Michael Bloomberg: Avoid the ‘cliff,’ restore the confidence

From the Washington Post, 12 December 2012:

Avoid the ‘cliff,’ restore the confidence
By Michael Bloomberg

Five years after we entered a historic national recession, the U.S. economy is still only sputtering along. Why? Some say the recession was just too deep to expect anything but a weak and prolonged recovery. Some say the stimulus was too small or poorly targeted. Or the plan to stabilize housing prices was too big or too small. Or government is taxing people too much or too little.

All of these issues made for interesting debates during the presidential campaign. But none explains why the national economy is still so weak.

Bloomberg asks why the recovery is weak. He doesn't like the answers. But he asks the wrong question.

Instead of considering what's special about the recovery, Bloomberg should ponder what was special about the recession we're trying to recover from.

He knows the answer.


Bloomberg identifies "the economy’s chief underlying problem:"

the lack of confidence businesses and individuals have in Washington’s ability to ensure stable market conditions.

The lack of confidence? Bloomberg mistakes results for causes. The lack of confidence in "Washington's ability to ensure stable market conditions" is a result of Washington's inability to ensure stable market conditions.

The chief underlying problem is not the lack of confidence, but the inability to provide a healthy economic environment. You know: "stable market conditions".

Why can we not achieve this healthy environment? Bloomberg knows the answer:

Unlike in the run-up to the 2008 crash, when businesses took too much risk, today they are not willing to take risks we need them to take.

Today, unwilling to take risks, "businesses are sitting on record amounts of capital." They're not spending. We're not spending.

In the run-up to the recession, Bloomberg notes, it was just the opposite: They were spending too much. We were spending too much. We were creating too much debt. Excessive accumulation of debt is what happened during the "run-up" to the crash. Excessive accumulation of private sector debt.

Most of that debt is still with us. This is the reason we cannot recover. But now Bloomberg expects us to create more debt, again. Silly man.