Ignoring economic storm won't make it go away

The Baltimore Sun

Wouldn't it be nice if one could simply ignore the economic storm battering us? A columnist for The Financial Times says she's suffering near-panic because the Internet makes bad news from all over the world instantly available. It is, she says, the ease of knowing what's happening to people everywhere that makes her freak out - not the things themselves. Lucy Kellaway writes, "In the middle of last week, I tipped over from a state of mild fearfulness about the global economy to one of wild panic over what is to become of us." It wasn't the firsthand experience she had with a vastly underbooked hotel in Cologne, or her friend who owns an ad agency grimly preparing to fire large numbers of her capable staff, that freaked out Ms. Kellaway, but rather a piece she read on HuffingtonPost.com about a well-dressed woman on Madison Avenue in New York who had lost her job and was begging on the street to feed her four children. The columnist says it is the Internet that is shattering our confidence. Too much information lends itself to increased anxiety.

A friend remarked that the news shouldn't focus so much on the mounting problems. He apparently thinks if, like the ostrich, we respond to the threats by just sticking our heads into the sand, things wouldn't seem so threatening. Perhaps ignorance is bliss, and happiness would be the prevailing mood if we didn't notice that friends and colleagues were losing their jobs because of sagging business revenues, and we could just pretend that everything is the same as it was those few short months ago when our leaders assured us everything was fine - that rising residential housing valuations were ours permanently, so everyone should be able to benefit from them, regardless of creditworthiness. That was before the global business model broke like Humpty Dumpty, with the present situation looking very much like that facing all the king's men, who, in the nursery rhyme, couldn't put old Dumpty back together again.

President Barack Obama knows how broken down the system is and has proposed a gigantic stimulus program to pump more and more money into the banking pipeline in an effort to get borrowing and spending by ordinary American consumers up and running again. The world economy depends on the willingness of Americans to live beyond their means. In recent years, the savings rate here had fallen to nothing, but with the collapse of the credit markets, Americans are recoiling from their spendthrift ways and beginning to pay down debt rather than assume more of it, and to save whatever they can for their own "rainy day" fund. Consumer confidence is at an all-time low, the markets are reeling, and bad news is finding us whether we surf the Net for it or not.

In its pregame show for the Super Bowl, NBC showed a shirt-sleeved president being interviewed by Today host Matt Lauer, who, like most liberals, is astonished that the House Republicans all voted against the $800 billion-plus stimulus bill, despite the charm offensive conducted by Mr. Obama in an effort to get some GOP representatives to climb on board. Mr. Lauer wondered how efforts to get bipartisan backing in the Senate would work out, prompting the president to acknowledge that the House bill contained a lot of spending that smelled of pork, and that some trimming was both likely and desirable before its passage.

That said, even a trimmed-down stimulus package is unlikely to have the effect of restoring "prosperity" of the sort we enjoyed the last few years. Mr. Obama seems to believe in the gospel of Fed Chairman Ben S. Bernanke and New York Times columnist Paul Krugman, which trumpets flooding the U.S. economy with dollars, a policy that will, in the end, almost certainly spark ruinous inflation. Mr. Bernanke said in a recent speech to the London School of Economics that his monetary strategy was "to put out the fire first and then think about the fire code." The money supply has exploded by more than 100 percent in just the last six months. He believes any significant inflation can be handled by gradually reducing the money supply by selling Treasury bonds. Count me among the spooked.

Ron Smith can be heard weekdays, 3 p.m. to 6 p.m., on 1090 WBAL-AM and WBAL.com. His column appears Wednesdays in The Baltimore Sun. His e-mail is rsmith@wbal.com.

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