In understanding why the U.S. economy remains so weak, there are certainly clear domestic reasons, one largely being an insufficient fiscal response-Obama did pass one in 2009 which did help some but preferably would have been bigger and less tax credits(even if you must have tax credits some of those credits were not very effective) the Bush tax cuts which still need to expire
For more http://diaryofarepublicanhater.blogspot.com/2011/08/still-more-on-bush-tax-cuts.html
the mortgage market is still in shambles(here Obama's new plan to refinance millions of mortgages can provide some help though even this is double-edged as it could further depress housing prices) and the fact that the credit markets have certainly not come back yet-banks have not started lending.
As far as these above named domestic issues, it should be noted that Obama's current proposal-which though he is for political reasons avoiding the term "stimulus" is more stimulus and if fully implemented(large if alas) would be close to 60% of the 2009 stimulus)-clearly would do something meaningful for growth and employment and to those who feel Obama hasn't done enough(ignoring the political dimensions: even the current proposal he has made it will remain to see how much he gets through this Congress), this is far more than any other First World country is doing right now. Indeed, as Krugman suggests, the trouble with Obama's bill-even if it all passed-is not being replicated in Europe and Japan. Indeed Canada is even trying to gripe that a buy American provision in AJA is protectionst.
As to the credit markets, the trouble is that the alleged Bush Boom of the 2000s-for most of us who were alive during this time(LOL) this was no boom-was driven by credit. The credit expansion that fueled the boom was so out of line with the productive capacity of the U.S. economy that it may be unrealistic to imagine that we can quickly go back to that kind of growth. The hope that the TARP would quickly reflate the credit bubble was far too optimistic. Banks aren't lending and for good reason.
Discussion of the banks and the "credit crunch" brings us to the global, international basis of the crisis. There has lately been a debate as to whether things are now "as bad as 2008." This question is particularly applied to the European Union (EU) problems.
Some say that the current concerns about many of the Mediterranean EU country economies could bring us something like the 2008 meltdown-"another Lehman Brothers"-while others assure us "it is not 2008"; these were Warren Buffet's exact words about his recent investment in Bank of America. On the other hand Nouriel Roubini recently said that things are now worse than 2008. Roubini is someone always worth listening too of course as he was one of a few who correctly predicted the implosion of the real estate bubble long before the fact.
http://mpra.ub.uni-muenchen.de/15892/1/MPRA_paper_15892.pdf
The above link I highly reccomend as it challenges head on the myth that no one could have seen the crisis of 2008 before the fact.
Recently Mr. Roubini said "We are in a worse situation than 2008."
Speaking at the Ambrosetti Forum on the shores of Lake Como, near Milan, Roubini said in an interview: “We are in a worse situation than we were in 2008. This time around we have fiscal austerity and banks that are being cautious.”
http://www.cnbc.com/id/44368995/We_Are_in_Worse_Situation_Than_in_2008_Roubini
The recent austerity vote came in Italy which voted yesterday to approve a $738.81 billion dollar austerity package. Berlusconi had tried for months to get this through and only succeeded now with threats to his own conservative People of Freedom party (his own party he started in 2009) with threats to their own seats.
Yet even this has been criticized as not going far enough as relying too much on tax increases and not enough on spending cuts. A major tax increase was rising the already very high value-added sales tax from 20 to 21%; of course such a move is likely to further depress growth by damping down on consumers.
For his part, Mr. Berlusconi is not popular and according to a poll by the ISPO institute, 79% of Italians are dissatisfied with the government's performance. Yet even more are dissatisfied with the opposition's actions during the economic crisis. This kind of reminds us of our own situation here at home where while polls suggest dissatisfaction with President Obama's handling of the economy, the GOP numbers are even worse.
As to the debate about whether this is "worse than 2008" one does have to admit at the least that there is are some striking similarities between the two. Those who try to argue "it's not 2008" make it too easy for themselves by simply poinitng out the crisis is not identical. Of course not, but the central worry is very similar. In 2008 the concern was that the subprime mortgages on the books of the "Too Big to Fail" U.S. banks were going to at some point force such huge losses on the their balance sheets that they could all fall and the economy would implode.
The concern in the E.U. at present is that the loans on all the big European banks-Europe's "Too Big Too Fail" banks could force them to take the big losses that it was feared the U.S. banks would have to take in 2008. This is pretty similar if not identical.
Indeed one wonders how much worse it has to get in Europe till it is "as bad as 2008"; even if for the U.S. it isn't that bad yet, in Europe the bleeding keeps gushing. Country after country passes austerity which will further depress growth in the hope of balancing a budget, meanwhile the citizens of the country riot. We have seen riots in Greece, even Britian, and now Italy.
What to do is a major question. Some in Germany want to take the populist, self-righteously inidnant line of "let Greece fail we were disciplined" yet that may do more harm than doing the bailouts. If Greece and Italy default-particularly Italy-we are talking about major problems in Europe "as bas as 2008" which would also impact the U.S. where the U.S. economy could see another major hit on it's already very mediocre growth. Solutions are in short supply,
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