Posted by: Tobias | October 3, 2008

Real economy consequences

Brad Delong gives a good, but perhaps still too abstract answer to the question of “why the hell should be bail out Wall Street?”:

The money crunch is particularly perilous because the U.S. economy needs to move 8 million workers out of vanishing jobs such as construction and tourism into new jobs and industries, said Brad DeLong, professor of economics. "Those 8 million jobs can't be created unless the funds flow through financial markets to expanding businesses – and they are not flowing right now," he said. "In the second quarter of 2007, we had $300 billion flow through financial markets to American nonfinancial businesses so they could hire workers and make things. We only had $150 billion, half of that, in the second quarter of 2008. We had even less in the third quarter of 2008. I think we might have zero in the fourth quarter. This is not a good situation to be in."…

[…] The question with the shortest answer also drew the biggest – and most rueful – laugh from the audience. Can a U.S. recession be averted at this point? "No," said DeLong as the rest of the panelists nodded in agreement.


  1. Why would jobs in tourism be vanishing?

  2. Why would jobs in tourism be vanishing?

    No idea. This is a guy from your alma mater, not mine =).

    Perhaps the demand for tourism services is increasing in wealth, a substantial part of which just got wiped out. Then again, the demand is likely decreasing in the value of the dollar…

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