Ten percent unemployment and millions of people losing their home, that's waaaaay more funny than anything on Jay Leno or Conan O'Brien. That is how they are playing it on Morning Edition. NPR told listeners that there are so many different theories. Yeah, I guess there are many different explanations for how human life took its current form, but evolution is the only one that serious people believe. The causes of the financial crisis are not complicated, even if NPR wants its listeners to believe they are. The economy was driven by an $8 trillion housing bubble. This bubble was easy for any competent analyst of the economy to see since there was an unprecedented run-up in prices with no plausible explanation in the fundamentals of the housing market. It was totally predictable that the collapse of this bubble would lead to a severe recession of the sort that we are now seeing. The bubble generated more than $1 trillion in annual demand through its effect on residential construction and consumption. There is no mechanism in the economy that allows it to quickly replace this amount of demand, which is why the economy is now operating at a level of output that is more than 10 percentage points less than its potential. There is nothing complex in this story. NPR does a huge disservice to its listeners when it asserts that the issue is complicated, since it conceals the enormous policy failure that led to this disaster. It also conceals the stupidity and/or corruption of the bankers who conducted themselves during the bubble years as though house prices would rise indefinitely. Also, given the enormous human suffering caused by this downturn, the laughing tone adopted by the reporters is completely inappropriate. Perhaps NPR will soon advance to Holocaust jokes.
--Dean Baker
