Time to Face the Facts: The Economy Probably Won’t Get Better For Quite a While

from the NDN blog:



Time to Face the Facts: The Economy Probably Won’t Get Better For Quite a While
Submitted by Robert J. Shapiro on Thu, 04/09/2009 - 5:49pm.


Brace yourself for very anxious and stormy time, economically and politically, because there’s little prospect that the U.S. economy will improve for quite some time. The latest to weigh in is the Federal Reserve, whose new private forecast sees no growth in sight for the rest of this year and slow gains at best for 2010. The Fed always speaks cryptically (even among themselves). What it means is that the economy is still in free fall, with our best prospect for hitting bottom coming sometime this summer, and then bouncing around the bottom through the fall and into early winter. Why early winter? The only force out there to stop the decline is the stimulus package, which ought to kick in just about then. The Fed didn’t say so, but their view that any recovery is some time off and will be a modest one reflects the judgment -- one I share -- that the administration’s fixes for banking and housing aren’t up to the task.

The Fed also didn’t say so, but the outlook for much of the rest of the world is at least as gloomy, since so many Asian and European economies depend on Americans to buy what they produce and on U.S. businesses to invest in their countries. That’s not in the cards for some time. Trade is falling at a 20 percent rate here, at 30 percent rates across much of Europe, and at 30 to 40 percent rates in much of Asia. This week, for example, we found out that Americans’ purchases of foreign imports in February were down $62 billion from a year earlier. That translates into tens of thousands of jobs lost in a lot of other countries (and ultimately fewer U.S. exports down the line).

The Fed’s view should be a wake-up call for the administration, which still talks about a “V” shaped business cycle, where our deep decline will be followed by a strong and sharp recovery starting late this year. V-shaped recoveries are powered by unleashing suppressed demand: People cut back until they see the light at the end of the tunnel, and then they buy everything they had put off during the recession -- especially houses and other large purchases that require credit. That’s the scenario behind OMB’s risible forecast of more than 3 percent growth next year, followed by two years of more than 4 percent gains.

This misunderstands the very nature of what we’re going through, which is nothing like the other recessions of the last 50 years. This time, the economy’s circulatory system, banking and credit, isn’t working. Even if it were, American households aren’t holding back because their wages are down a bit. They’re being forced to downsize for the long term, because this crisis has wiped out 20 percent of their net worth. It’s even more serious than that, because most Americans used the fast-rising net worth they thought they had over the last decade to support their consumption. Mainly, we withdrew trillions of dollars from the once fast-rising value of our houses so we could go on vacation, buy new furniture, and send the kids to college. We had to do that, because for the first time in more than a half-century, most people’s wages and incomes stagnated during a “strong” expansion. ............(more)

The complete piece is at: http://ndnblog.org/node/3798

And scary.

:scared:

time, and it agitates me that people think Obama can wave a magic wand and make fifteen years of economic recklessness vanish.

We are in a long term secular bear market, in which there will be mini bull markets.

But the "Buy and Hold" days are gone for most people.

and yet this guy has come up with quite a bit, considering.

He writes...."The Feds Didn't say so" twice to come up with his main thesis.
Then he refers to the parts that the Feds didn't say, but that writer said as
"the Feds' view".

Deceptively clever, but I'm not buying the dark clouds to the extent that this
blogger would have me do....when it is clear that Blogger is opining and pretending like
he is only agreeing with the Fed, when in fact, blog writer is having a conversation with himself
and acting like the Fed is agreeing with him, and that the Fed's View is the view that he has written,
but in actuality, the Fed hasn't really said any of what Blog writer is saying.

History repeats itself:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=5436301&mesg_id=5436301

The official history:

"In the 60s, the city began to live beyond its means, offering generous wage and benefit packages to unionized workers, and spending too much on welfare and other public services. Its coffers drained, the city by the early 70s had turned to the short-term bond market to cover everyday expenses. Sensing trouble, Wall Street cut the city off... The banker Felix Rohatyn and other civic-minded business leaders stepped to help the city put out the fire now known as the Fiscal Crisis of ’75. ...Rohatyn and company cut social spending and reined in the unions....the city started to get back on its feet."


The rest of the story....?

Yet wages have remained stagnant or lagging behind inflation for 30 years. Where did all the wealth that has been generated go? Increasingly, into fewer and fewer already overstuffed pockets. What is it going to take to change things up? Time, for one. And a couple of years is not going to be long enough, though a significant change can be made manifest in that time. We have to re-direct the distribution of the wealth generated in this country away from the oligarchs and spread it more equitably among the people who generate it.

The middle class has been clobbered for decades, and guess what? It's the engine that drives the economy. Not the Donald Trumps. Not the Rupert Murdochs. Not the Bill Gateses. Not the Koch brothers. Not the Walton family. Our economy and our nation are poorer when money is concentrated even more heavily into their hands. (And yes, I know I'm leaving out significant robber barons in this list; it's just examples.)

"Unutilized labor"

The bankers shut the money flow off, first, by wages, and now by credit. There's plenty of labor, and plenty of demand for products and services...but no money.

PAY PEOPLE FAIRLY AND STOP THE FRAUD...and we won't have problems like this.