Well, whether you want to blame the Community Reinvestment Act and the Democrats for the sub-prime mortgage crisis that is perhaps the catalyst for the Global Financial Crisis, or whether you want to blame it all on Bush’s failed economic policies, or whether you want to everyone from the Democrats to the Republicans to the CRA to Wall Street to Joe the Plumber is up to you.
But anyway, that’s not the point of this post. Many already, whether it be at dinner tables or boardroom tables, think the era of US global financial dominance is over. The latest guy to state this is former Reagan economic adviser, Dr Jerry Jordan (BTW, that link’s an mp3).
And from a similar interview to the one in the above link…
Dr Jordan says that when the US economy does recover, it will never be the same.
“What people need to understand about the United States in this environment and probably the British as well, that this is not your garden-variety economic contraction caused by restrictive monetary or fiscal policies to slow things down and cool off inflationary pressures,” he told Radio Australia.
“Rather this is much more the case that we went over the waterfall, we didn’t drown but we’re not able to swim back up to the top, and there’s no amount of monetary or fiscal policy that is going to get us back up to where we were a couple of years ago.“
However, at least he’s optimistic that it won’t get too bad, that is, like the Great Depression we saw 85-odd years ago.
“I don’t think depression is the right word,” he said.
“I think of it as a discontinuity from the growth path that we were on before, but the important part is that you cannot use pump-priming of the fiscal type or the monetary type, to get back to the level of car sales furnishings, home appliances [that we saw previously].
“There are literally thousands of stores in the United States that have been boarded up; companies bankrupted out of business by the end of last year, and they’re not coming back into business.
“It’s going to involve a new direction for the economy, but not a restoring of the old level of economic activity.”
Warren Buffet disagrees, however… at least on the recovery bit.
“Five years from now I can guarantee you that the machine will be running fine. But I’d like to get there a lot faster than five years. And we can.”
And will Obama’s stimulus package, the good ol’ Recovery and Reinvestment Act (warning: large PDF) prove Buffet right? At the moment, that’s anyone’s guess. Still, in the meantime, we might as well see who’s getting what.
The Tizona Group 