Stirling Newberry and Ian Welsh On Virtually Speaking 9pm EST Thursday December 10th
Jay Ackroyd will be interviewing us in world. If you have a Second Life account, hope to see you there, at:
http://slurl.com/secondlife/Virtually%20Speaking/167/100/25
If you can’t be in world, you can listen on Blog Talk Radio at http://virtuallyspeaking.ning.com/
And if you miss it, it will be archived at http://www.blogtalkradio.com/virtuallyspeaking
Before us, at 7:30 PM EST there will be music. Duo Appassionato – Violinists Izabela Spiewak (Izabela Jaworower) and Xi Yang (Young Zeid) play Vivaldi’s *complete* Four Seasons.
Much as I like Elizabeth Warren, I’m not going along with this:
“Even so,” the panel concluded, “there is broad consensus that the TARP was an important part of a broader government strategy that stabilized the U.S. financial system by renewing the flow of credit and averting a more acute crisis.”
It added, “Although the government’s response to the crisis was at first haphazard and uncertain, it eventually proved decisive enough to stop the panic and restore market confidence.”
Why? Well, because…
The panel’s 134-page report noted that after 14 months of the program, problems remain. Banks resist making loans, toxic mortgage-related assets still clog big banks’ balance sheets and smaller banks are vulnerable to troubles in the commercial real estate sector.
Here’s what happened, not just with TARP but with the overall bailout, of which TARP was only one part.
Because banks were not forced to recognize bad loans and assets, but have been allowed to keep them on the books it did not restart lending. Instead the money given, loaned and guaranteed has been used to allow banks to not take their losses, and they have used that money in addition to increase leveraged financial plays and for buyouts of other financial firms which are even more distressed.
We’re going to hear a lot of triumphalism over the next year, because the economy is probably going to “recover” more strongly than many expect, not primarily because of the stimulus, but because of increased military spending. Military Keynesianism is the only type of Keynesianism both parties agree with, and it should be no surprise that Obama escalating in Afghanistan, because that’s spending he can get through Congress and it directly creates jobs. It’s not the best possible stimulus, not even close, but it’s far better than tax cuts, or tax cuts in drag, which is what much of the stimulus spending actually was, since it allowed States to avoid raising taxes on the rich. (And yes, Virginia, I’m here to tell you that right now raising taxes on the rich and spending it to create broad based demand and jobs would be very stimulative.)
Japanification has occurred. To be specific, Japanification is when a society’s banks are unable to lend adequately because they have huge numbers of bad loans on the books which have not been recognized, and which they have to pay down over many years. The IMF forecast last year, which did not include a stimulus bill, assumed that the economy would have about the level of unemployment it has now. The IMF is one of the few organizations which saw the crisis coming and which was screaming warnings from the rooftop, so they are not Pollyanas.
The US economy has shifted down a step. The new “normal” is going to be higher unemployment and lower relative wages than was considered acceptable even under Bush, let alone under Clinton.
Meanwhile, the “decoupling” fools were talking about happening last year, is happening this year. Most Asian economies are recovering much much more strongly than Europe and the US. Why? Because they are creditor nations with surpluses. Their businesses and consumers can get credit, and their governments can run stimuluses much more effectively than the US can. They are also production societies which actually still concentrate on making real things, not on leveraged financial plays and suburban expansion of worthless communities without a real economic base to support them.
Meanwhile the US is trying to get the financial economy and the housing bubble going again. As long as the US is willing to keep shipping real productive capacity and the remaining few areas where the US has a technological advantage to Asia, and particularly to China, those nations will let the US try its financialization game again, but don’t expect them to be enthusiastic about it.
And once they’ve got what they need, it’ll be time to cut the US off. When the US makes nothing anyone else wants, why should the rest of the world play?
Can you say dollar/Yuan parity? Sure you can. Within 20 years.
Enjoy the next year, it’s going to be better than you expect, though unemployment will not recover all that much. But don’t expect the OK times to last, because they won’t. Nations which make less and less the rest of the world wants, don’t do well in the long run. The game of liquidating America’s advantages has been going on for over 30 years now, and the long run is now the medium run.
Soon it will be the short run.
When even the smart, competent people aren’t willing to face the reality of what’s happening in their own country, that country has nowhere to go but down. This will be a one step forward, to steps back decline, and triumphalists will scream about how wonderful each step forward is, but the trend is clear and there is no reason to expect it to change anytime in the next 10 to 15 years.
Comparative downturns to Nov09 by Stirling Newberry
Only down 11,000 this month, which is both better than I expected, and better than anyone else as far as I know.
The average duration of unemployment moved up from 26.9 to 28.5 weeks, which is an all-time record. Headline unemployment dropped slightly to 10% even. The broader U-6 measure dropped from 17.5 to 17.2%. The labor force decreased by 98,000 people, which accounts for the drop in unemployment figures despite no net job gains.
Big winners were the general service sector (58k) and temporary help services (52.4K).Manufacturing dropped 41K and construction 27, both of which are slower rates of loss than typical in the past couple of years. Health care employment continued to increase, government was mixed.
As Stirling’s graph shows this is now the deepest job recession of the post WWII era.
The question now is what happens in the next three months. My default assumption has been a job recovery in the spring, I suspect whatever we see in December, January will be a net negative (due to layoffs after Christmas), so I will be most curious to see February’s numbers.
Note that because of population increases, to maintain the same percentage of the population employed requires about 93,000 jobs a month be created.
(Wrote this August 31st. I think it deserves a bump back to the top. Remember, the CBO has said that the public option will have higher premiums than private insurance due to a higher cost structure.)
To put it really simply, if you don’t need a profit, and if you are only as efficient as your competitors, you will drive them out of business if you are not constrained in some fashion from doing so. Capital is the usual fashion to wipe out competitors, since non profits have trouble raising it. In the context of health care, arranging it so the public option takes on more unhealthy people is the more likely way to do it.
Since a real public option properly created to not be constrained from doing so WILL drive private insurers out of business, it will not be allowed to happen. It may be called a “public option”, but it won’t actually be allowed to operate as a public option should. A public option which won’t destroy the insurers in time, is also a public option which can’t drive down prices effectively.
All else is shadow play.
Apparently he is pushing for cuts in social spending, and opposing increasing taxes on the rich.
So far Bernanke has been succesful at making sure that the rich weren’t wiped out by their failures and retained their power.
Trillions were spent bailing out the rich, and no taxes were levied on them to pay for it. Now what will happen is that in order to balance the budget, money which primarily helps the middle and working classes will be cut, while those same middle and working classes will be forced to bail out the insurance and health industries.
At the same time, military spending is up slightly under 100% in real terms from what it was in 2000 (267.2 billion in 2000 dollars in 2000, 490 billion today). The US economy has militarized and financialized. Virtually everything that isn’t attached to one of those two streams (and remmber, the housing bubble was ultimately about financialization) is withering on the vine.
The decision to escalate in Afghanistan won’t cost 30 billion dollars a year, it will cost that money plus all the money which could have been saved by withdrawing from Afghanistan and cutting military expenditures significantly.
Coming and going, baby. Coming and going. First they used your money and credit to bail out the rich, now they are going to make you pay it all back, not the rich. Meanwhile banks aren’t lending, jobs aren’t returning and you are due for the 20 worst economic years of your lives.
This is a bipartisan project. Obama is as on board with it as Bush was. It’s not an accident that he wants to keep Bernanke or that he hired Geithner, the man who was supposed to watch Wall Street, as his Treasury secretary.
The world’s financial elites blew up the world’s economy. Now the world’s schmucks (aka. ordinary people) are going to be stuck with the bill.
Enjoy.
Addendum: Paperwight wrote about this in 2005 when it was Greenspan doing it. Plus ca change
I’m sure Sprint Nextel insisted on 8 million actual warrants. Because the lesson of the warrantless wiretapping that took place under Bush and now under Obama was that if you insisted on such warrants you’d be investigated, tried and send to jail, and if you didn’t, Congress (including Senator Barack Obama) would give you retroactive immunity.
So, as I say, I’m sure Sprint got warrants for all of this:
Sprint Nextel provided law enforcement agencies with customer location data more than 8 million times between September 2008 and October 2009, according to a company manager who disclosed the statistic at a non-public interception and wiretapping conference in October.
The manager also revealed the existence of a previously undisclosed web portal that Sprint provides law enforcement to conduct automated “pings” to track users. Through the website, authorized agents can type in a mobile phone number and obtain global positioning system (GPS) coordinates of the phone.
The revelations, uncovered by blogger and privacy activist Christopher Soghoian, have spawned questions about the number of Sprint customers who have been under surveillance, as well as the legal process agents followed to obtain such data.
Addendum: Commenter Drewvsea points out:
In fairness to Sprint, if you go and actually read the whole story at Wired, the Sprint spokesperson did give a reasonably plausible explanation for the “8,000,000″ number: it represents the number of pings sent to cell phones. It does not represent 8,000,000 individual law enforcement requests per se. Furthermore there is due process being adhered to regarding warrants, etc.– just go and actually read the full article.
