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.

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Responses

  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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