"We're going to go through hell, quite frankly."
That, according to noted economist James Galbraith Monday at the NAVA marketing conference in New York. After an hour of thoroughly depressing news, the analytical minds in the audience asked him to bottom-line it all, and that simple answer is what they got. The saving grace was that his presentation dovetailed nicely with cocktail hour, and drinks flowed freely to counteract the sour mood. I was going to go on about a cold rain blanketing the city, but I think I've pegged the schmaltz needle.
The timing of Galbraith's appearance couldn't have been better. As the son of famed Keynesian John Kenneth Galbraith ("price czar" in FDR's New Deal and a friend and colleague of John Kennedy) he had pretty good insight into the merits of the Great Depression analogy currently (and cavalierly) thrown about. When he raised a point about price controls instituted by his father, his "I know this because I asked him" quip pricked a few ears.
Highlights (or "low" depending on your perspective): In order for public money to offset downturns in private-sector productivity, the stimulus package will need to be at least three times its current size; 10 percent unemployment will be the norm for the foreseeable future; civil unrest will occur across the globe, especially in Eastern Europe, where massive currency devaluations and its close proximity to Russia will threaten the European Union and potentially lead to a second cold war. That's just a few ...
He's a Keynesian; I'm not (tough times for me and my friends). So I found his solutions remarkable. Increase Social Security by one-third for those already retired; lower Medicare eligibility to age 55 so those who are postponing retirement because of a lack of health insurance can now do so. This will free up private sector space and encourage a return to full-employment equilibrium.
He's testifying in Washington today, telling politicos essentially what he told us. Knowing how they've handled it so far and the "solutions" Galbraith's proposing, hell sounds about right.