No Longer Voices in the Wilderness

Cartoonist: Kal of The Economist

We often talk about being prematurely right here at TC because so many folks around us don’t seem to look at the facts on the ground, learn about a situation, and then ignore the majority when it blindly establishes a meme. I distinctly remember how it felt when I was one of a few people telling every one that Iraq was not responsible for 9-11 and we should not invade. Wow, did I get called a lot of unpatriotic names then.

I felt it when I refused to get caught up in Obamania, taking a position like little Huey Riley, “hope is irrational”, and trying to say let’s look at the facts on the ground. I know I’ve felt that way all this week, although thankfully, the regulars around here and all of the frontpagers are in the boat with me on the Park51 site. The angry words that get spewed at you when you don’t hush up and fit in with the crowed can feel like arrows sometimes. Still, there’s always been something in me that knows when something is right at the core and I’m like a mama bull. When some one waves a red flag at me, I charge.

This is another, less emotionally filled topic but one that I’ve been writing about for the better part of two years. This is NOT the recovery summer and we haven’t turned a corner. When unemployment stubbornly stays high and banks would rather play paper games than make loans with rates this low, you’re not out of the woods. Funny thing is that a lot of people around me have known this, but you hardly hear it from them because it seems the sensible people never make it to TV news or the Halls of Congress.

Here’s some of the voices joining me in the wilderness or coming to get me–I don’t know which–on our very fragile economy.

First, Paul Krugman–who along with a bunch of us old neoKeynesians called for a much stronger stimulus package about two years ago–headlined the shaky economy today. Unfortunately, he’s taking it out on Ben Bernanke who can’t do QE (Quantitative Easing) forever. The Fed’s balance sheet can’t be the ultimate repository of bad investment decisions. Some of the bad investors need to either be perp walked or sent to bankruptcy court. He needs to call his friends–if he has any–in the White House and explain why doing right by investment bankers isn’t the same as doing right by small banks who really lend money out in small communities. Also, Bernanke needs a full Board of Governors and the Obama appointments are languishing in the ether. (More signs of inability to govern.)

The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.

All of this is obvious. Yet policy makers are in denial.

Let me scream it from the wilderness yet again! If an economy depends on a 67% C, in an equation that reads C+I+G+(X-M)=GDP, then not giving the C people jobs is going to put a really damper on the the GDP. (That’s C=consumption, I=investment, G= Government spending, X= Exports and M= Imports). Also, I traditionally spooks easily, is subject to huge volatility, and goes outside of the country now in hunt of greener pastures. Also, the M (which you see is a negative) is HUGE these days. It’s a definition, so how can you argue with simple math?

Here’s Motoko Rich writing off the Op-ed page of the NYT.

Economic statistics released Friday offered the clearest sign yet that the recovery, already acknowledged to be sauntering, had slowed to a crawl.

The government lowered its estimate of economic growth in the second quarter to an annual rate of 1.6 percent, after originally reporting last month that growth in the three-month period was 2.4 percent.

The revision is a significant slowdown from the annual rate of 3.7 percent in the first quarter and 5 percent in the last three months of 2009.

The news came at the end of a week that showed the economic retrenchment that began in the second quarter has spilled over into the summer. Existing home sales in July were down to their lowest level in a decade, and sales of new homes last month were at their lowest level since the government began tracking such data in 1963. Orders for large factory goods, excluding the volatile transportation sector, dropped in July, indicating that recovery in the manufacturing sector was also stalling.

With such grim reports, economists are now concerned that the outlook for job creation, which has been spluttering all summer, could deteriorate further. Companies and consumers tend to be spooked by bad news, and market analysts and economists worry that faltering confidence could cause employers to hold back on hiring.

I have no idea what’s going to solve this problem because the Democrats appear to be in denial and have no back bone for fighting for the right thing. They also seem to be solidly sold out to the old Republican interests in big business because most of the Republicans elected these days are so bat shit crazy on social issues that no one wants to really touch them. (The new wedge issue appears to be purging the country of Muslims and Mexicans and probably Gay Americans if they could get away with it.) If I owned a business, I don’t think either a speaker of the house Nancy Pelosi or speaker of the house John Boehner would make me want to put my money into this country. I frankly think I’d head to India because their democracy seems more functional over there. Both India and China are certainly turning out better quality students these days in math, sciences like physics, engineering, computer sciences, and finance. India’s rule of law is based on the UK’s so it even has the benefits of extremely strong property rights. Watch for a continued flight of capital to the regions that aren’t experiencing social unrest, like Kerala.

Here’s bit on consumer/household confidence from the LAT and Jim Puzzanghera.

But just as there is widespread agreement that the economy is faltering, there is also a sense that the federal government is running out of options to rebuild momentum.

“Housing is in the tank. Confidence is going down. The stock market is going down. It’s hard to imagine how consumers will spend,” said Sung Won Sohn, an economics professor at Cal State Channel Islands and former chief economist for Wells Fargo.

He put the probability that economic growth will slide back into negative territory — a double-dip recession — at “40% and going up.”

On Thursday, the Dow Jones industrial average closed below the 10,000 benchmark on the heels of worrisome new economic reports.

The government said that while initial unemployment claims last week dipped to to 473,000, from 504,000 the week before, the four-week average still reached its highest point since November. Unemployment was at 9.5% nationally in July and higher in many states, including 14.3% in Nevada, 13.1% in Michigan and 12.3% in California.

And a mortgage trade group said that, while foreclosures overall continued to ebb, more homeowners fell behind on their payments — the second straight quarter in which that has happened. With unemployment still stubbornly high, the data suggest that foreclosures could soon ramp up again.

Those reports followed news earlier in the week that home sales had fallen to their lowest level in more than a decade, despite mortgage interest rates that are at their lowest levels in nearly 40 years.

“All the indicators at the moment are pointing in the wrong direction,” said Bart van Ark, chief economist for the Conference Board, a business research group.

Of course, I finally fell to the Jindal Plan of ridding Louisiana of 10,000 four-year graduates a year, but I have to say, even if you graduate them from community colleges or trade schools, where are they going to go? Certainly, not to work in stable jobs. Plus, there’s this trend that’s undeniable of getting rid of folks in the mid 40s upward so you don’t have to pay for their more expensive benefit plans. These are things that the Federal Reserve cannot handle. They can’t force banks to lend without a law that makes them do so. When TARP and some of these laws were put into play, tougher requirements on asset and liability requirements should’ve been attached to the money. That’s the role of the Treasury to get a vital law written and the role of senior legislators to push it through.

Question: What do we have as leadership in the Treasury and the Senate?

Answer: Little Timmy-in-the-Wall Street Well again Geithner and Lobbyist-in-Training Chris Dodd.

The only thing getting through congress right now is legislation written by mega corporations in oligopolies that benefit from that horrid market structure. The legislation they push reduces the chances of them ever seeing legitimate competition. We also see legislation handing them tax payer money to screw over their customers. It’s shameful!!!

Meanwhile, there’s still problems with the potential of that damned BP well to spew oil. It’s not killed yet, folks. Then, there’s seriously unemployed people and nearly bankrupt state governments and localities. Meanwhile, all Fox new can do is gin up some Muslim conspiracy story and all the politicians are on vacation. I’m glad some of the journalists are down here pointing out the 5 years of slow progress towards Katrina recovery, but really, a two day attention span is not going to solve our problems down here. They might as well go home and talk about the country’s economic problems.

Why can’t we get some real political leadership and effective and smart Journalists? All I see on TV are a bunch of idiots like Rick Sanchez (who has me not watching CNN any more because he’s just plain dumb… I’d like to see him on that show pitting him against fifth graders… he’d lose to every one of them!) and Allan Simpson (whose voice is downright mainstream compared to most on Fox). The journalists are clueless on any topic of substance and driven by ratings. The current group of politicians seem to have us re-fighting the revolution and the first and fourth amendment and the civil war and the 14th amendment.

What’s next a movement to re-establish prohibition and remove the rights of women to vote?

There’s definitely a vacuum of leadership and a national voice of reason and I’d rather be right and out here in the wilderness than in the vat of corruption and stupidity that is the MSM and congress.

Have a nice day and a pleasant tomorrow!!!