I was reading an essay just yesterday that makes the argument that the U.S. government needed to print money (a lot and soon) to finance its way out of this economic hole in the road. Although that seems wrong to many of us, it is the only way quickly to finance many new programs that will be able to immediately put more money into the hands of consumers, who need to spend to revive this sputtering recovery. (And we're not even considering here ("There Be Dragons!") the obvious concerns of whether recovering back to where we were before would be a disaster for the environment and the world economy.) And, gee, when even the New York Times decides to lecture President Obama's numbers guys for going too slowly, you know it might be time to get serious on some "jobs" action. For those of us who've already lost years of our normal working lives during this cycle (through the policies that encouraged outsourced industries, the importation of cheap labor, the declining quality in products and services, etc.), and the benefits that would have accrued for this work never to be recovered in future employment or through any other means, it's probably too little too late if they finally do move forward now on actually funding jobs programs. For the newly unemployed, it's a start that may not have occurred for years otherwise.
The trick I'd been hearing about for the first two years of the Obama administration was to give the rightwingers a lot of what they wanted during the first term (building bridges of goodwill!), so that the real programs for job creation, education, infrastructure repair, protection of the ecology, etc., could be passed with votes from both sides during the second term. But after what we've seen in the House of Representatives so far, good luck with that approach.
Anyone else out there think there is a good reason to move that jobs-creation program effort forward?
May 30, 2011
The Numbers Are Grim
A month ago, when an initial gauge of first-quarter economic growth came in surprisingly weak, many policy makers and economists expected the bad news to prove fleeting. But when revised data were released last week, the growth estimate remained stuck at an annual rate of 1.8 percent, compared with 3.1 percent at the end of last year.
More troubling in the latest figures, consumer spending — the largest component of the economy — was especially slow. Stagnant wages and higher prices for gas and food are squeezing family budgets, while falling home equity hurts consumer confidence. That suggests more bad news to come.
When consumers are constrained, so is hiring, because without customers, employers are hard pressed to retain workers or make new hires.
A recent Labor Department report showed a greater-than-expected rise in the number of people claiming jobless benefits even as private-sector economic forecasts are being revised downward — both very bad omens for continued job growth.
Republican lawmakers have responded to renewed signs of weakness with a jobs plan that prescribes more of the same “fixes” that Republicans always recommend no matter the problem: mainly high-end tax cuts, deregulation, more domestic oil drilling and federal spending cuts.
The White House has offered sounder ideas, including job retraining, plans to boost educational achievement and tax increases to help cover needed spending. But its economic team is mainly focused on negotiations to raise the debt limit, presumably parrying Republican demands for deep spending cuts that could weaken the economy further while still reaching an agreement on the necessary increase.
The grim numbers tell an unavoidable truth: The economy is not growing nearly fast enough to dent unemployment. Unfortunately, no one in Washington is pushing policies to promote stronger growth now.
The sinkholes in the economy should be obvious. Most prominently, the housing market is still awful, and state and local government budgets are still a mess. Conditions apparently have to get worse before deficit-obsessed policy makers will be ready to address them, including with bolstered foreclosure relief and more fiscal aid to states. More delay would only imperil the recovery, such as it is. And without a strong recovery, it will be even harder to repair the budget. Continued hard times means low tax revenues and high safety-net spending.
If Washington won’t do what is needed to make things better, there are still things that can be done to try to keep the economy from getting worse.
The administration could work to ease the rules for refinancing mortgages owned by Fannie Mae and Freddie Mac, the government-run mortgage giants. Easier refinancings would lower monthly payments for potentially hundreds of thousands of borrowers in good standing, and in that way, free up spending money to boost the economy.
The Federal Reserve, for its part, must be prepared to continue measures to bolster the economy as needed, even if that means looser policy for longer than it originally planned. Democrats in Congress must lay the groundwork for an inevitable fight over extending federal unemployment benefits, which expire at the end of this year.There’s a long way to go before the economy will thrive without government help.It's good to see the Times actually reporting some relevant numbers (not that they don't publish numbers all the time, but still, it's nice to see a little bit of context right out there in the lead editorial) Wonder when they'll come clean and publish some good editorial context about the loss of journalism numbers? James Howard Kunstler feels the same way I do on that subject and has no problem with letting the world know. (I love to read this guy (except for his "nuclear" blindness). Sometimes you need someone to just say what's true without any sugar-coating ("the numbers have improved over the horrible numbers of last month"), disclaimers ("but they didn't mean it"), or excuses about how they will eventually be better ("in the future . . . someday").
Where’s the Real News Reporting Gone? 27 May 2011 When I was coming up in the TV reporting business, “60 Minutes” on CBS was the pinnacle of TV news. I was lucky enough to make it to the networks (ABC and CNN) and now run my own site on the internet (which is where the news business is all heading). Today, as far as I am concerned, “60” is not the pinnacle of journalism. I don’t know what it is, but it is not the truth and light it once was. That was clearly evident in the first and second interviews with Fed Chief Ben Bernanke in the last couple of years. I was so upset about how poorly the second interview was conducted, I wrote a stinging criticism of the segment called “CBS Allows Fed to Spread Disinformation Unchallenged.” What Bernanke said was so preposterous, Jon Stewart of “The Daily Show” made fun of it. To be fair, I have also complimented the show when it has done good reporting. That said, good reporting is not being done on much of the mainstream media (MSM) these days – journalism fail. Journalist and science fiction author, James Howard Kunstler, agrees. Mr. Kunstler is here with his take on what the MSM is telling the public and what you really need to know. - Greg Hunter Get RealAh. Currency values . . . interest rates . . . exciting subjects for another day. ___________________
Americans gathered around the hearth of CBS’s 60 Minutes must have been bemused to hear reporter Scott Pelley announce self-importantly that the US Department of Justice is investigating Lance Armstrong’s bicycling team for performance-enhancing drug use. Does it really matter if any pro athlete takes drugs? Why not throw Babe Ruth out of the Baseball Hall of Fame for drinking sixteen beers the night before a World Series opener? Or Ditto Mickey Mantle for that, plus smoking two packs of Marlboros in the dugout during every game.
Notice that Scott Pelley did not announce that the US DOJ is investigating Goldman Sachs, or Citi, or Merrill Lynch, or Bank of America or several other so-called banks for looting the American public and influence-peddling in the halls of government. Or the SEC and the CFTC for failing to regulate the trade in frauds and swindles. The window for that sort of action is closing, and with it the reasonable hopes of citizens in the legitimacy of institutions that manage things.
The failures in journalism are now so stupendous that there are only a few possible explanations.
1. The major media, hard pressed by declining revenues and the extremes of competition on cable TV and the Internet, are in thrall to corporate advertisers who expect cheerleading for the status quo in return.
2. Major media editors and producers – the officer corps of journalism – are not smart enough to tell the difference between what’s important and what’s not and can’t run their newsrooms.
3. Mainstream media only reflects the cognitive dissonance that pervades the collective imagination of a culture – too much noise to think coherently.
4. We really don’t want to know what’s going on – it’s too scary.
5. Sometimes a generation of leaders just fails.
For those of you interested in a digest of reality, here’s what’s going on:
• The global energy predicament really is a crisis, even though nobody is currently lining up at the gasoline pumps. It’s a crisis because peak oil is for real and oil is the primary resource of advanced economies, and there are no miracle rescue remedies (“drill, drill, drill,” shale oil, shale gas). Peak oil means that we can’t increase supply in relation to still-growing demand, which creates disturbances in the energy markets. Peak oil also leads directly to a crisis of capital (money), because a nation (an economy) that can’t get increasing energy “inputs,” can’t create more wealth, can’t generate more loans (debt), and most importantly can’t expect what we’ve come to think of as normal economic growth. This creates further disturbances and distortions in financial markets.
• Without that sort of growth you get stagnation and then contraction. We’re probably past the stagnation phase and into contraction. We tried to compensate for stagnation (and conceal it) by allowing the financial part of the economy grow from 5 percent of all activity to over 40 percent of all activity. In the process, banking changed from a boring utility aimed at directing capital into legitimate investment (highly regulated) to a swashbuckling realm of unregulated swindles having nothing to do with real capital allocation but rather aimed at the sales of worthless “innovative products” (CDOs, et cetera), the creaming off of huge transaction fees, the use of computers to game exchanges, colossal carry trades between banks and public treasuries (you borrow money at zero percent – for free! – and invest it in paper that pays, say, 2.5 percent and keep rolling it over), and let’s not forget pervasive accounting fraud practiced by government and private business to the degree that money matters are now completely opaque and dishonesty can run rampant. After a while, nobody can have faith in the way things work, and that is a dangerous situation because it leads to political problems. The ultimate question is: how does a society manage contraction?
• One way to think about it is to stop using the word “growth” and substitute the term “economic activity.” There are lots of useful things we can do to rearrange daily life in the USA that would put people to work, but they would tend to defy the status quo. We could recognize that peak oil means that we have to grow our food differently and make local agriculture a more up-front piece of the economy. We could rebuild the railroads so that people don’t have to drive everywhere. We could rebuild our inland ports to move more bulk freight on boats. Notice these are very straightforward activities, unlike the manipulation of financial paper and markets. We’re not interested in focusing on agriculture and transport reform. Business and political interests are arrayed against changing anything. Something’s got to give.
• Political problems arise when many people in a society lose faith that their institutions are competent, trustworthy, and fair, and seek ways to bring them down. We’re in a political crisis and we don’t know it. Other parts of the world know it, and more of them are finding out every day.
Yesterday was Spain’s turn, as the governing party took a beating in local elections and unemployed young people moiled in the city squares. Many of them probably expected to work in corporate jobs. They may end up back on the farm or in the cork orchards. The rest of Europe has a lot to sort out, too, and after a half-century of being the world’s fairy-tale theme park, the terms of daily life have suddenly changed. The tensions between the requirement to adjust to change and the resistance to change will produce all kinds of disorder within and between the different nations of Europe. It will be hard to believe as it occurs, but essentially each nation, or region, will be thrown back on whatever resources it can muster, and that will be very difficult.
• The trouble in the Middle East and North Africa (MENA) is probably not so much over abstract ideas about “freedom” and “democracy” (we flatter ourselves to think so) as food scarcity and the pressures of exploding populations. The OCED nations might not care so much if this region didn’t produce so much of the world’s precious oil – but it does, of course, so we can’t help but meddle in the politics there.
I would not bet on continued stability of the type that has prevailed for decades, and by that I just mean the expectation that regular supplies of oil will get to the market. The USA is pissing away vast money resources to keep these supply lines open. We’ve made an enemy of Persia (Iran) and they want to rule the region, so we are trying to make a baloney sandwich out of them with garrisons east and west in Afghanistan and Iraq. It’s not working so well.
Now, Persia is making noises about establishing missile bases in Venezuela. They may overstep on that one. Pay attention. China has a deep interest in keeping the oil supply lines open, and it’s possible, if the wells, pipelines, and terminals are not wrecked by whatever happens next in MENA, that China will get some oil even if we don’t.
They offer engineering aid; we just send guys in desert camo with night-vision goggles and guns. Japan, you can possibly forget about. I maintain that they will be going medieval, especially now that they’ve foresworn further nuclear power development.
• If the US is politically nervous, it is not showing a whole lot at the moment, but there is so much potential for financial havoc and economic hardship that I have a hard time imagining the 2012 election will play out as many suppose – another red-blue pie-eating contest bought-and-paid-for by Wall Street.
We’re cruising straight into some kind of money crisis that is going to spin heads. This isn’t the first time I’ve said we could wake up one morning and find a Pentagon general in charge of things. If US economic history is any rule, Barack Obama would just be plain un-reelectable. But would anybody really vote for such a bumbling, glad-handing Babbitt non-entity as Tim Pawlenty? The things that really could tip the USA over are boring issues like interest rates and currency values – and the rule of law in money matters. They can’t compete for sex appeal with Lance Armstrong and whoever the latest incarnation of Lindsay Lohan is these days.
(Mr. Kunstler is a prolific and talented author. Some of his recent books include: “The Witch of Hebron,” “World made by Hand,” and “The Long Emergency.” To check out Mr. Kunstler’s bio (click here) To go to his website (click here).)