Archive for February 15, 2010

Reads (2-15-2009)

February 15, 2010 Leave a comment

Afghanistan offensive

Five Million Workers to Exhaust Unemployment Benefits by June – Calculated Risk

So, we bet you were asking: What happens when the recurring extensions of emergency benefits for the unemployed come to a halt?

Well, because of Washington’s refusal to reduce hours of work, the number of people in danger of exhausting their unemployment benefits all at once – and thereby plunging the economy into another leg down – increases with each extension of emergency unemployment benefits. At present, the number of folks so precariously balanced on the edge of financial disaster number about 5 million – if nothing is done to enact still another extension soon, 5 million will lose all benfits within four months. This is a crisis which grows each time the only real solution to unemployment is put off.

Quoting from the report:

Though June of this year, nearly 5 million workers will be left without additional EUC benefits, including 1.7 million who will run out of their limited 26 weeks of state unemployment benefits and another 3.3 million who will not be able to collect their full weeks of EUC. Additionally, when just considering the regular state program alone, at least 5 million workers will run out of their regular state benefits without any federal options available to them – meaning that they can rely on nothing more than their 26 weeks ofregular benefits, unless the ARRA is reauthorized.

Long-term unemployment has surpassed the severity of previous recessionary periods: currently, nearly 40% of unemployed Americans— over 6.1 million workers— have been unemployed for six months or longer. By comparison, the previous peak in long-term unemployment was 26 %, in 1983. On average, unemployment now lasts nearly 7 months, an increase of 75 percent since the start of the official start of the recession two years ago.

Greece: Our Debt, Your Problem – Infectious Greed

This is said to be the views of a Greece banking insider, pondering the situation faced by the country. (S)He makes the argument that for years after its entry into the euro Greece was systematically looted by the top 20 richest families, and sold over-priced muntions. The population is not likely to support an austerity to pay it back in order to protect German and French investors.

The notion that Brussels will dictate to Greece terms on public sector wages and impose a May deadline are, frankly, comical. The government may like the idea, but the entire population will probably go on strike. Needless to say, Greece can pay. If the government chooses to freeze savings accounts it can pay the whole kahuna in one go. But the Greek people will refuse to take any hardship. This is a matter between some French and German baby-boomers, their government, and twenty Greek families who will happily take more. I hope we default and the country is freed from the curse of free money that befell it in 1980. Once our politicians have no more money to disburse to the oligarchs, we can start to be proud Europeans.

Why we should not fear the spectre of deflation‎ – Financial Times

Washington has been warning of the danger of deflation for a decade or more. This article questions the fear of deflation. Although the author admits would prolong the current recession, he does not offer any solution for the record levels of unemployment produced by it. It is obvious from his argument that he sees “imbalances” in the economy as being worked out over the prostrate bodies of the unemployed.

Evan Bayh Not Running For Re-Election – Huffington Post



The Greek Tragedy That Changed Europe – Wall Street Journal

You see, all this debt came about because Greece’s unions and civil servants pushed Greece’s wage up to uncompetitive levels. And, it would be easy to fix if Greece had its own currency to devalue, but it doesn’t so Greeks will just have to eat dog food for a while:

Germany and France are cooking up a belated support package for Greece, but they have made it abundantly clear that Greece must slash public sector wages and other spending; the Greek trade unions get this and are in the streets. If Greece (and the other troubled countries) still had their own currencies, it would all be a lot easier. Just as in the U.K. since 2008, their exchange rates would depreciate sharply. This would lower the cost of labor, making them competitive again (remember Asia after 1997-’98) while also inflating asset prices and helping to refloat borrowers who are underwater on their mortgages and other debts. It would undoubtedly hurt the Germans and the French, who would suffer from less competitiveness—but when you are in deep trouble, who cares?

And, soon appearing in a crisis near you: The same argument for why you should be happy with your new Wal-Mart wages!

Greece Rescue Collides With the Policy Trilemma – Naked Capitalism

You might also want to read Yves Smith’s fascinating excerpt of a paper on how the similar demands for austerity in Germany, 1931, in face of popular anger, led to the Nazi regime.

Smith writes:

But we have had critical junctures in the past where an inability to manage politics led to disastrous outcomes. Consider Germany in 1931. The budget deficit had gone into the red as the recession deepened. Germany’s government faced a serious credibility problem in the international markets, embarked on a tough program of austerity measures, and a mere few months later, its bonds were trading at close to par.

Notice that the austerity measures were effectively imposed against the public’s will:

Pressed to get this mountain of debt under control, Brüning tried a variety of ploys. They all failed. Eventually, a budget calling for savage spending cuts, lower taxes, cuts in the pay of government officials, and smaller transfers to the Laender and municipalities had to be enacted by Noteverordung. But the move outraged deputies and key business figures on the right who wanted deeper cuts, while angering many on the left who considered the budget palpably unfair. As the big business oriented German People’s Party (DVP) committed binary fission, a majority of the Reichstag exercised its constitutional right to reject the decree. Hindenberg and Brüning reacted with a fateful
step: They dissolved the Reichstag, called new elections, and reenacted the Noteverordung with minor changes.

A disaster for the government ensued. In the September elections, amidst the highest voting turnout in the Republic’s history, the Nazis dramatically emerged as the second largest single party in the Reichstag, while the Communists made substantial gains…Not surprisingly, investors stampeded out of Mark assets….The Reichsbank was forced to raise its rediscount rate by a full point…..

What actually happened is that the government responded by redoubling its resolve to continue down the path of austerity so resoundingly repudiated by the electorate.

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