Tag Archive: recession

Anti-Capitalist Meetup: The Word is Crisis, Not Recession! by NY Brit Expat

Yes, comrades, we need to talk about crises again, the term recession simply does not explain what is really going on! Just in case you might not have noticed or perhaps the mainstream media where you live ignored it, the obvious has happened and the end of the so-called recession has disappeared into the fantasy novel. Once again there is a slowdown in growth and the financial markets are not particularly happy. This time, Germany and China are showing signs of slowdown. Globalisation has not ended the potential towards crises in the capitalist economic system; in fact, the greater interconnectedness of the world economy has exacerbated the situation and ensured that the contagion spreads.  

For those who believe the fantasies of neoliberal economics, the shock of these latest failures of neoliberalism must come as a surprise. But for those of us that have been warning of the stupidity of squeezing wages and destroying work conditions, rising inequality in income and wealth, the dangers of export-led growth when wage incomes are being squeezed meaning that unless governments become the sole purchasers of goods and services that are being produced (and they are not) that obviously there comes a point when working people cannot purchase goods and services as their incomes are too low, wiping out of savings  has happened and personal indebtedness leads to default and bankruptcy. Neither of these things helps to maintain capitalist growth, accumulation and profitability in the long run; forget that, it hasn’t even lasted in the short run.

I will be giving a run through on what is going on and why our lives feel as though we are living through the Shock Doctrine (which we are) then address the proposals of dealing with persistent unemployment under capitalism from the Left on which there is significant disagreement.

John T. Harvey: Austerity Leads To… Austerity!

In the real world and the reality based community, there is talk about austerity from people who understand the nuances of it and macroeconomic accounting identities. They point out the undeniable fact that there is austerity in the UK, the Eurozone, and yes, the United States. This interactive chart will show this, though I can’t embed it here. So instead, I will add a small snapshot of some of the data.

Net spending in the United States has steadily declined since it rose from 2008 to 2009 when the inadequate stimulus(only $500 billion of direct spending at about 1.5 percent of GDP) was passed. Stimulus packages don’t exist in a vacuum, and you have to count all government spending, which basically shows how exactly the numbers, including the stimulus as this does, didn’t close the output gap. And since the numbers didn’t, that is actually austerity. After all, spending went up in the UK and Eurozone from 2008 to 2009 as well, and since then, their spending has declined. Even though it is on a higher level, it is being cut at an even more alarming rate with its fate set to go below our miserable level by 2017.

I have pointed this out before. Sometimes I get frustrated, and point this out harshly, because some pride themselves on denying this established data to support whatever a politician in their party says or does. I don’t know why. Denying reality is not going to give resources to people who need them. There is a reason my last diary has been cited by the reality based Post Keynesian MMT community, in which I am truly grateful for and humbled by; it is the truth.

The real economy of jobs and wages continues to go nowhere thanks to the lack of deficit spending and an illogical debate in DC about how much austerity we need to appease the invisible bond vigilantes and confidence fairies. It is neoliberal deficit terrorist economic insanity based on lies. And on that note, it is my pleasure to republish a piece by someone in the reality based economic community whom I can now proudly say is a friend of mine, Post Keynesian MMT economist John T. Harvey. He, once again, brings clarity to these matters in a way that only he can.  

The Great Recession’s Untold Story: State Budgets

Cross posted from The Stars Hollow Gazette

Democratic Connecticut Governor Dannel Malloy (@GovMalloyOffice) joined the panel on Up with Chris Hayes to discuss the untold story of the Great Recession: how cash strapped states and local governments are dealing with the aftermath of the financial crisis and how they could be affected by the outcome of so-called “fiscal cliff” negotiations. Host Chris Hayes, along with Gov. Malloy, talk about austerity on the state level cash strapped states resort to extreme measures to balance their budgets and the different way states are finding to raise cash.

They are joined in the discussion by Elizabeth Pearson, fellow at The Roosevelt Institute; Maya Wiley (@mayawiley), founder and president of the Center for Social Inclusion; Veronique de Rugy (@veroderugy), senior research fellow at the Mercatus Center at George Mason University; and Dedrick Muhammad, senior economic director at the NAACP.

Stock Market Tumbles on Bad News

Cross posted from The Stars Hollow Gazette.

U.S. Stocks Fall Sharply

by Nathaniel Popper, New York Times

The Dow Jones industrial average finished the day down 1.8 percent, or 243.36 points, to end at 13,102.53, its worst performance since June. The losses added to the big declines on Friday, and dropped leading indexes to their lowest levels since early September, before the Federal Reserve announced its latest monetary stimulus program.

Since the Standard & Poor’s 500 index hit this year’s high of 1,465.77 on Sept. 14, the benchmark index has fallen 3.6 percent. It finished Tuesday down 1.4 percent, or 20.71 points, to 1,413.11.

Share futures were falling even before the opening bell because of disappointing financial results from American companies. The chemical maker DuPont said Tuesday morning that its revenue was down 9 percent in the third quarter from a year ago, and that it would eliminate 1,500 jobs. The company’s stock ended down 9.1 percent.

Thomson Reuters said Tuesday that 63 percent of the companies that have reported earnings so far have given revenue figures for the third quarter that were lower than what analysts expected.

Stock Market Suffers Worst Day In Months On Bernanke Separation Anxiety

by Mark Gongloff, Huffington Post

The stock market is freaking out like Bill Paxton’s panicky marine in “Aliens,” yelling “Game over, man! Game over!” All because it’s afraid of losing Ben Bernanke.

Late in the trading day on Tuesday, the Dow Jones Industrial Average was down more than 200 points, on track for its worst one-day loss since June. What had it in such a tizzy? There were lots of good reasons — third-quarter corporate earnings have been kind of awful, and Europe’s endless debt crisis continues.

But the main catalyst, according to Wall Street‘s best and brightest, are a couple of New York Times stories today, one by the well-sourced Andrew Ross Sorkin, suggesting that Federal Reserve Chairman Ben Bernanke probably won’t sign up for another term when his second term as Fed Chairman ends in January 2014. Binyamin Appelbaum runs through a handful of the possible replacements in a Mitt Romney administration, and at least one of them — Stanford’s John Taylor — is known to be opposed to Bernanke’s easy-money policies.

Of course the idea that Bernanke might be leaving should shock nobody, really. After eight years of riding herd on the worst economic crisis since the Great Depression, all the while being accused of treason and threatened with old-fashioned Texas lynchings, did anybody really expect that Ben would want another four years of this?

Apparently so. The market indeed seems shocked and horrified by the idea that it will no longer be able to depend on what’s come to be known as the “Bernanke Put” — the implied promise that Bernanke won’t let the stock market fall too far before riding to the rescue with another helicopter-load of money.

Sounds like a combination of the continued recession at the bottom of the economic stratus is trickling up to the top, at last, and the poor dears on Wall St. are concerned that they’re losing their “sugar daddy”. Tell me again why they hate Obama?

Austerity Insanity

Cross posted from The Stars Hollow Gazette

Doing the same thing repeatedly and expecting different results is the definition of insanity. It then must follow that Germany’s Chancellor, Andrea Merkel has got to be insane.

Eurozone in new crisis as ratings agency downgrades nine countries

Standard & Poor’s strips France of its AAA credit rating, rekindling fears in the markets over future of single currency

S&P said austerity was driving Europe even deeper into financial crisis as it also cut Austria’s triple-A rating, and relegated Portugal and Cyprus to junk status.

The humiliating loss of France’s top-rated status leaves Germany as the only other major economy inside the eurozone with a AAA rating, and rekindled financial market anxiety about a possible break-up of the single currency.

S&P brought an abrupt end to the uneasy calm that has existed in the eurozone since the turn of the year by downgrading the ratings of Cyprus, Italy, Portugal and Spain by two notches. Austria, France, Malta, Slovakia and Slovenia were all cut by one notch.

The agency said that its actions on eurozone ratings were “primarily driven by insufficient policy measures by EU leaders to fully address systemic stresses”. It added that fiscal austerity alone “risks becoming self-defeating“.

Germany,too may be facing a downgrade as it slips into recession as its economy is contracting in the face of the deflationary economic policy of the euro zone. So what does Frau Merkel do? You got it, more austerity.

Merkel: Europe Faces ‘Long Road’ to Win Back Trust

German Chancellor Angela Merkel said Standard and Poor’s downgrades of nine countries underline the fact that the eurozone faces a “long road” to win back investors’ confidence, pushing Saturday for it to move quickly on a new budget discipline pact and a permanent rescue fund.

I agree with Chris in Paris at AMERICAblog that the ratings agencies should be rendered useless considering their part in the current economic crisis but they are right about austerity. The Europeans led by Merkel are ignoring reality.

With a “recovery” like this, who needs recession?

  While nearly everyone has acknowledged that the so-called Recovery has been pathetic at best, the implication that most people take for granted is that it is still better than the Great Recession.

  But is that assumption true?

 Take for example a very bottom line measurement – your paycheck.

 Median annual household income has fallen more during the recovery than it did during the recession, according to a new study from former Census Bureau officials Gordon Green and John Code. Between December 2007 and June 2009, when the U.S. economy was in recession, incomes declined 3.2 percent. While during the recovery between June 2009 and June 2011 incomes fell 6.7 percent, the study found.

 This situation won’t change anytime soon, as 9 in 10 Americans don’t expect to get a raise this year.

  That by itself should cast doubt on the assumption that this “recovery” is real, but there are other ways to measure it as well.

Double-dip recession is upon us

  A couple days ago I read an interesting article on the aljazeera web site titled Double-dip recession is unlikely. What made the article interesting wasn’t the source, or the claim, it was the reasoning behind the claim.

 Most post-war recessions were kicked off when car sales and house sales and new construction plummeted.

  There seems to be little risk of a substantial decline in either car sales or house sales and construction, primarily because the levels are already so low….

  Both car sales and housing construction are already so low that they don’t have much room to fall.

 What the author is claiming is “things are already so bad, it’s hard to imagine them getting worse.”

 That’s a very interesting claim, but I doubt the author of the article learned it in an economics class. It sounds more like something he heard in a bar, and seemed to make a lot of sense after a few drinks.

 That’s not to say he doesn’t have a point of sorts. It’s just that his point is that we are in a Depression.

LQD: The AA+ rating is valid, but the S&P case is intellectually dishonest ~ Mosler

Burning the Midnight Oil for a Brawny Recovery

“LQD” is an abbreviation I first encountered at EuroTrib: it means “Lazy Quote Diary”.

The quote from Warren Mosler:

Credit ratings are based on ability to pay and willingness to pay.

David Beers of S&P knows this and has discussed this in the past.



So why then did David T. Beers decide to downgrade the US on ability to pay, and not explicitly on willingness to pay?

Sure looks like a case of intellectual dishonesty.

And I have no idea why.

So much for his legacy.

Well, its a very short post, so fair use restricts it to an even shorter quote.

But this is the gist of it: no issuer of its own currency is ever forced to default on debt issued in its own currency.

Think about it: if your family’s IOU’s were accepted by the bank to repay debts … could you ever run short of the means to pay your debts?

What would an honest downgrade have said? Below the fold.

Congress and Obama Ignore History at Our Peril

Cross posted from The Stars Hollow Gazette

One  of the signs of insanity is repeating the same mistake in hopes of a different outcome. Seventy five years ago, the congress and President Franklin D. Roosevelt did exactly the same thing that congress and President Barack Obama did on Wednesday with the same results.

FDR’s Recession

By the spring of 1937, production, profits, and wages had regained their 1929 levels. Unemployment remained high, but it was considerably lower than the 25% rate seen in 1933. In June 1937, some of Roosevelt’s advisors urged spending cuts to balance the budget. WPA rolls were drastically cut and PWA projects were slowed to a standstill. The American economy took a sharp downturn in mid-1937, lasting for 13 months through most of 1938. Industrial production declined almost 30 per cent and production of durable goods fell even faster.

Unemployment jumped from 14.3% in 1937 to 19.0% in 1938, rising from 5 million to more than 12 million in early 1938. Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels. Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. In most sectors, hourly earnings continued to rise throughout the recession, which partly compensated for the reduction in the number of hours worked. As unemployment rose, consumers’ expenditures declined, leading to further cutbacks in production.

The Roosevelt Administration reacted by launching a rhetorical campaign against monopoly power, which was cast as the cause of the depression, and appointing Thurman Arnold in the anti-trust division of the U.S. Department of Justice to act, but Arnold was not effective. In February 1938, Congress passed a new AAA bill which authorized crop loans, crop insurance against natural disasters, and large subsidies to farmers who cut back production. On April 2, Roosevelt sent a new large-scale spending program to Congress, and received $3.75 billion which was split among PWA, WPA, and various relief agencies. Other appropriations raised the total to $5 billion in the spring of 1938, after which the economy recovered.

The stock market plummeted over 500 points yesterday wiping out any gains from the recovery since 2008. The market is continuing to fluctuate after rather weak jobs report. While the U-3 dropped to 9.1%, it was due mostly to workers who are no longer seeking employment or are now in the ranks of the under-employed and jobs creation was weak. So after the debt ceiling deal and the worsening European banks situation, investors lacked confidence that the US could increase productivity.

But the White House and Congress insist on sticking to their story that if they hadn’t given the hostage takers all they wanted with no jobs stimulus or revenue increases, they wouldn’t have gotten the debt deal and the markets would have crashed. As John Nichols said in The Nation, “Unfortunately, it was wrong. Not just morally wrong. Not just politically wrong. Not just economically wrong. It was wrong with regard to the cherished markets.”

The Era of Republican Big Government is Already Here

It is far too soon to make sweeping pronouncements of any sort, but one of the most persistent issues of next year’s Presidential Election may well be a grand debate on the size of government.  Republicans have considered this their meat-and-potatoes issue since 1980, but in many ways, it is far less applicable today.  Even so, now that a substantial federal deficit exists, Republican Presidential candidates will be sure to keep bringing up that fact in debates, television ads, flyers, e-mail blasts, Tweets, and solicitations for contributions.  If only they knew that the era of Big Government has long been over.  Their paranoia about the evils of contagious socialism is a mere specter now.  But so far as myths go, this is one of the more persistent, and has gone unchallenged for so many years that it might as well be gospel in the minds of many believers.  

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