Once again today has been pretty busy, but there are three economic stories today that I think are worth looking at. I don’t have much time to draw and write up conclusions, but taken as a whole I think they paint an interesting, if incomplete, picture of where America stands with its money-dollars.
First, Taibbi does it again. His recent takedown of Goldman Sachs should be taught in J School 101 as an example of the proper role of the journalist. His new piece in Rolling Stone describes how Obama shamefully jettisoned his lefty financial advisers once he got elected, and instead chose to surround himself with typical Wall Street insiders. The reporting about the transition from president elect to actual president is fascinating.
Second, Krugman today reminds his readers exactly how bad the job outlook is:
“Some background: I don’t think many people grasp just how much job creation we need to climb out of the hole we’re in. You can’t just look at the eight million jobs that America has lost since the recession began, because the nation needs to keep adding jobs — more than 100,000 a month — to keep up with a growing population. And that means that we need really big job gains, month after month, if we want to see America return to anything that feels like full employment.
How big? My back of the envelope calculation says that we need to add around 18 million jobs over the next five years, or 300,000 jobs a month. This puts last week’s employment report, which showed job losses of “only” 11,000 in November, in perspective. It was basically a terrible report, which was reported as good news only because we’ve been down so long that it looks like up to the financial press.”
There’s a lot to be said for reminding people how bad the situation is for the most at-risk Americans out there. Huge drops in the Dow make for exciting headlines, but there’s no reason to believe that the relative stability of financial markets will translate to new jobs any time soon. Krugman, more than any one else in the mainstream press, has been trying to keep that fact from disappearing.
Lastly, here’s a chart that illustrates a sad but obvious truth: the surviving banks are getting bigger, faster.
This chart comes from the Congressional Oversight Panel’s latest report, and it’s pretty self-explanatory. Here’s the COP’s gloss:
“Bank consolidation has worrisome implications for moral hazard, as long as there continues to be a perception in the market of an implicit guarantee. As a small number of banks acquire a larger share of the market and competition decreases, the systemic risk they pose rises.”
There will be more bank failures, and many of them will end up with the failed bank getting taken over by one of the big four. Treasury has as far as I can tell no plan at all for reversing the trend in this graph, even though a good 35% of the US banking system is now undeniably too big to fail and drenched in moral hazard.
None of this should come as any surprise. As Dick Durbin said about DC, banks “frankly own the place.”
So, yeah, those are three things I saw today that I thought were worth passing along, even if they are a bit distressing. I’m sure there will be plenty more to come.