It has been my contention since 2007 that global capitalism was entering a period of stagnation that could not be cured by the temporary fix of lowering interest rates. Yesterday’s grim unemployment report in the U.S. only compounded the problems in the rest of the world.
The report on American jobs added to the global pall that has deepened with Europe’s debt crisis and slowing growth in China and India. Global financial markets, weak in early trading on Friday, sank further on the report. The Dow Jones industrial average lost 2.22 percent, or 274.88 points, wiping out its gains for the year, and the main index of the German stock market closed down 3.4 percent.
The American economy since Ronald Reagan first started to push Supply Side economics (sometimes know as trickle-down economics) has increasingly skewed gains to the top 1% and flattened middle and lower class wages. In such an atmosphere the engine of consumer spending could only be fueled by easy consumer credit mixed with aggressive marketing efforts—the classic “keeping up with the Jones’s” routine. Fiscal stimulus depended mostly on aggressive military spending which seemed to grow even in the face of the collapse of the Soviet empire. The financial sector, which was once restricted to aiding the manufacturing economy, gradually became the driving force in the economy. Speculative finance became so important to keeping the dogs of depression at bay, that the Lender of Last resort–The Fed–essentially ended up becoming the backstop to the most egregious kind of derivative trading, pouring hundreds of billions into Wall Street investment banks. Read more…
I’m ready to wager that when the campaign of 2012 is all over, President Obama’s speech yesterday in Osawatomie, Kansas will be seen as the turning point that led to his victory in November 2012. Readers of this blog know that I have long cited Teddy Roosevelt’s Progressive Movement (outlined in his own speech at Osawatomie 101 years ago) as one of the high water marks in American politics. The great historian Richard Hofstadter noted that the progressive reform movement “was the effort to restore a type of economic individualism and political democracy that was widely believed to have existed earlier in America and to have been destroyed by the great corporation and the corrupt political machine.” That of course is the effort that we must undertake today.
My first request is that you read the whole speech. It is one of the finest examples of progressive political oratory in my lifetime. It is part history lesson and part economics seminar. Read more…
What is at the heart of the great disappointment Liberals are having with President Obama? I wonder if it is inherent in any of the three progressive “change elections” I have experienced in my lifetime. Do we really believe that just because the Presidency passes from a conservative Republican to a progressive Democrat that anything really essential to the established power structure of America is going to change? My first experience of Progressive Disappointment Syndrome (PDS) was when I was too young to even vote in 1960. Somehow a teacher of mine convinced me that Kennedy would really listen to Eisenhower’s warnings about the unwarranted power of the Military Industrial Complex and move us towards a more peaceful stand with the rest of the world. But all you have to do is look at this picture of the first meeting after the election where Ike and JFK met.
There lurking behind the Presidents were the Joint Chiefs, as if to say, “don’t worry, nothing is going to change”.
And then there was Bill Clinton, heading out for his first trip on Air Force One, and for the Wall Street establishment, Bob Rubin is right by his side as if to say “don’t worry, nothing will change”
And then we come to President Obama, elected in the middle of the biggest financial disaster of the last 70 years, caused by Bob Rubin and his buddies. And who does Obama show up with on the White House front steps? You got it. Larry Summers and Tim Geithner, Bob Rubin’s acolytes, saying to the barons of finance, “Don’t worry, nothing will change.”
I really feel like Obama has to prove in the next week that he is not a prisoner of the establishment. He has to show that he can break with the twin powers of the Military-Industrial Complex and the Financial-Congressional Complex that have bankrupted our country, compromised our democracy and condemned us to years of stagnation and drift. It’s obvious the Republicans have no solutions to our current crisis. There are solutions out there. Whether Obama get’s his balls back on Thursday seems to be the only question.
This morning it is deja vu all over again. In March of 2008, after having warned my readers for three months that a crash was coming, I wrote a piece about what I called Savage Capitalism. The short selling sharks had managed to crash Bear Stearns and now were swimming around with blood on their snouts looking for their next prey. It would be Lehman Bros. The whole notion that the great fortunes of the present day were made selling short, was a particularly dispiriting one.
I’m a boomer and I was raised in the 50′s with a healthy respect for the great companies and fortunes made from producing the goods America wanted. Whether General Electric, Ford Motor, AT&T, IBM, all were producing world class quality products. Even banks like Chase Manhattan and Bank Of America added great value to the American economy. But things are different now. The great fortunes get built betting on failure. John Paulson, who personally made $5 Billion in 2010, did it by shorting mortgage securities that he designed to fail. George Soros made $1Billion in 1992 shorting the British Pound.
At this very moment the school of short-selling sharks is circling the bonds of Portugal, Greece, Italy, Spain and Ireland. Their big score is if they can get one of those countries to default. Read more…
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way.-opening sentences of Dickens’ “Tale of Two Cities”
When I first started talking about the notion that we were in an Interregnum–Gramsci’s notion that “The old is dying and the new cannot be born. In this interregnum there arises a great diversity of morbid symptoms”–I didn’t really suspect that it would get quite so morbid. A couple of days ago, a reporter, having read my Brave New World Redux post, called me up to ask about the reference to “Flash Robs” in the context of the London Riots. I made what I thought was a fairly uncontroversial remark about two facts. First, that in a world of increasing inequality, there is a group of unemployed young people who are totally untethered to the social norms. Second, those young people use social media for everything, including organizing vandalism and looting. Even though the reporter took a long discussion and boiled it down to one line, I still feel my comment was true. What I have seen since then is an onslaught of hate mail, much of it overtly racist, probably brought on by this blog post revealing me to be “an undisclosed new media leftist”. And here I thought I could return to my community and have a decent, civil conversation. Jeesh! Here’s an example of the kind of shit I read every morning. This one from one Dan Anthony.
Let’s tell it how it is.. These Mobs are Black Ghetto Welfare Slaves. Their parents and grandparents were also Welfare Slaves. A bunch of people caught in a cycle of no education, no ambition, and no morals. Stupid People breed Stupid People. If this was the best Economy in the history of the country , these people would still be doing this. The Economy up and downs do not effect Welfare Slaves. Maybe if people in this country told the truth without worrying about who’s feelings get hurt, we can move on and become a better society. Stay out in Cali with the rest of the elitest, leftwing nuts. You assholes out there are phooney, full of shit, Limo Liberals GO FUCK YOURSELF AND FUCK YOU JERK OFF.
I’m trying to figure out why my comments about the haves and the have nots has struck such a cord. Read more…
Categories: California, Entertainment, Interregnum, New Federalism, Television Flash Mobs, Inequality, Interregnum, London Riots, New Federalism, Politics, Recession
After Thursday’s stock market crash, we find ourselves staring into the abyss of a potential double-dip recession. Republican’s, having ignored the history lesson of the business lobby 1937 Austerity Push, which managed to push America back into depression, seem to be clueless to the fate of most Americans. Of course, As the New York Times reports, their financial base is doing very well and luxury spending is reaching new highs. But America’s economy lives and dies on the confidence of the average consumer. In the go-go years of the late 1990’s the concept of “mass affluence” and “affordable luxury” dazzled marketers into believing that “aspirational marketing” was the path to the streets of gold in which the majority of citizens would have 60” inch flat screen TV’s running 500 channels of cable TV and 100 MBPS Broadband services, even if they had to hock their house to get it. But, as a new White Paper from Ad Age entitled, “The New Wave of Affluence” points out, “In 2011 however, in the wake of a massive reset, it appears that mass affluence may be a thing of the past.” Ad Age goes on to suggest that marketers concentrate their attention on the 3% of the American population earning more than $200,000 per year, “who account for almost 50% of consumer spending.” The esteemed Telecom analyst Craig Moffett, in a report titled “How the Other Half Lives” chose to look at the darker side of this picture. “After paying for food, shelter, and transportation, the average bottom-40% family is left with…. wait for it…. just $1,215 per year, or $100 a month, for everything else. That’s $100 per month for all discretionary purchases, telecom services, cable or satellite TV, movies… and everything else. Indeed, after Healthcare, the number drops below zero.” A recent report on consumer discretionary spending from the Federal Reserve Bank of New York shows “this time is different.” Going back decades, such spending had never fallen more than 3 percent per capita in a recession. In this slump, it is down almost 7 percent, and still has not really begun to recover.” Read more…
In 1922, the British Empire held sway over a population of about 458 million people, one-quarter of the world’s population,and covered more than 13,000,000 square miles: approximately a quarter of the Earth’s total land area. By 1956, after the disastrous attempt to hold on to the Suez Canal, the British finally abandoned the last of their imperial pretensions and settled into rebuilding their own country, culture and spirit. By 1964 the world was sharing in the joy of life after empire.
To read the analysis of David Sanger in the New York Times this morning, life in America for our children will be a pinched, pale shadow of itself.
For Mr. Obama and his successors, the effect of those projections is clear: Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded. Read more…
Categories: Barack Obama, Defense Policy, Economics, Foreign Policy, Futurism, Military Spending, Politics, Recession American Empire, Barack Obama, Credit Crisis, Defense Budget, Military Industrial Complex, Obama budget, Politics, Recession, The Beatles
In this time of constant bickering between the right and the left, the movie Avatar has become the highest grossing film in history. To achieve these astonishing grosses of $1.86 Billion (besting Cameron’s own Titanic in record time), the movie has appealed across all demographics and all political profiles. This is not to say that right wing critics didn’t try to discourage their partisans as Jonah Goldberg points out.
The film has been subjected to a sustained assault from many on the right, most notably by Ross Douthat in the New York Times, as an “apologia for pantheism.”
It would be a cop-out on my part to say the huge success was due only to the gee whiz special effects and the immersive 3D environment. Read more…
Categories: Barack Obama, Climate Change, Energy Policy, Entertainment, Futurism, Interregnum, Military Spending, Movies, Politics, Recession Avatar, Interregnum, Military Industrial Complex, Politics, Recession, Religion, Tom Friedman
Here is a scary thought. The Pareto Principle in economics says that 80% of the effects come from 20% of the causes. In practical terms it might mean that 20% of your movies at Warner Bros. would generate 80% of the revenue. Pareto himself noted that 80% of the waelth in Italy was held by 20% of the people.
This morning unemployment hit 10.2%, a 26 year high. Yesterday the Labor Department reported that productivity surged to 9.5%. The U.S. has worked hard to transform itself into a knowledge economy and companies like Google and Goldman Sachs record record revenues per worker. What if some version of the Pareto Principle begins to apply itself to employment–20% of the workers produce 80% of the GDP? Dan Greenhaus of Miller Taback & Co has the grim reality of our future.
We have argued and continue to argue that another jobless recovery is materializing and if our estimates for G.D.P. growth going forward materialize, the unemployment rate will remain at elevated levels for several years. Nearly 16 million people are unemployed right now while another 9 million are working part-time jobs because they cannot get a full-time job.
So here is the reality of life for the bottom 40% of America’s families. After they pay for food, housing and transportation they have $1200 per year to spend on “discretionary items” like clothing, medicine and doctors. Read more…
Categories: Barack Obama, Business, Corruption, Defense Policy, Economics, Innovation, Interregnum, Military Spending, Politics, Recession, Wall Street Banking crisis, Barack Obama, Glenn Beck, Interregnum, Military Industrial Complex, Politics, Productivity, Rebuild America, Recession, Republican Party
This is the most frightening economic chart I have seen in the last decade.
Net private investment, which includes spending on everything from machine tools to new houses, minus depreciation, fell to 0.1% of gross domestic product in the second quarter of 2009, according to the latest government data. That’s the lowest level since at least 1947.
Capitalism’s most vulnerable point is the death spiral of overcapacity. In the easy credit boom times we built too many malls, too many car factories, too may fast food joints, too many houses. Now the only way for businesses and consumers to survive is too cut back drastically.
That creates a chicken-and-egg problem at a time when the unemployment rate is already nearly 10%: Without more jobs, U.S. consumers will have a hard time increasing their spending; but without that spending, businesses might see little reason to start hiring Read more…
Categories: Barack Obama, Business, California, China, Economics, Energy Policy, Futurism, Innovation, Politics, Recession Barack Obama, Green Jobs, overcapacity, Politics, Recession, Youth unemployment