The Onion has a cunning bit of satire, Recession-Plagued Nation Demands A New Bubble To Invest In , that offers a welcome bit of relief from the oppressive sense of doom that pervades most financial news right now.
A sample bit:
“What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future,” said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. “We are in a crisis, and that crisis demands an unviable short-term solution.”
Of course, they are making this up. But I love the idea of a ‘bubble-based investment firm.’ And there is a kind of truth to it — for several decades now, the easy money has flipped between real estate and stocks. When one cooled off, the other tended to heat up (don’t take my word for it — I got it from the economist Robert Shiller). Neither is much good right now, at least for those looking to make easy, quick money. Quoth the Onion: “America needs another bubble,” said Chicago investor Bob Taiken. “At this point, bubbles are the only thing keeping us afloat.”
Bubbles get a qualified thumbs up in Daniel Gross’s book Pop!. Writing in 2007, after the subprime bubble had popped, Gross said “Today the services-driven U.S. economy is showing a remarkable capacity to blow and deflate bubbles quickly. With the assistance of Federal Reserve Chairman Alan Greenspan, we transitioned seamlessly from Internet bubble to real-estate bubble to alternative-energy bubble in just six years.”
He writes less breezily in a recent issue of Newsweek, saying that “this downturn is likely to last longer than the eight-month-long recession of 2001. While the U.S. financial system processes popped stock bubbles quickly, it has always taken longer to hack through the overhang of bad debt.”
UPDATE: Gross and Fortune’s Allan Sloan are interviewed on what it’s like to try to cover the economic meltdown.
As the Onion sagely noted, “The U.S. economy cannot survive on sound investments alone.” Unfortunately, now it’s choking on bad ones. And most people aren’t laughing.
In fact, Robert Borosage fumed about “Wall Street socialism” in a post today, screaming about taxpayers picking up the pieces for the extra-rich bankers, but seeing none of the benefits.
He of course makes an easy point. It might even be right. Nobody wants to see the government reprise what it did in the late 1920s and early 1930s, which is, let the market do its thing until it had practically killed itself. Though Amity Shlaes in her 2007 book “The Forgotten Man” argues that what the government did instead was create a dependency on government that extended the Depression for years longer than it should have lasted. Whether or not you agree with Borosage, we seem to be in a similar cycle of dependency, only it’s for financial services firms, which since Long Term Capital Management have become too important to fail and must be rescued by taxpayers.
The question is whether it’s gone too far. From outside the system, watching wave after wave of bad news and the unprecedented responses from the Federal Reserve and the administration, it feels like it’s no longer working. I’d like to apply for my bail-out now. I’m inspired by this December, 2001 Onion item entitled “National Board of Steve Jaskoviak Requests $10 Billion Bailout.” Jaskoviak notes that “In order to continue providing Americans with a full range of Steve Jaskoviak-related services, it is crucial that I receive this aid. This relief package will not only will cover my $5,612 Visa debt, but numerous administrative costs, as well.”
