If an inept pilot pulls back the stick and puts a plane into a steep climb with too little power, it will fall to one side, the lower wing stalled out but not the upper, causing a rapid corkscrew plunge straight down—a “tailspin.” In the early days of flight it was a killer. Instinct screams, “Pull back the stick!” but it’s already back. The world whirls until the crash. Curtains.
A tailspin meant death until a nervy pilot, acting against intuition, slammed the stick forward. The spin stopped, the plane came out of its deadly dive and leveled out. Today, recovering from a tailspin is one of the first things a student pilot learns.
Economies, like airplanes, can take off, gain or lose altitude, climb steeply, or go into a tailspin and crash. Recovering is surprisingly similar to dumping an airplane’s stick; instead of pulling back you push forward. And like in the air, it’s counter-intuitive and takes guts.
It starts with a steep price climb, like tulips in 17th Century Holland, or real estate in 21st Century U.S.A. People buy, prices rise, those who don’t want the product, tulips or houses, buy to sell, or “flip,” for a profit. In the real estate boom, banks got into the game selling bad loans, which they bundled and sold, fueling the fire while eliminating risk to themselves. The bubble burst in 2008 wrecking markets, halting new construction, sales of materials, transportation, furniture, appliances, and all the jobs that went along. Pension funds, cities, counties, even countries who’d invested in junky mortgage-backed securities, were suddenly drowning in debt, and so were banks who’d bought “credit default swaps.” In the crashed economy, people stopped buying. Lacking customers, manufacturers stopped producing. People suffered and hoped for recovery. But how?
The inept pilot pins his hopes on “the market” as Herbert Hoover did in 1929, causing worse suffering until FDR came in with a raft of stimulus packages, NRA, CCC, WPA, FHA, HOLC, PWA, even SSA—Social Security—the most successful program in history. Yet even that might not have been enough if not for WW-II, which justified high taxes and a still greater stimulus—building a military. The recovery lasted all the way into a post-war boom. But you don’t need a war to fix a crash, just horse sense and guts. Barack Obama has both and is fixing it. Four more years he’ll have the economy humming again.
That is, unless confused Teapublicans get Mitt Romney elected, stick jammed into his lap, stuck in the “run its course” delusion. He still thinks GM and Chrysler should have gone bankrupt while the country spun into the worst crash ever. Imagining that corporations are people (and people are corporations?), he doesn’t understand that people feel pain, hunger, can starve, can die. He and his friends though, in their insulated estates with two-Cadillac elevators, won’t lose a thing. The irony is that his Teapublican base stands to lose all it’s got.
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