Two sentences of Steve Rattner’s New York Times op-ed contain gross contradictions and unsubstantiated errors without a scintilla of evidence, which disputes his own argument and leads us to reject it: “Well-intentioned efforts to avoid another financial crisis have put the banking system in a straitjacket, discouraging lending and reducing liquidity on trading desks, which has contributed mightily to market gyrations. In turn, weakening credit markets stir fears of corporate bankruptcies.”
First examine his logic: his conclusions depend solely our accepting his loaded, emotionally laden descriptions: “straitjacket,” “stir fears,” “discouraging,” “bankruptcies.” (He opens with “alarm bells.”)
Take bankruptcies: does Rattner say why, when, which sectors, regions, or revenue size, public or private or recommend a fix? Does he offer trend numbers or forecasts from the 383,000 series of FRED (Federal Reserve Economic Data) put out daily/weekly/monthly by the St. Louis Fed, the most complete and highly reliable public economic data set in the world? Is Apple about to topple? Goldman? Home builders? Fracking operations? Lodging? Software? Big Pharma? Chemicals? Small banks? More: is bankruptcy bad? Does it create disruption or greater efficiencies? He is prompting bandwagon fear!
Rattner’s final conclusion, with the same flourish of assurance, blames unnamed “officials” and “fiscal policies”–again with no specifics! He is in the clouds–with no back up! Is it Europe, China, the US or all three to which he points?
His greatest challenge to our understanding is in his description of credit markets.
Rattner does not explain how Central banks offering fund rates near or even below zero, “weaken” credit or “reduce liquidity” when these rates do precisely the opposite: the credit weakness is in its demand not in its regulation or monetary policies–a weakness more impacted by the political economy of austerity that weakened demand, cycled a secondary bottom in the recovery and dampened growth by weakening demand through reductions in spending (deficits not withstanding).
Rattner argues both ways as he ignores the cause of the last global fiscal crash, unregulated runaway cash (much of it as unbacked derivatives) that imploded, capped by the LIBOR rigging scandal at the loan desks of the major global banks. Yet he says demand is weakened by the very actions on principles taken to reign in this corruption and restore confidence and honest liquidity without fear.
Absent of math and models, his fuzzy logic of buzz words doesn’t work!
Who Gets the Blame for the Slowing Economy? – The New York Times http://nyti.ms/1LTJ6yb
~~Thank you for pointing out both the lack of specificity and the use of a particular language, designed to inspire fear.
~~I couldn’t agree more, Rattner is always guilty of:
1/ cherry picking the available data
2/ making egregious unsupported statements
3/ finds patterns where none exist
4/ spins specious causal chain narratives
5/ uses ‘charge’ words (alarm bells?)