The Good, the Bad & the Ugly
Cramer’s ‘Rant Heard Round the World’ Turned Out to be Right; BusinessWeek 'Recession in America' Blog Goes Belly-up; WaPo's Pearlstein Writes Obituary for Capitalism.

Aug. 6, 2008

The Good
     “Mad Money” host Jim Cramer isn’t what you would call conventional, but a year after a fiery rant he turned out to be right about Bear Stearns.

     Cramer shouted on Aug. 1, 2007 during CNBC’s “Street Signs” about the Federal Reserve’s hesitation to cut a key interest rate.

     “[I]t is no time to be an academic, it is time to get on the Bear Stearns call,” Cramer said during the “Stop Trading” segment on “Street Signs.” “Listen – open the darn Fed window. He [Bernanke] has no idea how bad it is out there. He has no idea! He has no idea! I have talked to the heads of almost everyone single one of these firms in the last 72 hours and he has no idea what its like out there. None!”

     Cramer slammed his hands on the set table during the outburst, and became enraged enough to warrant pleas to calm down from host Erin Burnett.

     “[M]y people have been in this game for 25 years, and they are losing their jobs, and these firms are going to go out business ... and he’s [Bernanke] nuts,” Cramer continued. “They’re nuts. They know nothing! … The Fed is asleep. [Federal Reserve Bank of St. Louis] Bill Poole is a shame. He’s shameful!”

     Seven months later, in March 2008, Bear Stearns fell and was taken over by JP Morgan Chase (NYSE:JPM) – although he did mistakenly say Bear wasn’t in trouble just days before the collapse.

The Bad
     At first it seemed like a new and innovative way to spread the doom-and-gloom news associated with the economic downturn. But BusinessWeek magazine’s recession blog, launched in May to give a personalized glimpse into "recession" hardships, has apparently fallen on hard times of its own.

     "This blog is one of the places we'll tell these stories," BusinessWeek.com reporter Tim Catts wrote on the blog's first post on May 2. "Here, we'll jump into the conversation about where the economy is and where it's going. Yes, sometimes we'll look at the latest data. Sometimes we'll share observations from the road. The goal is to give readers real stories about how the downturn is affecting individuals, businesses, and communities."

     However, activity on the blog has been scarce of late. Nearly three months later, there are just 23 posts. Meanwhile, the nation's Gross Domestic Product grew at a 1.9 percent pace for the second quarter of 2008, according to government estimates announced July 31.

     The blog has only been updated three times since June 4. The most recent post was by John A. Byrne on August 1. It declared a recession “officially started on June 1.”

The Ugly
     The U.S. economy has just barely flirted with a recession, yet Pulitzer Prize-winning Washington Post business columnist Steven Pearlstein has forecast the end of capitalism. 

     In his column on August 1, Pearlstein predicted the death of the era of free-market capitalism with the hallmarks of “smaller government, lower taxes, freer trade and more deregulation.” Because, according to Pearlstein, the free-market “model” has not delivered “goods” such as safety and fairness.

      “It's always risky to call turns in history, but my guess is that this consensus [toward free markets] is unraveling,” Pearlstein wrote in the Washington Post. “Just as the Gilded Age gave way to the Progressive Era and the New Deal gave way to the post-war era of big government, big business and big labor, the current era of free-market capitalism seems to be giving way to something else.”

      Pearlstein didn’t credit the union movement or the protectionist talking points championed by Sens. Hillary Clinton, D-N.Y., and Barack Obama, D-Ill., the final two Democratic presidential contenders. He instead blamed the government for not raising taxes so it could afford to play the role of provider.

      “Let's be clear: It is not the protectionists of the AFL-CIO or CNN who are primarily to blame for the erosion of public support for trade in the United States, as bone-headed as they may be,” said Pearlstein. “The blame lies squarely with a business community that continues to support Republican politicians who refuse to raise the taxes and spend the money necessary to provide the economic safety net for American workers that a free-market economy has not, and will not, provide.”

     According to Pearlstein, policies of lower taxes and less regulation that grew from President Ronald Reagan’s legacy have failed to provide other things that Americans value.

     “For the past 25 years, the United States has put its faith in open, unregulated and lightly taxed markets, and there’s little doubt that, over time, that model has expanded economic output and improved economic efficiency,” Pearlstein said. “But what Americans have also come to realize is that the same model is less adept at providing other things that we value highly -- things like safety, fairness, economic security and environmental sustainability. And more often than not, these are ‘goods’ that can be had only by giving up some of that output and some of that efficiency.”

The Good, the Bad & the Ugly tracks the best and worst media coverage of business and economics. Readers are invited to submit suggestions or news tips to Staff Writer Jeff Poor at jpoor@mediaresearch.org.