Here’s How Europe’s Woes Are Continuing to Haunt America


The great and good are all gathered this week at Jackson Hole, sort of a Davos for powerful nerds that’s run by the Kansas City Federal Reserve. Neil Irwin reports that Robert Hall of Stanford presented an assessment of “why the housing crash and financial crisis caused such sharp and prolonged economic pain,” which prompted a comment from Hyun Song Shin of Princeton. You may recall Shin as the ideal median economist, but in this case he’s pointing out that one big problem with the economy is that bank credit has been anemic for the past few years. As the chart on the right shows, banks normally lend at about 2.5 percentage points above the Fed’s target interest rate, but ever since 2009 they’ve been lending at about 4 points above the Fed’s target. This isn’t a huge problem for big companies, which mostly rely on bonds to finance themselves, but it is a big problem for small companies, which rely more on mortgages and bank loans.

This reminded me of something Shin predicted a couple of years ago. During the housing bubble years, he said, European banks were indirectly providing about $5 trillion in credit to U.S. borrowers, nearly as much as American banks provided. But after the financial crisis, as European banks were forced to delever, that funding dried up. This is one way that America is suffering from Europe’s woes: Credit remains very tight, and as a result, interest rates on ordinary bank loans remain stubbornly high. Shin’s latest set of charts seem to suggest that he was right—or at least partly right—two years ago when he wrote about the malign effect of European delevering on American finance. We’re not immune just because we’re an ocean away.

WE CAME UP SHORT.

We just wrapped up a shorter-than-normal, urgent-as-ever fundraising drive and we came up about $45,000 short of our $300,000 goal.

That means we're going to have upwards of $350,000, maybe more, to raise in online donations between now and June 30, when our fiscal year ends and we have to get to break-even. And even though there's zero cushion to miss the mark, we won't be all that in your face about our fundraising again until June.

So we urgently need this specific ask, what you're reading right now, to start bringing in more donations than it ever has. The reality, for these next few months and next few years, is that we have to start finding ways to grow our online supporter base in a big way—and we're optimistic we can keep making real headway by being real with you about this.

Because the bottom line: Corporations and powerful people with deep pockets will never sustain the type of journalism Mother Jones exists to do. The only investors who won’t let independent, investigative journalism down are the people who actually care about its future—you.

And we hope you might consider pitching in before moving on to whatever it is you're about to do next. We really need to see if we'll be able to raise more with this real estate on a daily basis than we have been, so we're hoping to see a promising start.

payment methods

WE CAME UP SHORT.

We just wrapped up a shorter-than-normal, urgent-as-ever fundraising drive and we came up about $45,000 short of our $300,000 goal.

That means we're going to have upwards of $350,000, maybe more, to raise in online donations between now and June 30, when our fiscal year ends and we have to get to break-even. And even though there's zero cushion to miss the mark, we won't be all that in your face about our fundraising again until June.

So we urgently need this specific ask, what you're reading right now, to start bringing in more donations than it ever has. The reality, for these next few months and next few years, is that we have to start finding ways to grow our online supporter base in a big way—and we're optimistic we can keep making real headway by being real with you about this.

Because the bottom line: Corporations and powerful people with deep pockets will never sustain the type of journalism Mother Jones exists to do. The only investors who won’t let independent, investigative journalism down are the people who actually care about its future—you.

And we hope you might consider pitching in before moving on to whatever it is you're about to do next. We really need to see if we'll be able to raise more with this real estate on a daily basis than we have been, so we're hoping to see a promising start.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate