BBC News Online has a little piece entitled “US economy: What can be done to stimulate growth?”
It’s actually not so bad, with two of the four economists interviewed taking positions which aren’t 100% in favor of more borrowing and spending. Although, there is an obvious bias on the part of the online editor who chose them. The first up, Robert di Clemente (a generally sharp guy) speaks more truth than the other three combined, and makes real points about why we are where we are. The other three either say “Please, sir, may I have some more QE”, or suggest that we may as well get around to doing more of it.
Naturally, one of them is the BBC’s favorite far-Left economists not named Paul Krugman, one David Blanchflower. I’m sure many people here have seen him over and over again on the BBC (type his name in the search field on this blog).
What’s interesting is that only di Clemente says outright that Government policies on jobs and growth have failed. He also tells us something that nobody has ever said on the BBC before: 40% of jobs losses have come from three industries: housing, automotive, and finance. Think for a second about what this means, as two out of three are very relevant to the UK.
The reason for all those job losses in the housing industry is obvious: the whole thing was bloated way, way out of proportion, to an unsustainable level, by specific Government policies. Fannie Mae and Freddie Mac and the Government-sponsored sub-prime mortgage scheme all led to houses being far overvalued, and a massive construction boom by developers in the hopes of everyone getting to buy and sell and flip houses and buy-to-let, and all that. Does that sound familiar? It should. So when that bubble burst, of course there were going to be an awful lot of people out of work.
That doesn’t mean that we need to do something to raise the industry back up again to unsustainable levels so all those people can have jobs again, either. It means that many of those jobs should never have existed in the first place, and were actually based on an ethereal foundation. Things never should have gotten so out of hand. If many of those jobs hadn’t existed, it’s quite possible many of those now unemployed would have found work in other, more sustainable sectors, and would still have jobs now.
The automotive industry has been bleeding jobs for ages, and the bailout didn’t stop it from continuing. The loans and what amounted to taxpayer funding of union pensions didn’t add a single job, and hasn’t put a single person back to work. Nor can any QE scheme return the automotive industry to its former, unsustainable level. So again, Government policies did not and cannot bring back jobs.
Di Clemente also mentions the finance industry. I know what you’re thinking: “Hang on, the BBC told me that we bailed out the evil bankers so the greedy bastards who caused all our woes got off scott free and still got their massive bonuses, etc.” So how can there be unemployment in the finance industry? It certainly doesn’t jibe with the BBC Narrative.
In fact, 106 banks went bust in 2009, large and small, retail and investment. Last year, the number was 109. Some of these got bought out and absorbed into larger companies, which, or course, still means plenty of people made redundant. This doesn’t include venture capital firms, hedge funds, etc., which have also folded since then.
The other fascinating thing di Clemente mentions is that there are plenty of employers out there looking to hire, but simply can’t find the right skilled workers. Apparently all those liberal arts graduates with watered down degrees we’re churning out don’t have the right skills for real existing jobs. Does that sound familiar?
The next bubble to burst in the US is student debt. That’s another Government scheme artificially propping up an entire industry to unsustainable levels. Cracks are beginning to show, but it will be a couple years before it all starts to go south in the manner of the mortgage crisis. Watch this space, and don’t expect the BBC to tell you about it. It’s actually rather strange that the BBC has never mentioned this, considering how much energy they’ve spent telling you that student debt is terrible so the nasty Tories should abolish tuition fees like they do in wonderful Scotland. You’d think they’d be looking for some context which might back up their ideology. Only they can’t be bothered because they just know they’re right, so it’s not important.
In essence, di Clemente raises more interesting points in 340 words than an entire year of BBC reporting on the US economy. He basically blows all of Mardell’s and Flanders’ reporting out of the water. These are major issues, none of which are discussed openly and honestly by the BBC. He’s smart enough not to point his finger directly at the President, and instead blames the ideological divide in Congress. But it’s very clear from his statement which side he thinks is the problem, and it ain’t the heroes of the BBC. Why isn’t this man on speed dial instead of Blanchflower? Ah, I see I’ve answered my own question.
More damning is the fact that there are exact parallels in Britain for most of this. Yet the BBC never discusses it. Where’s the context? Why not look for lessons to be learned, BBC? Is it because you don’t like what you see and it will hurt the Narrative?
So obvious when you put it like this David.
Blanchflower is the BBCs Brownie of choice. He has been covering for the beloved Gordon and the experiment we`re still clearing up from.
Utterly shamless, brass necked and none of them will be reminded of their role in getting it all so wrong.
It`s as if they think we`re goldfish…the mass of people will not forget who crashed the car and ran off to Harvard, Dartmouth or the BBC studios.
I know no-one who listens to the BBC these days..so biased, so wrong and so at odds with the mass of the British people.
CJ… While i share much of your view, you haven’t come to terms with the fact that there are enough of your “goldfish” type out there in the electorate, and they know it! From their choice of reading matter (daily rags) to being unaware the INBBC is feeding them propaganda to sheer apathy or their class envy, there’s no way they are going to see their world any different I’m afraid. That argument also applies to a degree to our “Dave” too. How can folk vote into office a total europhile who has now denied us our rferendum, once promised as “cast iron” and who now wants allow Turkey inot the EU? It beggars belief!
I wish i moved in the same circles as you do and who dont (to a man) listen to the BBC ? hell , my world is sure different to yours. Pray continue your campaign.
You might be right Graham. People are and can be stupid, but if ANYONE out there is happy enough to fall for the Libleft Lies that the political class and the media left us all with in 2010…and willing to expect any one of them to have anything to say about how to correct it…then I`ve not met them here is real life.
School staff rooms, council quango meetings, outside courts and union marches?…well they talk of nothing else…but that`s not real life. Just turkeys with their heads up each others arses who need the Guardian and the BBC to tell them not to think…as if!
The silent majority keep their own counsel, but will deserve to be stuffed if they give a Toynbee, Miliband or Blair, Brown etc any house room-even in the tiniest of minds!
I happen to think that the Frogs Chorus of the BBC and the LibLefties are just more raucous and shrill at the moment. Sense 40 or so years of their cultural hegemony( as their boss wuold have said) is at an end…although it won`t seem that way to any of `em!
Long way between the tiny brain and the lashing lazy tail of the dinosaur…but ends up extinct nonetheless, please God.
Pray God I continue?…praying helps!
I`ve seen the end of the Book and know the good guys win
The BBC is hopeless at economics, and that’s not surprising.
A clique of securely employed, highly paid and pensioned, often privately educated people from the one corner of the UK which is relatively affluent is not really worth listening to about the real world.
Once you see how much they overpaid the Rosses…the shambolic move to Salford with all manner of consultants selling the “pods” and “creative chairs”…how much they inflate the whole media going rate with we saps as the bankrolling patsies…and , generally: distort anything with their bloated and life-denying shadow…I think it safe to say that,
No they`re a crappy at economics as everything else…they never get the consequences of what they demand for the rest of the world out here!
Luckily they pay the likes of Brian Cox to spout off on theri behalf…and if he`s as gullible in his science, then we`ll be laughing yet!
QE injects money into the banking sector (in exchange for bonds). To get from the banks to the economy at large the banks need to lend but right now more people in the US are paying down debt and not borrowing. Even interest rates at 1% or so are not enough incentive to get people borrowing again since people feel they already have enough debt. So it is basically ineffective.
All that happens is that this extra money ends up speculating on the stock market rather than being used for productive new business growth. It also undermines confidence as people sense that the economy is fragile and it delays the inevitable workout process of all the bad investment/lending decisions made during the boom.
What I can say in its favour is that it may have softened the economic fall and has maybe helped avoid deflation which is generally considered to be worse than (lowish) inflation.
The Beeboids know all about how QE is a shot in the arm forhe stock market. Only yesterday the Beeboid business presenter on the News Channel was hyping up just that, only she was also conflating the stock market with the actual economy.
Any benefits of QE – and I say this as a reluctant supporter of the original round of TARP bailouts – are in the increasingly distant past. And if we keep propping up a zombie economy, we’ll have de facto deflation in the end anyway.
Oh, and I agree with your analysis – it’s spot on. Di Clementi brings in new facts which if given a broader airing would transform the debate and make it more realistic than the usual simplistic and jealousy-tinged banker bashing narrative that the BBC love.
This seems to be current BBC procedure, having a token non-leftie on. Must be so they can point to something to rebut claims of bias … I’m sure that’s why Top Gear has survived for so long.
Forgive the blog plug, but there was a similar example of the 3:1 ‘balance’ on another US-related BBC discussion fairly recently: http://wp.me/p1CkQu-5q
Good post, Vir. Justin Webb is a joke. Did they mention that Clinton’s surplus was in part due to the dot-com bubble, which hurt the economy when it burst? And it’s not that we never want to pay for government, it’s just that it’s too big and oppressive – and will get bigger next year under ObamaCare – we’re just not willing to pay for it anymore
Thanks David. They didn’t mention, either, the role Clinton played in nudging(/forcing?) lenders to take on poor risks.
There is an agreement amongst a lot of commentators across the political spectrum (Wealth Manager Jonathan Davis to Marxist Professor Richard Wolff) that banks are still in a zombified state (i.e. dead but lethal) and that in contrast to the line that is fed to listeners by the BBC, they have NOT and cannot rebuilt their balance books. They are merely continuing to stiff the middle classes by wiping out the values of people’s pensions and savings as well as their jobs by keeping interest rates artificially low so they can continues to speculate with other people’s money and stuff their pockets with bonuses conflated on their “apparent” share value.
Successive US governments have followed the bidding of Wall Street at the expense of the US taxpayer. The abolition of the Glass Steagall Act at the behest of a cabal of bankers headed up by Larry Summers (who is still pulling strings behind the scenes) was on of a sequence of calamitous banking policy decisions that had ramifications was beyond the borders of the US.
As in this country and Europe the real power brokers are the banking sector, if you are sufficinetly driven, ruthless and intelligent you are going to exert your will via a career in the upper echelons of banking. That is precisely what is happening in the US and Europe at the moment, it really doesn’t matter to the likes of Larry Summers whether it’s the Republicans, The Democrats or The Tea Party in control, the real power brokers are the men from Goldman Sachs and Morgan Stanley.
Banks do not keep interest rates low. The government does that via the inflation targetting mandate that it imposes on the central bank. Most economists believe that increasing interest rates at a time of monetary contraction would make the situation worse not better. As a saver, I hate it but that’s the way it is. It has nothing to do with Goldman Sachs or the other investment banks. You can blame them for other things but not this.
The Federal Reserve is what is keeping interest rates low. The Federal Reserve act in the interest of banks (it was founded by six private banks in 1913 as a means of ensuring a degree of stability in the banking system). It is an incredibly powerful organization, far more powerful than the politicians whose policy making decisions are circumscribed by the decisions of the Fed.
I agree that Jonathan Davis’ recent attack on the lack of any degree of moral hazard being exerted on the banking sector and that interest rates should have been allowed to rise and banks to fail may seem reckless. But his argument (along with many other economists) that by allowing delinquent banking practices to continue on the back of Bernanke’s low interest rate policy is leading to a collapse in the value of paper money is what is going to lead to an inevitable second and even more catastrophic banking collapse.
Banks I reiterate are the real policy makers – not governments.
And neither your or my savings and taxes will be able to cover the next banking collapse when it occurs.
Good article.
The government interference via Fannie Mae and Freddie Mac into the housing and mortgage markets was the seed of the problem that came later where there was an assumption that debts were being effectively underwritten by the U.S. government. This view has been pretty much censored by the BBC (up until now, it seems).
The story is always the same. Interfere with markets at your peril.
And what do we have today, the IMF calling for more intervention.
Surely it is time that governments learned to get out of the way.
However, how can this be done if the BBC is programming the government and the rest of us to think the other way?
The BBC is unwilling to show the other side of the debate. As you say interventinists like Christine Lagarde get plenty of the top jobs without any real questioning. However if you go out and look there is plenty of intelligent analysis which questions much of what we are told. Look at this for example.
Moves by the Federal Reserve,ECB and the Bank of Greece tell us that a liquidity noose is tightening on many banks
http://www.mindfulmoney.co.uk/wp/shaun-richards/moves-by-the-federal-reserveecb-and-the-bank-of-greece-tells-us-that-a-liquidity-noose-is-tightening-on-many-banks/
If you read it you will see that the banking system into which so much money has been poured is in trouble. Insight like this allows us to be ahead of events whereas the BBC economics department wil probably tell us that when more banks hit trouble that it is a “surprise”..