All This Stuff About Bailouts Preventing The Second Great Depression Is Just Propaganda

[girl gone mad]

All This Stuff About Bailouts Preventing The Second Great Depression Is Just Propaganda

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Not to worry. Now we know (if there were ever any doubt), that TARP and the “stimulus” and all the various bailouts helped prevent a "Second Great Depression." According to an article from the NY Times, Alan Blinder of Princeton and Mark Zandi, Chief Economist at Moody’s, have proven “empirically” that the bailouts worked. Even though the bailouts were politically unpopular, and even though there is still a great deal of “populist” anger about them, Blinder and Zandi have shown us the “wisdom” of the bailouts, and proved conclusively that our rulers saved us all from financial and economic armageddon. Of course, there’s just one little problem with this narrative: Blinder and Zandi have done no such thing. For all their charts, appendices and footnotes, they’ve proven nothing whatsoever. Nada. Zip. What they have done, however, is puke up a pretty little piece of bailout propaganda when the ruling class needed it most.

All the more galling, the Blinder-Zandi paper was originally titled "How We Ended the Great Recession." Given such hubris, I was fully prepared to delve deep into their methodology, examine carefully all their assumptions, and offer a full critique of the arguments implicit therein. Alas, no such critique will be forthcoming. I've read the "paper" from beginning to end, from cover page to footnotes to appendices. Everything. But I still have no idea how they arrived at any of the results laid out ever so neatly in their ostentatiously detailed charts. That's because their model, and the assumptions they used, are nowhere to be found. If these were third graders, they'd get a zero for not showing their work.

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In a nutshell, the Blinder-Zandi model assumes that:

* interest-rate spreads have large, significant effects on economic activity;
* financial interventions (such as TARP) are best modeled in terms of credit spreads;
* these financial interventions, in fact, significantly reduced the various credit spreads;
* (and finally) without financial interventions like TARP these spreads would have remained elevated for a much longer period of time.

Is it any wonder then, that the model shows a massive difference between the bailout scenario and the non-bailout scenario? After all, that’s what the model has been designed to do. Based on the assumptions Blinder and Zandi made at the very start, there could be no other possible outcome than one that shows a large, significant deviation between the bailout scenario and the non-bailout scenario. It's already baked in. The precise “results” are just numerical icing on the bailout cake.

Read more: http://www.businessinsider.com/propaganda-second-great-depression-2010-8#ixzz0vUImENo1