumption growth from 2002-7 were not at boom levels, thus a smaller fall-off in percentage terms would get to the same "baseline" or below trend levels. 

Here's the entirety of the Krugman posting from March 20:

The Great Recession versus the Great Depression

Reading this article about the global manufacturing plunge, I wondered: how does the current slump stack up against the early stages of the Great Depression? The US has consistent industrial production data back to 1919, so it’s a fairly straightforward exercise. Below is the change in industrial production, measured in logs, from the previous peak in 1929-30 and 2007-9.

At first, the current recession didn’t hit industrial production all that hard. But the pace accelerated dramatically last fall, so that at this point we’re sort of experiencing half a Great Depression. That’s pretty bad.

Clarification: Those are natural logs — sorry, economists use them so frequently I forgot to explain. So basically multiply by 100 to get the percent change.

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Krugman v. Obama

I started this blog last year with writeups criticizing some fuzzy thinking by Dr. Paul Krugman, the noted economist-pit bull-lion (take your pick) of the left (see Krugman Loses It). His op-ed today at the New York Times, "Wall Street Voodoo", is of real importance because it reveals two major criticisms of Barack Obama himself. This criticisms may be missed by a quick read, so I wanted to post this rather than devote myself to my second cup of the day.

A. Consider paragraph 1, which appears to be a typical partisan snipe by Dr. Krugman:

"Old-fashioned voodoo economics — the belief in tax-cut magic — has been banished from civilized discourse. The supply-side cult has shrunk to the point that it contains only cranks, charlatans, and Republicans."

DoctoRx here. Who campaigned on a platform of a tax cut for 95% of Americans? And who has put almost half of the proposed stimulus package into tax cuts rather than Government spending? Well, the correct answer is: Barack Obama. Since he is not a Republican, then he must be either a crank or a charlatan, in Dr. Krugman's view.

B. After the body of the argument, the piece ends in a pessimistic note:

"Unfortunately, the price of this retreat into superstition may be high. I hope I’m wrong, but I suspect that taxpayers are about to get another raw deal — and that we’re about to get another financial rescue plan that fails to do the job."

DoctoRx here. Who will be the President who Dr. Krugman fears will provide taxpayers a raw deal, and another failed rescue plan (and who as Senator voted for the prior failed rescue plan and last year's failed stimulus plan (remember that one, with the useless rebates?)): It's the O-man, that's who!

This split amongst the Democratic faithful is big news.

And for what little it is worth in the scheme of things, I agree with most of Dr. Krugman's points, though I disagree with his use of the N-word ("Nationalization" of the banks), both on policy grounds and on tastelessness grounds (especially given the ethnic heritage of Mr. Obama; let's not even mention an "N" word even in the service of a joke). Instead of nationalizing the failed banks, I say let 'em go. Even their names are toxic at this point. I'm going to die. So are you. So can failed companies, whether they make machine tools, sell consumer electronics or off-price women's clothing . . . or whether they happen to deal in financial matters.

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