Don’t miss Ben’s favorite poem “about working and love and Wagner and Cadillacs.”
It was a dreary, drizzly day in Los Angeles. My wife and I and all of our dogs decided to go down to Rancho Mirage. Before we left, I had a nice morning reading sad stories about the economy, especially one about how banks had so much cash, so much more cash than they had good uses for, that they were discouraging people from saving. Interest rates on deposits are trivial, as we all know. Now, the New York Times reports that some banks are actually charging customers to allow those people to deposit money with them.
That means interest rates are negative. As far as I am aware, the last time this happened was in the worst days of the Great Depression. We are in a classic Keynesian “liquidity trap.” That means when the Fed pumps more money into the system, it doesn’t get used for new plants or expansion, but just stays in the most liquid form, like the shortest term Treasury instruments.
Again, this is exactly what Keynes said would happen when an economy reached stasis at a level well below full employment.
Kids, I hate to break this to you, but it sure looks as if Keynes had this part of the present-day situation nailed down. The part about what you do about it—well, that part is still a bit of a sticky wicket.
I doubt if most Americans, even very learned Americans like Wlady, know that the Great Depression only ended with Pearl Harbor. Not until we got full national mobilization and unlimited war production did the Great Depression end. Unemployment was well into double digits as of late 1941. That was after every kind of New Deal program. Only stupendous national government spending got us going.
No chance of that now, right? No, wrong. It’s worse than that. We are already having massive deficit spending and it’s truly massive. We spend about $40 billion each day more than we take in at the federal level. We still have 9 percent unemployment and a prostrate housing sector.
Either Keynes was wrong about that deficit spending or we have to do it at a full mobilization level, where we quadruple federal spending deficits or something like that.
That’s not going to happen.
What do we do? Monetary policy just will not work when there is zero enthusiasm in the business world. Neither will deficit spending.
A friend suggested that we make it illegal to be unemployed. If you are still unemployed, while in good health, after six months, you will be assigned a job as sorter of books at a postal facility or a trash picker-upper at Zuma Beach or a schoolteacher in Brentwood Park. You won’t get any more unemployment comp. unless you take the job.
This sounds like a good idea to me, but probably most people would consider it too severe.
I go back to what I keep saying: for some of the unemployed, the fault genuinely is theirs. They are just not looking to work. For others, obviously not. They really are suffering. Their pain is in no way their own fault. But compulsory work? Is that a bad idea? I guess sometimes, yes, sometimes, no.
What about housing? Here, it’s just a catastrophe. What on earth will we do? Surely, the solution is not to take away the tax deduction for mortgage interest. That makes no sense at all.
Before my wife and I set out, Phil DeMuth and I had lunch at Nonna, a great Italian café. We had unbelievably good pizza. Most of the time we talked about my favorite novel, The Great Gatsby.
Topics: Was Gatsby Jewish? I think he must have originally been in Fitzgerald’s mind. “Gatsby” or “Catesby” is often a cover name for Katz. Gatsby had the very Jewish combination of superficial toughness and extreme sentimentality we Jews often have. Plus, he was great pals with the notorious fictitious mobster Meyer Wolfsheim, and I wonder if Wolfsheim would have trusted a Gentile with his highly secretive business.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?