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In fact, Bhide argues, unemployment will keep the American economy crippled for at least a year, if not more. "You will see job creation, but it won't be enough to stop unemployment from rising," she said. "The economy needs about 250,000 additional payroll jobs each month just to keep the unemployment rate from rising further. We'll see some rise in payroll jobs in the first half of 2010, but it won't be enough. And we'll see unemployment rise till it peaks in Q1 of 2011, most likely."
Now, of course, Roubini and Schiff look like geniuses, or at least right. But for years, the smartest guys in the room rolled their eyes and chuckled at the mention of them. In hindsight, our boundless American optimism clearly got us into this mess, as we told ourselves we could always amortize the consequences of our overconsumption, spending, and debt. But so did our experts. The men and women who we trusted to know better, who dazzled us with their jargon and numbers, harvested billions while the world crumbled.
For years, fund manager Harry Markopoulos warned the Securities and Exchange Commission that Bernie Madoff was running the largest Ponzi scheme in history, but it turns out that SEC managers were too busy visiting pornographic web sites to care. Goldman Sachs, the only big-ticket money firm to weather the crash, now stands accused of widespread fraud. That old Ayn Rander Alan Greenspan even had to slink into Congress and admit that he had "found a flaw" in the ideology he imposed upon the American economy.
If John Williams is wrong, as so many experts tell us, it's a measure of how profoundly our most important institutions have failed us that he doesn't seem that wrong right now. How likely is it that Williams, almost alone among the entire economics profession, knows the truth? Then again, how likely was it that that Wall Street, the federal government, and the credit rating agencies knew less about the mortgage bond market than a one-eyed, Asberger's obsessive, sitting in his San Jose living room and shorting subprime securities, the story of which is told in the compelling book The Big Short by Michael Lewis?
Everywhere you look in America, you can see the erosion of public confidence in our foundational institutions. The media took its hit long ago, of course. But scientists are now widely derided as cooking climate numbers. Congress now has the lowest approval numbers in history. Bankers, once the dullest and most dependable citizens of the republic, are hiding in the Hamptons until the rage dies down.
No lay person can judge the merits of John Williams' arguments; we just don't have the expertise. We used to find the people who were trained to know better and ask them. But in this climate and at this moment, that may not work for the public anymore.
Even Alan Auerbach, the Cal economist who thinks so little of Williams' work, acknowledges that the public isn't in the mood to listen to guys such as himself. "I understand that it's hard," Auerbach said. "It's hard for economists to say don't listen to this guy. Because we're not always right. Just look at the crash. Anything can happen."
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