If I Could See This Economic Crisis Coming, So Could the People Who Are Paid to Know These Things Since everyone has their “I told you we would be in a Recession/ Second Great Depression” stories out now, here is mine. Back in the spring of 2007 over at
Salon I started a thread called “A Dog Starved at It’s Master’s Gate Predicts the Ruin of the State.” That is a quote from William Blake. I meant it literally. Now, I am no economist, but I follow politics and history, and way back in 2001, I knew that W. and Co. would engineer a recession. Ever since Nixon, Republican presidents have been using recession to bust unions, increase racial hostility and keep workers down. By 2007, it was clear as day that the Federalists
really meant it when they said they wanted to roll the country back to the days before FDR.
You see, FDR was not supposed to bring the country out of the Great Depression. Not before a handful of businessmen and rich folks instituted Mussolini style fascism (that is the kind where money rather than ideology rules, and it does not much matter whom you kill as long as the train run on time). Ferdinand Pecora ruined the game of the Banksters back in the 30s by showing that the rich had feet of clay coated liberally in shit. No one wanted to trash good old fashioned American democracy to support
crooks like J.P. Morgan after he was finished.
So, companies like Morgan have been biding their time, waiting for a second chance.
This is what I wrote in March, 2007 at Salon in their forums. (Corsi warning!)
Thanks for the links about Income Inequality in the Reagan years. The statistics about how everyone saw increase in their wealth by about 100% in the two decades after WWII, and then everyone except the top 20% saw a decrease in their wealth in the last two decades of the century while the top tier saw a paltry 20% increase (I am betting that was a mega increase for the mega rich and a just staying even for the just barely rich) shows something.
The CEOs salary increases of 150% look obscene, but glance back at the WWII numbers and you will see that they would have expected increases there, too. Everyone was getting better off.
The whole point of the engineered Reagan recession--which was part of the Federalists attempt to roll the US back to the pre-FDR years---was to subvert democracy. When everyone got richer and better educated and healthier and more secure and more hopeful, this translated into a popular sense of empowerment. We witnessed this in the 1960's, when students decided that they did not have to go fight a war they did not believe in and women decided that institutionalized sex descrimination was not right and minorities fought for and won their rights and later gays did, too. None of these battles could have been won without the empowerment that comes with economic prosperity. Western europe and Japan bask in all their social freedoms because of their economic prosperity, which makes the people immune to fear propaganda and makes them expect their government to serve THEIR wills.
Make people afraid that they will be kicked out on the street before they can collect their next paycheck because someone with a different skin color will take their job or make them worry that illness will eat up their savings or make it impossible for their children to afford college because their kids have all been arrested for minor drug crimes which make them ineligible for federal grants---and they are too scared to question the political system.
Things that people took for granted as good in 1972 but which many mainstream Americans would now look over their shoulders before advocating--labor unions, sex education, choice in contraception and abortion, prayer free schools.
The crazy thing is that this kind of politics is bad economics. Even the highest tier makes less money, because the scared, underpaid workers have nothing to spend and nothing to invest. However, it is useful if your goal is to concentrate power in the hands of a few. It is especially useful if you serve a foreign corporate master who does not value democratic principles, say the Saud Family and the Carlyle Group or the perverted monstrocity that it is the Government of the People's Republic of China. (McCamy Taylor)
http://tabletalk.salon.com/webx?14@185.RcVdbB7QlGq.80@.773c6822/39
Anyway, here is what little old me (physician, writer with no economic training whatsoever) saw coming down the pipeline in early 2007. If your banker, stock broker or whoever did not warn you,
what are you paying them for? http://tabletalk.salon.com/webx?14@185.RcVdbB7QlGq.47@.773c6822/76
Apr 1, 2007"Today's Fort Worth Star Telegram business section also reprinted this article from the NYT about how the rich keep getting richer and about how we continue not to tax them.
"In the 1980s and 1990s this would have been considered commie talk. However, this is what people are thinking about now.
"Note that the top 1% are making a higher % of the nation's wealth than they have at any time since 1928. We all know what happened in 1929.
"http://www.nytimes.com/2007/03/29/business/29tax.html"
Apr 1, 2007"OK, now that I made the hint, here is why concentration of wealth into the hands of a few may be the recipe for distaster for many ( of just one of the reasons why I title this thread "A dog starved at its master's gate predicts the ruin of a state")"
http://www.gusmorino.com/pag3/greatdepression/ The large and growing disparity of wealth between the well-to-do and the middle-income citizens made the U.S. economy unstable. For an economy to function properly, total demand must equal total supply. In an economy with such disparate distribution of income it is not assured that demand will always equal supply. Essentially what happened in the 1920's was that there was an oversupply of goods. It was not that the surplus products of industrialized society were not wanted, but rather that those whose needs were not satiated could not afford more, whereas the wealthy were satiated by spending only a small portion of their income. A 1932 article in Current History articulates the problems of this maldistribution of wealth:
We still pray to be given each day our daily bread. Yet there is too much bread, too much wheat and corn, meat and oil and almost every other commodity required by man for his subsistence and material happiness. We are not able to purchase the abundance that modern methods of agriculture, mining and manufacturing make available in such bountiful quantities14.
Three quarters of the U.S. population would spend essentially all of their yearly incomes to purchase consumer goods such as food, clothes, radios, and cars. These were the poor and middle class: families with incomes around, or usually less than, $2,500 a year. The bottom three quarters of the population had an aggregate income of less than 45% of the combined national income; the top 25% of the population took in more than 55% of the national income15. While the wealthy too purchased consumer goods, a family earning $100,000 could not be expected to eat 40 times more than a family that only earned $2,500 a year, or buy 40 cars, 40 radios, or 40 houses.
Through such a period of imbalance, the U.S. came to rely upon two things in order for the economy to remain on an even keel: credit sales, and luxury spending and investment from the rich.
One obvious solution to the problem of the vast majority of the population not having enough money to satisfy all their needs was to let those who wanted goods buy products on credit.
Apr 1, 2007"More on extreme wealth concentration on economic depression:"
http://www.informationclearinghouse.info/article17145.htm?ref=patrick.net 02/21/07 "ICH" -- -- This week’s data on the sagging real estate market leaves no doubt that the housing bubble is quickly crashing to earth and that hard times are on the way. “The slump in home prices from the end of 2005 to the end of 2006 was the biggest year over year drop since the National Association of Realtors started keeping track in 1982.” (New York Times) The Commerce Dept announced that the construction of new homes fell in January by a whopping 14.3%. Prices fell in half of the nation’s major markets and “existing home sales declined in 40 states”. Arizona, Florida, California, and Virginia have seen precipitous drops in sales. The Commerce Department also reported that “the number of vacant homes increased by 34% in 2006 to 2.1 million at the end of the year, nearly double the long-term vacancy rate.” (Marketwatch)
The bottom line is that inventories are up, sales are down, profits are eroding, and the building industry is facing a steady downturn well into the foreseeable future.
The ripple effects of the housing crash will be felt throughout the overall economy; shrinking GDP, slowing consumer spending and putting more workers in the growing unemployment lines.
Congress is now looking into the shabby lending practices that shoehorned millions of people into homes that they clearly cannot afford. But their efforts will have no affect on the loans that are already in place. $1 trillion in ARMs (Adjustable Rate Mortgages) are due to reset in 2007 which guarantees that millions of over-leveraged homeowners will default on their mortgages putting pressure on the banks and sending the economy into a tailspin. We are at the beginning of a major shake-up and there’s going to be a lot more blood on the tracks before things settle down.
The banks and mortgage lenders are scrambling for creative ways to keep people in their homes but the subprime market is already teetering and foreclosures are on the rise.
Apr 1, 2007"And more thoughts on a Second Great Depression (Hey, if you are a Federalist and you want to roll back time to before FDR, this is what you get.)"
http://www.bullnotbull.com/archive/depression2.html There are so many factors pointing to a breakdown of the current dollar-based financial system that I have simply lost count. The rich get richer and the poor get poorer and the divide between them grows wider each day. The US government is in more debt than it can every repay. Personal bankruptcies are at an all time high. Home "ownership" is also at an all time high, but much of it is due to risky loans made by audacious banks to unqualified buyers. It is the banks that own the homes, not the people. In fact, banks own just about everything, since most everything these days is purchased on credit. Personal debt is at an all time high. Americans work longer and harder, but wages have stagnated. The number of Americans who are homeless and in jail is at an all time high. These problems are not going away, and they're not getting better. People are falling out of the system at an increasing rate, and it is only a matter of time before that trickle becomes a deluge.
My point is not to convince you of the inevitability of a financial collapse. One need only look at history to understand that the tide of prosperity rises and falls with time. In my mind a second great depression is a foregone conclusion, a fait accompli. The storm clouds are gathering and growing darker. We have already felt the first drops of rain. It is not a matter of if, but when.
This was not an April Fool’s joke. I meant it. And now, just less than two years later, nationwide unemployment is up to 7.2%. Plus we have unemployment at 9.3% in California, and it's over 10% in Michigan---
http://www.bls.gov/news.release/empsit.nr0.htm Over 10% in Michigan! That is way higher than the 5% unemployment needed to qualify for a recession.
That is Depression level unemployment! And it happened on W.'s watch! Plus, the reason they keep cutting interest rates—that’s because they feel the hot breath of the big bad Depression wolf breathing down our necks. About the only reason no one wants to use the D word is because they don’t want to lay it at W.’s door. They are going to try to blame it on the Democrats instead. That is the same reason they waited a whole year to tell us that this recession started in December---of 2007. Later, they will pretend it started in December of 2008.
II. Ed McKelvey of Goldman Sachs: The “decision of are we or aren’t we in recession (is) a largely meaningless exercise” Jan. 2008 So, why could not your banker, your stock broker, your investment counselor tell you that we were heading into a recession back in the spring of 2007 and maybe even into a Second Great Depression? I guess they still wanted your money, like these folks at Goldman Sachs. And maybe they were hoping that if they painted a rosy picture for the Republicans, they would get some of that bailout money Hank Paulson had promised them.
http://blogs.wsj.com/economics/2008/01/04/unemployment-rate-crosses-recession-threshold/In an article at the WSJ called “Unemployment Crosses Recession Threshhold” we are told
Don’t Panic! . This is not
real unemployment . Vote Republican! And yes, I do believe that this was after Rupert Murdock acquired the WSJ, which may be why its financial advice was full of shit.
From Jan. 4, 2008
By one rule of thumb, the unemployment rate has now risen enough to send a reliable signal of recession.
Economists at Goldman Sachs say once the three-month average of the unemployment rate has risen 0.3 percentage points, the economy has always either been in, or about to enter, a recession.
The jump in the unemployment rate to 5% in December from 4.7% in November means that threshold has now been crossed; in an email, Goldman’s Ed McKelvey says the three-month average is now up 0.357 percentage points from the trough in December 2006 (based on newly revised data).
snip
In a report issued Thursday evening, Mr. McKelvey said the rule may not hold this time around, because the dynamics of job loss have changed; it is driven now more by reduced hiring rather than increased firing, which, the report argued, means job loss is likely to be more gradual. “One of the key elements of an economic cycle is the tendency of changes in net job creation (up or down) to reinforce the effects of shocks on the economy. If those changes are more moderate than in the past, then changes in the growth rate will also be more moderate — in this case reducing the probability that real GDP falls.”
As to whether today’s number changes anything, “I would simply say, stay tuned,” Mr. McKelvey writes this morning. He adds: “the definition of recession is what the Cycle Dating Committee says it is, not anything else. In my view, this makes the binary decision of are we or aren’t we in recession a largely meaningless exercise, as we’re simply guessing what they think rather than recognizing the reality that the unemployment rate has risen meaningfully and is apt to continue going up and that this means we’re in a weak economic environment with well understood implications for financial markets.” –Greg Ip
Meaningless to whom? To those who are out of work? To those who are losing their homes? To those who have lost their retirement money? We all realize that Goldman Sachs was never worried. Their man, Paulson had them covered all along They were slated to get
$10 billion in bailout money that they would then turn around and pay themselves as
big fat bonuses.http://www.capitalresearch.org/blog/?p=2869 III. America Must Be Made to Realize That This Recession/Depression Was a Criminal Affair and that the Bush Administration Contributed to It As I mentioned in the introduction, I know less than nothing about economics. I am sure that I have made errors in this OP as a result. Feel free to correct them. However, I am convinced that a recession/depression was deliberately engineered. Create wealth disparity. Bury the country under a mountain of debt that no one wanted. Encourage people to load up on credit that they would never be able to pay off so that they would lose the only form of wealth that the middle class possesses—their homes. Make it impossible for individuals to ever clear their debts----why, we might as well be working on tenant farms in the South, buying our goods at the company store on credit, turning over our crops to the landlord at harvest time, praying that he does not tell us “It’s a shame that prices are so low. Doesn’t even cover your debt.”
Now all the Republicans have to do is convince Americans that people like Phil Gram and George W. Bush were not to blame, that the modern day Banksters did not rob us blind, that no one could predict what was to come (and certainly that no one engineered the crisis or deliberately made it worse), that the recession and depression actually happened on
Obama’s watch and everything will get better if we just elect a new Republican Congress under a new Newt and a new Ronald Reagan. You all remember how much better things were under Ronald Reagan, don't you?
That is why I wrote back in September, 2008 that Obama needs his own Ferdinand Pecora, someone to publicly expose the people in the business, banking and political world who caused our current economic crisis.
http://journals.democraticunderground.com/McCamy%20Taylor/300The people who started this mess are still out there, waiting to reap the rewards of our misery. They control the press. They control the jobs. Obama has about three months--that 100 day honeymoon---before they will start calling this
his Recession/Depression and talking about how great the Bush years were for business.
Ten billion free taxpayer dollars for Christmas bonuses would be good for almost anyone's business.
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