The administration had to come right out the other day and squelch a rumor making the rounds, a real wild fire, that Fannie and Freddie were going to offer some loopy mortgage-forgiveness program, which would have the effect of a stealth sort of stimulus program, because all those grateful home owners would suddenly have, via a smaller mortgage nut, more discretionary money to spend.
“People make jokes about the U.S. turning into Argentinaville, and a gambit like this would push us close,” the Journal’s editorial page said (although they still managed to blame to administration for more or less fostering the rumors, never mind the fact that Wall Street never met a government handout it didn’t like, so long as it was attached to the hand taking the out.)
There is definitely a yearning out there for something new from the government, and it’s not necessarily being spread by the administration. It’s palpable. This is it. We’ve come to the end of our stimulatory rope, and we’ve found that indeed we were pushing on a string all along. If people want to say the stimulus saved 8.5 million jobs, well, fine; there’s no way to definitively prove that, but have at it. The stimulus was supposed to spark up and restart the business cycle, get companies hiring, people spending, everything humming again.
It hasn’t worked. The government — through two administrations of differing political parties and a purportedly independent central bank — has almost literally moved heaven and earth to try and get this economy firing again, and it’s gone just about nowhere.
Not totally nowhere, mind you. Wall Street was saved. Corporate America’s doing pretty good, judging by second-quarter profits. But the small-business is still struggling, and the average consumer is just out in nowheresville.
This morning’s lousy jobs report is just reinforcing the cry for somebody, somewhere to do something. Somebody, somewhere, may in fact try. But what makes you think anything, a stealth stimulus, or another round of quantitative easing, will be any more effective that the first rounds? Especially as these next efforts are almost certain to smaller in scope.