You read my mind. Look for a post tomorrow on Remnick’s rabblerousing.

Don’t be ashamed of finding something in common w/ Prof. Gramm. I’ve occasionally agreed with Rev. Al myself! And you are correct that markets are part supply-demand and part psychology.

Steve,

I think you hit the nail with what Gramm was saying. There were people on the edge before our current economic downturn — even some people (dare I say) who were doing poorly during the Clinton admin.

There are also plenty of people out there who bought trucks-full of luxury items during the good times and set nothing aside to get them thru the bad. Should we feel sorry for them?.

As Geoff alludes, mass psychology is an interesting phenomenon. But that mass of economic actors is made up of individuals, and when it comes to their personal financial circumstances, many of them were at the ragged edge before the economy turned down. In theory it would be noble for them to go on doing their parts to keep the consumer spending engine revving up the economy. But so many of them now realize they’re figuratively and literally out of gas.

There is a big element of consumer confidence involved in getting out of any economic downturn. If the aggregate nation perceives that the economic conditions are bad and apt to get worse, nobody is going to spend anything that they absolutely don’t have to. That is inevitably going to have the effect of reducing consumer expenditures, which will also have the effect of delaying an economic upturn.

When the consumer thinks that there’s no ceiling, they just keep spending, no matter what (witness the housing bubble). Conversely, when there’s no evident floor, everybody sits on their wallets and the whole economy contracts.

Admittedly, the greed of the oil interests has sucked any optimism that the consumer might feel right out of the equation (all the way from the Iraq war to the current oil bubble), but to the extent any of us have some spare bucks in our wallets right now, the chances are that they are more apt to stay there than they might have a year or two ago.

So, to some extent Phil Gramm is right. I still can’t believe that I’m saying this….

I forget who it was, but someone said recently he’d make a good veep choice. Yes. And, of course, no.

One quibble: the definition of “unemployment” that yields the 5% figure is an extremely narrow definition of being unemployed, because it doesn’t count those who have stopped looking for work — like many of those absentee Black dads that Obama and Jackson are arguing over — or those who are underemployed, like people with skilled trades or advanced educations who are flipping burgers or temping or working off the books because decent career-type work is not available.