How Not To Talk About Financial Panics: New Rules For Pundits

(7)  On the other other hand, never say that the numbers—the projections—foretell a sovereign debt crisis that might cause theU.S. government to default on the payment of the national debt (as against shutting down parts of the government’s day-to-day operations). 

These numbers just don’t add up to a crisis unless you believe that public debt as such is a moral problem to be grasped in terms of family budgets—in this case, I can’t help you—or that David Brooks is a reliable guide to anything except his reading habits, or that the costs of Medicare and Social Security are the real burden and the unbearable weight of the welfare state.  The rush to Treasuries in the last week indicates that nobody in his right mind has any doubts about the full faith and credit of the U.S.

(8)  Never say that China has a point in scolding Americans for their consumerism and indebtedness. 

Read between the lines and understand that Party leaders there are announcing that they’re not yet ready to map the transition to consumer-led growth—that is, to follow the inadvertent American example.  Yes, China will diversify its sovereign debt portfolio, but, like all other rational beings on the planet—this category excludes Rand Paul, Grover Norquist, Newt Gingrich, Rick Perry, and Michelle Bachmann—its leaders know that there’s no safer haven than U/S/ Treasuries, and no more resilient source of enterprise, than the USA.  They remember when Japan was Number One, ready to outstrip the colossus of the West, and they don’t want to reproduce that experiment.

Ready, then, are you, for the talk shows next Sunday?  Sure you are.  Just keep that Blackberry handy.

* * * * * *


(9)  Never say that the Fed has shot its wad, not even when it has delivered two huge doses of “quantitative easing.”

QE 3 is coming, and then what?  Inflation?  Not a chance.  Under Ben Bernanke, there is no limit to what the central bank will do in the name of recovery.  Milton Friedman once quipped that you could drop money from helicopters when monetary policy exhausted its effects.  Bernanke is a disciple, he’ll do it.  More is better, he believes, or at least not as bad as less.  Still, dollar bills from on high can’t work for long.

(10)  Never say that Bank of America will collapse…

…even if its stock loses 20 percent of its value in one day—that would be Monday—and every hedge fund is now circling the company like greedy heirs gathered in the parking lot of an upscale hospice.  On the other hand, maybe it will, and maybe it should, since B of A is more deeply sunk in the mortgage market than any other bank thanks to its acquisition of Countrywide.  No one has any confidence in the “management team” there, not even the team itself.  Triage?

(11)  Never say that you have to be bullish when stock prices plunge. (“You can buy cheap!”)

If you plug in the numbers (Q ratio, CAPE), the stock market is still about 40 percent overvalued, even in view of the slaughter of the last two business days.  But certain stocks are sure bets, they’re the ones, like Apple, that are driven by consumer demand, right?  Oops.  Where is that demand supposed to come from, now that state and local governments are cutting back, no spending stimulus is forthcoming from the feds, unemployment benefits are expiring, and wages are still stagnant?   Hold the presses.  Also, get cash heavy, and try to get out of equities unless you’re looking at emerging markets where local or regional distribution of consumer goods can be sustained by domestic demand.

(12)  Never say “double-dip recession,” because this locution marks you as a moron who can’t think seriously about what we’re going through.

The Great Recession didn’t end in 2009, when the NBER announced that it had, and it still isn’t over, not when you measure unemployment or consumer spending, or, for that matter, corporate investment.  There’s no correlation whatsoever between the numbers on output, employment, and consumer spending, in part because employers have increased output and shed jobs, in part because consumers are still trying to balance their household budgets.

(13)  Never say that private investment is crowded out by government spending…

…so that you then get to claim that cutting “entitlements” is the way to renewed growth.  If you do, be prepared to address this question:  since when was private investment the cause of economic growth?

Don’t have a good answer?  Here’s a hint: not since 1919.

Take the argument a step further and acknowledge the possibility that private investment follows the demand curve determined by consumer spending—in other words, it doesn’t create jobs and thus increase consumer demand, in the proverbial sequence we all know by heart—and then what?  Then you’ve got a real problem on your hands, which might be outlined as follows.

(14)  Never say that where markets exist, there capitalism abides.

Markets and commodities were in common usage before capitalism appeared in the eighteenth and nineteenth centuries, and will presumably outlast this mode of production.  There were merchants, bankers, traders, and pirates galore back then, before the creation of markets in land and labor, but no capitalists and very few proletarians:  there were market societies that weren’t yet capitalist societies.

Think through the analogous possibility, that we already inhabit a market society that no longer requires capitalists as the trustees of the social surplus—a market society which is no longer a merely capitalist civilization.

If private investment is not the cause of economic growth, and hasn’t been for almost a hundred years, what are capitalists good for?  Why do we keep them around?  To allocate resources rationally, to develop the productivity of the labor force, as Marx suggested?  In view of economic events since 1983, you’d have to say no.  To discipline our desires by containing them within the anal-compulsive demands of the profit motive, as Keynes suggested in calling that motive a “somewhat disgusting morbidity”?  In view of the same events, you’d have to say, probably.

That is our real problem: we don’t know how to think past capitalism, even though it’s disintegrating right before our very eyes.  We don’t need the oligarchs, whether they’re members of the Politburo or the Business Roundtable, to allocate resources on our behalf, but we cling to the comforting idea that we do.

James Livingston

James Livingston teaches history at Rutgers. His forthcoming book is “Against Thrift: Why Consumer Culture is Good for the Economy, the Environment, and Your Soul” (Basic, 2011). He blogs at

Leave a Reply

Your email address will not be published. Required fields are marked *