Monday, July 11, 2011

Why Nothing Works Right Anymore (For A Reason) - Today's Data Sucks/QE2 Failed Because Money Went Offshore!

Lifted gently from a comforting place:

Let Them Eat Cuts in Vital Social Services by Abby Zimet

Oh, the hypocrisy: Rep. Paul Ryan, godfather of belt-tightening for the poor and sick and elderly, spent an evening this week sipping $350 wine - actually, two bottles, for $700 - with like-minded cohorts.

The event was caught by a Rutgers business professor and TPM reader who noted they spent more than the weekly earnings of a two-income working family making minimum wage.

From Marketwatch:
Monday, July 11, 2011

Notes on the week ended July 9th

State and Local Government Payrolls Are Shrinking

There is nothing good that can (be) said about the dismal June employment report from the BLS on Friday; there wasn't even a snowstorm or tornado outbreak to blame it on this past month...maybe we should just focus on the two private unemployment reports out earlier in the week. TrimTabs, an investment research firm which analyzes the Treasury's daily income tax deposits reported the economy added 171,000 jobs in June; then ADP, which surveys only the private sector, reported an increase of 157,000 jobs from May to June....those two positive reports set everyone up to be crushed by the government report which came out Friday. Even oil prices had regained the level they were at previous to the release from the strategic reserve in hopes of a strong report, but the optimism all reversed when the unemployment report showed a statistically insignificant gain of only 18,000 jobs and a higher unemployment rate at 9.2%, which would have been even higher if a quarter million job seekers hadnt given up entirely last month. The labor force participation rate dropped to a 25 year low of 64.1%... in addition, May's dismal report of only 54K jobs gained was revised downward to 25K, and 15K was knocked off the previously reported April figure... breaking the establishment report down further, private payrolls were up 57,000, offset by a loss of 39K government jobs, of which nearly 13K were schoolteachers.... Indeed, private job creation during this recession has been in line with previous recessions; what has made this one measurably worse has been the loss of 577,000 state & local jobs since the start of the "recovery"…

Other stats from the report continued the dismal litany; the broader measure, U6, which includes those working part time who want full time work, increased from 15.8% to 16.2%, and the employed to population ratio dropped to 58.2%... the average workweek was also cut by a tenth of an hour, and the average hourly earnings fell a penny to $19.41. (I dont know how that average is computed; it may well be inflated by a handful of people taking home 7 figure incomes, while the lions share of workers are barely making the minimum.)

Nonetheless, with most Americans carrying a large mortgage, credit card &/or student loan debt, household balance sheets will continue to be under pressure with negative wage gains, which are even worse adjusted for inflation...we need rising wage raises across the board to get out of this balance sheet recession…lower wages such as we are seeing just digs a deeper debt hole for everyone...

Something i've often mentioned in writing about these unemployment reports is that we need something on the order of 125,000 new jobs each month just to keep up with the net increases in the workforce as young people are added, & I've often tried to put that into perspective by explaining how many years it would take at a given rate for the economy to get back to full employment; but i've never felt my explanations were i was pleased to see that David Beckworth put together the adjacent chart that shows just that...what it shows is a target trendline wherein job growth would keep up with population growth, our current unemployment dip, and how many years it would take for us to reach full employment if the economy would start generating 200K, 300K, or 400K jobs per month (click to enlarge). You can see that even with good job growth of 200,000 per month it would take until 2023 to reach full employment, and even if the economy added 400,000 jobs a month, it would still take 3 years to employ everyone who would typically want to work full time...our average per month so far this year has been 126,000, so net on 6 months we've just been treading water...

All of which makes the ongoing negotiations between the tea party in the Whitehouse and the tea party in congress on how much to cut from government programs even more perverse; how everyone can be talking contractionary fiscal policy in the midst of the most protracted period of high unemployment since the depression defies may have heard that Obama has doubled down on the tea party demand that $2 trillion be cut from government spending over 10 years and that he now wants $4 trillion in cuts, including huge cuts to social security and medicare of which we have few details; there are some who think it was some kind of theater on Obama's part, trying to paint the extremists into a corner; but i've seen nothing to suggest he doesnt believe the whole tea party anti-deficit line himself; he voted against raising the ceiling when he was in congress, all his economic advisors who wanted a larger stimulus have left the white house, & even Joe Biden's economic advisor Jared Bernstein has turned to blogging for more stimulus, which tells me he wasn't being heard when he was on the inside either...

One of the proposals for cutting government expenses which has surfaced & gotten some press is a change in the way COLA (the cost of living adjustment) is computed for social security and government employee's would change the government’s way of measuring inflation adjustments from the often quoted CPI (consumer price index) to a more obscure index called the chained consumer price index; according to the Wall Street Journal, this change would save $300 billion in entitlement payments over ten years; the way this index is computed is that it assumes that as the normal items which a social security recipient purchases get more expensive, they will substitute a cheaper item in quote an example from the BLS FAQ factsheet on this method: "If the price of pork increases while the price of beef does not, consumers might shift away from pork to beef." -- get it? and we can assume if the beef becomes too expensive, the index will be adjusted the next year for the price of the catfood seniors will be expected to switch to instead, and when gas gets too expensive, the old folks will most likely walk...

I don't know where this country is heading, but i have a sense that this country is being overtaken by a Cultural Revolution similar to what retarded China's growth for ten years during theirs...& it seems we're gonna lose a decade or two, just like china did during their cultural revolution, and by the time we come to our senses, the rest of the world will have passed us by...

It seems that as soon as one can describe a plan for saving Greece and salvaging the European Union, the plans fall apart...last week the Greeks agreed to impose severe austerity, give up most of their sovereignty, and sell most of their country off to the highest bidder (including 39 airports, 850 ports, railways, motorways, sewage works, a couple of energy companies, banks, defence groups, thousands of acres of land for development, casinos and Greece's national lottery), but on monday SP ruled that the french debt restructuring plan would still be considered a default...since the whole point of all the negotiations leading up to the plan was to avoid such a credit rating ruling, which would prohibit the ECB from buying greek debt, the question became will the plans be changed or will the central bank rules...there's now talk of calling it a "temporary default" as a sleight of hand workaround...while that was being discussed, Moody's downgraded Portugal's debt to junk status, and fears of contagion spread to Italy, whose interest rates across the board hit new highs, along with those of Portugal & Ireland...with European officials blaming the credit rating agencies, euro chairman Juncker now wants a european agency, which presumably would produce more favorable ratings...and as borrowing costs for the PIIGS are rising faster than i can list them, it occurs to me i just can embed this table of links to Bloomberg's timely updating of european bond interest rates, so you can see all the updated hockey stick graphs for each country for yourselves...

Greece 2 Year 5 Year 10 Year
Portugal 2 Year 5 Year 10 Year
Ireland 2 Year 5 Year 10 Year
Italy 2 Year 5 Year 10 Year


2 Year

5 Year

10 Year

Belgium 2 Year 5 Year 10 Year
France 2 Year 5 Year 10 Year


2 Year

5 Year

10 Year

_ _ _ _ _ _ _ Today's news:
Wall St extends losses; Nasdaq down 2 percent
Read on, friends, from which we learn how the Fed works (and they hope we don't pay attention because it's hard). Many Yale and Harvard Business School grads probably cannot follow this.
Why QE2 Failed: The Money All Went Offshore
Global Research, July 9, 2011

On June 30, QE2 ended with a whimper. The Fed’s second round of “quantitative easing” involved $600 billion created with a computer keystroke for the purchase of long-term government bonds. But the government never actually got the money, which went straight into the reserve accounts of banks, where it still sits today. Worse, it went into the reserve accounts of FOREIGN banks, on which the Federal Reserve is now paying 0.25% interest.

Before QE2 there was QE1, in which the Fed bought $1.25 trillion in mortgage-backed securities from the banks. This money too remains in bank reserve accounts collecting interest and dust. The Fed reports that the accumulated excess reserves of depository institutions now total nearly $1.6 trillion.

Interestingly, $1.6 trillion is also the size of the federal deficit – a deficit so large that some members of Congress are threatening to force a default on the national debt if it isn’t corrected soon.

So here we have the anomalous situation of a $1.6 trillion hole in the federal budget, and $1.6 trillion created by the Fed that is now sitting idle in bank reserve accounts. If the intent of “quantitative easing” was to stimulate the economy, it might have worked better if the money earmarked for the purchase of Treasuries had been delivered directly to the Treasury. That was actually how it was done before 1935, when the law was changed to require private bond dealers to be cut into the deal.

The one thing QE2 did for the taxpayers was to reduce the interest tab on the federal debt. The long-term bonds the Fed bought on the open market are now effectively interest-free to the government, since the Fed rebates its profits to the Treasury after deducting its costs.

But QE2 has not helped the anemic local credit market, on which smaller businesses rely; and it is these businesses that are largely responsible for creating new jobs. In a June 30 article in the Wall Street Journal titled “Smaller Businesses Seeking Loans Still Come Up Empty,” Emily Maltby reported that business owners rank access to capital as the most important issue facing them today; and only 17% of smaller businesses said they were able to land needed bank financing.

How QE2 Wound Up in Foreign Banks

Before the Banking Act of 1935, the government was able to borrow directly from its own central bank. Other countries followed that policy as well, including Canada, Australia, and New Zealand; and they prospered as a result. After 1935, however, if the U.S. central bank wanted to buy government securities, it had to purchase them from private banks on the “open market.” Former Fed Chairman Marinner Eccles wrote in support of an act to remove that requirement that it was intended to keep politicians from spending too much. But all the law succeeded in doing was to give the bond-dealer banks a cut as middlemen.

Worse, it caused the Fed to lose control of where the money went. Rather than buying more bonds from the Treasury, the banks that got the cash could just sit on it or use it for their own purposes; and that is apparently what is happening today.

In carrying out its QE2 purchases, the Fed had to follow standard operating procedure for “open market operations”: it took secret bids from the 20 “primary dealers” authorized to sell securities to the Fed and accepted the best offers. The problem was that 12 of these dealers – or over half -- are U.S.-based branches of foreign banks (including BNP Paribas, Barclays, Credit Suisse, Deutsche Bank, HSBC, UBS and others); and they evidently won the bids.

The fact that foreign banks got the money was established in a June 12 post on Zero Hedge by Tyler Durden (a pseudonym), who compared two charts: the total cash holdings of foreign-related banks in the U.S., using weekly Federal Reserve data; and the total reserve balances held at Federal Reserve banks, from the Fed’s statement ending the week of June 1. The charts showed that after November 3, 2010, when QE2 operations began, total bank reserves increased by $610 billion. Foreign bank cash reserves increased in lock step, by $630 billion -- or more than the entire QE2.

In a June 27 blog, John Mason, Professor of Finance at Penn State University and a former senior economist at the Federal Reserve, wrote:

In essence, it appears as if much of the monetary stimulus generated by the Federal Reserve System went into the Eurodollar market. This is all part of the “Carry Trade” as foreign branches of an American bank could borrow dollars from the “home” bank creating a Eurodollar deposit. . . .

Cash assets at the smaller [U.S.] banks remained relatively flat . . . . Thus, the reserves the Fed was pumping into the banking system were not going into the smaller banks. . . .[B]usiness loans continue to “tank” at the smaller banking institutions. . . .The real lending by commercial banks is not taking place in the United States. The lending is taking place off-shore, underwritten by the Federal Reserve System and this is doing little or nothing to help the American economy grow. Tyler Durden concluded:

. . . [T]he only beneficiary of the reserves generated were US-based branches of foreign banks (which in turn turned around and funnelled the cash back to their domestic branches), a shocking finding which explains . . . why US banks have been unwilling and, far more importantly, unable to lend out these reserves . . . .

. . . [T]he data above proves beyond a reasonable doubt why there has been no excess lending by US banks to US borrowers: none of the cash ever even made it to US banks! . . . This also resolves the mystery of the broken money multiplier and why the velocity of money has imploded.

Well, not exactly. The fact that the QE2 money all wound up in foreign banks is a shocking finding, but it doesn’t seem to be the reason banks aren’t lending. There were already $1 trillion in excess reserves sitting idle in U.S. reserve accounts, not counting the $600 billion from QE2.

According to Scott Fullwiler, Associate Professor of Economics at Wartburg College, the money multiplier model is not just broken but is obsolete. Banks do not lend based on what they have in reserve. They can borrow reserves as needed after making loans. Whether banks will lend depends rather on (a) whether they have creditworthy borrowers, (b) whether they have sufficient capital to satisfy the capital requirement, and (c) the cost of funds – meaning the cost of borrowing to meet the reserve requirement, either from depositors or from other banks or from the Federal Reserve.

Setting Things Right

Whatever is responsible for causing the local credit crunch, trillions of dollars thrown at Wall Street by Congress and the Fed haven’t fixed the problem. It may be time for local governments to take matters into their own hands. While we wait for federal lawmakers to get it right, local credit markets can be revitalized by establishing state-owned banks, on the model of the Bank of North Dakota (BND). The BND services the liquidity needs of local banks and keeps credit flowing in the state. For more information, see here and here.

Concerning the gaping federal deficit, Congressman Ron Paul has an excellent idea: have the Fed simply write off the federal securities purchased with funds created in its quantitative easing programs. No creditors would be harmed, since the money was generated out of thin air with a computer keystroke in the first place. The government would just be canceling a debt to itself and saving the interest.

As for “quantitative easing,” if the intent is to stimulate the economy, the money needs to go directly into the purchase of goods and services, stimulating “demand.” If it goes onto the balance sheets of banks, it may stop there or go into speculation rather than local lending -- as is happening now. Money that goes directly to the government, on the other hand, will be spent on goods and services in the real economy, creating much-needed jobs, generating demand, and rebuilding the tax base. To make sure the money gets there, the 1935 law forbidding the Fed to buy Treasuries directly from the Treasury needs to be repealed.

Ellen Brown is an attorney and president of the Public Banking Institute, In Web of Debt, her latest of eleven books, she shows how the power to create money has been usurped from the people, and how we can get it back. Her websites are and

Global Research Articles by Ellen Brown
Have you wondered why the "big boys" needed those bonuses NOW? We learn the secret to the good life at CoyotePrime:
“Collapsing Financials” by Mark Sircus “These elites do not have a vision. They know only one word: more. They will continue to exploit the nation, the global economy and the ecosystem. And they will use their money to hide in gated compounds when it all implodes." - Chris Hedges "If you thought the global financial crisis of 2008 was difficult, wait till the sequel comes to your doorstep. Some investment professionals feel that the sky could soon be falling as recent events have led many to brace for the worst. The world and everyone in it should be preparing for some very difficult days ahead but that is not happening because most are drinking some kind of happy tea. An unprecedented financial storm of unknown scope and dimension is upon us but it is crushing certain people, cities, states and countries before others. Many are perceiving and reporting that the fundamental economic outlook has changed substantially over the last couple of weeks. "There is a growing sense of despair in Brussels. Unlike previous attacks on the Euro project, the latest downgrade of Portugal's debt by the ratings agency Moody's feels like the beginning of the end. Those economists and fund managers, who argued that a second bailout for Greece with private sector involvement would mean something similar for Portugal and most likely Ireland, are hitting their target. Like a 19th century battalion holding the line against oncoming hoards with depleted firepower and an officer class at war with itself, the Euro's supporters are in a desperate situation," writes the Guardian. A clear majority of the uncrushed are certain that there is nothing to worry about and go about their business as if life will continue on as it has these past few decades. But 100 percent of the crushed have no doubt that there is a civilization-scale catastrophe taking place and that there will be little or no recovery from it for as far as the eye can see into the future. John Rubino wrote, "For a couple of years now it's been clear that the world was about to fall apart, with the only question being which local failure turns out to be the catalyst for a systemic breakdown. So many things were on the verge of blowing up... yet none of them did. The world's governments have engaged in a heroic period of "extend and pretend" that has kept the system together longer than seemed possible. But now the game seems to be ending. It's still not clear which bomb will go off first, but a bunch of fuses have gotten very short indeed. Here's a survey of old crises that are finally coming to a head." You want to see something that blew up this week? "In the past week the ten-year interest rate increased by 12%. That is a monster change. This equates to 2,000 Dow points or 240 on the S&P," writes Bruce Krasting in his essay"Are the credit markets getting unstable?" If that trend continues, the fuse will light the powder and western civilizations financial system will come down hard. The price on the benchmark 10-year note edged lower, pushing its yield to 3.20%, up from Thursday's yield of 3.14%. Last Friday's losses continue what has been a sharp decline in bond prices. Ron Holland said, "Today we find the United States and most of Europe in a similar situation. We risk an eruption and collapse of the mountain of unsustainable sovereign debt built up over the last two decades. Frankly, the U.S. dollar and national debt situation is so dire and our means to contain a sovereign debt crisis so limited by multiple wars, Washington's debt and political incompetence at home that anything could happen - almost overnight. Even a minor foreign policy or economic event like a Greek default or Middle East crisis could wreak havoc with the precarious interlocking sovereign debt pyramid in the West. American and most European governments and the central banking elites, which created the criminal sovereign debt fiasco, are only trying to buy more time to delay the inevitable. This inaction means the threat of an immediate U.S. dollar collapse cannot be ruled out. Therefore, readers who have not protected themselves certainly have cause to worry because now could be too late." We are now only 60 days from the need of the United States government to fund half a trillion - 467.4 billion to be exact - dollars of debt."This is the amount of debt that matures through August 31 and has to be rolled over or the U.S. is bankrupt... in every sense of the word. Treasury must "roll over" almost $500 billion in debt that matures during August 2011. New debt is issued and the proceeds are used to repay the maturing debt plus interest due. Treasury will require market access throughout August to avoid defaulting on maturing debt. About $380 billion in short-term T-bills maturing, plus $90 billion in long-term securities," reports Tyler Durden. Greece agreed last week to bind itself in another round of debt servitude. Violent demonstrations notwithstanding, members approved another round of tax increases and spending cuts to keep Europe's own extend-and-pretend game going a while longer. Think of Greece as maxed out on five credit cards, taking on a second part-time job, holding yard sales and applying for a sixth card just to keep up minimum payments on the other five. Everyone knows it's a losing game but they, as well as other governments around the world, have been playing at the table of unlimited debt through credit. The world's financial system is hanging by its teeth and the entire western world is ailing from debt overdosing. What we have been experiencing these past decades is roaring prosperity compared to what is coming down the road. As the economy collapses life is going to get very strange; our problems and the chaos are going to get a lot worse. The free market is dead and we have all arrived at a sort of involuntary socialism where the largest banks rape and pillage everyone else. "At the start of the second half of 2011, with a global economy in complete disarray, an increasingly unstable global monetary system and financial centers in desperate straits, all this despite the thousands of billions of public money invested to avoid precisely this type of situation. The insolvency of the global financial system, and of the Western financial system in the first place, returns again to the front of the stage after just over a year of political cosmetics aimed at burying this fundamental problem under truckloads of cash," writes GEAB. There is no other possible end state then a full collapse of paper and digital wealth, which in today's world would be a catastrophe of civilization-destroying capacity. Silver Shield says, "The dollar collapse will be the single largest event in human history. This will be the first event that will touch every single living person in the world. All human activity is controlled by money. Our wealth, our work, our food, our government, even our relationships are affected by money. No money in human history has had as much reach in both breadth and depth as the dollar. It is the de facto world currency. All other currency collapses will pale in comparison to this big one. All other currency crises have been regional and there were other currencies for people to grasp on to. This collapse will be global and it will bring down not only the dollar but also all other fiat currencies as they are fundamentally no different. The collapse of currencies will lead to the collapse of ALL paper assets. The repercussions to this will have incredible results worldwide." "Those areas that have lived highest on the hog in the dollar paradigm will most likely be the worst places to live when the dollar collapses. We will not be as fortunate to muddle through this collapse like we did in 2008 when it was a corporate problem. This time around, it is a national and global problem. The global Ponzi scheme has run out of gas as the demographics decline, as cheap abundant oil declines, as hegemonic power declines," continues Shield. Peter Yastrow, market strategist for Yastrow Origer, told CNBC. "What we've got right now is almost near panic going on with money managers and people who are responsible for money," he said. "We're on the verge of a great, great depression. The Federal Reserve knows it." And there is nothing they or anyone can do to stop it. "If you think that the banking system of the western world is strong enough to guarantee the debt of the western world, you're totally out of your mind. That's the reason they'll do everything possible to paper over the Euro crisis to prevent the defaults in order to prevent another crisis in banking that definitively would occur, that absolutely would occur from a default. This fact is ravingly positive for gold. You would have a complete collapse of the western banking system if Greece goes down," writes Jim Sinclair.
The middle classes around the world are being impoverished just to pay interest on the sovereign debts to the banking elites who are enjoying the life of the filthy rich. The world is just waiting for the spark to start the run-out of the dollar and our Treasury debt. Any serious financial or natural disaster could trigger the long overdue collapse and bring the Ponzi-type deck of cards down almost overnight on top of us. In the meantime Washington and European governments will simply throw its people's wealth and promised benefits at the problem thus buying them more time to do what they do best - steal all the money and power they can. Concentration of wealth is at obscene levels and these are the people that Jesus the Rabbi talked about when he talked about the rich, the eye of needles and the chances of getting into heaven. From what I have seen these people are not planning on going to heaven and in fact have been spending billions of their dollars building underground centers and complexes. Seems like human hell- can you imagine these people having to live in tight quarters with each other?"
From the Sideshow:
Remember being told how Obama was going to get all those awful Republican operatives out of government so regulators and oversight specialists could do their jobs? It's worse than a joke to watch what the Obama administration policies on that matter are. Because they're not just leaving right-wing operatives in place, they are turning malfeasance into policy. It's well beyond "regulatory capture". (I've never understood the way libertarians point to regulatory capture as a reason to disempower government. They know regulatory capture is bad, and they know it will happen, but their answer is to simply get rid of the regulators entirely and let the people who they know will bribe and corrupt run things without interference. That is, instead of guarding against regulatory capture, you just get rid of the things that can slow it down. How does that make sense? )People are only just beginning to become aware of a creepy organization called ALEC - the American Legislative Exchange Council - and how it is dedicated to a mission to destroy America from the highest reaches of power. They are in the boardrooms and even in Congress and they are among the most dangerous people in America. You should know who they are and try to stop them, and help your neighbors do the same.

What's missing from this fake straight talk about what's "really" wrong with the economy is that all of the "causes" are uncaused, they just happened without anyone doing anything and there's nothing that can really undo them, we should just dick around with SSI and wring our hands.

Via Suburban Guerrilla I learn that Ron Paul has a solution to debt ceiling madness, and that Dean Baker thinks it's a "surprisingly lucid" plan. "In short, Representative Paul has produced a very creative plan that has two enormously helpful outcomes. The first one is that the destruction of the Fed's $1.6 trillion in bond holdings immediately gives us plenty of borrowing capacity under the current debt ceiling. The second benefit is that it will substantially reduce the government's interest burden over the coming decades. This is a proposal that deserves serious consideration, even from people who may not like its source."

Of course, it won't happen, because then they'd lose their fake "reason" for killing Social Security, public education, Medicaid and Medicare, and any other "social" program they can wreck, and that's what this is really all about. Susie thinks she knows the rationale behind Obama's policy of greasing the slide to serfdom: "Rather than do the hard work of bringing other countries up to our standards, he's decided we have to be broken. And he thinks it's what's 'best' for us. He's doing it because he cares. He sees social programs as simply postponing the day when the workers (not the special people, like him and his friends) are living in tin shacks without running water, and he wants to wean us off the safety net." Well, he's certainly driving the economy down. (Also, salt is not bad for your heart.) Really, though. He's as much as spelled it out. Wrecking the American economy is the policy.

More on that from Digby, on our culture of casual, careless cruelty, the jaw-dropping conservatism of the administration, the shrillness of Kevin Drum in the face of horrible, anti-Democratic policies (that he still doesn't understand are meant to be that way), who they are spreading the pain to, Geithner lying about the need for Kabuki, and more screwing it up when they can't even pretend to know what they're doing. I mean, seriously, these are people who are betting against the United States and then fixing the game.

From Paul Krugman we get the inside info on what they have planned for us (P.S. In the long run, we're all dead):

If you were shocked by Friday’s job report, if you thought we were doing well and were taken aback by the bad news, you haven’t been paying attention. The fact is, the United States economy has been stuck in a rut for a year and a half. Yet a destructive passivity has overtaken our discourse. Turn on your TV and you’ll see some self-satisfied pundit declaring that nothing much can be done about the economy’s short-run problems (reminder: this “short run” is now in its fourth year), that we should focus on the long run instead.

This gets things exactly wrong. The truth is that creating jobs in a depressed economy is something government could and should be doing. Yes, there are huge political obstacles to action — notably, the fact that the House is controlled by a party that benefits from the economy’s weakness. But political gridlock should not be conflated with economic reality.

Our failure to create jobs is a choice, not a necessity — a choice rationalized by an ever-shifting set of excuses.

Excuse No. 1: Just around the corner, there’s a rainbow in the sky.

Remember “green shoots”? Remember the “summer of recovery”? Policy makers keep declaring that the economy is on the mend — and Lucy keeps snatching the football away. Yet these delusions of recovery have been an excuse for doing nothing as the jobs crisis festers.

Excuse No. 2: Fear the bond market.

Two years ago The Wall Street Journal declared that interest rates on United States debt would soon soar unless Washington stopped trying to fight the economic slump. Ever since, warnings about the imminent attack of the “bond vigilantes” have been used to attack any spending on job creation.

But basic economics said that rates would stay low as long as the economy was depressed — and basic economics was right. The interest rate on 10-year bonds was 3.7 percent when The Wall Street Journal issued that warning; at the end of last week it was 3.03 percent.

How have the usual suspects responded? By inventing their own reality. Last week, Representative Paul Ryan, the man behind the G.O.P. plan to dismantle Medicare, declared that we must slash government spending to “take pressure off the interest rates” — the same pressure, I suppose, that has pushed those rates to near-record lows.

Excuse No. 3: It’s the workers’ fault.

Unemployment soared during the financial crisis and its aftermath. So it seems bizarre to argue that the real problem lies with the workers — that the millions of Americans who were working four years ago but aren’t working now somehow lack the skills the economy needs.

Yet that’s what you hear from many pundits these days: high unemployment is “structural,” they say, and requires long-term solutions (which means, in practice, doing nothing).

Well, if there really was a mismatch between the workers we have and the workers we need, workers who do have the right skills, and are therefore able to find jobs, should be getting big wage increases. They aren’t. In fact, average wages actually fell last month.

Excuse No. 4: We tried to stimulate the economy, and it didn’t work.

Everybody knows that President Obama tried to stimulate the economy with a huge increase in government spending, and that it didn’t work. But what everyone knows is wrong.

Think about it: Where are the big public works projects? Where are the armies of government workers? There are actually half a million fewer government employees now than there were when Mr. Obama took office.

So what happened to the stimulus? Much of it consisted of tax cuts, not spending. Most of the rest consisted either of aid to distressed families or aid to hard-pressed state and local governments. This aid may have mitigated the slump, but it wasn’t the kind of job-creation program we could and should have had. This isn’t 20-20 hindsight: some of us warned from the beginning that tax cuts would be ineffective and that the proposed spending was woefully inadequate. And so it proved.

It’s also worth noting that in another area where government could make a big difference — help for troubled homeowners — almost nothing has been done. The Obama administration’s program of mortgage relief has gone nowhere: of $46 billion allotted to help families stay in their homes, less than $2 billion has actually been spent.

So let’s summarize: The economy isn’t fixing itself. Nor are there real obstacles to government action: both the bond vigilantes and structural unemployment exist only in the imaginations of pundits. And if stimulus seems to have failed, it’s because it was never actually tried.

Listening to what supposedly serious people say about the economy, you’d think the problem was “no, we can’t.” But the reality is “no, we won’t.” And every pundit who reinforces that destructive passivity is part of the problem.


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