Wednesday, February 11, 2009

Financial Crisis Now an Economic Crisis

This may seem subtle and even obvious but this point occured to me today while reading an article by Daniel Gross in Slate on Secretary Geithner's speech about the bailout. The hostile punditry and market response seemed premature to me, given the fact that his speech could have been a lot worse and the Obama team has only been in office a couple of weeks.

But back to the point: It appears we in the United States and elsewhere are moving from a financial crisis to a real economic crisis. Words matter when considering policy.

Here is Gross's final paragraph. You can follow the links:

The great challenge for Obama now is that the economy at large is beginning to resemble the financial sector. The latest readings on job losses, auto sales, and overall economic growth show an economy that is spiraling downward. Politicians may be hoping that the economy is like a bungee-cord jumper, who, after experiencing a sickening drop, experiences great relief as he bounces back sharply. But they might want to temper the promises they make about recovery. Many economists believe we need a bigger stimulus package, not a smaller one. Obama's rhetoric about recovery may be reassuring, but, at this point, Geithner's pessimism is more credible.

1 comment:

Jalal Alamgir said...

This is quite ominous. What remains to be seen is whether US will begin to employ protectionist measures, which will surely bring reprisals from other countries. Whatever happens the administration should resist the temptation of "beggar thy neighbor."

Jalal Alamgir