The Wall Street Journal provides a big-picture look at how the state has made massive advances over markets in the last year and a half.
In 2008 and 2009, Washington strove to save the economy. In 2010, Americans will get a clearer picture of how Washington has changed the economy.
Only as the recession recedes will it become fully evident how permanently the state’s role has expanded and whether, as a consequence, a new, hybrid strain of American capitalism is emerging.
One thing is clear: The government is a much bigger force in today’s U.S. economy than it was before the financial crisis. “The frontier between the state and market has shifted,” says Daniel Yergin, whose 1998 book “Commanding Heights” chronicled the ascent of free-market forces starting in the 1980s. “The realm of the state has been enlarged.”
To prevent crumbling housing and credit markets from sinking the broad economy, the Bush and Obama administrations and the Federal Reserve spent, lent and invested more than $2 trillion on one initiative after another. If you owned a credit card or a money-market fund, had a savings account, bought a Dodge pickup or even a hunting rifle, or borrowed to buy a home or finance a small business, odds are good that the U.S. stood behind you or the firm that served you.
Washington pumped $245 billion into nearly 700 banks and insurance companies and guaranteed almost $350 billion of bank debt. It made short-term loans of more than $300 billion to blue-chip companies. It propped up life insurers and money-market funds.
It bailed out two of the three U.S. auto makers. It lent billions trying to jump-start commercial-real-estate, small-business and credit-card lending. In two February stimulus bills enacted a year apart, the government committed $955 billion to rouse the economy.
Today the U.S. government, directly or indirectly, underwrites nine of every 10 new residential mortgages, nearly twice the percentage before the crisis. Just last week, the Treasury said it would cover an unlimited amount of losses at mortgage giants Fannie Mae and Freddie Mac. Etc.
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also see “Higgs Ratchet Effect”!
I had a decent, civil conversation with an aunt over Christmas break; one of those out-of-town visits to relatives you see a few times a year or less. She’s votes lock-step with democrats all the way. A politician becomes an angel if they just put a “D†after the name. It’s so easy! These hospitable relatives of mine are comfortably middle-class Roman Catholics, which befuddles the mind even more.
Anyway, she made the point to me that “trickle-down economics†does not work. I mused over the conversation later and realized why I did not argue the point: “Trickle down economics†in our day do not work because the same fake currency is used on the private side of life as the public works government engineering she champions. In other words, both approaches to stimulating economies, bridging the income inequities and all that noble stuff… Both methods do not work when the money that you SAY you are doing it with is completely fiat, counterfeit, fake and debt-based. So these numbers really mean nothing at all to me any more, except the destruction of the dollar.
What mind-games the media plays when they pit good little republicans and democrats together to fight out where this fake money should go! Such a matrix delusion we are given to think in!
No kidding, Keith! Well said.
“Only as the recession recedes”
Yeah, in a decade or so.
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