Monday, July 13, 2009

No recovery possible...

Greetings good citizen,

I had one of those ‘fish or cut bait’ moments when it came to tonight’s post. I could have run with a reasonably ‘fresh’ update of the homeless situation or I could chose a relatively ‘stale’ story about the non-existent ‘green shoots’ that everybody is beating to death.

Well, didn’t I run into a few ‘copies’ of the homeless story in various places today so I decided to go with the ‘stale’ failed recovery angle…mostly because there is a ‘tie-in’ between Jesse’s main point and my own closing remarks in last night’s piece.

Until I noticed that Jesse had ‘cross-posted’ this article himself, I was backing away from using it (not that it would have been the first time I’d used an article posted by a third party, it was the ‘third party, stale issue’ bit that had me waffling.)

One of the problems with blogging, we almost never get to stories first. It’s our added ‘two cents’ that make the story worth reading, er, again.

There is No Recovery coming…

Submitted by Jesse of Le Café Américain

"The banks must be restrained, and the financial system reformed, and balance
restored to the economy, before there can be any sustained recovery."

Often a closing comment from our blog, essentially this is what Robert Reich is saying in his recent essay on the economy.

The median wage must generally increase for consumption to resume, and for this to happen the heavy taxes of the financial sector and the oligarchs on the real economy must be lowered significantly in proportion to its size.

There is reason for pessimism that this can happen voluntarily. I have come to the conclusion that there is a pathological drive in some small portion of the population to acquire and control and devour rather than consume, even to their own destruction.

The law sets limits on the speed on highways to protect the many from the reckless and willful behaviour of the few. That we ought not to set limits on the banking system is a remarkable bit of speciousness.

There are obvious questions of how to limit, and how to detect and prevent and prosecute violations, but few can argue that not regulating traffic is the best solution to the difficulty of the task. The comparison of highway regulation to economic commerce and financial transactions is more valid than obtuse. And there are many Wall Street bankers guilty of at least manslaughter in this most recent episode of reckless defiance of the common good for the sake of personal profits.

The comparison of this latest epidemic of bad economic behaviour is strikingly reminiscent of the Gilded Age at the end of the 19th century and the Roaring 20's. As you may recall both periods were followed by economic dislocation and a world in flames.

Why we allow this sort of bestial behaviour to ravage the many, in the mistaken support of 'free markets,' where nothing these people touch can remain free and effective and efficient for long, is truly an accomplishment of propaganda and those blinded by ideology.

Robert Reich
When Will The Recovery Begin? Never.
Thursday, July 09, 2009

The so-called "green shoots" of recovery are turning brown in the scorching summer sun. In fact, the whole debate about when and how a recovery will begin is wrongly framed. On one side are the V-shapers who look back at prior recessions and conclude that the faster an economy drops, the faster it gets back on track. And because this economy fell off a cliff late last fall, they expect it to roar to life early next year. Hence the V shape.

Unfortunately, V-shapers are looking back at the wrong recessions. Focus on those that started with the bursting of a giant speculative bubble and you see slow recoveries. The reason is asset values at bottom are so low that investor confidence returns only gradually.

That's where the more sober U-shapers come in. They predict a more gradual recovery, as investors slowly tiptoe back into the market.

Personally, I don't buy into either camp. In a recession this deep, recovery doesn't depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped.

Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water -- owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving. Those who can't are hunkering down, as they must.

Eventually consumers will replace cars and appliances and other stuff that wears out, but a recovery can't be built on replacements. Don't expect businesses to invest much more without lots of consumers hankering after lots of new stuff. And don't rely on exports. The global economy is contracting.

My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.

The X marks a brand new track -- a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin.

Most certainly good citizen there is no going back to the way things were before. To do so would require that the economy shrink to a point where a vast majority of humanity is left on the outside looking in.

No irony should be lost on the fact that our leaders are indeed, right this very minute, endeavoring to put our old economy back on track, which, fortunately for most of us, is an exercise in futility.

It is the ‘exercise in futility’ part of this puzzle that constitutes the most disturbing aspect of what is being done ‘to us’ rather than ‘for us’…

There is no portion of the stimulus program that promotes economic growth. There is no CCC or WPA providing jobs for the tens of millions that have lost them. There isn’t even a disastrous ‘Taft-Hartley’ act under consideration intended to curb the rampant off shoring of desperately needed US jobs.

No good citizen, at best the ‘stimulus’ merely serves as temporary ‘life-support’ while the economy shrinks down to its ‘new’ size.

If you can’t find a job once the dust settles, you aren’t looking hard enough!

Then, like now, we will scratch our heads and wonder what the hell they’re smokin’ because then, like now, there won’t be any, er, ‘legitimate’ jobs.

Bizarrely, once the rule of law ‘fails’, the rules of the jungle automatically take over.

You’ll find a ‘job’ all right; you’ll have a full time job avoiding capture for the crimes you’ll be forced to commit.

Unless you want to ‘cut to the chase’ and do things ‘Japanese style’. You wander into a retail establishment that is known to prosecute every incidence of shoplifting. You make it pretty obvious that you are taking some goods ‘for a walk’ and stand outside the store until security ‘apprehends’ you.

Given the already crowded state of the prison system, it is unlikely that you would be jailed for a ‘first offense’, or maybe even a second or third offense. But eventually they will ‘lock you up’ and you’re home free, three squares a day and a roof over your head…and nobody got hurt. (Well, YOU may get hurt depending on how big a dickhead security wants to be. To the plus side, punching out the guard for being too aggressive is sure to ‘expedite’ your trip to the big house.)

Not that this is how anyone ‘wants’ to live…but in a society that fails to provide you with a way to support yourself, this is one way out, albeit a dangerous and ultimately meager one.

The natural ‘alternative’ would be to boost as much stuff as you could without being caught. This is easier said than done because it involves never hitting the same place twice. If the operation is a chain, always assume that security in the first place you hit has sent your picture to the other outlets in the region.

Listen to me, giving advice on stealing…and I’m no thief! Sadly, this is where things are headed and survival is job one for each and every one of us.

For the time being, this is a bridge most of us won’t have to cross anytime soon. Although as matters stand, there soon won’t be a nickel’s worth of difference between being in the big house and living on public assistance.

Walls and bars do not a prison make.

As an aside, the topic I was going to comment on, the homeless situation; lends credence to the fact that our society is on a downhill run.

While most people that lose their living situation have family, not every family is capable of taking in their less fortunate siblings for an extended period of time.

In fact, the entire ‘landscape’ of homelessness has turned on its head. Homelessness was once characterized as being mostly single men, now 80% of the newly homeless are single women with one or more children in tow.

Apparently, (and for the time being) it is still unusual for a married couple to fail to find one sibling/parent between the two of them that is capable of (at least temporarily) taking them in.

No one wants to impose but desperate times call for desperate measures.

Why am I even bringing this stuff up? Isn’t the current employment picture gloomy enough without pointing out that many of us will be faced with um, dire choices in the not too distant future.

I’ve been rolling this subject forward on the personal level up until now, let’s ‘zoom out’ for a look at the macro environment.

The economy has shed tens of millions of jobs, off shoring is still a major issue and nobody with the power to curb it is doing anything about it. There is no ‘accident’ here nor is it merely an ‘oversight’. Most of our ‘allies’ have ‘export based’ economies, if we close off access to our markets, they have no place to turn.

Yet for the US to recover, we need every job we can get our hands on.

Eventually this will turn into a ‘do what you’ve got to do’ sort of situation. We will have to start producing what we can for ourselves just as our ‘allies’ will have to scale back their export based economies.

Until this ‘re-balancing’ of local economies takes place there is going to be a whole lot of ‘pain’ happening throughout the world.

Once again, there is no such thing as magic and time is the enemy. The speed with which local economies can re-balance directly effects the amount of carnage any given society experiences.

There is, naturally, another enemy waiting in the wings and that enemy is those who have benefited from destroying the global economy.

How quickly can these powerful criminals, who will adamantly resist change, be dealt with?

Since these multi-national criminals effectively control the governments of the world, I’d posit the pain they are inflicting upon us will be long lasting indeed.

That said, it’s never been easy.

We were standing pretty much in this exact same spot 90 years ago…and we gave the capitalists another chance.

Will we let them ‘off the hook’ again?

I don’t think our children can afford such leniency. The future of our species now depends on our pursuing a more sustainable path.

If we are to survive we must stop enslaving one another for our own selfish ends.

So, since there is no ‘recovery’ possible, what’s it going to be?

Do we select a new path or do we allow the greed-heads among us to drive our entire species over the cliff as we return to barbarism?

Thanks for letting me inside your head,


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