September 22, 2011

Two economies - the evidence mounts; why the Fed is limited

Last week, Salon had a story on the "hourglass economy." Here's the takeaway:
It's not hard to understand what is happening here. The middle class, squeezed by globalization and advances in technology, is sinking backward, while the rich benefit disproportionately from gains in trade and excessively accommodative tax policy.
More on this below.

This week, that's reflected in an AP story about a selected boom in the housing market, focusing on, of all places, Detroit.

Well, not quite Detroit. Selected rich suburbs of Detroit. Per an AP story, talking about a housing recovery, but only for houses for the rich:
The (rich-others) divide is also making credit a perk of the rich. Mortgage rates are the lowest in decades. But what good are absurdly cheap rates if you can’t get a mortgage? The banks aren’t granting credit to anyone “who even has a smudge on their application,” says Jonathan Miller, founder of real estate consulting firm Miller Samuel. Applications for new mortgages languish at 10-year lows.
I applaud Federal Reserve Chairman Ben Bernanke's actions yesterday, while noting, in light of this, a caveat he has made himself.

Bernanke has in the past consistently been cautious on where to trod, and said that Congress needs to take more action. While his Fed predecessor bears plenty of blame for the crisis we're in, and he does a bit himself, Bernanke is right. Ultimately, the Fed can only do so much outside of a political solution.

Whether Obama's tinkering at the edges "jobs program" or whatever, real, deep political action is needed to produce a "fix that works," i.e., a fix that produces a stable long-term recovery.

Preznit Kumbaya squandered two years believing you could negotiate with today's GOP. Educated progressive voters squandered three years believing he was something that he's not, i.e., more than a neoliberal. And, pseudo-progressive pundits would still have us believe it's all the GOP's fault.

It's not. Contra the Salon pull quote, Preznit Kumbaya is trumpeting "free trade deals" as part of his jobs package. He ignores that many of the jobs created will be low-wage sweatshop jobs likely worse in both pay and working conditions than the jobs the deal wipes out. But yet, the likes of Andrew Leonard can assume that it's only the GOP who doesn't care that we have a Gini index like that of the Philippines.

1 "More people going to college" is not a fix. (Nor is the claim that Obama's massively increased non-loan aid to students. He's tweaked that, and not a lot more.)
2. "Free trade deals" certainly aren't a fix.
3. For immediate stimulus, a "jobs deal" that doesn't include direct hiring of blue/gray collars by the federal government is not a fix.
4. Promoting "green energy" while ignoring free trade undercutting it, too, is not a fix.

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