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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

February 11, 2010 at 10:20 AM

Socialists and speculators? It’s all Greek to me

Top of the News: Socialism ain’t what it used to be. The Greek prime minister, a socialist, has been spending his time trying to appease the conspiratorial cabal that really controls the commanding heights of the world economy: bankers and speculators. While the European Union has agreed to a nebulous form of “support” to fend off a Greek default, the drama is far from over.

Greece wasn’t highly vulnerable to the global meltdown merely because of high government spending — it was that the spending was done through borrowing, and the Greek economy is not as diverse, entrepreneurial or productive as it needs to be. As with other smaller economies, business and tax revenue have been badly mauled by the Great Recession. The result: shakily financed government debt that is 120 percent of GDP. And unlike the United States, Greece lacks the world’s reserve currency or the safe haven of Treasury securities.

Germany must be wondering if the Euro was such a good idea after all. The EU has a common currency but each country sets its own fiscal policy. Germany has sustained decades of sound monetary and fiscal policy at home, as well as one of the world’s most robust economies and best social-safety nets (and high-speed rail). Now Germany and France must step up, at their peril, to keep the Euro bloc from unraveling under pressure from the Great Disruption. Its unraveling would hit America hard, too.

In a few weeks or months, those who are curious will find the rare news report on the speculators that were short-selling Greece, making the crisis worse as they enriched themselves.

The Back Story: Why, oh, why do politicians put numbers on their hopes for job creation? Gov. Chris Gregoire claims her jobs plan will create 40,000 jobs. Now the Obama administration is saying it expects 95,000 new jobs a month this year.

Remember in True Grit, when the outlaw says to John Wayne: “That’s mighty brave talk for a one-eyed fat man…”? The Duke could deliver with his guns, but politicians are extremely constrained in today’s environment, where taxes must usually be cut and “government is the problem.” Much of the federal stimulus went to just preserving jobs — a good thing, but hardly the New Deal. One-third of it went to tax cuts that weren’t stimulative. At the state level, leaders are trying to close a huge budget hole.

Government can indeed create jobs — just look at America’s one ambitious jobs and uplift program: the military. But we’re not doing FDR-like things anymore, which for the 21st century would involve a much larger commitment to such things as high-speed rail, Amtrak, transit, the electrical grid, etc., plus more money for research, universities and a tougher trade policy. That would create jobs.

Otherwise, politicians will play small ball and hope that the private sector responds. But as we face the worse unemployment crisis since the Great Depression — where we are down more than 10 million jobs and need to create 125,000 a month just to stay even — 95,000 is neither serious nor realistic. I guess politicians don’t think they can speak to the American people like adults, about the historic challenges we face.

Today’s Econ Haiku:

At the New York Times

The climate change deniers

Get strange new respect

Comments | More in Macro/Big picture


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