There has been a lot of talk about the financial crisis over the past year and a half, and I obviously think that will remain an important subject, at least until we have a truly reformed financial system. Preventing the next financial crisis should be high on our society’s priority list. But as the months and years wear on, I suspect we will see more articles like Don Peck’s recent 8,000-word article in The Atlantic, “How a New Jobless Era Will Transform America.”
Peck’s article is not about what caused the recent crash and recession, but what its societal consequences will be. And the article is almost unremittingly bleak. Even before 2008, we had already lived through a decade of stagnant median income and sluggish job growth; the recession pushed some unemployment levels, such as the underemployment rate (people out of work, working part-time for economic reasons, or too discouraged to look for work) to levels not seen since the Great Depression. It’s not particularly clear where growth will come from, as manufacturing remains in decline, services are becoming increasingly outsourceable, and other countries take the lead in the most plausible major new industry (alternative energy). According to Nobel laureate Edmund Phelps, “the new floor for unemployment is likely to be between 6.5 percent and 7.5 percent (for several reasons, including “a financial industry that for a generation has focused its talent and resources not on funding business innovation, but on proprietary trading, regulatory arbitrage, and arcane financial engineering”).
The societal implications that Peck sees are worse than the mere numbers would imply. Young people who graduate into recessions never catch up with cohorts around them that graduate into better economic conditions, partly due to risk aversion, partly because they move up more slowly and get tagged as underperformers. Unemployment also changes people:
“Krysia Mossakowski, a sociologist at the University of Miami, has found that in young adults, long bouts of unemployment provoke long-lasting changes in behavior and mental health. ‘Some people say, “Oh, well, they’re young, they’re in and out of the workforce, so unemployment shouldn’t matter much psychologically,”‘Mossakowski told me. ‘But that isn’t true.'”
The effects of unemployment go beyond, and last longer than, not having money.
“Andrew Oswald, an economist at the University of Warwick, in the U.K., and a pioneer in the field of happiness studies, says no other circumstance produces a larger decline in mental health and well-being than being involuntarily out of work for six months or more. . . . Only a small fraction of the decline can be tied directly to losing a paycheck, Oswald says; most of it appears to be the result of a tarnished identity and a loss of self-worth.”
Some of the results show up quickly: “Last March, the National Domestic Violence Hotline received almost half again as many calls as it had one year earlier; as was the case in the Depression, unemployed men are vastly more likely to beat their wives or children.”
I think this means that we need to think of employment not merely as a determinant of GDP, but as an independent good in itself. Furthermore, there are sound economic reasons why we should care not just about the overall unemployment level, but about unemployment levels in specific sub-groups (such as men in inner cities), since unemployment has obvious negative externalities.
The recession may also be reinforcing the long-term trend toward inequality in American society. Recessions typically reduce income inequality in the short term, since the rich gain much of their income from investments, which drop faster than wages in a market crash. But the tougher labor market could increase the advantage that people have coming from the upper class: “Princeton’s 2009 graduating class found more jobs in financial services than in any other industry,” Peck reports.
My initial thought was that the financial crisis and recession might have a salutary effect because the middle class, faced with serious economic insecurity, might start worrying more about economic security (and identifying more with the poor and working class), instead of thinking that individual initiative alone would make them rich. I still think this is possible. Unfortunately, it seems to be unlikely. Peck cites economic historian Benjamin Friedman, who “argues that both inside and outside the U.S., lengthy periods of economic stagnation or decline have almost always left society more mean-spirited and less inclusive, and have usually stopped or reversed the advance of rights and freedoms.” The mechanism for this is simple: although some people may react to economic insecurity by realizing that their interests lie with labor rather than capital, other people will react by blaming their misfortune on immigrants, or minorities, or Jews, or gays, or — this being America — the government.
The only solution, says Peck, is a making “the return to a more normal jobs environment an unflagging national priority.” A more normal jobs environment seems like the bare minimum of a solution to me, and he would probably agree. But even that represents a shift from our current political center of gravity, where people think the medium-term deficit is a bigger problem than jobs.
By James Kwak
The Baseline Scenario 
Government generating a “return to a more normal jobs environment” is a contradiction in terms.
But that is a debate for the future. Why not start today where we can all agree, and lynch a few bankers?
(Actually, I am a little surprised this has not happened yet. We have become a nation of sheep.)
both inside and outside the U.S., lengthy periods of economic stagnation or decline have almost always left society more mean-spirited and less inclusive, and have usually stopped or reversed the advance of rights and freedoms
Nicely understated and a good argument for WPA-type employment. However, much too much empty pride out there for artificial employment programs to do much good, imho. America is being flooded with cheap assault rifles and shotguns. People coming down from the high of large houses, expensive cars, constant restaurants and vacations, armed to the teeth… not good.
The situation is particularly volatile if they’re also well-educated.
Documented central bank fraud: http://ideas.repec.org/a/cup/jechis/v55y1995i03p612-636_04.html
How much do we really know about the Gread Depression?
You mean the intelligentsia usually instigate revolutions?
“My initial thought was that the financial crisis and recession might have a salutary effect because the middle class, faced with serious economic insecurity, might start worrying more about economic security (and identifying more with the poor and working class), instead of thinking that individual initiative alone would make them rich. I still think this is possible. Unfortunately, it seems to be unlikely.”
Isn’t unemployment in the U. S. concentrated in the lower classes? Unemployment in the middle class is less than 5%? That does not promote solidarity with the lower classes.
“The mechanism for this is simple: although some people may react to economic insecurity by realizing that their interests lie with labor rather than capital, other people will react by blaming their misfortune on immigrants, or minorities, or Jews, or gays, or — this being America — the government.”
Could you cite some research that supports that this is the mechanism by which society becomes less inclusive and more mean spirited?
well yeah
English civil war, American war of Independence, French Revolution and of course the Bolshevik Revolution, all instigated by members of the middle or upper middle classes. Even the Middle age’s peasant revolts were lead by the relatively well off.
Histories lesson; don’t piss off the middle classes, the poor are too busy surviving.
My initial thought was that the financial crisis and recession might have a salutary effect because the middle class, faced with serious economic insecurity, might start worrying more about economic security (and identifying more with the poor and working class), instead of thinking that individual initiative alone would make them rich. I still think this is possible. Unfortunately, it seems to be unlikely. Peck cites economic historian Benjamin Friedman, who “argues that both inside and outside the U.S., lengthy periods of economic stagnation or decline have almost always left society more mean-spirited and less inclusive, and have usually stopped or reversed the advance of rights and freedoms.” The mechanism for this is simple: although some people may react to economic insecurity by realizing that their interests lie with labor rather than capital, other people will react by blaming their misfortune on immigrants, or minorities, or Jews, or gays, or — this being America — the government.
Basically every element of American ideology and indoctrination is fascistic, anti-humanist, and antisocial, so on its face it would seem far more likely that America becomes overtly fascist instead of recovering any humanity it may once have had.
Even today, as long as the mere term “Wall St” isn’t included, Americans are prone to cravenly support their own liquidation, as in the poll results which showed majority support for the Citizens United decision.
And the polls which showed eroding support for “America’s” private corporate wars abroad spiked right back up the moment Obama gave his speech, even though it was the exact same Bush fraud. But for Americans, all it really takes is dangling a shiny toy like a speech to get them excited again, evidently.
It seems pretty clear that Americans are simply too mentally deficient to understand how they’re being looted and enslaved. It looks like it was a fluke that they understood the TARP. I guess that was just too public, going to Congress and all. Since then we’ve seen how the looters in government are determined to continue the bailout without ever having Congress vote on it again. Thus the removal of all limits on Fannie and Freddie debt, or Geithner’s attempt to get infinite TARP-like “authority” enshrined in the financial “reform” bill via the “resolution authority” scam.
So every structural trend seems to portend that there will be no organized resistance, no attempt to redeem the country and restore the people’s rights and property. On the contrary, anger will be inchoate and easily astroturfed, as we’re seeing with the teabaggers. Those being most viciously liquidated will become the minimum wage thugs of their own liquidators.
And that leads to the temperament issue. As confused as the teabaggers are, at least they’re angry and want to fight.
But for many years now I’ve looked in vain for anger and the will to fight among those who supposedly want to resist and brak corporate tyranny. Among “progressives” I’ve seen no end of sarcasm, “irony”, wonkery, and process fetishes, but very little in the way of Old Testament anger, little of the old-style revolutionary consciousness, and nothing of the 30s-era Spanish will to fight.
All of that’s too “square”, I guess. And definitely too “mean-spirited”. And thus the war is lost before it began…
(Oh, fer chrissake, what in that comment triggered “moderation”?
And meanwhile every pro-Goldman troll gets right through on the other thread. Heckuva job.
I’ll try reposting it without the word f a s h i s t.)
(Ponderous. “Moderation” again. So I give up.
Let’s see if this gets through:
I like puppies. I like ice cream. We should do whatever the government says because it knows best. Goldman Sachs are just savvy, efficient, good corporate citizens.
Anybody who complains about jobs is just a nattering nabob.
Yup, I take back my nasty comment.)
I’m not sure if it’s that Americans are sheep as much as they’re just caught up in trying to survive. Who has time to revolt while you still have enough savings to hold you over to the next job? Who has enough energy to revolt when you’re too poor to eat?
The unique experiment in democracy, that was America has shapeshifted over the last thirty years into a keptocracy, wherein thefew, the predator class, 2-5% of the population owns and controls the government, and 80% of the nations wealth and resources. I blame the republican reich, and the fascist element of the gop that rose to power under the slithering reptile nixon, and eventually gained almost total power and domination under the last bush hunta. The same brood of hobgobblins, freaks, criminals, supremists, pathological liars, and wanton profiteers honed and groomed under nixon, seized ultimate power under bush the idiot.
America as we knew it is dead and gone. What we inhabit now is Amerika, a kleptocratic, predatorclass owned and control fascist state, where any law, or principle is altered for the sake of the oligarchs. The people don’t matter, and are of little or no concern to the predatorclass. Ditto the earth. We are no more than digits in a monstrous PONZI scheme.
There will come a day, (and the sooner the better) when the predatorclass will be forced to employ contractors for security and intelligence, or pay dearly for underestimating the level of animosity and desperation roiling in the hearts of their fellow Americans, the poor and middleclass, and their children. A society forced or put into these circumstance is ripe for conflict and asymmetrical responses to the rank and brutal oppression by the predatorclass. Touring around in Bentley’s or Ferrari’s, or AMG’s, M-Class stuff; gathering for the yaught tour are going to be risky ventures. There will be a reckoning and balancing, – there will be blood.
Here’s my source: http://www.huffingtonpost.com/2010/02/10/no-labor-market-recession_n_456797.html
“where people think the medium-term deficit is a bigger problem than jobs.”
According to the latest CBS/NYT Poll only 4% consider budget deficits as the most important problem. But 27% worry about jobs.
TOTALLY! I love that song too!
Do you hear the people sing
Lost in the valley of the night?
It is the music of a people
who are climbing to the light.
For the wretched of the earth
there is a flame that never dies.
Even the darkest night will end
and the sun will rise.
They will live again in freedom
in the garden of the Lord.
They will walk behind the ploughshare;
they will put away the sword.
The chain will be broken
and all men will have their reward.
Will you join in our crusade?
Who will be strong and stand with me?
Somewhere beyond the barricade
is there a world you long to see?
Do you hear the people sing?
Say, do you hear the distant drums?
It is the future that they bring
when tomorrow comes!
Will you join in our crusade?
Who will be strong and stand with me?
Somewhere beyond the barricade
is there a world you long to see?
Do you hear the people sing?
Say, do you hear the distant drums?
It is the future that they bring
when tomorrow comes…
Tomorrow comes!
So sorry – the words from end of the first act are more appropriate! Come on guys! Don’t be so bleak!
Do you hear the people sing?
Singing the song of angry men?
It is the music of a people who will not be slaves again.
When the beating of your heart echoes the beating of the drums,
there is a life about to start when tomorrow comes.
Will you join in our crusade? Who will be strong and stand with me?
Beyond the barricade, is there a world you long to see?
Then join in the fight that will give you the right to be free.
Do you hear the people sing?
Singing the songs of angry men?
It is the music of a people who will not be slaves again
When the beating of your heart, echoes the beating of the drums
There is a life about to start when tomorrow comes
Will you give all you can give so that our bannermay advance?
Some will fall and some will live
Will you stant up and take your chance
The blood of the martyrs will water the medows of France
Do you hear the people sing?
Singing the songs of angry men?
It is the music of a people who will not be slaves again
When the beating of your heart, echoes the beating of the drums
There is a life about to start when tomorrow comes!!!!!!!!!!!!!!!!!
Nemo, “lynch a few bankers” are you kidding? Investigate, regulate and remake, but not “lynch.” You want to see them hanging from trees? Are you kidding?
For over thirty years it has been the official policy of the US government to have the American middle-class compete directly with people making 3 dollars a day.
HTF did anybody think this was going to end?
That’s point one. Point two is GS is doing very well thank you. And that’s all that counts anyway…
Looks like protectionism is in our future.
The only question is whether is comes from the right or left.
Glad to hear we do have moderation here.
Good post James – wish this kind of analysis was reported more often. I agree with you – I thought that the recession would make people pull together. I also thought Obama would use it as a catalyst to make the necessary changes…
I am so naive!!
Since it is now obvious that Goldman committed themselves to helping Greece hide billions in debt, it erases all doubt that I had that Goldman has intentionally set about to cause financial distress in the world economy. They now hold the resources, thanks to the tax payer suckers of America, to shop for assets on the cheap. What a self serving disaster huh?
Middle class, yes, and intensely debating ideas with one another — about what government should be, what the rights of citizens are, how new rules for power might work. Like Jefferson, Adams and Franklin. If that is not intelligentsia, I don’t know what is. (Unless by that one means the professional tame intelligentsia — and even so, in many nations universities spark revolutionary movements.)
I remember reading that when the USSR changed, strangers were stopping on street corners to discuss these things with one another. I envied them.
They will let you read that article for a mere $30. Could you give us the major points?
It seems to me that it’s time to look at the taxes we levy on employment: the payroll taxes that fall only on wages and only on the lower end of the payscale. Benefits need to be funded, but they can be much more easily funded, with fewer adverse side effects for initial job seekers, if the levy was applied to all income, including capital gains and investment income, at a progressive rate. A five percentage point income tax surcharge, in place of the current payroll tax, would be a natural choice.
Paul Daley
I believe that James Galbraith had a book on unemployment and income inequality – showing that when unemployment was 6% or greater (typically under Republican administrations) income inequality grew; and when unemployment was 5% or less (typically under Democrats) income inequality got less. He termed 5% or less as the “ethical leval of unemployment”.
This adds even more emphasis to the conclusion – jobs are an urgent national priority.
How do we legitimately move members of the lower classes into the higher classes?
30% of our students fail to complete high school. That might be a starting point.
except — maybe we aren’t in Kansas anymore . .
“blame the republican reich, and the fascist element of the gop that rose to power under the slithering reptile nixon, and eventually gained almost total power and domination under the last bush hunta”
>………
pointing blame at GOP while blindly supporting
larger gov or more gov is not very bright.
Dems grow government as do the GOP.
Obama has Tax loss timmy, and the GS bank crowd
along with Barney “nothing wrong with Freddie and Fanny” Franks..we could go on and on pointing to
the one party system we have..
We Conservatives see Large GOV as the main problem
as such the GOP or Dems are not a solution.
Those here who post about the GOV solving the problems
of the criminal power elite seems to be missing the common denominator in all of these failures of GOV and
Banks..the people we have in positions of GOV power and the heads of banks all benefit by expanding GOV control of our wealth and lives..
IF you have a powerful GOV pray you have decent people
running it or else this current state of failure is what you are going to get each time.
Yes, and under the current trading regime, we cannot get those jobs.
Some “conservatives” would say that; I would say that the problem is bigness: big gov’t AND big business. The two grow hand in hand, the one feeding off the other. To attack but one side of the equation is to fail in the attack; it is to leave your flank open. To succeed in such one-sided attacks is to fail.
Since when was lynching an activity marked by individualism and creativity.
Making either smaller is the rub..as a conservative I can see a tax revolt in an attempt to reduce gov and
not supporting Big Business (GE is a great example) with what we buy..removing funds from stocks and
bonds buying Gold and clearing out bank accounts also robs them of economic power..and of course not supporting current GOP and Dems with our funds.
When a brave politico moves to down size GOV the attacks are constant and immediate..ala Ron Paul or
Palin..yet many on the Left rejoice in this as if
all good resides in a all powerful Federal Gov.
“not supporting Big Business (GE is a great example) with what we buy..removing funds from stocks and
bonds buying Gold and clearing out bank accounts also robs them of economic power”
Now that’s an idea even this liberal can get behind.
Stop buying stuff on credit and stop trading stocks and bonds. Then we wouldn’t care if they failed.
Of course, if you job is dependent on everyone using credit, then you’ll suffer. On the other hand, you need a new job anyway. Pay off your debt. Walk away from your mortgage if you are underwater. Stop refininancing you mortage every few years. Stop buying big cars on credit – buy a used one for cash or at least very little credit. Support reform of student loans to lower the cost of college.
It may not work to break their hold, but its worth a try.
Not this level of moderation. It’s a little much. I actually think it flagged me because I quooted the OP!
(And not for the first time. These scurrilous OP’s around here..)
So let’s try again without that.
Basically every element of American ideology and indoctrination is fascistic, anti-humanist, and antisocial, so on its face it would seem far more likely that America becomes overtly fascist instead of recovering any humanity it may once have had.
Even today, as long as the mere term “Wall St” isn’t included, Americans are prone to cravenly support their own liquidation, as in the poll results which showed majority support for the Citizens United decision.
And the polls which showed eroding support for “America’s” private corporate wars abroad spiked right back up the moment Obama gave his speech, even though it was the exact same Bush fraud. But for Americans, all it really takes is dangling a shiny toy like a speech to get them excited again, evidently.
It seems pretty clear that Americans are simply too mentally deficient to understand how they’re being looted and enslaved. It looks like it was a fluke that they understood the TARP. I guess that was just too public, going to Congress and all. Since then we’ve seen how the looters in government are determined to continue the bailout without ever having Congress vote on it again. Thus the removal of all limits on Fannie and Freddie debt, or Geithner’s attempt to get infinite TARP-like “authority” enshrined in the financial “reform” bill via the “resolution authority” scam.
So every structural trend seems to portend that there will be no organized resistance, no attempt to redeem the country and restore the people’s rights and property. On the contrary, anger will be inchoate and easily astroturfed, as we’re seeing with the teabaggers. Those being most viciously liquidated will become the minimum wage thugs of their own liquidators.
And that leads to the temperament issue. As confused as the teabaggers are, at least they’re angry and want to fight.
But for many years now I’ve looked in vain for anger and the will to fight among those who supposedly want to resist and brak corporate tyranny. Among “progressives” I’ve seen no end of sarcasm, “irony”, wonkery, and process fetishes, but very little in the way of Old Testament anger, little of the old-style revolutionary consciousness, and nothing of the 30s-era Spanish will to fight.
All of that’s too “square”, I guess. And definitely too “mean-spirited”. And thus the war is lost before it began…
(Yup. It was the OP.)
Highlights:
” A true labor market depression faced those in the bottom two deciles of the income distribution, a deep labor market recession prevailed among those in the middle of the distribution, and close to a full employment environment prevailed at the top.” From a study in 2009.
“The highest group, with household incomes of $150,000 or more, had an unemployment rate during that quarter of 3.2 percent. The next highest, with incomes of $100,000 to 149,999, had an unemployment rate of 4 percent.
“Contrast those figures with the unemployment rate of the lowest group, which had annual household incomes of $12,499 or less. The unemployment rate of that group during the fourth quarter of last year was a staggering 30.8 percent. That’s more than five points higher than the overall jobless rate at the height of the Depression.” From the NYT report on the study.
How exactly do you figure the Wasilla welfare queen with her Bridge to Nowhere, her bailouts, her wars, and her bloated weapons budgets, and her hatred for civil liberties is for “small government”?
(I know, I know, it’s ridiculous to argue with these types. Anyone who would even start out saying Palin is anything other than a Big Government psycho is obviously beyond redemption.)
Yes, but 25% are concerned about the economy, which should not have been given as an option with other options that it includes, such as jobs and the deficit. Who knows how people feel about increasing the deficit in order to decrease unemployment.
I’m a 60 year old man and see the divide clearly. There are the rich that sneek around in the closed rooms of hotels. Ski on their own mountains and travel in their private jets. I know some have make their money and earned it but I and everyone else know that the majority have stolen their wealth through games with financial instruments that have no social redeeming value. We also know that any clean well paying job that is produced in this country is headed somewhere else because the company wants to teach you your lesson for wanting to share in the profits earned. With the Supreme Court decision a couple weeks ago it looks like game over. The fall of this country is totally wrapped up in greed and hate is everywhere. Corporate America has some answering to do. That they bought their way into our government has made things much worse. I am becoming afraid to even post thoughts or feelings anymore but that doesn’t mean I don’t know what needs done one way or the other. This is a moral crisis above all. Sharing will get us to the other side. If we don’t change I see small groups of private armys roaming the country side in the very near future.
Unfortunately Nemo, I know a lot of people who aren’t sheep. That scares the crap out of me.
Paul Daley: “Benefits need to be funded”
Not really. The only reason to earmark taxes is political. The idea that benefits need to be funded has provided for political pingpong for decades. If we can give several hundred billion dollars to Big Finance in a matter of days, we can fund benefits. Easily.
Seems to me there is a solution for the Government. To all of the chicken-littles (including the President) who fret about “excessive” government spending, I would simply point out that it is far better to deploy government spending in a way which REDUCES unemployment, rather than arises as a consequence of it. Why not a new approach: Government as Employer of Last Resort (ELR). The U.S. Government can proceed directly to zero unemployment by hiring all of the labor that cannot find private sector employment. Furthermore, by fixing the wage paid under this ELR program at a level that does not disrupt existing labor markets, i.e., a wage level close to the existing minimum wage, substantive price stability can be expected. Other benefits could be provided, including vacation and sick leave, and contributions to Social Security and, most importantly, health care benefits, providing scope for a bottom up reform of the current patchwork health care system.
Government as employer of last resort would not be introducing another element of intrusive bureaucracy into our economy, but simply better utilizing the existing stock of unemployed, now dependent on the public purse – especially the chronically long term unemployed. The current system we have relies on unemployed labor and excess capacity to try to dampen wage and price increases; however, it pays unemployed labor for not working and allows that labor to depreciate and develop behaviors that act as a barrier to future private sector employment. Social spending on the unemployed prevents aggregate demand from collapsing into a depression-like state, but little is done to enhance future growth and demand, which can be done via the ELR by providing them with employment, greater education and higher skill levels.
The ELR program would allow for the elimination of many existing government welfare payments for anyone not specifically targeted for exemption, and would command greater political legitimacy, as society places a high value on work as the means through which individuals earn a livelihood. Minimum wage legislation would no longer be needed as it would be established via the ELR. Labor would welcome the safety net of a guaranteed job, and business would recognize the benefit of a pool of available labor it could draw from at some spread to the government wage paid to ELR employees. Additionally, the guaranteed public service job would be a counter- cyclical influence, automatically increasing government employment and spending as jobs were lost in the private sector, and decreasing government jobs and spending as the private sector expanded. It would therefore remain a permanent feature of our economy, in effect acting as a buffer stock to put a floor under unemployment, whilst maintaining price stability whereby government offers a fixed wage which does not “outbid” the private sector, but simply creates a stabilizing floor and thereby prevents deflation.
ELR is desired because a more or less free market system does not (and, perhaps, cannot) continuously generate true full employment. No civilized nation should allow a large portion of its population to go without adequate food, clothing and shelter. Best of all is that the program would be creating a stock of EMPLOYED people, rather than a buffered stock of unemployed, where social capital depletes rapidly, and several long-term social pathologies develop. The current policies clearly are not working; it’s time to try something that can put as many Americans as possible into productive employment.
And over 30% about the economy.
…although some people may react to economic insecurity by realizing that their interests lie with labor rather than capital,
Since when? The truth is that our collective interests lie with increased savings (i.e.; capital) rather than efforts to create monopoly power in the labor market (unions). Innovation and ultimate economic progress happen in a competitive marketplace as a result of the application of capital in combination with technolgical progress. Unions aid in advocating improved working conditions in cases of employer neglect and abuse (capitalists are far from perfect), but ultimately hinder economic progress when they focus on redistribution.
Go to school, stay in school and learn. Work hard, study hard, and make yourself a bargain to your first employer. Then learn how the world works, save some money and go into business for yourself. Or join a union and be a pawn for the rest of your life.
But for many years now I’ve looked in vain for anger and the will to fight among those who supposedly want to resist and brak (sic) corporate tyranny.
Try this:
Compete and WIN.
Once again, the example of Denmark springs to mind. Their unemployment benefits extend up to 4 years.
http://www.npr.org/blogs/money/2010/01/podcast_the_awesomest_economy.html
Hence the campaign over the last 30 years in America to eliminate the middle class! Brilliant.
Federal funding of states is another solution. Federal govt can and does run deficits. States can’t. States cut education, health even protective services like police. State, county and city employees are laid off, increasing unemployment. States like California are in dangerously unstable condition.
I live in CA. Schwarzenegger has no money for social programs and cuts all of them. A few days later, he announced a new $45 billion water project for the state, funded by fed. grants, bonds and taxes.
Federal gifts to states, which are cancelling out any gain in eployment from stimulus efforts,would be a fix. Not fed. grants to water projects but directed at keeping state workers employed so these workers could spend their wages keeping others working. Targed state assistance by the fed govt is one solution.
From an earlier post re Americans competing with low-paid foreign labor: “China and India are NOT entitled to grow at our expense.” Japan already did grow at our expense – starting after WWII, millions of manufacturing jobs went there via rich American companies profiting using cheap materials and Japanese labor. Does anyone remember “Made in Japan?” Now the Chinese get blamed. “Made in China” is an expletive, while it’s the rich American corps. using the cheap labor and materials there profiting. Their GDP increases at a rate of 9%/year because of high employment and their government spending on infrastructure. So if you want American jobs back, look at the modern powerhouse “Japan” we provided them. Doomsayers believed Japan’s co-opting of American jobs would destroy the U.S. and we are still here.
Why should it appear to be such a revelation that not having a meaningful place in the world (or vocation in Weberian terms) that provides both a livelihood and the capacity to appear in the public world amongst others? Marx and his 19th century contemporaries all saw that the shift from a society of orders (with hereditary statuses)to one based exclusively on the sale of labor power made humans vulnerable in new ways. The same recognition is certainly a core insight of Durkheim (that under-integrated suffer [anomie]). It’s even worse in the U.S. where market position is the sole determinant of value – and thus becoming un-employed is to become a non-person. It most certainly puts an intolerable strain on intimate social relations (household formation [e.g. getting married] is predicated on earning an adequate income, and so is household preservation. Male self-worth is closely tied to the capacity to earn a wage, and when that disappears, there is more than enough pathology to go around.
The U.S. doesn’t have an adequate safety net even in the best of times – and now in the worst of times, we are destroying human capital left and right.
What is both pathetic and deeply amoral is to hear talk as if humans existed only to ‘serve’ the ‘economy’.
Just out of curiosity, at what wages would an American have to agree to work for in order to make him competetive in the world market?
I’ve heard many people blame unions for the job losses in America. I am no fan of unions myself because I think their employment for life attitude (i.e. – they can’t be fired for screwing up or being lazy) and the shoddy workmanship I saw coming out of the UAW back in the early to mid 1980’s soured me on organized labor. That being said, hearing conservatives declare that American workers want too much money, too many benefits and put too much of a strain on businesses doesn’t sit right.
So, how do American workers compete for jobs in a world market when the workers they are competing against often live in squalor and at best have a standard of living much lower than we do in this country? How do we compete and win?
Simon sez: “…where people think the medium-term deficit is a bigger problem than jobs”.
Which begs a question: why? Does it have anything to do with our millionaire-pundits carrying not just water but whole oceans of BS for the “top” people?
I’ve long thought that when opining on matters such as taxes, capital gains, estate taxes or cuts to social programs, the David Gregorys, Candy Crowleys, Cokies and Bashs of the world should be made to say: “In the interest of fairness and full disclosure I must say that as someone making over $500,000 a year….”
Mr. James Kwak wrote”
“But as the months and years wear on, I suspect we will see more articles like Don Peck’s recent 8,000-word article in The Atlantic, “How a New Jobless Era Will Transform America.”
Peck’s article is not about what caused the recent crash and recession, but what its societal consequences will be. And the article is almost unremittingly bleak.”
National Employment Law Project – Feb 4, 2010 – excerpt
“… nearly 1.2 million jobless workers will become ineligible for federal unemployment benefits in March unless Congress extends the unemployment safety net programs from
the American Recovery and Reinvestment Act (ARRA).
By June, this number will swell to nearly 5 million unemployed workers nationally who will be left without any jobless benefits.”
I agree, more bleak articles will be written about the growing diaspora, where survival will not go to the strongest or the smartest, but rather to the most adaptable. My 2-cents.
From Peck’s article:
“But for the most part, these benefits seem thin, uncertain, and far off. In The Moral Consequences of Economic Growth, the economic historian Benjamin Friedman argues that both inside and outside the U.S., lengthy periods of economic stagnation or decline have almost always left society more mean-spirited and less inclusive, and have usually stopped or reversed the advance of rights and freedoms. A high level of national wealth, Friedman writes, “is no bar to a society’s retreat into rigidity and intolerance once enough of its citizens lose the sense that they are getting ahead.” When material progress falters, Friedman concludes, people become more jealous of their status relative to others. Anti-immigrant sentiment typically increases, as does conflict between races and classes; concern for the poor tends to decline.”
I have been on the web talking to people all over the world about their intense reaction to the movie Avatar. Now I come here to the financial blogs and find out that you guys are the Na’vi and are already planning the war. Who would have thought it.
I think that we will see things come to a head this summer when the Eurozone debt crisis blows up and banks start to fail big time. People will take to the streets when the next round of losing their money kicks in. What the bankers ignore is that Americans are very aggressive people with lots of guns. I think that this time blaming those terrible “illegal aliens” won’t work. All we have to do is stop paying our credit card bills and mortgages en masse and the big banks might find out that they aren’t so powerful after all.
Recent events have shown that once the illusion of stability is punctured collapse follows almost immediately. Once people world wide decide that it is no longer in their best interest to continue paying their bills, the whole thing will come down like a house of cards. This will be one way to clear the debt off people’s back. This is our Hometree being brought down by the RDA/banking system. It won’t be an easy or fun thing to live through.
Neil D, the song lyrics are great. Where do they come from?
WE are in a People Bubble.
There are too many people, billions more are on the way, and there just not enough jobs for all of them, in the traditional, proletarian sense of the word. The U.S. economy has generated no new jobs in 11 years, while the population has soared. There are no jobs drivers on the horizon. We have reached the tipping point.
TO anyone with eyes, it is clear that Capitalism is no longer able to serve human society’s needs. It is an outdated, 19th century mode of production, well suited to a small but growing industrial society, but obviously obsolete and increasingly irrelevant in the 21st century.
Of course humans don’t exist to serve an abstract “economy”; they exist to serve one another. The economy is the sum total of their efforts.
Also, we may be destroying human capital, as you put it, but far better a few million couch potatoes than a few million freezing and starving in the streets, as was the case in the 1930s. Real GDP per capital in the U.S. today is 10X what it was in 1933. Focus on how far we’ve come rather than the short term problem.
Ray, we are disadvantaged here because even if we are forced to work for “third-world” wages, we will find it very difficult to live on them because, unlike poor nations, we have many laws in place that limit our ability to find low-priced shelter. We are not allowed to divide houses up into tiny rooms, nor to crowd many people into one apartment and sleep in shifts. Nor is it legal in most cities to live in homes with no plumbing. In many countries, one can see ingenious little shelters carved out here and there on the edges of things — for example, under the spans of bridges — but here, legally, it is either be up to code, or cardboard. Although, my sister who works in an inner city school in Kansas City says many of her students’ families are living in hand-made, unplumbed shacks in the deep wooded ravines which border the Mississippi River, coming in to stay with family or friends during the worst winter weather. (She says the city ignores them.) So maybe we should be teaching basic life skills, like carpentry and gardening, to every student in high school. I could get behind that. Might be good for us in the long run. People feel MUCH too entitled in this part of the world.
An inevitable collapse? At least it’s not a crash
Monday, Feb. 15, 2010 11:17AM – Globe & Mail – excerpts
“…. North American investors keep looking for trouble…, heading into a holiday weekend….None of this comes as a surprise to Hal Vogel, a Wall Street veteran who runs his own investing and consulting firm… “We’re due at least for a pretty good correction. It could be more serious, but it’s too early to know.
A crash would be too strong a word to characterize what he expects is now under way. “Collapse is more appropriate terminology,” he says.
And what, pray tell, is the difference?
Well, it turns out that a collapse is slower, less steep and a lot less frightening, because it means positions are being unwound gradually. A crash, on the other hand, involves a panicked selloff at any price, as investors rush for the exits.”
“If this grinds onward and commercial bank lending does not increase, then there will be a point of recognition where everybody says, ‘Holy cow, there’s a problem here.’ And that’s when you get your crash.”
http://tinyurl.com/ybjb56g
The twin towers “collapsed” in about 30 sec. These things are like earthquakes. One minute you are OK and 7 min. later all there is is rubble with nothing in between. This is what the financial guys don’t get.
Bider wrote:
“The twin towers “collapsed” in about 30 sec. These things are like earthquakes. One minute you are OK and 7 min. later all there is is rubble with nothing in between. This is what the financial guys don’t get.”
Monday, February 16, 2009 – New Haven Register – excerpt
Transcript from a Jan. 27 C-SPAN interview with Rep. Paul Kanjorski, D-Pa.,
“I was there when the secretary (of the Treasury, Hank Paulson) and the chairman of the Federal Reserve (Ben Bernanke) came those days and talked to members of Congress about what was going on. It was about Sept. 15. Here’s the facts, we don’t even talk about these things.
“On Thursday at about 11 o’clock in the morning, the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States to the tune of $550 billion, as being drawn out in the matter of an hour or two.
“The Treasury opened up its window to help. It pumped $105 billion into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic.”
“If they had not done that, their estimation was that by 2 o’clock that afternoon, $5.5 trillion would have been drawn out of the money market system of the United States, would have collapsed the entire economic system of the United States and within 24 hours the world economy would have collapsed.”
http://tinyurl.com/yey5q7f
Sharing will get us to the other side. God bless you, Bruce.
I agree, it is a bit dangerous to post here, because we could someday see some terrible version of McCarthyism digging up this old web stuff in some kind of inquisition. I am not too worried about it myself, as I do not believe force or violence is the answer — and also I am a lot older than you are– not long to live, most likely. I do think younger commenters should be careful.
I do not feel despair over the state of things because we are just living through a historical process, the elements of which were in place before we were born. Many great visionaries have forseen it — an internal disintegration. And the emergence of something new.
A long time ago I had a good hard look at what genetic engineering could become in the hands of corporations in a hundred years. That scares me much more than a financial meltdown and social chaos, more even than armed mobs scavenging across the land. So I am at peace. But it would be hard to be young and have to decide whether or not to have children. And the young will have to dig deep to establish their true identities in these deeply shifting times.
India(nearly a billion), and China(plus 3) were socialist/backwards economies not competing for U.S. jobs. Not applicable.
Even if you want to include those ‘Made in Hong Kong’ matchboxes I loved so much, so be it. Same argument, small pop. Appreciate your sunshine though, however misplaced.
“How exactly do you figure the Wasilla welfare queen with her Bridge to Nowhere, her bailouts, her wars, and her bloated weapons budgets, and her hatred for civil liberties is for “small government”?”
>>>>..
hard to know where we can agree..Palin as govenor
extracted tax $$ from big oil – tried to get a clean energy (nat gas) pipeline built to Conus. which would create thousands of jobs for her state.
As for hatred for civil liberties and bloated weapons
projects I hope you can back up this claim with facts.
I used Palin as an example of how the media is used
to attack populist pols..not so much that I support her. Much like Ron Paul the elites want no part of
PALIN does that then put you with the likes of Paulson and Big MONEY?? the media has been effective in it’s -character attack on those that do not toe the approved line.
It would be refreshing if our current Political class could address new ideas with something less that total
fear and loathing.
I guess more people see this than I originally thought. All my good friends(4 or 5 and feel fortunate) see both corporate and government systems totally broken and unable to function in anything other than preditory fashion. Illegal workers don’t scare me a bit anymore but Wall Street scares the crap out of me and now that they have shown us that they own our government I guess we can just get that market down to zero and arm up. As a lamb all I got is words. Anyone ever wondered about “Onward Christian Soldiers”? Never made much sense to me. But then neither does this continual line of people being placed on the alter of greed. I’m ready.
The soup and bread lines of the Depression era didn’t have the social safety net of today’s food stamp programs, unemployment benefits, and social security. Instigating factors that could bring about social unrest, followed then by forced economic reforms, may have already passed.
For awhile there, in various cities, they were holding “pink slip” parties for the unemployed, a non-web based social networking way of connecting employers with the unemployed.
By using the Boolean search string method (http://www.computerwork.com/jobsearch/search_tips.cfm ), you can better target your job search, as opposed to using the more traditional method of Google algorithms. Of course, both methodologies are based on the current economic assumption – there are plenty of jobs to be had (not to mention those that even come close to paying a living wage).
[The banking industry is not a growth industry (as is with healthcare, education, and government employment) but there are currently open positions but the criteria have become more exacting (as has been the case across other industry fields) and as with banking, there is the additional vetting process of passing a DOJ criminal background and credit check – and there also lies the greater irony – considering our politicians and CEOs.]
I think what antiani is getting at is this shouldn’t be the America you thought it was. We should allow for shanty towns and more lax regulations, because after all, other countries do it, right? How dare people in the richest country in the world ask for plumbing! how dare they!
Extortion.
The Baseline Scenario and other critics of the current policies should:
1. Document and aggressively emphasize the dollar costs of the huge subsidies to giant banks. Appeal to the self-interest of the vast majority of people, including the rich, who do not benefit from these policies.
This requires some hard work. The subsidies are disguised as a shell game of Federal Reserve and Treasury and other loans, implicit and explicit guarantees, and so forth. Thus, a proper accounting is difficult. Dean Baker at CEPR has produced some hard estimates, but they are much less than the total cost.
2. It is necessary to aggressively confront the “blame the government” excuses and scapegoats other than the “too big to fail” policy, which is the principal contribution of the government and government policy to the crisis.
There are three major government scapegoats at present. These are:
1. Alan Greenspan and the Federal Reserve for keeping interest rates low. Often, the so-called Taylor Rule is cited. This simply does not explain the housing bubble or crisis. If interest rates are 1% then banks should have made loans returning more than 1% ONLY. The abandonment of sound proven lending practices is not caused by low interest rates.
2. Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac continued to apply better lending practices than private banks during the build-up. Even if they did not, this does not explain the vast problems of “private sector” banks, especially the “too big to fail” so-called “private” banks that enjoy the “too big to fail” subsidies.
3. The Community Reinvestment Act (CRA). This is the most dangerous and credible “blame the government excuse” other than “too big to fail”, because it actually alleges a situation where the government forced (“ordered” is often said) the banks to make bad loans to unqualified borrowers.
The CRA excuse is, of course, mostly nonsense. Amongst other things, even if true, the bank directors and executives had a responsibility to their shareholders to refuse to make unsound loans, accept the poor CRA scores, and forgo any mergers or bank branch openings that would eventually result in the failure of the banks (without government subsidies). Most importantly, most of the problem loans are not CRA loans at all.
It is necessary to aggressively confront these and related excuses as well as to firmly point out the long history of these “blame the government” excuses after the failure of policies labeled as “free market” or “private sector” including the Savings and Loan fiasco of the 1980’s, the Internet and Telecom bubble of the 1990’s, the electricity market deregulation fiasco in California in 2000, and so forth.
3. The claims to special competence in the allocation of capital by the directors, executives, and highly compensated employees of the “too big to fail” banks must be debunked. In reality, they have presided over the misallocation of trillions of dollars to electronic gadgets of limited value, web sites selling pet food and other ephemera during the 1990’s, excessive home building and home improvement via the housing bubble in the 00’s, and similar poor to bad investments.
4. The frequent invocation of “innovation” and “research and development”, as well as “growth” and “investment”, must be directly confronted and debunked. The huge rise in the standard of living and general economic growth from about 1775 when the separate condenser steam engine was invented until around 1970 was due in no small measure to steady and rapid advances in power and propulsion technology. These involved both incremental evolutionary progress as well as repeated revolutions in which new types of power and engines were introduced.
In contrast, the last forty years has seen negligible substantive progress in these areas. This is visible in the rising cost of energy and current energy problems. The trillion dollar invasions of Iraq and Afghanistan have, notably, not produced one drop of extra oil, cheaper energy, or any other of the supposed benefits initially (and to this day) promised. Quite the opposite.
iPod or steam turbine? Which can’t you live without?
(most power plants use steam turbines to generate power)
The clever exploitation of blinking gadgets like iPod’s and Blackberry’s, and Microsoft latest upgrade of Windows to justify disastrous financial and economic policies must be aggressively and effectively confronted and debunked.
Finally, preaching to the choir is of limited value. The message must be taken to the general public, to business leaders, to the unconvinced.
Sincerely,
John
ZeroHedge.com: The Jobs Plan We’d Get If Leading Innovation Scholars And Growth Economists Weren’t Being Volckerized (i.e., Ignored As Volcker Was Until Recently)
http://www.zerohedge.com/article/guest-post-jobs-plan-wed-get-if-leading-innovation-scholars-and-growth-economists-werent-bei
The Jobs Plan we’d get would leverage America’s advantages to make America the Silicon Valley of the global market for customized education (CE).
Understanding why we’d get this plan starts with knowing that popular online markets for CE can be expected to catalyze the creation of many jobs.
—-
To learn about Zero Hedge, see this feature story from the September 27, 2009 issue of New York
magazine:
http://nymag.com/guides/money/2009/59457/
lol.. talk about brainwashed
You should go read “What’s Wrong with Kansas?”
Substitute yourself for Kansas voters, and supply side libertarianism for republicanism.
Unless you earn the majority of your income in capital gains and dividends, advocating on behalf of capital is advocating against your own interests, making you (and most libertarians) a pawn, or more aptly “useful idiot”
Something tells me that you aren’t actually a tycoon, as much as your want to pretend by looking at the world from their perspective
If interest rates are 1% then banks should have made loans returning more than 1% ONLY. The abandonment of sound proven lending practices is not caused by low interest rates.
But it IS caused by failure by the central bank to recognize the true rate of inflation. Real interest rates are the only thing that matter, and with home prices rising at 15% per year, real rates (even at 7%) were hugely negative, causing the bubble. Greenspan et al were most certainly to blame for failing to recognize this.
Ray: “So, how do American workers compete for jobs in a world market when the workers they are competing against often live in squalor and at best have a standard of living much lower than we do in this country? How do we compete and win?”
Unionism has to become international again. The welfare of workers in the U. S. depends upon the welfare of workers in Bangladesh. Unions understood that 100 years ago. “Workers of the world, unite!”
[The only solution, says Peck, is a making “the return to a more normal jobs environment an unflagging national priority.”]
This really gets to the heart of the matter, since one can make the argument that for the last 30 years we have been evolving the jobs environment aaway from anyhting normal. Finnacial interests have come to dominate our econolmic policy to the detriment of everythig else. And what do we have to show for it: the ATM is the only societally useful introduction by the financial sector.
The real problem though lies with our government. Look at all the various attempts at “stimulus” over the last 18 months. The focus has been on stimulating “consmumption” rather than investment. We need to punish, quite severely, the financial sector so that future generations will avoid it like the plague and instead go into something else that at least must be a more productive enterprise and have a more positive impact on the rest of society.
What does GDP have to do with anything? The point is that, without other social structures, how economically beneficial you are to society, or what you do to “exist to serve one another” is how you measure your self-worth. pointing to GDP is exactly the wrong approach for dealing with individual’s self-worth and the destruction of human capital. It’s kinda like saying “well, you lost your job, but now you can go be a fat lazy drunk slob who is unimportant to society!”
Investigate and regulate? By who? The SEC? With all due respect, I have a better chance finding a Unicorn than finding an effective regulation by the SEC and other government inefficient government agency.
P.S. I do think the lynching part was wrong lol.
Not pretending to be anything, nor do I (as someone who runs a small business and must serve customers every day or risk failure) clip coupons. All I want is a chance to compete to better my place in life, and this country, no matter how flawed, allows me that privilege. Monopoly power is anti progress, no matter where it arises.
Like your name, Bider.
Could you give us links to the Avatar discussions? I agree, reaction to Avatar is very significant.
Increasing the number of high school graduates won’t do much other than deflating the value of a diploma (not that it was anything to begin with).
Rich people are culture heroes in this society. We may give some of them the frowning of a lifetime, but beyond that, we’re not going to do a damn thing but blame the usual scapegoats, as James points out.
Education helps but still the best indicator of your future finacial success is who your parents are.
So, you’re now essentially saying that a “just” society doesn’t provide only food and shelter (best measured by the GDP statistic which you deride), but must also guarantee we all have something “meaningful” to do?
Its been 80 years since the physical ravages of the depression. Our society, because it is built on the foundation of individual initiative, has mostly solved the issues of food and shelter for our populace. Now, if you’ll be kind enough to quit carping and get out of the way, we’ll get to work on being sure we’re all “self-actualized”.
Give us time and we’ll fix that one too.
Aside from its benefits, the Employer of Last Resort idea would provide an empirical test for the idea of some economists that there is low demand for work in a recession. Hardly anyone would take the jobs offered, if that were true. (Fat chance, that!)
I do not think that it would give use 0 unemployment, because some people, maybe a lot, would rather look for work than work at minimum wage. But it would sure reduce unemployment, take people off welfare and reduce the amoun of food stamps, and put money in the hands of people who would spend it. :)
c smith: “The truth is that our collective interests lie with increased savings (i.e.; capital) rather than efforts to create monopoly power in the labor market (unions).”
It’s not an either/or. A fair number of people are both workers and capitalists.
As for increased savings, people need money before they can save it. Currently, that means that the gov’t should run a deficit to get the money to the people.
Four years! That’s a long time to be out of work. Skills and self-esteem decay over time. Better put them to work before then.
You’re exactly right; not an either/or.
Worker/capitalists ARE the middle class.
Why must the resources flow thru government before they can be “saved”? Terribly inefficient.
Part of me wishes you were being prophetic, Tony. Part of me thinks that the wealthy will disappear into their enclaves (Greenwich, the Hamptons, etc.), where they’re already invisible to most of us and live sumptuously while the rest of us tear ourselves apart. One thing they’ll be able to count on is crack police protection. I can’t think of a more reactionary layer between the masses and the elite.
America will not be the birthplace of any future revolutions except perhaps fascistic ones. We never vanquished fascism; we just beat the Germans. The intoxicating vision of fascist ideals — dominance, authority, race, rank — never seems to die completely. Someone rises in every generation to defend brutality in the name of order.
some guy in a cube: “WE are in a People Bubble.
“There are too many people, billions more are on the way, and there just not enough jobs for all of them, in the traditional, proletarian sense of the word.”
That’s the lump of labor fallacy. There is no such thing as a fixed supply of jobs. Before agriculture, it took about 2-3 hours of work a day to survive. Now, with agriculture and mechanization, it probably takes several minutes, on average. Of course, most of us want to do more than survive. Jobs depend upon what we and everybody else want and can provide. We create our own reality. :)
Perhaps you can provide something other than oleagenous persiflage to the fact that about 1 in 4 american children now suffer nutritional insult on an annual basis
Sorry — that should say Missouri River.
“If they had not done that, their estimation was that by 2 o’clock that afternoon, $5.5 trillion would have been drawn out of the money market system of the United States, would have collapsed the entire economic system of the United States and within 24 hours the world economy would have collapsed.”
>>>>…..
LOL, Kanjorski et al, have repeated this often..BUSH came running out of the WH claiming Disaster is immanent. Now months later I cannot but think that what a bunch of hokum this was..Any bank you deal with will put a hold on large money transfers until all aspects of it are verified ..48 hours or longer..does the bank owned lackey pols expect intelligent Americans to believe that banks and the fed could not of shut down the withdrawal of 100 of billions for at least that long (48 hours)..The crash in 08 was the great rape of the American public by ………, …………..,…………….fill in the blanks as you wish.
P.S. in early 1900’s, trade on wall st was stopped for 4 months!!! to aid the UK central banks
Thank you, John. This is about the best reply to all the branded cant (“innovation,” especially) that causes even incisive critics to blink.
As astute as your observations are, they won’t be echoed for another thirty years, when historians are writing about the disintegration of the once great, forever late U.S.
Still, thank you nonetheless.
Further reading:
http://gawker.com/comment/19421082
How did that work out in 1832?
And just what are all these folks going to do, Mr. Auerback? Based upon the systems I’ve seen in Europe, where so many people are in ‘public service’, the incidence of low production stemming from having a guaranteed position renders many services barely functional. People need to believe, based upon their own hard work and diligence, that their lives mean something. If they do not, if they’re engaged in make work projects, not only do they lose their drive excel, to move into the private sector where they have more opportunity and responsibity, but they become complacent and entitled. I understand the logic behind this system, and wish solving the joblessness blight would be this easy.
I find it interesting that no one has commented upon the birth rate either. It is very, very hard to justify having more children than those who would replace you anyway, but if the economic cards are not reading well, it’s simply a sure route to poverty–this is not a fair position in which to place an innocent child. But no one wants to say this for fear of being labelled a bigot, when in truth it’s a matter of being honest.
I think it’s more realistic asking how we are going to get the higher classes down to our level.
c smith: “Why must the resources flow thru government before they can be “saved”? Terribly inefficient.”
They don’t flow through government, at least, the federal government. The come from government. Dollars are not backed by anything anymore. The government doesn’t need to borrow from us or tax us to spend money. In any time period, given the GDP and import/export balance, any increase in private savings equals the federal deficit. To the penny.
Tinsley13: “Based upon the systems I’ve seen in Europe, where so many people are in ‘public service’, the incidence of low production stemming from having a guaranteed position renders many services barely functional.”
That’s why it is important to make guaranteed jobs minimum wage (or close to it). That way, when the economy recovers, people will move on to better jobs, and the number of guaranteed jobs will decrease. A jobs guarantee should be counter-cyclical, not an entrenched system.
But even if you get some entrenchment, work is better than welfare, right?
Bruce: “I think it’s more realistic asking how we are going to get the higher classes down to our level.”
Why should we do that? They earned (or inherited) their wealth.
There is a natural downward socioeconomic mobility. Usually it takes only 3 generations to move from upper class to upper middle class or middle class. The problem is that there are barriers to upward mobility. In addition, there are many more in the lower class than in the upper class. Removing or diminishing those barriers is more beneficial, unless things are really bad.
It depends on how you increase the number of high school graduates. The battleground is not high school, it’s just where you see the effects. The key lies in middle school. That is where you start to see the differentiation between winners and losers.
As for hatred for civil liberties and bloated weapons
projects I hope you can back up this claim with facts.
You mean she wants to repeal the Patriot Act, shut down Gitmo, and restore the Constitution, you know, little things like habeas corpus and fair trials for every detainee? I must’ve missed that.
Just like I missed when she called for the GWOT to be ended and attacked bloated Pentagon budgets, demanding that weapons spending be severely cut.
(What was up with the Israeli flag pin? Sounds pretty dire.)
I used Palin as an example of how the media is used
to attack populist pols
Yes, demanding $100K to speak to the allegedly downtrodden and not to a republican astroturf, right? Sounds very populist.
I don’t know, my idea of a populist would include speaking directly to the poor and doing it for free, especially if the speaker is already rich.
does that then put you with the likes of Paulson and Big MONEY??
I place anyone who supported the Bailout, like Sarah Palin or Glenn Beck, with Paulson and Wall St. and Big Money.
As I’ve said before, anyone who’s truly against the system would reject all existing “celebrities”, none of whom are there to do anything but try to package the same old lies in new wrapping paper. The people need to find their own leaders.
It’s a mark of not being serious to still engage in political celebrity worship, and especially in the case of such an obvious liar and Big Money, Big Corporate, Big Government agent as Sarah Palin.
Does investment really need a stimulus? This would be true, if there was a shortage of capital. But that does not seem to be the case. There is, however, a shortage of customers, and consumers are the one’s who ultimately direct the movement of capital. No one will invest if they think no one is buying. So the best stimulus to “capital” by indeed be a stimulus to consumption.
But we may get (yet another) reverse test of this, if congress allows unemployment benefit extensions to expire.
It is a continuing education about modern irreconcilable differences to read blog posts.
What is going on is very well put in a quote from Antonio Gramsci in the Intro to Part V of John Ralston Saul’s ” The Collapse of Globalism and the Reinvention of the World”
” The old is dying, the new struggles to be born,and in the interregnum there are many morbid symptoms.” Gramsci 1930.
Historic models of capitalism and socialism that were based on 19th and early 20th century experience are of no value because of massive technological change and gross overpopulation. What emerges must be a synthesis between factions for future commonwealth associations. To that end there must be collapse to simplify and remove irreconcilable factions. That will be messy and decidely not politically correct as collapse moves on to a simpler political solution that stabilizes.
I’m young and I don’t care. Let ’em come. If they can’t handle the truth, then I’ll take all comers that try to shut me down. Liberty or death. Being careful about what I say would not be liberty, would it? ;-)
And for the record, for a number of reasons (not the least of which the apparent destruction of modern stable society) I’ve decided that children would be a bad idea for me. Even buying a house doesn’t sound like that great an idea. I value mobility and a life pared down as small as I can make it. It seems, to me, the only logical way to survive the next 10-15 years of (most likely violent) change.
Wall Street and Washington Hope You Are Gullible: Disappoint Them
February 14, 2010 – Huffington Post – excerpts
“If a high-on-crack driver crashed his speeding rental car into your house and killed your spouse, you would be outraged if law enforcers took bribes and gave the driver a pass on a blood test. If the judge then merely fined the killer and ordered you to pay it, you would appeal, wondering what happened to justice. If the government then handed the crack-driver keys to a bigger rental car and presented you with the rental bill, you would certainly protest.
How is it, then, that you have remained largely silent in the face of the same sort of behavior by Wall Street and Washington? Bonus-seeking bankers careened off the right path and ran Ponzi schemes that nearly ruined our economy. Bureaucrats and elected officials bailed them out without demanding consequences. Bankers are revving their engines again.
Taxpayers are asked to believe that over-borrowing by U.S. consumers created a global financial crisis. This myth aids and abets Wall Street. The economy was nearly destroyed because banks borrowed massively, and they borrowed many multiples more than they could afford. Wall Street pumped the Fed’s cheap money through financial meth labs, and deceptive financial vehicles ran over securities laws at top speed.
Congress must start again from scratch, and give us real reform. Washington needs to get back in the driver’s seat, and voters need to make Congress steer straight this time by calling and writing representatives and senators.”
http://tinyurl.com/ycpjstj
A lot of the talk of small business owners sounds a lot like the talk of low paid Fox News watchers, and to me it all starts to sound like the following: “We all want a shot at the lottery.”
You DO realize that the rich you want to be a part of have NO motivation to let you in their club, right? In fact, they have every motivation to dangle the carrot in front of you but never let you IN. While I don’t advocate full on communism, the expectations of being wealthy need to be scaled back heavily in this country. Further, people need to get a far firmer grasp of what their personal expectations should be. You will work your whole life, maybe become fairly wealthy, but never be extravagantly rich.
That’s reality, and that’s what America seems to fail to deal with.
I said nothing about being a “just” society. I was just echoing the sentiment that because we are a bankrupt nation in every way but cash, that the economic downturn in this country is a different beast, and it’s a great point by Mr. Leonard. I can’t help but have a perpetual feeling of living inside the song “How I Wish You were Here”, showing that it has nothing to do with a problem with America, but modern industrialization.
Right on. That is what I mean when I say we feel too entitled. And feeling entitled plays into the financiers’ con, so after we sell our souls as usurers ha ha we get nothing in the end.
We don’t need all that stuff. Those big houses are obscene. Rather than own a mansion, I would far prefer to live in a modest home in a culturally rich, convenient, ecologically sane community. And that kind of place is not built by Wall Street usury.
We have taken individualism and competition too far. We need to face that, and turn around. “Communism” has been used as a scare word for too many generations. It is like the N word — it needs to just go away, and not scare anybody any more.. Like Bruce says, sharing will get us to the other side.
I have no axe to grind regarding Capitalism. Mine is merely an observation. In the US, it is undeniable that the private sector is shrinking while the public sector is growing. Public sector employees enjoy greater pay, benefits and security. Each year, the number of participants (both buyers and sellers) who are actually benefiting from Capitalism dwindles. This trend will continue in the decades ahead.
Those hoping for Capitalism to save the day will be deeply disappointed.
But they were not peacefully at home. They were trying to get their share of a dirty business. More like you lost a spouse as collateral damage while doing business with the Mafia. I mean, everyone knows the capitalists have been playing dirty in vulnerable nations for a long, long time.
Using monetary policy like hiking the federal funds rate to pop asset price bubbles is like using a sledge hammer to kill an insect. Monetary policy has the potential to affect inflation and investment decisions (and hence growth rates) across the entire country. Any policy decision that affects such a large area is bound to suffer from fallacy of composition errors. As bad and widespread as the latest housing price bubble was, there is simply no reason why large parts of the country should suffer for the speculative excesses of a few regions. Fiscal policy and regulatory forbearance offer far better and more precise ways of dealing with asset price bubbles. Finally, even if the current financial panic was in part caused by too loose a monetary policy, this does not mean that tight monetary policy will necessarily prevent future panics. It is important to remember that during the 1980’s there were numerous financial panics even though interest rates were substantially higher than they are today. Even more troubling for the argument that a higher federal funds rate would have prevented the most recent financial crisis is the fact that international comparisons of prevailing interest rates reveal little correlation between interest rate changes and housing prices. See for example figure 3.13 of this recent IMF report:
http://www.imf.org/external/pubs/ft/weo/2009/02/c3/Fig3_13.pdf (warning PDF file)
In conclusion, the assertion that overly lax monetary policy *caused* the housing bubble is highly questionable. Contributed to maybe, but caused, I don’t think so.
“Fiscal policy and regulatory forbearance offer…”
should read:
“Fiscal policy and other policies designed to crack down on regulatory forbearance offer…”
“The CRA excuse is, of course, mostly nonsense. Amongst other things, even if true, the bank directors and executives had a responsibility to their shareholders to refuse to make unsound loans, accept the poor CRA scores, and forgo any mergers or bank branch openings that would eventually result in the failure of the banks (without government subsidies). Most importantly, most of the problem loans are not CRA loans at all.”
>>>>…..
you place blame on bank directors while absolving the
congress who wrote the CRA, B Frank et al.
Mr Mcgowan ..your post hedges with many “even if true”
statements that are in direct conflict with your support of Big GOV…loose money policy from the Fed
and it’s directors made bubbles possible..
The elephant in this room is ignored by so many posters..Gov Debt at all levels is destroying the
economy and standards of living (we will see much worse as the dollar is devalued)
yet we keep reading here that the GOV should provide this or that benefit..well folks smell the coffee the GOV is broke..busted we cannot spend our way out of this mess..have you all become so disoriented that you do not understand this fact?
Terrific! I’ll stop paying taxes, encourage all my friends to do the same, and then we’ll see how that “non-backed” dollar thing works out. Any third grader can see that the WILLINGNESS of the private sector to provide resources to the Federal treasury is what allows the Fed to (temporarily) run the printing presses. You modern monetary theorists are stuck in some sort of endless loop akin to the perpetual motion crowd. When the prime driver (the taxpayer) gives it up, the whole game collapses. See the PIIGS for a quick preamble.
Plenty of buyers at lower prices for everything. We need deflation, but the debt load is too great to permit it, so we end up zombi-fied. In this state, economics becomes a game of who you know, rather than what, because the players in the worst positions are able to argue for political bailouts instead of being allowed to fail. Investors pour out of the woodwork when house prices fall low enough, for example, but the great Federal banking/housing-support engine (the Fed, FHA, Fannie, Freddie, HAMP, $8k tax credit, loss carry back for builders, etc.) won’t let them go where they need to go. But they will, in time.
You’re exactly right. I will work my whole life, with no thought of retirement…and be supremely grateful for the opportunity. I have no desire for great wealth, only for the chance to wake up each day with an engaged mind and a purpose beyond myself. I’m truly blessed.
commissar: “The elephant in this room is ignored by so many posters..Gov Debt at all levels is destroying the
economy and standards of living (we will see much worse as the dollar is devalued)”
If the gov’t spends more than it takes in, it runs a deficit and increases the gov’t debt. Where does the money go? To us. We have more money. If the gov’t runs a surplus and thus reduces the gov’t debt, and we have less money. The size of the gov’t debt is simply a record of how much money the gov’t has passed on to us and not gotten back, since the beginning. How much did it have at the beginning? 0. How much did we have? 0. So if we pay off the gov’t debt, we are back to 0. That’s true no matter how big or small the gov’t debt is. Running a debt doesn’t make the gov’t bankrupt, it just leaves more money in our hands.
Debt deflation can quickly spin out of control. There were a lot of investors looking to scoop up bargains during the great depression too. When prices kept falling some of them ended up jumping out of windows. Be careful what you wish for.
I see posts saying we think the rich are our heros. Well I feed the homeless once a month and would take any one of those people (including the addicted) into my home before I would let Jamie Dimon near me or my family. Certainly not all, but regardless of the percentage. Money corrupts and is the most deadly addiction on earth. Too many rich folks have beaten down any walls that would restrain them. In the process they have abused people and caused suffering. Maybe they just need to get poor for awhile. It’s a place where you depend on others and are thankful when you get a meal. Where you want to help others and see the need to be honest in all your dealings.
Outstanding comment, Mr. McGowan! I do think you’ve nailed a large portion of the factors that have led to the current quagmire. (BTW, I’ve made a cursory inspection of your website and look forward to perusing it further! :) You are most certainly spot-on with your observations of the current wars and “blinking gadgets.” However, I think of equal, if not more, importance is the “how” and “why” the factors you’ve cited came to be. Could it be that our “educational system” is geared primarily toward producing irrational and unreasoning fodder for corporate machinations? Can there be any doubt that the corporations enlisted Madison Ave. “spin doctors” to further shape “beliefs,” initially instilled in our “schools,” that everyone is entitled to “the good life?” Why is it that no one places any “blame” on the “average AmeriCONs” who were “flipping” houses for egregious profits, arbitrarily inflating “value,” without regard for anything beyond their personal profit? (Sounds a lot like the modus operandi of the incessantly referenced “fat cats” to me.) The sad fact is that most people in this country are either utterly and completely “ignorant” or so over-specialized (pigeonholed) as to be “functionally ignorant” in any other frame of reference. In essence, our “civilization” has created its own form of (cannibalistic?) predator-prey society and most people imagine themselves, or strive to be, the predator. When any “environment” contains nothing but predators, the system collapses. Alas, all of this is purely academic at this juncture as we’ve perturbed Mother Nature to the point where “she” will soon be dictating the “terms and conditions,” absolutely, and our make-believe existence will be nearly, if not completely, terminated.
Nice explanation Min. Keep it short and simple; government debt is not the same as private debt. Good to see you hanging out at Bill Mitchell’s site =)
Yet under Bush II unemployment WAS at 5% or lower, yet inequality grew. There’s another factor (enforcing existing regulations is obviously one issue).
. . and no, I don’t collect interest. I keep my savings in a safe deposit box and bear the cost of inflation. Maybe not smart but it feels good.
On the other hand, i never had a mortgage, just built up slowly, and working for low wages I now own my little home and the 2 acres it sits on, and the granny house I am building out back for my old age. There are many benefits to not playing the money-and-status game. I am deeply grateful for the choices I made in my youth.
You act as if it doesn’t matter how much we spend, or whose “hands” the money ends up in. The fact is that beyond a certain percentage of GDP, government debt brings down entire economies because creditors balk. Furthermore, all gov’t spending is not equal. If our spending buys us a useful asset at a cost close to what the private sector could produce it for, all the better. If, on the other hand, it pays bloated salaries and benefits to workers with little or no public accountability, its not only a waste, but a crime.
A New Phase, Not Just Another Recession
February 15, 2010 – Huffington Post – excerpts
“It is becoming increasingly clear that the financial meltdown of 2008 and the subsequent economic contraction that continues to this day represent more than just another recessionary cycle. More importantly, they represent a structural change, a new phase, the phase of the dominance of “finance capital,” as the late Austro-German political economist Rudolf Hilferding put it.
Although the current domination of our economy by finance capital seems new, it is in fact a throwback or “retrogression” (as financial expert Michael Hudson puts it) to the capitalism of the late 19th and early 20th centuries; that is, the capitalism of monopolistic big business and gigantic financial institutions. The rising economic and political influence of powerful financial interests in the early 20th Century led a number of political economists (such as John Hobson, Rudolf Hilferding and Vladimir Lenin) to write passionately on the ominous trends of those developments — developments that significantly contributed to the eruption of the two World Wars and precipitated the devastating Great Depression of the 1930s, by creating an unsustainable asset price bubble in the form of overblown stock prices….
In the absence of an overwhelming pressure from below (similar to that of the 1930s), Keynesian or New Deal economic reforms could remain a (fondly-remembered) one-time experience in the history of economic reforms.”
http://tinyurl.com/ykde32g
Pigeon Fever: Ponzi Schemes Still Thriving
Morley Safer Takes a Look at Why People Are Too Trusting and Gullible
60 Minutes Feb. 14, 2010
http://www.cbsnews.com/stories/2010/02/11/60minutes/main6198863.shtml
c smith: “Plenty of buyers at lower prices for everything. We need deflation, but the debt load is too great to permit it, so we end up zombi-fied.”
We need deflation? Are you a banker?
“In this state, economics becomes a game of who you know, rather than what, because the players in the worst positions are able to argue for political bailouts instead of being allowed to fail.”
It seems not, since you are OK with the big bankers failing.
Inflation, generally speaking, is good. It greases the wheels of commerce, so to speak. That’s why the Fed targets inflation, when it can. Deflation is generally bad. It discourages lending, which puts a damper on borrowing, risk-taking, innovation.
At the present time, the average person has too much debt, not enough savings. Deflation makes the real interest he pays higher, and makes it tougher to get the money to pay his debts. We have high unemployment, which puts downward pressure on wages (wage deflation). Instead of deflation in the prices of goods and services, we need wage inflation, which would help people pay off their debts. Also, general inflation would help people by reducing the real interest on their loans.
Now, with high unemployment we are not going to get general inflation any time soon, so that is not really a problem. Unemployment is the problem.
James Kwak writes, “Preventing the next financial crisis should be high on our society’s priority list.”
If this statement were true today, it would have been true yesterday, after the last financial crisis and before the current crisis. I.e., preventing the current financial crisis “should” have been a top priority; instead, all the major players–the top prioritizers–enabled the bubble.
Kwak shares with Elizabeth Warren and other liberal academics the popular illusion that capitalism can be “reformed” to remove or palliate its odious effects–economic crisis, unemployment, war, environmental degradation, political corruption, and so on.
Jamie Dimon recently opined that a financial crisis should be expected every five to seven years.
I’m betting on Dimon.
Min, nice trick- however the money borrowed to put it in the hands of the people has been used to float private debt (underwater mortgage debt) leverage, it also was and is used by
Money center banks (too big to fail) in leverage schemes CDO’s SDO on and on (try 40 to 1)..so all of this Increased leverage makes your 0 balance a minus number ..now add in the US debt purchased by other Nations (China etal) that expect to be paid..and you get
The current state of finance: Ben prints more money to monetize the debt..which devalues the dollar..this circle of borrowing and monetizing will collapse the dollar
And destroy the wealth remaining as our GDP implodes as it will not be able to
Service the debt on the books much less the Trillions Obama plans to spend in the next three years
This does not end well.
c smith: “I’ll stop paying taxes, encourage all my friends to do the same, and then we’ll see how that “non-backed” dollar thing works out.”
I am afraid that what you save in taxes will be more than eaten up in fines and attorney’s fees. In addition, we would lose the fruits of your labor while you are away.
“Any third grader can see that the WILLINGNESS of the private sector to provide resources to the Federal treasury is what allows the Fed to (temporarily) run the printing presses.”
The government governs by the consent of the governed. If people do not consent, the government falls. But the people do not provide money to the government, it’s the other way around.
“You modern monetary theorists are stuck in some sort of endless loop akin to the perpetual motion crowd.”
I am not a theorist. This is just the bookkeeping part of MMT, which Bernanke and Greenspan and the anti-Fed people agree upon.
“When the prime driver (the taxpayer) gives it up, the whole game collapses.”
Of course. Consent of the governed. That does not mean that the people have a store of money that they graciously bestow upon the government from time to time.
“See the PIIGS for a quick preamble.”
Nope. The Euro is not a national currency. What we are seeing in Europe is similar to what happened in the Great Depression. Going off the Gold Standard was one of the main things that countries could do to get out of the Depression. The Euro is functioning like the Gold Standard. In fact, the contrast between Europe and the U. S. shows the value of a floating fiat currency.
So, peasants are dying. That’s the feature part.
What’s the bug?
Min burbles:
What’s the proportion between earning and inheriting? And of so-called earning, how much is pure looting?
c smith: “You act as if it doesn’t matter how much we spend, or whose “hands” the money ends up in.”
Don’t read too much into what I say. I am responding to the idea that the gov’t is bankrupt. The gov’t started with no money, and if we pay off the gov’t debt, it will end up with no money. That does not make it bankrupt.
“The fact is that beyond a certain percentage of GDP, government debt brings down entire economies because creditors balk.”
That may be true when the debt is not in the national currency, or the currency is not a floating fiat currency, but it is not true of the U. S. The U. S. does not depend upon creditors to function. (IIUC, current law requires the Treasury to have funds in its account at the Fed to spend, but Congress would authorize spending if need be, just as they keep raising the debt ceiling.)
“Furthermore, all gov’t spending is not equal.”
Again, we agree. :)
“If our spending buys us a useful asset at a cost close to what the private sector could produce it for, all the better. If, on the other hand, it pays bloated salaries and benefits to workers with little or no public accountability, its not only a waste, but a crime.”
Again, we agree. :)
Exactly, I used to view poverty as a sin but realize I was off target(pun intended). Some of the happiest people I know have very little and just make due by not collecting debt or having to consume. But they also realize their inheritance and behave in accordance.
commissar: “Min, nice trick-”
It is not a trick. The gov’t started with no money and would end up with none. Having no money does not make the gov’t bankrupt.
“however the money borrowed to put it in the hands of the people has been used to float private debt (underwater mortgage debt) leverage, it also was and is used by
Money center banks (too big to fail) in leverage schemes CDO’s SDO on and on (try 40 to 1)..so all of this Increased leverage makes your 0 balance a minus number ..”
Well, here I admit that I have some questions, myself. Banks create money by lending. But that is only temporary, because the money is paid back. But what, as in the cases you bring up, there are defaults and foreclosures that produce loan losses. Then does the money that was created become permanent? I used to think so, but now it seems to me that the banks write off the loans and that destroys the money in the bank, bringing everything back to 0. And even if there is a bank failure, eventually everything evens out, and we are back to 0.
“now add in the US debt purchased by other Nations (China etal) that expect to be paid..and you get
The current state of finance: Ben prints more money to monetize the debt..which devalues the dollar..this circle of borrowing and monetizing will collapse the dollar”
IIUC, the Fed does not monetize the debt, under current U. S. law.
A devaluation of the dollar would help exports, which would stimulate our economy. At this point, that would be good for us. :)
“And destroy the wealth remaining as our GDP implodes as it will not be able to Service the debt on the books much less the Trillions Obama plans to spend in the next three years
“This does not end well.”
An implosion of GDP would not be good. But that does not mean that servicing the debt would cause that. We have been servicing the GDP for a long, long time without an implosion of GDP. In fact, we even caught up with the trend line of GDP growth from before the Depression! And the debt has been growing all along, with overall moderate inflation, except for a temporary bout of high inflation. We face serious challenges, but bankruptcy because of the gov’t debt is not one of them.
The overall point is, though, that we are never going to pay off the national debt, unless we decide in the future to monetize it and stop issuing gov’t bonds. (I doubt if that will happen in our lifetimes, though.) But monetizing it means just that. The debt tells us how much money the gov’t has created over the years. Monetizing it just means that we will get rid of the debt and keep the money.
soloduff: “Kwak shares with Elizabeth Warren and other liberal academics the popular illusion that capitalism can be “reformed” to remove or palliate its odious effects–economic crisis, unemployment, war, environmental degradation, political corruption, and so on.”
This is no illusion. After the regulations passed as a result of the Great Depression, the U. S. went 50 years without a financial crisis. Then, we started to dismantle those regulations. They may not have been perfect, but they worked well.
“Jamie Dimon recently opined that a financial crisis should be expected every five to seven years.
“I’m betting on Dimon.”
Dimon’s remark is self-serving. After deregulation we have returned to a cycle of financial panics like they had in the 19th century. If we accept that as normal, then why re-regulate? Dimon would prefer it if we did not, and so he says that it is normal. :)
James Kwak writes “Preventing the next financial crisis should be high on our society’s priority list”
I could not disagree more. Preventing the next financial crisis was the only priority of our current regulators and look where that has led the world.
Again, for umpteenth time, read through all the regulations that emanated from the Basel Committee and try to find a word by Simon’s regulator pals about the purpose of our banking sector… such as helping to create jobs… instead they placed the banking sector on a crazy and totally useless pursuit of AAA ratings… and that is long from finished.
To create jobs and to find our way out of the current quagmire is not done by avoiding risks, on the contrary it can only be done with a lot of risk-taking.
Quick fix, cut the work week to 30 hours and expand equality like Single Payer, affordable housing (cheap rents) and mass transportation. Who needs to work 50 hours a week anyway?
Also clean energy reverse mortgages would tap into the people with home equity and reverse global warming and lower peoples energy costs and create lots of green collar jobs. But I guess it might lower the cost of energy which is a no no with energy companies too big to take a big hit.
@Min
“Monetizing the debt,” is a poor choice of words. Historically, “monetization,” refers to the practice of converting gold into currency. Since August 15, 1971 (my birthday! the August 15 part that is, not the 1971 part) the U.S. government has ceased doing this. Outstanding U.S. debt is denominated in dollars so there is really nothing to “monetize;” it’s all already money. Although, I guess you could call the Feds actions in purchasing foreign reserves and converting them into U.S. dollars “monetization,” if you wanted to.
Per Kurowski,
I’d be interested to know what you think about Warren Mosler’s proposals to reform the banking sector he lays out here:
http://neweconomicperspectives.blogspot.com/2010/02/warren-moslers-proposals-for-treasury.html
He certainly begins with a clear statement of what the purpose of the banking sector should be.
@NKlein
Thanks for the correction. :)
What I had in mind was what commissar referred to as “printing money”.
@commissar
NKlein knows what’s what.
Doug_F. wrote 2/15/2010 8:27:51 PM:
“Just for giggles and of course the sheer deterrent values, I would really appreciate seeing Goldman Sachs and J.P Morgan Chase investigated with a view to declaring them Organized Criminal Conspiracies, and thus subject to the US RICO Statutes. Asset-seizures-r-us.
Would not help Greece of course but anything that would bring down the real life ‘Wolfram & Harts’ is aces with me. If Obama did that he would probably be almost universally popular. Even with his enemies.
Ahh — one can dream. One can dream.”
http://tinyurl.com/y8hdkes
It was ‘reformed’ from 1935 to around 1995 thereabouts. No financial crisis during those years.. hmm, what law was in place around that time?…
Kwak writes: “I think this means that we need to think of employment not merely as a determinant of GDP, but as an independent good in itself.”
Duh. Actually the point is generally recognized–the unemployment rate is often seen as the bottom line in evaluating the economy.
Not really Min, just a curious social studies teacher trying to expand my horizons. As for banks creating money by originating loans, you really have to distinguish between government high powered money and bank credit money. They tend to get conflated, but really they are quite different. I get confused myself, but so far what I’ve taken away is that even if it seems bank credit money can turn negative in actuality it always nets to zero; someone’s assets have to be someone else’s liabilities. But the process of deleveraging can have severe negative consequences for the private sector (especially if the price adjustment is quick and disorderly) so someone has to step in to fill the gap in spending left as the private sector net-saves. If there is a current account deficit the only sector left that can accomplish this is the public sector. There’s no escaping that fact; the books have to balance. It’s just not possible to have a current account deficit, a public sector surplus, and have the private sector net-save. The books won’t balance. Those saying the deficit should be cut now are in effect saying they want the private sector to save less. There’s a time and a place for that, but now is not it.
Though I can find some particular pieces I could agree with, and the purpose of banks definition is quite good, the whole proposal is just too confusing mix up a lot of different concerns and pieces, and frankly some of them of minor importance… like the discussion of the use of Libor.
Also and as I believe I have said before I cannot get a handle on the “No public purpose is served by the issuance of Treasury securities with a non convertible currency and floating exchange rate policy” as if the US was a closed system and its government had not to be reigned in.
Therefore given I am a bit short of time I must abstain from commenting it extensively, at least for now… though I have copied it for future reading.
Let me follow up with a few additional points, partly in response to some comments.
1. The Baseline Scenario and other critics of the current disastrous economic and financial policies should avoid and indeed aggressively rebut being drawn into the “free market” versus “government” framing of the debate. The current policies are massive government intervention into the “free market” on behalf of a few politically favored banks. By no reasonable definition is this a free market.
2. One can and I do heavily criticize “blame the government” excuses without embracing “big government”, socialism, or anything of this kind. Indeed, hard core “free marketeers” should be among those denouncing these tired excuses.
3. It is important to recognize and make others aware that militant “anti-government” and “free market” rhetoric is being systematically and blatantly used to promote policies that are in fact massive government intervention on behalf of a few companies.
The strategy is to oppose any policy to undo the damage as “socialism” or intervention in the “free market” loudly and aggressively. To oppose chopping the banks up, reducing them to a reasonable size, as “nationalization” or “socialism”. To imply that the government “owes” the banks a bailout and massive subsidies because the government caused the problem through Alan Greenspan/the Federal Reserve, Fannie Mae, Freddie Mac, the CRA, and other government scapegoats (and never through the “too big to fail” doctrine).
The aggressive “free market” and “anti-government” rhetoric magically disappears when the issue is government subsidies to the banks. It may even be said that the government must subsidize the banks to save “the free market”. Indeed, liberal and left wing rhetoric may suddenly be adopted to promote the massive subsidies for the banks.
Rather than being mesmerized by the “free market” versus “government” issue, critics of these disastrous economic and financial policies must recognize the duplicity and aggressively attack this cynical and phony “free market” rhetoric.
The “free market” promotional label must be clearly distinguished from the free market ideal or theory.
4. The Community Reinvestment Act (CRA) excuse has been extensively debunked. This however must be repeated and the arguments simplified and streamlined to reach the broadest population.
5. The Baseline Scenario and other critics of the current disastrous policies, to be successful, must directly confront and rebut the attempts to portray the housing bubble as a poor people’s problem, a phenomenon of low income groups, often black and Hispanic. This is demonstrably false. A large percentage of the middle class, upper middle class, and wealthy Americans were drawn into a massive, ill advised wave of home buying, home building, and home improvement. Unless the problem is correctly portrayed as a problem of the mainstream of America, “Middle America”, it will not be overcome.
It is clear that there is widespread, almost universal opposition to these policies across the political spectrum both in the US and around the world. The policies are contrary to the interests of the large percentage of the US and world population. They are also just plain wrong, immoral, and unethical. Widespread opposition is thus hardly surprising. This opposition is, however, divided, confused by shifting, deceptive arguments carefully targeted to the prejudices of the left, the right, and other groups.
Nonetheless, opposition to date has failed miserably. This calls for a reexamination of strategies and tactics and new approaches. Amongst other things, this requires both recognizing and systematically rebutting the blizzard of shifting arguments, excuses, half-truths and lies used to protect and extend these disastrous policies.
Sincerely,
John
Many great commentaries here, and a wild array of perceptions of the current problems, why and how we got to this treacherous place. As one lives on the lowerend of the economic strata, – I can assure everyone out there who cares to listen – there is a huge population of Americans that are enduring real pain, suffering, stress, dread concern, and all the downtheroad ramifications that Mr Peck alludes to in the article linked above, – and that there is very real animosity out there toward anyone and everyone perceived to be culpable for the very real crisis this is ruining many of our lives. From our perspective, there are grotesque injustices. Injustices in the causes, in the current policies which totally favor, benefit, and advance the best interests of the predatorclass, and in the possible remedies. Injustices bread animosity, which eventually leads to vengeance and that is the future the predatorclass is crafting. America is a well armed society. Those arms are going to be employed when enough people are pushed to the point of non-recovery, or hopelessness, and that critical threshold is very near if not already active.
The gop is a horde of pathological liars. There is no such thing as a free market! Small government would also require a reduction in defense, (actually offense) and military, intelligence, and private military and private intelligence outlays.
Forked tongued republicans cannot cry and whine like school girls about big government, out of one side of their twisted mouths, – and then screech like harpies out of the other side when big, huge, giant, massive government warmaking (military, intelligence, private military and private intelligence) expenditures are questioned.
The entire FICTION and MYTH of biggovenment is a gop republican reich disinformation and propaganda perception management operation.
Challenge the gopbacked funding of the big, huge, giant, massive government largess shoveled to the TBTF finance, energy, oil, defense, military, intelligence, private military, and private intelligence, pharmaceutical, and agra oligarchs, and let’s hear the gop response. The gop, wingnuts, and their lockstep mindless partisans in redneck Amerika are pathological liars. Republicans spew one thing on TV to get elected, and do the exact opposite once elected to favor, benefit, shield, or advance one or another oligarch.
Know this predators!!! Many of us will not go quietly or peacefully to the dungeons, slave quarters, or the ovens. There will be a reckoning and a balancing, and there will be blood.
America needs to, and will decide what kind of nation we are, and what kind of society we will bequeath our children. If the current panjandrum continues unabated, – those many guns will be employed regularly out of necessity, desperation, or pathological anger. If we can muster the courage to right these terrible wrongs, and begin to remedy these horrific grotesque injustices, – then there may be some hope that our future as a nation and a people can be reconciled. If not – then you better buckle up predatorclass biiiaatches, – because many Americans are locked, cocked, and ready to rock, and super pissed. There will be a reckoning and a balancing, or there will be blood.
Thanks for looking it over Per Kurowski. I also didn’t really understand the discussion about banks contracting in the Libor rate. My take on public debt issuance is that it is necessary to keep interest rates from falling to whatever rate the Fed is paying on excess reserves. If the federal government didn’t sell bonds then deficit spending would increase the reserves in the interbank market and the competition would put continuous downward pressure on interest rates. The Chartalists think this is a good thing because it would reduce speculation in the secondary markets for government debt and promote long term investment in more productive activities. To deal with asset price bubbles they would rely on fiscal policy and regulatory intervention. Despite my comment above, I’m not so sanguine fiscal policy and regulatory agencies can always be used effectively to rein in asset price bubbles so I think in normal times government debt issuance is probably a good idea. Like you, I worry about the danger of having a government whose fiscal capacity is completely unrestrained. That said, between roughly September 2008 and June 2009 we had a huge contraction in nominal GDP so, like StatsGuy has recommended on several occasions, I would support a permanent injection of several hundred billion dollars of new money into the economy without any corresponding debt issuance. I highly doubt this would be inflationary in our current environment. The question for me then is not whether or not we should deficit spend, but how do we spend this new money. That’s just my relatively uninformed opinion about the macro-economic situation though. What I was hoping you could comment on is professor Mosler’s recommendations related to banks being forced to hold all loans on their books. I’ve been interested in your criticisms of the Basel protocols for some time now and was wondering if you thought professor Mosler’s recommendations in regard to securitization and insurance swaps/defaults furthers your stated goal of getting banks back into the business of accurately pricing risk. This seems vitally important to me and besides you and a few other commentators out there I hardly ever see it discussed.
Wha’s that?
Agree vehemently with 1 caveat – think of the NRA. Most of the firearms are owned by wingnuts siding with the gop. Liberals use their intellects and senses of values and compromise. Repubs lie, manipulate and brandish and use guns – see the nut who murders health workers who perform and assist in abortions. That’s a typical anti-Obama, anti-anything expressing common sense – type gun owner.
Seems like you’ve still got a job. Revisit this post when you’ve reached late 40s and hunting for a job 6+ mos later.
This post has an “Are there no workhouses?” cluelessness about it
commissar: “Min, nice trick”
After NKlein’s correction, I looked further into the U. S. situation. I had thought that the legal constraint on the Treasury of having to have funds in the Fed before spending was definitive. My assumption was that the Fed did no monetization. Also, Andrew Jackson eliminated the national debt, with a small surplus, and presumably there was also money in circulation. So with monetization and the Jackson surplus, it seems like we are in no danger at all of going bankrupt, not even reaching zero. :)
I dunno, I think I could do without some of the “work” of certain parts of the financial sector…
Corporate solution to the problem: cut one person, pay the remaining person 75% of their normal wages, have them work 60 hours a week exempt and uncompensated to make up for the missing worker. Welcome to corporate America! Here’s your shovel; dig your own damn grave.
raya, a little reality: from AP “A family source said Bishop, a mother of four children – the youngest a third-grade boy – was a far-left political extremist who was “obsessed” with President Obama to the point of being off-putting.”
She is the nut who killed (3) teachers &
wounded more this weeek at U of Alabama..how’s that fit in your lefty world view- kinda makes it seem just a little off the mark who are the real cold blooded killers?
might want to look at violence by Union thugs, Che,
Mao,Polpot,Stalin, Hitler (national socialist) before
calling the GOP violent. just saying…
Photo by AP
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I haven’t read the Northeastern study, but the Huffington Post piece appears to categorize by income level. Isn’t that a little circular? I’d expect those without jobs to have lower incomes. Perhaps the underlying study provides a better foundational definition for middle and lower classes, but if it’s truly income-based I’d have to take its conclusion with a grain of salt.
Well, it was an academic study. Combining income when employed with income when unemployed is a sophomoric error. I expect that the figures are for income when last employed, except for those who have never been employed. (I don’t know how they handle those.)
4 billion people will affect the U.S. more than the 100 million Japan had at the time.
Am sure the Chinese and Indians are nice people, but let them make their own jobs.
I see the author of the “Jobless Era” also wrote a piece for The Atlantic back in 2005: “Pffffttt: The U.S. real-estate bubble is likely to leak, not pop.”
So if we’re lucky, maybe he’ll be as wrong now as he was back then.
James Kwak: “My initial thought was that the financial crisis and recession might have a salutary effect because the middle class, faced with serious economic insecurity, might start worrying more about economic security (and identifying more with the poor and working class), instead of thinking that individual initiative alone would make them rich. I still think this is possible. Unfortunately, it seems to be unlikely. Peck cites economic historian Benjamin Friedman, who “argues that both inside and outside the U.S., lengthy periods of economic stagnation or decline have almost always left society more mean-spirited and less inclusive, and have usually stopped or reversed the advance of rights and freedoms.” The mechanism for this is simple: although some people may react to economic insecurity by realizing that their interests lie with labor rather than capital, other people will react by blaming their misfortune on immigrants, or minorities, or Jews, or gays, or — this being America — the government.”
I would add that the American people are both almost always sucseptible to a foolish and self-damaging identification with the rich, and that class warfare in the USA almost aways works down only.
The Great Depression being an exception, and notable precisely for that exception.
Uh, no, because that would mean a full-scale Depression II. Remember, back then he was underestimating the rate of damage.
yes- Heaven forbid you would want to identify with people who’ve built something with their talents…
Tony Foresta wrote February 15, 2010 at 11:38 pm”
“There will be a reckoning and a balancing, or there will be blood.”
“History does not repeat itself, It rhymes”
Mark Twain
” lengthy periods of economic stagnation or decline have almost always left society more mean-spirited and less inclusive, and have usually stopped or reversed the advance of rights and freedoms.” The mechanism for this is simple”
>……
so is the converse true? : lenghty periods of economic expansion and growth make a society good spirited and inclusive with advance of rights and freedoms?
if so not so bad to have rich get richer and more
of the population moving up in incomes
Old saying: “a poor man never employed anyone”
Or, put differently, there is no such thing as “trickle up” economics…
On the contrary, all economics is “trickle up,” and it is the poor man who employs everyone. All business is based on selling something, and the business climate is measured by the number of solvent customers. Where wealth is gathered into a few hands, the market declines; the rich man has his money, but no place to productively invest it, his very wealth having shrunk the market. Hence he turns not to real investment, but to speculation.
“On the contrary, all economics is “trickle up”
>……
sorry if I LOL..it is always amazing to see how idiology can overcome reality and facts..
Accumulation of wealth provides the leverage to expand economic growth..the rich do not put wealth into a hole in the ground..it is lent via banks or
it is used as the basis for loans to expand business
which expands employed who can then purchase more goods and services..but I am sure you know this already and your economic arguments are only a
way to further a political agenda.
Well stated, thought-provoking plus quintessential. Thanks, John C. Medaille!
Actually, labor provides the leverage to expand. The biggest factor in expansion is rising skills of the labor force, which helps form new capital. You only need so much capital. Currently, there is an oversupply, and has been for decades. A country with a contracting or slowly expanding real economy (as opposed to the FIRE economy) doesn’t require much capital. When capital is over-accumulated, it turns to speculation and consumer lending (usury). That’s what these bubbles are.
If you want to expand the economy, expand the consumer base; nobody produces anything unless they think there are buyers out there.
We should also try to properly educate the 70% that actually receive HS diplomas.