Mike Whitney on the US economy

[bigbadwolf]

Dissident Voice : Visualize the Dow at 6,000

The economic sky is quickly darkening and Bernanke made no effort to hide his concern. His testimony was as close to the truth as one gets in Washington where honesty is usually eradicated like a malignant tumor. In any event, it is worth wading through Bernanke’s speech word by word even if it only reinforces one’s belief that the economy is about to take a sleigh-ride through a deflationary blast-furnace which will ultimately result in the demise of Breton Woods, the disorderly replacement of the dollar as the world’s reserve currency, and an end to the United States short-lived dominance as the world’s lone superpower. The American Century has about run out of steam just eight years into the new millennium. Bernanke’s presentation confirms what the econo-bloggers have been saying for the past three years: the end is nigh, get your house in order.

Personal consumption is down, the labor market is softening, and food and fuel prices are soaring. Housing values are plummeting, wages have stagnated, and American households are more overextended, underpaid and stressed out than anytime in history. It’s all bad. No wonder consumer confidence is at its nadir.

 

[IlyaKEightSix]

Doomsayers. Idiots. America has gone through worse, and has come back. Try this article:

http://www.economist.com/opinion/displaystory.cfm?story_id=11791539

So long as McBush doesn't get into office, then we can definitely recover.

 

[alain]

So long as McBush doesn't get into office, then we can definitely recover.

... so, you think is going to be better with Obamanomics?

 

[swindler]

Obama and McCain both have said very little on their economic approaches, if anything of substance at all. They both will not do anything against the Fed.

One man who tries to tell the truth... Ron Paul.. knows alot about monetary policy and has brazenly been against the Fed. It is kind of funny that after he dropped out of the presidential race (he rarely got airtime from the big NBC / ABC / CNN etc and had to get thousand of petition votes to let him get into some of the debates. Even then the questions were never for him he got maybe one question to everyone else's three to four) he is now being asked to come onto shows to give his opinions. He has been spot on with everything so far. He has been against the bailouts and likens the idea behind them to a drug addict getting a quick fix then becoming even more debilitated later on. The taxpayers and citizens get hammered the hardest.

Yes we have seen worse times, but then there were not so many problems. We are fighting an endless stupid war, we have built up bubble after bubble, the insanely leveraged banks are failing, the SEC is envoking special privileges, freddie and fannie want bailouts and will get them, people are being untruthful to how their companies are doing (Bear Stearns said the week prior to going under "We have enough capital") and the S&P 500 for the past decade has only grown what 1.2% compounded yearly?

It isn't only an American thing though, the world markets are so intertwined that when one person falls others get dragged down as well.

 

[bigbadwolf]

... so, you think is going to be better with Obamanomics?

The malaise goes deeper than some figurehead of a president. As if it would make a difference. And The Economist specialises in silver-lining assessments and upbeat prognoses, which is why I don't read it. The US is in long-term social and economic decline, with intractable structural problems that go back decades. The "Washington Consensus" is in disarray. US financial and policy-making elites haven't a clue about what to do. The idiot who wrote the Economist article is not suggesting anything concrete -- just some optimistic bromides, with quite a bit of equivocation.

 

[bigbadwolf]

One man who tries to tell the truth... Ron Paul.. knows alot about monetary policy and has brazenly been against the Fed. It is kind of funny that after he dropped out of the presidential race (he rarely got airtime from the big NBC / ABC / CNN etc and had to get thousand of petition votes to let him get into some of the debates. Even then the questions were never for him he got maybe one question to everyone else's three to four) he is now being asked to come onto shows to give his opinions. He has been spot on with everything so far. He has been against the bailouts and likens the idea behind them to a drug addict getting a quick fix then becoming even more debilitated later on. The taxpayers and citizens get hammered the hardest.

It isn't only an American thing though, the world markets are so intertwined that when one person falls others get dragged down as well.

I agree with the rest of your post, so have snipped it out to save bandwidth. One thing exercising people's minds is how the US economy is going to get decoupled from other economies. The dollar will lose (rather, is losing) its de facto reserve currency status. Concomitantly, other nations are increasingly reluctant to acquire US dollars or US financial assets in return for tangible goods. Those countries with large dollar-denominated reserves are trying to "diversify." This will make it difficult for the US to sustain the twin current account and fiscal deficits, which have been funded by the rest of the world. In short, it will become difficult for the US to live beyond its means, to which it has become addicted worse than a heroin junkie. Concomitantly, the US consumer will cease to be the engine of global economic growth. I reiterate that it's not clear how the decoupling will take place. It will be very painful for the US and will involve discomfort to everyone else. But it is inevitable. Just like an abscessed tooth has to be extracted by a dentist (but in this case without any anesthetic).

I like Ron Paul for his candor but consider libertarianism naive in that modern capitalism has co-evolved with the development of the modern state: they're two sides of the same coin.

 

[IlyaKEightSix]

... so, you think is going to be better with Obamanomics?

Yes, I think so. I think that without the world hating us, and without us going headfirst and alone into all sorts of wars and losing too much blood and treasure, when we can focus our resources inwards on improving conditions here in the US, things may get better. Especially with Obama espousing wind/solar energy. If enough people get behind alternative energy, it can spark the second industrial revolution (hopefully). Japan in fact, by 2013 hopes to launch the first satellite into geosynchronous orbit to be exposed to solar power 24/7 and beam it down constantly.

As for the bailouts being bad, consider the consequence: what happened the last time the American public completely lost faith in the financial system? The Great Depression happened. You think the Fed can just stand by and watch that happen?

The entire reason the government is saying that it will stand behind Freddie and Fannie is to raise confidence so it won't have to use the bailout.

 

[alain]

Especially with Obama espousing wind/solar energy.

Unless we start to run cars/trucks with sails or solar panels, wind/solar won't do any good. The energy problem in US has very little to do with electricity generation but with a lot other things (like transportation, for instance).

Japan in fact, by 2013 hopes to launch the first satellite into geosynchronous orbit to be exposed to solar power 24/7 and beam it down constantly

As far as I remember all the russian space ships (I haven't looked at theses things since I was a kid, i.e., at least 20 years ago) always had solar panels..

 

[IlyaKEightSix]

I agree with the rest of your post, so have snipped it out to save bandwidth. One thing exercising people's minds is how the US economy is going to get decoupled from other economies. The dollar will lose (rather, is losing) its de facto reserve currency status. Concomitantly, other nations are increasingly reluctant to acquire US dollars or US financial assets in return for tangible goods. Those countries with large dollar-denominated reserves are trying to "diversify." This will make it difficult for the US to sustain the twin current account and fiscal deficits, which have been funded by the rest of the world. In short, it will become difficult for the US to live beyond its means, to which it has become addicted worse than a heroin junkie. Concomitantly, the US consumer will cease to be the engine of global economic growth. I reiterate that it's not clear how the decoupling will take place. It will be very painful for the US and will involve discomfort to everyone else. But it is inevitable. Just like an abscessed tooth has to be extracted by a dentist (but in this case without any anesthetic).

I like Ron Paul for his candor but consider libertarianism naive in that modern capitalism has co-evolved with the development of the modern state: they're two sides of the same coin.

This decoupling won't happen if America would just stop being charitable to developing nations. We should turn our back to the developing nations of the world and let those people live as they can. The only foreign nation that should receive American subsidies is Israel (because of all of the nobel prize winners coming from there). We can use the money we save by not airlifting food to Africans or funding the weapons of Palestinians to encourage k-12 teacher competition (almost nobody that Renaissance hires is American...hence Jim Simons created Math For America--an idea I greatly applaud), or subsidies to alternative energy firms so that they can create more jobs.

We need a second industrial revolution in this country, and I think that it will come from wind and solar power plant construction, and a new space program for geosynchronous solar satellites that beam solar power down to the surface.

It certainly won't come from subsidizing developing nations.

 

[IlyaKEightSix]

Unless we start to run cars/trucks with sails or solar panels, wind/solar won't do any good. The energy problem in US has very little to do with electricity generation but with a lot other things (like transportation, for instance).


As far as I remember all the russian space ships (I haven't looked at theses things since I was a kid, i.e., at least 20 years ago) always had solar panels..

Alain:

www.popsci.com/futurecity

This is where our resources need to go. Towards achieving THAT.

And yes, while space stations and all have solar panels, I don't think they're in geosynchronous orbit, and certainly, they're not beaming the energy down to produce electricity.

Also...

www.teslamotors.com

Alternative energy transportation is on its way. But I think it can use every penny it can get.

Edit:

Alain, here's another something to look at:

10 Audacious Ideas to Save the Planet | Popular Science

Come on, quants, get with it! I thought you're the ubernerds here on planet Earth! Don't tell me you're not reading the geeky stuff >_<!

 

[swindler]

.... I like Ron Paul for his candor but consider libertarianism naive in that modern capitalism has co-evolved with the development of the modern state: they're two sides of the same coin.

You could also make an arguement that they are the same side of a rigged coin. Which shaped modern politics more... the people or the corporations? I've been under the impression that republicans wanted smaller government, but for some reason the government keeps on growing and now include several branches that add no real value and could easily be removed. Some politicians honestly want to make a change but are held up due to lobbyists having their way with other members of the congress / senate / whichever level being bought out. I don't understand how legal bribing is allowed constitutionally...

There will be a backlash sometime. I don't think it is that far off..

 

[bigbadwolf]

He ventured forth to bring light to the world | Gerard Baker - Times Online

And there were other wonderful signs. In the city of the Street at the Wall, spreads on interbank interest rates dropped like manna from Heaven and rates on credit default swaps fell to the ground as dead birds from the almond tree, and the people who had lived in foreclosure were able to borrow again.

Black gold gushed from the ground at prices well below $140 per barrel. In hospitals across the land the sick were cured even though they were uninsured. And all because the Child had pronounced it.

And this is the testimony of one who speaks the truth and bears witness to the truth so that you might believe. And he knows it is the truth for he saw it all on CNN and the BBC and in the pages of The New York Times.

 

[IlyaKEightSix]

STOP BASHING JESUS OBAMA!

Okay, okay, the article was funny. But I'll take the charismatic evil I don't know over the evil I do.

Say NO to McBush!

There is no need to give tax cuts to the rich. Money is power. Power corrupts. Absolute power corrupts absolutely. Trickle-down economics has been given a chance for the past eight years and look where it went.

Obama certainly won't live up to all of the optimism he inspires, simply because there is no overnight solution to a problem eight years in the making. But I'm willing to give him a try, if not for little more than to get back at all of the *red*necks that put the current clown in office.

Think about it. New England. California. Pennsylvania, New Jersey, the Great Lakes, and the West Coast are all blue states. Not coincidentally, this is where a VAST majority of America's educated populace reside.

I don't care about a president that I can relate to. I don't care about a president with "experience". I care about one that's willing to take the reins away from the horrid GOP and spin the wheel 180. The GOP has had the white house for 8 years and have turned the best of times that Clinton left us in and turned them into some of the worst times in American history.

Well I say no more of that. Out with the republicans.

 

[bigbadwolf]

But I'll take the charismatic evil I don't know over the evil I do.

You've hit the nail on the head: all it's about is charisma. There's no real ideological divide. (When was the last time there was in a US presidential election?) The populace is always given a choice between two equally crummy candidates, with the Democrat pitch being: "Vote for us: we're ever so slightly the lesser evil."

 

[IlyaKEightSix]

Well, guess what? Charisma counts. If he's able to tell the EU what they want to hear, then America can get more votes in the UN going its way.

I wonder how many vetoes Putin threw just to make Bush look like a moron.

 

[bigbadwolf]

Milton Friedman School of Lunacy

Dissident Voice : The Outsourcing Tragedy

But outsourcing, and the consequent loss of millions of American manufacturing and service jobs, is not the plain and simple result of corporate greed. It is, instead, an inevitable result of a combination of factors, including:

• the successful enactment of the right-wing dogmas of "the invisible hand" and "trickle down," namely the conviction that individual entrepreneurs and corporations will, by seeking only their own economic gain, obtain the best results for society at large. These are "dogmas" because they are "proven," not by historical evidence or practical experience, but rather through repetition.
• the corollary libertarian dogma that government has no justification whatever in interfering with the economic activities of private individuals and corporations. In the words of Milton Friedman, "There is nothing wrong with the United States that a dose of smaller and less intrusive government would not cure."
• fiduciary responsibility: the legal requirement that the primary responsibility of the corporation is to its stockholders, not the public.

The lessons of history notwithstanding, we have tried market absolutism and minimal government once again, and they are failing once again. The United States of America is near bankruptcy, our currency is in decline, we are massively in debt to our rivals, our manufacturing base has been dismantled, and we are despised the world over.

 

[IlyaKEightSix]

Our manufacturing base will never return to the way it was before, with masses of blue-collared workers employed by large corporations. Simply because the computer has taken over the assembly line. No longer do you need armies of workers to snap together the car, like you did at the Ford plant in the 1920s.

We've become a more knowledge-based economy not because of the Chinese, but because technology has taken over what the armies of American laborers used to build. And as the Chinese demand better standards of living, so too will they become less attractive as an outsourcing target.

If people want to find a job today, they should get an education and learn to spot an opportunity.

 

[bigbadwolf]

Our manufacturing base will never return to the way it was before...

http://www.ft.com/cms/s/0/2aa7a12e-6709-11dd-808f-0000779fd18c.html

China is set to overtake the US next year as the world's largest producer of manufactured goods, four years earlier than expected, as a result of the rapidly weakening US economy.

http://www.ft.com/cms/s/0/a1cfa9e8-...uid=b8efc2ae-d98d-11dc-bd4d-0000779fd2ac.html

Having grown up in an America where the opportunities seemed endless, I am dismayed at how optimism seems to have diminished among our younger people.

One of the reasons we feel so overburdened by debt is that it has steadily taken more borrowing to finance our growth. In the 1950s the economy grew by 73 cents for each dollar of added debt. In the 1960s it was 65 cents. By the 1980s it was only 34 cents and so far in the current decade it is less than 20 cents.

We all know the sad story of our slippage in mathematics and science. In fourth grade, American children are ahead of almost everyone in the world. By the eighth grade they are even and by 12th grade they are seriously behind. If you walk through the labs of our great scientific universities you see many Asian faces. Some of them are Americans who grew up here but many are foreign students. In the past, most of them stayed to enjoy the benefits of our open society but now many are going home. Since September 11, 2001 many have trouble getting visas and there are now considerable opportunities for them in their native countries. Today, America is the leader in only five product areas: computer hardware, software, biotechnology, aerospace and entertainment. That is not enough to provide job opportunities for a country of 300m people.

VDARE.com: 07/09/08 - A Work Force Betrayed

The idea is nonsensical that the US can remain the font of research, innovation, design, and engineering while the country ceases to make things. Research and product development invariably follow manufacturing.

If a 40-50 percent increase in offshored product development jobs, a 65 percent increase in offshored R&D jobs, and a more than 80 percent increase in offshored engineering services and product design-projects jobs do not constitute US job loss, what does?

</SPAN>

 

[bigbadwolf]

In the NYT:

The Cost of Retail Survival: 99¢. Or Maybe 99¢ Plus

This is the chief reason the 99-cent promise is becoming more and more of an empty one — as both Mr. Diouf's and his competitor's signs prove. The stores have fallen back on a bait-and-switch trick, luring customers with the sign, only to reveal, amid more expensive items, a grim 99-cent row of little-girl barrettes, shiny stickers and single rolls of toilet paper perhaps best suited for sanding furniture.

In Crown Heights, Brooklyn, a sign on a store clearly used to read, "99 cents or less," but the last word has been crossed out and replaced with the word "plus."

In Park Slope, at 99¢ Plus Bazar, where everything once cost 99 cents, more and more little "1" numerals are appearing on price stickers, spreading from shelf to shelf like a pox. "We used to have beautiful things for 99 cents," said the owner, Robert Tayeh, 51. "Whoever thought up 99 cents, they made money. We're just trying to pay the bills."

 

[bigbadwolf]

By Richard Cook at dissidentvoice:

U.S. wholesale prices in July 2008 grew at the fastest rate since 1981. The cost of materials has risen 9.8 percent in the last twelve months, according to government data.

According to analyst Michael Hodges, average family income adjusted for inflation declined six percent from 1999 to 2005, and the drop has continued since then. With families no longer able to borrow on their shrinking home equity for purchasing power due to the collapse of the housing bubble, they have had to tap into their savings. According to Hodges, "As of summer 2007, savings were a negative 1.3 percent, an all-time low." (Grandfather Economic Report, August 2008)

The government claimed that GDP grew during the 2nd quarter of 2008—hence no recession—admitting at the same time that the chief driver of growth was the economic stimulus rebates sent by the IRS to taxpayers. The rebates, however, were paid for by more government debt, with a $490 billion federal budget deficit projected for fiscal year 2009 that begins next month.
Whether even the paltry 2nd quarter growth at an annual rate of 1.9 percent was "real" is subject to debate. Since the U.S. began to lose its manufacturing economy, a long-term slide that began after the Vietnam War, all economic growth has been in the services and financial sectors.

The government counts any financial transaction that can be taxed as part of the GDP whether or not it results in the creation of goods and services of tangible value. Bizarrely, a transaction can add to GDP even if it is based on money that has been borrowed and must be repaid with interest in the future.

So this type of debt-based GDP growth can actually be destructive in the long-run. This has happened in the U.S., where total household, student, business, and government debt will soon be pushing $70 trillion against an annual GDP in 2007 of $13.8 trillion.

Thus with inflation now running at close to ten percent, we have entered a period of stagflation potentially worse than the 1970s. And stagflation is nothing less than a weapon of mass destruction aimed at the livelihoods not only of the elderly and those on fixed incomes, but also on students, the unemployed, families, and almost everyone who has a job in the producing economy.