Sunday, May 3, 2009

Obamanomics vs. economics

Barack Obama blames "a small group of speculators" for the bankruptcy of Chrysler. This is a politically convenient alternative to blaming the greedy goons who run the United Auto Workers.

Yesterday, Instapundit linked Conor Clarke, who wondered "why business and policy stories get reported like campaign stories," which is an easy question to answer: Because that's what the editors want.

The Obama phenomenon has so entranced the journalistic elite that everything is now framed in terms of whether it helps Democrats or hurts Republicans (these are the only two possible effects of any event). As I remarked via Twitter to Tammy Bruce, if the Chicago Bulls go to double OT, the media are now obliged to tell us how this news will help Democrats.

The problem that this absurd synchonicity between the media and the Democrats has created is that economics isn't politics, and economics is not public relations:
Don't you people understand that it doesn't matter how "popular" you and your policies are, if what you are doing is the wrong thing to do? And that it doesn't matter how clever and persuasive your arguments are, if your policies bring disaster?
The fundamental realities of supply and demand cannot be wished away by Hope, and all the favorable publicity in the world is not going to change that. And yet Team Obama apparently believes that, with the assistance of their media friends, they can alter economic reality.

So today, Instapundit links Megan McArdle, who talks about how Obama has attempted to bully hedge-fund investors on behalf of the UAW and asks the provocative question:
What do you think this is going to do to the supply of credit for industries with powerful unions?
Indeed. Investors are not stupid, and you can't make capitalism work without capital. McArdle actually voted for Obama, but has recently written some of the most sobering assessments of the misconceptions of Obamanomics. This past week, she wrote a brilliant 1,070-word article summarizing the fundamental problems, which inspired me to describe the failure of Obamanomics thus:
The stimulus-and-bailout policies have not addressed the fundamental problems of the economy -- namely, an excess of debt and a shortage of capital to spur job creation -- while the entitlement trainwreck of Social Security and Medicare loom immediately ahead. By piling on new trillion-dollar deficits, at a time when the recession will result in significant tax revenue shortfalls, the Democrats are steering the economy into a stagflation trap.
Obama and the Democrats apparently believe that by applying enough political muscle and ginning up enough good media coverage, this economic reality can be made to go away. They're wrong. It Won't Work.

UPDATE: Oh, spare me your psychobabble:
What is the chance that the current downturn will morph into another Great Depression? That question has been preoccupying people for months. The popular mood has a huge impact on the economy, so it’s worth noting what many people seem to forget: Depression scares come and go. And by one authoritative measure, the current outbreak of concern has been surprisingly mild.
This is written by a Yale University economics professor! Repeat after me: Economics is not psychology.

This Ivy League idiot then cites a poll of consumer confidence, as if "popular mood" was the most important factor in the current crisis. It's not. We are confronted with a capital shortage, which would be disastrous enough even if the government weren't currently in the hands of people who are profoundly hostile to capital.

Would it be too obvious to point out that the great mid-20th-century heyday of Keynesian economics was also the heyday of Freudian psychology? And that both of these theories were wrong? Look at what this idiot, Robert Shiller, wrote about Keynes and "animal spirits" in January and tell me if you've ever seen greater economic idiocy published in the Wall Street Journal.

The Keynesian professor looks at the Rorshach inkblot and sees consumer confidence (since this "demand-side" input dominates Keynesian thinking), whereas I'm looking at the inkblot and seeing an inkblot.

You can't make capitalism work without capital, and the capital shortage is going to result in a lack of job creation. Or, as Michelle Malkin said in September: "The fundamentals suck."


  1. Terrific analysis. The delusions of this administration and their supporters are stunning on a daily basis. I wake up every day hoping that maybe some of the "kool aid" has worn off overnight. Thanks for the daily dose of reality and sanity.

  2. You see Obamanomics as a failure because it will not acheive what you assume to be a shared goal - reviving economic productivity. Nothing could be further from the truth.

    Obamanomics is not a means to improving economic productivity. It is merely one part of an iterative political strategy disguised as economics. You see glimpses of the true endpoint reflected in McArdle's concern for capital.

    Obama's moves are intended to keep capital out of the markets. When the markets fail to recover due to a lack of investment the next phase of Obamanomics will begin. That phase will attempt to fix blame for a lack of recovery upon those who were unwilling to invest in such a fraught environment.

    The goal then being seizing control of enough capital such that the government becomes the dominant player in any market.

    It only sounds sinister if you question their motives, but since we all know that the Democrats always have the best of intentions there will be nothing to worry about.