Two about the economy

Whether an economic depression now is harder or easier on us, there won’t be many jumpers this time. The windows don’t open now.

Two articles:

New York Times

March 24, 2008

With Economy Tied to Wall St., New York Braces for Job Cuts

By LOUISE STORY

New York is accustomed to job losses on Wall Street. They come with just about every economic slump, and their impact is felt throughout the city.

But now, as the city braces for a big contraction in the financial sector as a result of the credit crisis and the collapse of Bear Stearns, the fallout could be worse than in the past.

The New York economy is more dependent than ever on high Wall Street incomes, which have jumped by more than half since 2001, to an average of $387,000, according to the city comptroller’s office.

Last year, the finance industry was responsible for nearly a third of all wages earned in the city, the highest in modern times. And each Wall Street job supports three workers in other sectors.

A great many of the 14,000 employees of Bear Stearns are expected to lose their jobs because of the firm’s cash shortage and its pending acquisition by JPMorgan Chase. As the credit crisis unfolds and other firms discover the depths of their losses related to bad loans, few expect the layoffs to stop there.

“Up to this point in New York City, the material result of the credit crunch hasn’t been felt as quickly as people were expecting,” said Marcia Van Wagner, deputy comptroller for the budget of New York City. “It took a while for the other shoe to drop.”

Read more at:

http://www.nytimes.com/2008/03/24/business/24jobs.html?scp=1&sq=With+Economy+Tied+to+Wall+St.%2C+New+York+Braces+for+Job+Cuts+&st=nyt

New York Times

March 24, 2008

Op-Ed Columnist

Taming the Beast

By PAUL KRUGMAN

We’re now in the midst of an epic financial crisis, which ought to be at the center of the election debate. But it isn’t.

Now, I don’t expect presidential campaigns to have all the answers to our current crisis — even financial experts are scrambling to keep up with events. But I do think we’re entitled to more answers, and in particular a clearer commitment to financial reform, than we’re getting so far.

In truth, I don’t expect much from John McCain, who has both admitted not knowing much about economics and denied having ever said that. Anyway, lately he’s been busy demonstrating that he doesn’t know much about the Middle East, either.

Yet the McCain campaign’s silence on the financial crisis has disappointed even my low expectations.

And when Mr. McCain’s economic advisers do speak up about the economy’s problems, they don’t inspire confidence. For example, last week one McCain economic adviser — Kevin Hassett, the co-author of “Dow 36,000” — insisted that everything would have been fine if state and local governments hadn’t tried to limit urban sprawl. Honest.

On the Democratic side, it’s somewhat disappointing that Barack Obama, whose campaign has understandably made a point of contrasting his early opposition to the Iraq war with Hillary Clinton’s initial support, has tried to score a twofer by suggesting that the war, in addition to all its other costs, is responsible for our economic troubles.

The war is indeed a grotesque waste of resources, which will place huge long-run burdens on the American public. But it’s just wrong to blame the war for our current economic mess: in the short run, wartime spending actually stimulates the economy. Remember, the lowest unemployment rate America has experienced over the last half-century came at the height of the Vietnam War.

Hillary Clinton has not, as far as I can tell, made any comparably problematic economic claims. But she, like Mr. Obama, has been disappointingly quiet about the key issue: the need to reform our out-of-control financial system.

Let me explain.

Read more at:

http://www.nytimes.com/2008/03/24/opinion/24krugman.html?hp

Jim