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A Short Crisis?

Do you know how long the current global downturn will last? “We are convinced that we can overcome this crisis in a period of 18 months,” said President Bush and the other leaders attending the APEC summit in a joint declaration this weekend. “We have already taken urgent and extraordinary steps to stabilize our financial sectors and strengthen economic growth.”

That’s good to know. But does a year and a half seem too long to you? “Certainly, some in the region may think that recovery may take 18 months,” said Dan Price, one of Dubya’s aides, as he and his boss winged their way back to Washington. “President Bush believes that the actions we are taking now will begin to produce results in the much nearer term.”

Thank you, Mr. Price, but, frankly, no one pays much attention to what the American president says these days about the economy. And I’m not just referring to the Bush-bashing community. People intuitively know that politicians and economists are clueless when it comes to the greatest downturn they have ever witnessed. For example, this morning Bill Kristol noted that Senator Chuck Schumer does not have a “well-grounded view” or even a “well-informed clue” about how much stimulus is needed, a subject on which the New York senator pontificated in front of ABC’s cameras yesterday.

Forget Schumer. I know how much stimulus is needed. The amount is not “between five and seven hundred billion dollars”–his answer. The answer is none at all. Stimulus, in a situation like we are now facing, just postpones necessary change and makes the eventual reckoning even more painful. This economy needs to deleverage, eliminate failing participants, and wring out imbalances. And until it does all these things–which will take far longer than 18 months–it will continue to falter. Japan tried to stimulate its way out of its massive problems last decade only to prolong agony. China is now going the stimulus route, and it will suffer an even worse fate.

We do not need optimistic words–of the type President Bush reflexively makes–or serious-sounding pronouncements-which Senator Schumer is so good at delivering. We need Trumanesque plain-speaking. There’s no point in talking to us like we’re children, especially because most of us sense the worst is yet to come and that the period of adjustment will take years. Because our elected leaders won’t tell us the truth, we have to speak honest words to one another. Pass the message along.


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