Question/Comment: Over the past few weeks, we have gone to extreme measures to save economies around the world. Treasuries and central banks to date have used multiple tools to ease this crisis such as, lowering Interest rates, pumping billions of dollars into stock markets and failing companies, offering to buy bad assets, and nationalizing banks, to no avail.
Is it time to admit that the world is already in a recession? And what can Main Street and people around the world do to restore confidence in world economies?
Paul Solman: Almost everyone IS admitting the world is in recession, or heading towards one. How to restore confidence on Main St.? (Is there a “Main St.” in Dubai?)
Here’s my best shot, repeating some of what I’ve written before:
This world has the same economic resources – people, land, raw materials, technology — that we had yesterday, last week, last month, last year. In fact, we have MORE people and MORE technology. So the problem is HOW to deploy our resources. The markets, left to their own devices, have done a spectacularly poor job. So now it’s governments’ turn to mobilize us so we don’t sit idle, and become even less rich than we are at the moment.
As for many Americans, what’s the worst that can happen here? Compared to almost every other country in the world, we’re in a better position to handle a breakdown of the global economy (though I don’t know about Dubai). We grow enough food to feed ourselves. Yes, we might have to cut back our fossil fuel use drastically, but mightn’t that actually be a GOOD thing, though a re-reliance on coal could be devastating. Could we car pool more? Ride bicycles more? Walk more? We’re not going to starve, and we’re unlikely to freeze. Moreover, the growing inequality of the past 30 years or so may finally turn around.
Of course, there’s the grim condition of unemployment. But if the credit markets stay frozen and the downturn gets worse, we’ll have to pump more government money into the world economy, just as many people (especially Democrats) have long advocated here in the US. We might extend unemployment benefits; put people to work on public projects. According to its champions, such a program would restore America’s badly deteriorating infrastructure, move us toward energy “independence” via alternative sources and conservation, even perhaps foster a sense of national unity.
Show this to your friends in Dubai, or on Facebook, perhaps? Or maybe back on Main St. itself. See if it makes them feel any more confident.