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Posts Tagged ‘Economic Downturn’

The impending death of Conservative Socialism

October 23, 2008 Leave a comment

Brad DeLong wrote a piece that just begs to be read. In it, he examines the reason why, as he so elegantly states:

The Bush administration, having entered office as social conservatives, leaves office as conservative socialists, proprietors of the most sudden large expansion of the state’s role in the US economy since mobilisation for the second world war.

For Brad, the question is why this happened:

Why did they decide to partially and quasi-nationalise America’s banks – to invest $250bn in preferred stock plus warrants and tell the banks that it wanted them to use the capital to expand their loan base rather than contract it via deleveraging? It is certainly not what Henry Paulson signed up as Treasury secretary to do.

The question for us, however, as election day approaches and the Party of Wall Street plummets to earth, like John McCain’s fighter jet over the rice paddies of Vietnam, Moron in the cockpit (Mission Accomplished!) for an extended stay at the Obama Hilton, we wonder of the fate of his successor.

That tortured metaphor in place, we can proceed.

The rush of the Party of Wall Street into the safe embrace of its chief rival, the Party of Washington – so completely and handsomely expressed in the endorsement of Barack Obama by that lapdog of the House of Bush, Colin Powell, this past Sunday – the conversion of social conservatives to the conservative socialism of the Democratic Party, no doubt, causes you to consider the possibility that this event heralds not simply the collapse of the former, but also the timely demise of the latter.

In this, you are indeed one step ahead of us, knowing, full well, that without Wall Street, Washington can not function in the old way.

Conservative or not, the faint socialism of Washington’s variety – itself the faintest reflection of the no less faint European reflection of 19th Century Socialism – rests on the most vibrant practice of full blooded Wall Street ponzi schemes erected from a stable base of dollar reserves, easy credit, and an ever lengthening social work day.

Until now, the Party of Washington‘s most convincing argument on behalf of its conservative socialism – read: Social-Fascism (Yes, we did use the “F” word, now clap your hands over your eyes!) – consisted almost entirely of its alleged role in protecting the rest of us from the predatory practices of Wall Street.

One of the intellectual apologists for this “function” of Washington is the economist Jared Bernstein, who wrote some time ago:

… we live in a complex world, where markets can provide only partial solutions to the challenges we face. Market failures abound, and government will unquestionably be called upon to repair these failures. For years, we’ve elected politicians who’ve railed against this reality, pretending that they can refund that fifth of the economy that we spend on government –”it’s your money!”– and still provide the services we want and need. To put it mildly, it hasn’t worked. We’re spending the same share as ever, yet we’ve squandered years when we could have been making progress against the challenges of globalization, of environmental degradation, of deteriorating infrastructure, of economic inequality, of costly inefficiencies in health care.

The only problem with this delusion of Mr. Bernstein: precisely at the time the Party of Wall Street has finally and completely conceded its bankruptcy – both ideological and actual – and turned to the Party of Washington for Bolsheviki Salvation, Washington is itself insolvent, and, under the grinding crush of an unprecedented post-War economic downturn.

Washington may not only be unable to help its retainers on Wall Street, but itself as well.

It is clear industry is faltering, state and local government are facing defaults, unemployment is rising, housing mortgage, and consumer debt defaults continue to increase, pension and retirement funds teeter ominously.

In January, the victorious Party of Washington will face this daunting environment, armed only with the treasury’s printing press, a somewhat fearful community of central banks seeking the safest possible investment instruments in a rapidly deflating economic bubble, and an extremely attenuated ideology to repair what are now being called the “excesses of Wall Street,” but really is a watershed moment for humanity.

Good luck, guys!

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The Great Turning…

September 25, 2008 Leave a comment

Details are beginning to dribble out on how wrenching the changes will be for you in the next few months. Analysts on CNBC are frankly admitting rising unemployment through 2010 – at least 7 percent next year alone.

Govenor Patterson, of New York, indicates a slowing economy for at least 18 months, and perhaps for two years.

Hope you have your galoshes – shit will be deep, once you wake up to discover you have just transferred almost a trillion dollars to China. From Bloomberg:

“China is very worried about the safety of its assets,” he said. “If you want China to keep calm, you must ensure China that its assets are safe.”

Don’t cry for US, Argentina…

September 25, 2008 2 comments

Figures don’t lie, but liars figure – Mark Twain

The Moron returned to television last night bringing anguished tales of impending doom – news to all, apparently, but any person who has done the slightest bit of investigation into this crisis on the numerous web pages devoted to the subject.

The failure of Congress to hand him a blank check to bailout Wall Street, said the Marionette-in-Chief:

…would cause massive job losses, devastate retirement accounts and further erode housing values, as well as dry up loans for new homes and cars and college tuitions. These are risks that America cannot afford to take.

Of course, a simple back of the envelope calculation would have laid all this bare without the whining squeal of the Decider. The US needs several billion dollars each and every day to fund its pretensions to empire.

Above all, this requires the continuing inflows of currency from all the major holders of American dollars – China, in first place, but also Japan, Russia, and the oil dependencies in the Middle East.

These inflows rest on the assumption among the global holders of the American debt that their assets are safe, relatively liquid, and retain their value in the face of decaying global economic conditions.

The Empire is on life support, and you are being sacrificed. You are being asked to pony up untold billions of to guarantee the assets of the People’s Republic of China, who, through their mouthpiece, economist Yu Yongding, explicitly demanded action:

“If the US government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,” Yu said in e-mailed answers to Bloomberg. “If it is not the end of the world, it is the end of the current international financial system.”

As we noted at the time, not one of the leading members of the Party of Washington and the Party of Wall Street uttered a single response to this threat:

Not a word this week from a single member of the elite bosses of the Party of Washington. Not a peep from the economic vandals of the Party of Wall Street.

Not a single response from The Presidency, the office of the Speaker of the House, nor from the office of the Senate Majority Leader.

Not a word of this and its implication for you and those you love from the lips of the nominee of the Party of Washington, who waxed eloquent regarding how life will profoundly change under his enlightened term in office.

He went on for forty-two minutes, we are told, yet found not ten seconds of it where he could have told the nation, “Uh, sorry. The Chinese just sent us an ultimatum: Either we fix our economy, or we are cut off from the spigot.”

We also told you the implications of this threat:

There are only two choices here:

  1. Dismantle America’s Empire – withdraw from Iraq, Afghanistan, all overseas bases, pull back the fleets, recall the submarines, and stand down, or,
  2. Starve.

Last night, the Moron told you which of these choices Washington made.

Don’t cry for us, Argentina.

When it was your turn, back in 1999, we sure didn’t.

Can we have some more?

June 30, 2008 Leave a comment

Jared Bernstein, the Democratic Party’s left-wing economist darling is on a tear again.

To paraphrase Former Vice President Mondale, Jared has revealed that Republicans will spend you into the poor house, as quickly as the Democrats – the difference being the Republicans won’t admit it, while the Democrats will wear their profligacy as a badge of honor:

… all this conservative talk about cutting spending is just that: idle chatter. When push comes to shove and political forces are in play — and when aren’t they? — McCain will support most government spending as much as the next guy or gal. Conservatives from Bruce Bartlett to Larry Kudlow to Grover Norquist can caterwaul from here to eternity about “holding the line on spending,” but the phrase is meaningless. It all comes down to cases, and there will always be cases, like these two bills targeted at offsetting the current failures in housing and labor markets, that are worth supporting. And enough politicians will support them such that they become law.

Having exposed the most recent Republican about face on the issues of unemployment benefits and the mortgage meltdown, Jared goes on to point out direct government spending as a share of GDP has held virtually unchanged at about 20 percent since 1959.

Thus, voters should expect to ante up at current levels despite the outcome of the November presidential elections:

… there are big differences between the D’s and the R’s on the role of government. But barring a percentage point of GDP either way, the differences amount less to the level of spending and more to competence and fiscal stewardship.

For Jared, this is good news for two reasons: first, it makes the current scale of government spending appear as the natural cost of governing a large, complex, and sophisticated economy which is, nevertheless, prone to, “market failures,” like economic downturns and crashing housing markets.

Second, It make it possible for him to declare, “If anything, the pressing needs of the environment, public infrastructure, and health care suggest that share is likely to go up before it comes down.”

So we are left with this Hobbesian choice:

No matter who runs the show, there will be spending, and it will cost roughly the same to have good government or lousy government.

We want to state, at this point, we a completely in favor of, “good government” – whatever that is. It is likely that, “good government,” is preferable to, “lousy government,” – and, we note, for emphasis, it has the word, “good,” right in its name!

Lousy government – who wants that:

… given [the Republican] addiction to big tax cuts and war, a conservative government would also be an evermore indebted government.

Wait a darn minute Jared. (We just loved his use of the word, “damn,” in his post – its just so edgy!!!)

Isn’t Barack in favor of big tax cuts and an unchanged pace of military spending?

Okay, he is against the war in Iraq – thus far – but he is offering no change in the level of military spending, promises to “rebuild” military forces, and will continue to wage a war in Afghanistan.

And, neither he, nor John McCain, will touch the sacred obligation of repaying the holders of the public debt.

So, how is he going to do all this, AND, address the, “the pressing needs of the environment, public infrastructure, and health care,” AND, stop accumulating more public debt?

Jared has the answer:

… we live in a complex world, where markets can provide only partial solutions to the challenges we face. Market failures abound, and government will unquestionably be called upon to repair these failures. For years, we’ve elected politicians who’ve railed against this reality, pretending that they can refund that fifth of the economy that we spend on government –“it’s your money!”– and still provide the services we want and need. To put it mildly, it hasn’t worked. We’re spending the same share as ever, yet we’ve squandered years when we could have been making progress against the challenges of globalization, of environmental degradation, of deteriorating infrastructure, of economic inequality, of costly inefficiencies in health care.

That answer, in short form is this:

For the past 50 years, your government “squandered” 20 percent of GDP and still failed to address fundamental economic damage caused by market failures.

Can we have some more?

Just when you think it might be safe to support Barack…

June 24, 2008 Leave a comment

Jared Bernstein opens his mouth again, and, new questions are raised.

In this episode, the intrepid defender of all things government come up with another reason to gang-rape your wallet and hand the proceeds over to questionable causes.

Says Jared:

… we have been over-consuming and under-investing. And here’s part of the solution: a major, smart, strategic program to revitalize the nation’s infrastructure.

Oh, do tell. Exactly how have we been over-consuming and under-investing, Jared?

… markets under-invest in public goods and for a very simple reason: private firms can’t claim enough of a return on such investments, so they fail to invest enough in them.

What does this mean, Jared? If, markets “invested” in public goods, it stands to reason the goods would not be public, right?

So, when, for instance, private companies like for-profit hospitals exist, we do not classify them as “public goods,” for the simple reason there is nothing public about them.

But, do for-profit hospitals under-invest?

Do for-profit educational institutions under-invest?

Do operators of for- profit roads – as exist in California – under-invest?

So, what is Jared talking about, when he states, “we have been over-consuming and under-investing?”

Who is we, Jared?

“We,” of course, is Washington.

Washington has been “over-consuming,” and “under-investing.”

Washington has been neglecting the the roads and bridges of this nation, as it has poured trillions into 24-7 global military operations, uninterrupted, since World War II.

Washington has also neglected communications, education, healthcare, water systems, energy conservation and climate management – about every major system required for an advanced economy to function efficiently.

But, we have the coolest gadgets ever fielded by an army in the history of warfare. Generals can sit in the Pentagon, and watch real-time as a small troop of Taliban fighters are taken out in the remote mountains of Pakistan.

We have smart missiles that can blast an Iraqi resistance fighter into paradise, while cattle graze peacefully nearby.

We got SHOCK, we got AWE, we got kids who graduate from high school and couldn’t make change if the register at McDonald’s didn’t provide a hint.

COULDN’T FIND IRAQ IF IT WERE CIRCLED ON A MAP AND LABELED WITH BIG BLOCK LETTERS.

But, damn, we can kill some Taliban.

And, the only proposal the most progressive economists in the Democratic Party can come up with is some minor infrastructure repair to produce a little ECONOMIC pump-priming.

This is their hair-raising, wild-eyed, left-wing, radical response to the Republican agenda?

This, is what frightens conservative mouthpieces?

That the Democratic Party would continue to sail aircraft carriers around the Persian Gulf AND repair a bridge or two?

Is THIS the change we are supposed to believe in?