1 Boring Old Man

When the Recession became apparent in September of last year, I felt blind-sided. I was preoccupied with the coming Presidential Eection, and the wealth of information coming out about the Bush Administration [confirming what we’d been speculating about all along]. For a time, I found myself getting up to speed on things I knew nothing about – Derivatives, Economic Bubbles, Credit Default Swaps, the Commodotites Futures Modernization Act, Deregulation. As I pored over these unfamiliar topics, I began to see why things had fallen apart, I began to read about The New Deal and the Great Depression.

The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables.

They even have pictures of it in the economics books:

In actual practice, the GDP falls quickly, then Unemployment rises drastically. At some point, things turn around, and these parameters reverse. Following an initial rapid decline, Unemployment reaches some point where there’s a slow fall until the next crisis. People who write the paragraphs in the economics books under the figures are quick to point out that the time between peaks and troughs is variable – unpredictable. What made the Great Depression different was that it didn’t terminate on its own.

So, is what we’re going through just the "business cycle," or was it caused by all the things we thought about, or some mixture of both?  Do we have to do something to turn it around? Or does it correct itself, by itself? Why is the economy so obviously cyclic? In this case, the plunging CONSUMER PRICE INDEX suggested we were flirting with a panic-driven DEFLATIONARY SPIRAL…

Geithner Said to Lose His Cool at Regulators’ Meeting
New York Times
August 4, 2009

Treasury Secretary Timothy Geithner blasted top regulators in an expletive-laden tirade amid frustration over President Barack Obama’s faltering plan to overhaul financial regulation, Reuters reported, citing a Monday story in The Wall Street Journal. A person familiar with the meeting said that Mr. Geithner told regulators “enough is enough,” the newspaper said. The meeting took place last Friday with Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro and Federal Deposit Insurance Corp. Chairman Sheila Bair.

The Treasury Secretary said regulators had been given a chance to air their concerns, but that it was time to stop, the newspaper said, citing the person. A Treasury Department representative had no immediate comment. The Fed, the S.E.C. and the F.D.I.C. did not immediately return calls seeking comment.

Mr. Obama in June unveiled a financial regulatory overhaul, sometimes called the biggest since the 1930s. Among other things, the plan would give the Fed added powers, award the government more power to break up troubled companies and create a new agency to oversee consumer finance. Many major banks and industry trade groups however have criticized the plan, as have some regulators wary that any redistribution of power would reduce their own.

According to the newspaper, Friday’s roughly hour-long meeting was unusual because of Mr. Geithner’s repeated obscenities and his aggressive posture toward regulators generally deemed independent of the White House. The newspaper said Mr. Geithner told attendees that the administration and Congress set policy. It also said the Treasury Secretary, without singling out officials, raised concerns about regulators who have questioned the wisdom of giving the Fed more power. Ms. Schapiro and Ms. Bair have argued that more authority should be shared among a council of regulators.