Monday, August 16, 2010

"Partying Like It's 1929" Is This Finally The Economic Collapse? World Is Over America: "Post-Anti-American" As 'Thug Women Take Charge

If you thought that "Dumbya" Bush and Crying Hankie Paulson woke up one morning in September of 2008 and noticed that the economy had just started to get bad and required quick action to save it from going over the edge, think again. They all knew about the decline's eventual endpoint if not exactly when at least since 2006, and they certainly knew what type of stimulus was going to be needed to bail out the taxpaying citizens of the country who had been expected all along to ultimately save their and their casino-running goombahs' hides (no slur intended to Italians).

"I know this sounds a bit dire, but little has changed from where we were a year ago . . . . we had a huge bounce off the lows, but we had a similar bounce off the lows in 1930. The equity market was up something like 50% in the opening months of 1930, and while I am sure there was euphoria at the time that the worst of the recession and the contraction in credit was over, it’s interesting to see today that nobody talks about the great run-up of 1930 even though it must have hurt not to have participated in that wonderful rally. Instead, when we talk about 1930 today, the images that are conjured up are hardly very joyous.

. . . The economy is on the rocks and another round of quantitative easing won't help. The Obama administration will have to toughen up and push through another fiscal stimulus program. It's the only way. QE, low interest loans, zero rates, consumer subsidies, tax cuts or more bank reserves will not do the trick. Private sector deleveraging is beginning to accelerate, which means that economic contraction is unavoidable unless government spending increases substantially for an extended period of time.

The budget deficits are going to balloon. Get used to it. That's what it will take to get back on track. Obama's stimulus was never big enough. Experts like Paul Krugman, Joseph Stiglitz and Obama's-own Christina Romer figured it would take roughly $1.4 trillion to suck up the excess capacity in the system and really put a dent in unemployment. $787 billion is a pittance compared to the $6 trillion in home equity and $4 trillion in retirement funds that were lost in the housing bubble flameout. When that much money vanishes from the system, it takes time to regroup. It blows a hole in personal balance sheets and forces people to cut back on spending. That's why the personal savings rate has skyrocketed to 6.4% in a matter of months. People are strapped and trying to pull themselves of the red. It's government's job to give them a hand.

Think Ben Bernanke (originally appointed by Bush in 2006) is still "Man of the Year" and that the Obama boys have done a good job for the hopeful folks who worked so hard to elect a "change" candidate? Mike Whitney reports for all of us stuck down here in the sticks that it's a " 'Financial Party' " on Wall Street, Like It's 1929." (Emphasis marks added - Ed.)
On Tuesday, the Fed announced that it will reinvest the proceeds from maturing mortgage-backed securities (MBS) into US Treasuries. The process is called Quantitative Easing. In theory, Q.E. increases inflation expectations so that consumers spend more and rev up the economy. That's the theory. But adding to bank reserves when the banks are already loaded to the gills, achieves nothing. It doesn't put money in the hands of people who will spend it, generate more economic activity or increase growth. It's a big zero. Oddly enough, the Fed even admits this. According to an article in Bloomberg News, "The Central Bank posted a paper co-written by Seth Carpenter, associate director of the Fed’s monetary-affairs division, finding that the “quantity of reserve balances itself is not likely to trigger a rapid increase in lending.”

No "increase in lending" means no credit expansion and no rebound. Thus, QE will have no real impact. From the FOMC Statement:

"Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated . . . .

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability."

There's not a glimmer of light in the Fed's statement, and yet, "the Committee anticipates a gradual return to higher levels of resource utilization". But how? And on what is the Fed basing its prediction? Certainly not the data. Maybe tea leaves? The truth is the economy is in very bad shape and getting worse. This is from Wednesday's New York Times:

"The government’s preliminary estimate for economic growth in the second quarter is likely to be revised substantially lower . . . . "Combining the bigger-than-expected trade deficit with other weak data suggests that Q2 growth was only 1.2 percent rather than the 2.4 percent originally estimated, placing the economy on even shakier ground than it seemed,” wrote Nigel Gault, chief United States economist at IHS Global Insight." (New York Times)

The Fed has dramatically revised its growth forecast downward since its last meeting. The fiscal stimulus is petering out and inventory restocking is nearly over. Now the economy will have to stand on its own without the support of fiscal and monetary aid. But is it strong enough? Households are still patching their balance sheets, credit is tight, and businesses have no incentive to invest due to flagging demand. So where's the growth going to come from? If the government does not provide more stimulus, asset prices will tumble, unemployment will rise, and the economy will contract.This is from Wednesday's Wall Street Journal:

"A Wall Street Journal survey found that by a two-to-one margin Wall Street economists see deflation as a bigger threat to the U.S. economy over the next three years than inflation. “Deflation is dangerously close,” said David Resler of Nomura Securities, one of 53 economists surveyed by the Wall Street Journal. Among economists who answered the question, nearly two-thirds said that deflation poses the bigger risk to the economy over the next three years; the remainder said inflation is the bigger threat. That compares to an April survey, when the economists were split 50/50 over whether inflation or disinflation posed the bigger risk over the next year." ("WSJ Survey: Risks of Deflation on the Rise, Fed on Hold Longer", Phil Izzo, Wall Street Journal)

The looming risk of deflation is what makes the future so "unusually uncertain". (Bernanke words) But investors don't like uncertainty, which is why they (are) pulling their money out of equities and moving it into bonds. That's also why the flight to safety has continued for more than 2 years since the crisis began. No one knows what the policy is or what the rules are. It's catch-as-catch-can. At the same time, falling bond yields are a referendum on Bernanke's performance. Historic low yields on Treasuries indicate that the Fed has been unable to restore confidence or allay investor fears. Recent surveys of small business owners (National Federation of Independent Business) and CEO's show that confidence continues to plunge. Consumer confidence is in the dumps, too. Bottom line: No one has faith in the Fed's approach.

Bernanke hoped that restarting his bond purchasing program would convince Wall Street that he was prepared to provide as much liquidity as needed. But traders saw through the ruse. The bond market cast its ballot immediately, driving yields into the ground. Investor pessimism pushed the 10-year below 3% while 2 year Treasuries slumped to historic lows. Investors are betting that the economy is headed into another vicious cycle of debt-liquidation and depression. They don't believe the Fed can stop the freefall, so they are shifting into risk-free liquid assets.

It took the stock market a bit longer to grasp what was going on, but 24 hours later, the rout on Wall Street began. Shares plunged throughout the session pushing down the Dow Jones 265 points by the end of the day. The other indexes were battered as well. The dollar strengthened on fears of deflation while bond yields on short-term notes fell sharply. Bernanke thinks the economy can muddle through on its own, but Wall Street isn't buying it. They want more monetary stimulus, and they want it now.

. . . Bernanke maintains the recovery is on track and that the economy is slowly improving, but as economist Dean Baker (CEPR) points out, demand has been weak throughout the crisis and is showing no signs of a rebound. Here's Baker:

"Growth has been boosted over the last 4 quarters by an inventory cycle as firms went from depleting to building their inventories. This cycle has now ended. Inventory growth is unlikely to accelerate further in the quarters ahead. This means that GDP growth will be close to final demand growth.

Final demand growth has averaged 1.2 percent in the last four quarters and was 1.3 percent in the most recent quarter. There is no obvious reason to expect that the rate will increase in the near future."

Bernanke's no-jobs, no-growth recovery has run out of gas. Now we need a real solution, a fiscal solution; a solution that will lower unemployment, put the country back to work and restore public confidence in government. And there's not much time to act either. As pessimism spreads and economic atrophy sets in, the prospect of a general fall in the price level becomes more likely. That will lead to more layoffs, more excess capacity, more plummeting asset prices, more debt-liquidation, more defaults and more bankruptcies. Obama and Co. need to get this thing right before the underlying downward trend reasserts itself and we find ourselves back in the soup.

Is This Finally The Economic Collapse? Keith R. McCullough thinks so and in the pages of Fortune he goes into great technical detail. It's quite interesting and whether you think he's full of it or not, worth a look.

But only a look. One commenter mirrors my own thoughts about the so-called debt burden, and a "condescendingly elegiac" article in Newsweek (below) from Howard Fineman, no less, tells us that it's already over for the U.S. (unless Obama gets busy with a further decent-sized stimulus, of course, and I'm guessing they've got a pretty pert point right now before they go belly up from not actually reporting anything other than approved/manufactured "good news" about the Rayguns - Bush I & II Revolutions for the last 30 years (when I immediately cancelled my subscription)). (Don't forget that according to one of those blonde bombshell grandchildren, Bill Clinton is one of George H.W.'s "favorite stepsons" (for some reason or other). (Emphasis marks added - Ed.)


This article is total Bullshit. Paul Krugman, Mike Whitney, and Michael Hudson have debunked this many times. If we don't spend now to create jobs, no matter what happens to the debt, the economy will never get off it's back. If you're worried about the debt, there is an answer to that. Taxes on the wealthiest are far too low. $35,000-a-night hotel suites in Manhattan? You betcha there's room for taxation. Tea Party Ayn Rand schlubs notwithstanding. Post-Anti-Americanism Europe can’t even be bothered to hate America any more.

August 9, 2010 "NewsWeek" - You can still buy an American newspaper at the kiosk in Rome’s Piazza Colonna, but you have to ask the lady behind the counter. She turns from the window, paws through a stack on the floor, and produces an International Herald Tribune, holding it at arm’s length like a day-old fish. It’s the same availability and tone in Venice, the Greek islands, and Istanbul. The implicit question in the transaction is always the same: why would you want to read that thing about that place at this time?

And when you read about America in European newspapers, what you are likely to find is a tone bordering on pity. The U.S. is depicted as a fraying empire of obesity, ignorance, debt, gridlock, stagnation, and mindless war. Sure, the iPad is cool, but it is evidence of what America was, not what it will be again. The stories are not angry, accusatory, or even ideological. It’s worse: they are condescendingly elegiac.

European disdain for the United States is centuries old, of course. But over the course of decades of traveling in the U.K. and on the continent, I have never gotten the sense that I got on a recently completed three-week trip to Italy, Greece, Turkey, and the Black Sea. America is no longer admired, imitated, or feared. We remain — for now — a safe haven for dollars (of which there are too many in the world). But we increasingly are seen less as a model or as an empire than as a cautionary tale of national neglect and decline.

Some Europeans can’t quite hide their schadenfruede. The British — whose publications and personalities are increasingly (and annoyingly) influential in the colony they lost 227 years ago — are global leaders in condescension (think Simon Cowell). But for America they add a special twist of bitter lemon to their analyses. It’s the triumph of the doddering older brother who no longer has to be grateful to his junior. Memories fade, and the Brits no longer feel they have to be kind out of homage to our having saved them from Hitler.

A couple of examples from the genre. Writing in the Guardian, Timothy Garton Ash sees a Third World shabbiness when he visits the United States. “Every time I come back to the United States,” the Oxford don writes, “the airports, the roads, the public spaces look more tattered, battered, old-fashioned. Modernity is no longer self-evidently here.”

Edward Luce, a brilliant and diligent reporter for the Financial Times, surveyed the American landscape and came up with a mournful portrait that echoes, in equal measure, Diane Arbus, Walker Evans, and Robert Altman. Citing incontrovertibly bleak statistics about the struggles of middle-class Americans, and the growing disparity between the really rich and everyone else, he concludes that the U.S. is losing its essential character: it is no longer the land of opportunity and upward mobility; no longer the place where the future will surely be better, and more prosperous, than the past.

. . . And why, you might ask, does much of the rest of the world see us this way? I have a few suggestions:

The post-post-9/11 world. After an initial burst of sympathy, the world has lost patience and stomach for the “war” we launched against Al Qaeda and its allies. It’s cost the U.S. $2 trillion to $3 trillion or more, but Europe doesn’t agree with the premise or, even if it does, doesn’t want to pay for the cost. It would rather look away from our struggle, and, increasingly, would rather blame us than Al Qaeda.

The euro. In spite of all the talk about the euro’s demise, and the problems of Greece and Spain and Italy, the currency is surviving, as is the economic union it represents. The euro is back up.

Asia and Arabs. Turkey is turning east, both for investment money from the Gulf and for construction projects (the Turks are master builders) in Asia. As the U.S., burdened with mounting debt and structural political and economic sclerosis, is facing the possibility of a double-dip recession, most of the BRICs (and I would add Turkey) are moving ahead.

Obama fatigue. I talked to numerous businesspeople and others in Europe who had lost the awe they had — briefly — that we had elected an African-American, and a cool global guy at that. They are aware that he has lost his popularity in the United States, and, even though he managed to enact some massive legislation — on health care, stimulus, and finance services — they increasingly view him as ineffectual. “He’s hollow,” said one leading businessman in Istanbul.

Can't say that I disagree with that as T.S. Eliot would have a field day with the current cast of politicos, wouldn't he?

And I'm guessing Fineman was an indifferent history student who learned his from Fox News. Grateful to Americans? Maybe for mopping up and impressing everyone by nucleating Japan after they had already surrendered, but can you say "Stalingrad," Howard?

No? Didn't think so.

And so it goes.

And, of course, just when you thought everyone was suffering, James Petras comes to the rescue with these tidbits:

While progressives and leftists write about the "crises of capitalism", manufacturers, petroleum companies, bankers and most other major corporations on both sides of the Atlantic and Pacific coast are chuckling all the way to the bank.

Paul Krugman chimes in with the real facts on that fraudulent Social Security so-called Deficit Commission:

"So let's beat back this unnecessary, unfair and - let's not mince words - cruel attack on working Americans. Big cuts in Social Security should not be on the table."

The women running from the far right (Carly Fiorina, Meg Whitman and Linda McMahon) are providing an excellent example of how the 'thugs have cheapened money (printing presses still too hot to touch) - and integrity - so incredibly that they can throw it away to win political positions that just a few years ago would have been impossible dreams for such nonentities. Nope. I have no interest in campaigning for rich, self-indulgent bitches (and, yes, I'm well-read on their campaigns). (Emphasis marks added - Ed.)

These aren’t moms in tennis shoes, or earnest reformers who got their starts on the school board or with the League of Women Voters, or, on the right, women who cut their teeth in the right-to-life movement. They’re playing from the men’s tee, elbows out and with their own money. Whitman is outspending her opponent in the California gubernatorial race, Democrat Jerry Brown, 86 to 1. One report said she spent more in one day than he has during the entire campaign. She has already dropped $100 million and is on track to become the biggest spender in a state with a long record of affluent people seeking office on the coattails of their money. According to a survey done earlier this year by The San Diego Union-Tribune, only one of 18 self-funded notables running since 1964 got elected, and that was Arnold Schwarzenegger, who spent “only” $6 million of his money, a pittance compared with Whitman.

. . . “People have tended to trust self-financed candidates, thinking they’re not owned by anybody else but themselves, but I’m not at all certain that will hold in this economic environment, with Wall Street’s problems and high unemployment,” says Sherry Bebitch Jeffe, a political analyst at the University of Southern California School of Policy, Planning, and Development. “She’s pledged to spend at least $150 million, and people are asking, ‘Why doesn’t she just invest in the state?’

. . . The novelty of having serious female candidates contending in both the senate and governor’s races has not rallied the sisterhood the way it did a generation ago. Californians may not be ready for another novice (Schwarzenegger leaves office with very low approval ratings), and Whitman’s money may not be enough to calm voter concerns. There are rumblings that Fiorina isn’t spending enough of her money, and she’s also pro-life in a very blue, pro-choice state. Fiorina's opponent, Democrat Barbara Boxer, who's contending for a third Senate term, should never be underestimated; she is a ferocious campaigner. And Sarah Palin’s endorsement of Fiorina will be used by Boxer — and with independents, that’s far more negative than positive.

Self-financed corporate women candidates represent another crack in the glass ceiling, but one that’s not entirely celebratory. When running for office becomes pay-to-play, that excludes more women than it lets in. Money has gotten these women in the game, but money doesn’t always win, not in wrestling, not in life, and certainly not in politics.

Paul Harris looks up at the current news from the lower (what used to be called the middle) classes:

Whether it's the poor of Camden or Colorado Springs or Atlanta, or among the growing throngs of the 99ers, millions of Americans are discovering that working hard, doing the right thing and obeying the rules are no longer enough.

And can the Obamaniacs solve the riddle that corruption-laden Washington, D.C. imposes upon their good-natured, protected carcases? Poor Obama. Poorer us. (Emphasis marks added - Ed.)

How broken is Washington? Beyond repair? A day in the life of the president reveals that Barack Obama’s job would be almost unrecognizable to most of his predecessors — thanks to the enormous bureaucracy, congressional paralysis, systemic corruption (with lobbyists spending $3.5 billion last year), and disintegrating media. Inside the West Wing, the author talks to Obama’s top advisers about the challenge of playing the Washington game, ugly as it has become, even while their boss insists they find a way to transcend it.

Transcendance! Emersonians all!!!

And Dead Fish Are Washing Up Everywhere . . .

And, I almost forgot:

U.S. Death Squads Are Roaming the Globe (making more friends and neighbors for US):

As American counterterrorism operations spread beyond war zones into territory hostile to the military, private contractors have taken on a prominent role, raising concerns that the United States has outsourced some of its most important missions to a sometimes unaccountable private army.

Land of the Unfree?

I'm worn out. And broke. Down. She's gone. Suzan ____________


Mauigirl said...

Sadly true, all of it. I think the foreign view of America is true. The only reason so many people here don't know it is because so many of them have never left this country and looked around at other places. They're the ones who keep pounding out how great America is. Sure, if you don't know anything else. Admittedly there are certainly places I'd rather not be, but on the whole most western countries work better than ours does these days.

Suzan said...

You are so level headed, friend.

While I feel like I'm screaming for people to become acquainted with the real economic facts every day, you come along and nail it.


The liars in the media don't help, of course, but mainly the people are so ignorant that they have no idea how blatant the lies are.

Thanks for the comment!


I think the foreign view of America is true. The only reason so many people here don't know it is because so many of them have never left this country and looked around at other places.

Tom Harper said...

I subscribe to the Financial Times. I saw that article 2 weeks ago that you were referring to, about the decline of America's middle class.

I think you're right that most countries don't hate or fear us any more. It's more like pity and/or schadenfreude. Sort of like running into that high school bully you were terrified of 35 years ago, only now he has a 58-inch waistline, triple chin and walks with a limp.

Suzan said...

Ya got me, Tom.

But you know I save these up in my little black file folder to use whenever I find them most cogent to my argument.

Not that these wouldn't be pretty darn on point just about any time. . . .

And I think the new emotion they feel towards us is indifference (or an involuntary cringing) - we've shown them the error of the new fascist ways and they want to stay far away from it (US) now.

No one wants to be infected with our "freedom" idea anymore.


Short Short Stories said...

The nation is ruled by various forms of fundamentalism. They are dangerous and destructive people. Their brains have limitations from all the Kool-aid they have been drinking in their Houses of Propagandistic Evangelizing.

They want to take over the wealth, and turn the flock into Sheeple. They want the Sheeple to drink their form of religious propaganda, as the wealthy elite reach into the Sheeple's threadbare wallets.

The whacky fundies are all over. The wars are about fundie training and crusading. And the resistance is led by fundie training and crusading.

It is outrageous.

Suzan said...

You got it, baby!

And I'm a constant reader of WashingtonsBlog and yours.

Gooood sheeeeple!!! (pats heads kindly)


Thanks for commenting, friend.


They want the Sheeple to drink their form of religious propaganda, as the wealthy elite reach into the Sheeple's threadbare wallets.

Jack Jodell said...

A very powerful post, Suzan. Rather than 1929, I see a lot of parallels today with 1937. FDR's New Deal "stimulus" had shown some success, but there was still a long way to go. Then conservatives convinced him to cut back on spending a bit. No sooner was that done than the recession of 1937 hit.

Conservatives are always dead wrong when it comes to the economy. They cause recessions and depressions and then they always want to impede progress. Just as FDR hadn't spent enough to really rev-up the economy, so too is it today with Obama and his blue dog Dems and the Republicans. If your house is on fire, you don't only spray water on part of it. You need to do what it takes to get the job done.

This GOP philosophy of keeping all the wealth in as few hands as possible is utter folly and is the root cause of all our problems. Once the poor and middle class have more money to spend, THEN we'll see the economy healthy again, and not until then. It is the ONLY way to success!

tnlib said...

Well, this action-packed post certainly cheered me up. Whew!

I'm not overly concerned about the European perception of Obama or of the U.S. but for different reasons.

I think people here and abroad got caught up in the symbolism of our first black president and didn't look beyond that symbolism. As young as JFK was when elected president, he had over 15 years of experience in politics, something lacking in Obama.

And I think anytime someone is put on a really high pedestal, there's bound to be a huge crash because he or she can't sustain the romance (kind of like a marriage). In general, the European media isn't as sloppy as ours but I doubt if they are as good as they used to be and are as subject to biased reporting and lack of depth.

I suported Obama and I still do. I'm not thrilled with how he's handled everything but my God, this man has been fighting a concrete wall of obstructionism, racism and just plain old fashioned bullshit since he said, "I will."

I think the charge of lacking substance is misplaced and a bit unfair. I think he's much more subtle than a lot of people. As an NBC correspondent observed tonight, Obama doesn't wear his religion on his sleeves.

Re European perceptions of the U.S., I'm not surprised at all - especially after the past two years of the wing-nuts showing their butts about everything from A to Z. We (they) are ignorant, provincial and unsophisticated. I think many progressive bloggers have written about how the Tea Buggers are making as look like idiots before the rest of the world.

Having said that, I sometimes think my international friends have a bit of a superiority complex. They don't seem to like us very much until they're invaded. After we dig them out of trouble they don't like us any more. Kind of like the governors of the Gulf states who complain about too much government, and who say they'll refuse the stimulus checks but accept them anyway (and take credit for the idea), and who criticize the government for not acting fast enough after the oil spill.

Don't know where in heck all that wind came from. Sorry.