Asleep at the wheel

This is sure to boost public confidence in the administration:

Barack Obama on Monday launched what he promised would be an enduring bipartisan process to bring down the fiscal deficits that have started to explode under his watch. Mr Obama, who called 130 lawmakers and members of think-tanks to the White House for what he described as a “fiscal sustainability summit”, added that by the end of his first term, he would halve the budget deficit he inherited from George W. Bush….

Although Lawrence Summers, head of the National Economic Council, fell asleep on the podium, most attendees, including Republicans, appear to have appreciated the exercise.

I’m really enjoying what passes for the Obama presidency. This economic crisis isn’t tragedy, it’s farce. And I, for one, am laughing. Meanwhile, the self-proclaimed expert on the Great Depression, Ben Bernanke, demonstrates that he didn’t learn anything pertinent from his much-ballyhooed studies of it:

Federal Reserve Chairman Ben Bernanke told Congress Tuesday the economy is suffering through a “severe contraction” and pledged to use all available tools to lift the country out of the recession that already has cost millions of Americans their jobs…. Bernanke hoped that the current recession, now in its second year, will end this year.

If someone’s health is damaged from an overdose of steroids, giving them even more of the same steroids they previously injected isn’t going to make them better. And if an economy is contracting due to credit-inflated malinvestment, injecting more cheap money into the system to prop up the worthless investments isn’t going to cause it to grow again. The failure of the Fed to do the right thing may be a net positive in the long run, though. The credibility of central banking is rapidly being destroyed, and a failure to ward off a second Great Depression may have the capability of killing the concept for at least a few generations to come.

As I said in the AGD study, it really looks like 1930 right now. If I was in the market, I’d be watching out for an impressive bear market rally kicking off soon, then collapsing in the fall once it becomes clear that the contraction hasn’t ended, ala 1931.