The truth about the state of the economy

No one seems to know the real state of the economy or rather agree on where the crisis stands or where its headed. The stock market is doing fine, yet unemployment is at an all time high and the dollar seems to be on a steady decline. The entire world is keen to learn the answer but it’s interesting to note that even the experts are unsure and can’t agree on this issue.

A perfect example of this confusion is reflected in two articles in today’s NY Times, one by David Brooks for praising Obama’s economic team headed by Tim Geithner, the other by Paul Krugman, criticizing the same team for failure.Both seem to agree though that public opinion on the overall state of the economy is negative. I suspect the Mr. Brooks given his conservative credentials is thankful that Mr. Geithner and co. didn’t swing so far to the left and go on a nationalizing binge, while Mr. Krugman is very much focused on the technicalities of the financial mess.

Mr. Krugman…

For the economy is still in deep trouble and needs much more government help. Unemployment is in double-digits; we desperately need more government spending on job creation. Banks are still weak, and credit is still tight; we desperately need more government aid to the financial sector.,….

So here’s the real tragedy of the botched bailout: Government officials, perhaps influenced by spending too much time with bankers, forgot that if you want to govern effectively you have retain the trust of the people. And by treating the financial industry — which got us into this mess in the first place — with kid gloves, they have squandered that trust.

While David Brooks…

Well, the evidence of the past eight months suggests that Geithner was mostly right and his critics were mostly wrong. The financial sector is in much better shape than it was then. TARP money is being repaid, and the debate now is what to do with the billions that were never needed. It now seems clear that nationalization would have been an unnecessary mistake — potentially expensive and dangerously disruptive.