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Stagflation is one of those words which makes the non-economically inclined slip off into a stupor. But, as Ian laid out on Saturday, the Bush Administration's economic policy hasn't changed for years, and we are all living the results.
...for the last 6 odd years, nothing has changed. The basic pattern of the Bush years was set in stone after 9/11, the policies of the Presidency, the Fed and Congress haven't changed. So the events unfolding now are just the logical consequences of decisions made years ago such as:
* to invade Iraq;
* to make tax cuts for the rich in order to bail them out from the dotcom crash;
* to drop interest rates through the floor;
* to allow a telecom oligopoly to form;
* to condone Chinese mercantilist policies which subsidized Chinese exports with a low Yuan;
* to tolerate the Yen carry trade, and
* to refuse to regulate the creation of money in the form of securitization and exotic derivatives.In 2002 and 2004 the American people voted to continue these policies, including the war in Iraq. In 2006 they voted to end at least some of these policies, but Congress and the President decided to kick the ball down the field, pass some pork bills and wait till 2009 to do anything about any of it. Their bet was they could hold the meltdown off till after the election. They were wrong....
I read this on Saturday, and went off searching for something hopeful. Some sign that there was really a silver lining. What I found was not promising:
-- Krugman highlights a speech from the head of the NY Fed, wherein he talks about credit markets worsening faster than the Fed can cut rates, which spells meltdown. Ugly. And getting uglier still.
-- Calculated Risk asks whether we are, indeed, in recession.
-- There are reports that the Fed could step in with another emergency rate cut, due to the looming recessionary pressures. But is that only going to increase inflationary pressure? Guess we'll see. In short, if you have plenty of money, can diversify your investments, and wait out the downturn, you should be okay, at least in the short term.
Which is to say, most people are worried sick.
What can be done? There are a couple of thoughtful articles on that subject that I wanted to bring to everyone's attention and get your thoughts on them.
-- Stanley Kutler has a piece in the Washington Independent on the contrasts between FDR's directed relief, reform measures and public works projects for economic stimulation and correction, versus the Hoover/Bush "wait and see" approaches. Anyone noticing a trend with results from Democratic-led governments and Republican ones?
...The New Deal launched vast public works projects, expanding and improving the nation’s infrastructure. The Works Progress Administration and Public Works Administration built roads, parks and airports. It employed people on cultural and historical projects, including the collection of slave narratives, public art and various records’ collections.
President Franklin D. Roosevelt (public domain)Now-forgotten conservatives railed against the public works program as a boondoggle but it is a historical marker for an imaginative and successful governmental effort to provide for the general welfare. More than eight million people, working on more than one million projects, benefited from the programs. We can recognize the physical achievements easily enough, but the intangible of providing gainful employment and instilling self-respect for productive work is beyond measure.
Public works essentially provided recovery and relief. But the Roosevelt administration’s enduring legacy came from its reform measures, most notably the Social Security Act. The administration also laid down numerous reform programs, including legislation and regulatory commissions for banking, securities, communications and labor practices....
Imagine a government and a people who worked hand in hand to get themselves out of this mess together -- recognizing that each had a job to do well, and then did it.
Given the choices made by the Bush Administration to pour money into the five-year-long failure in Iraq rather than spending it on crumbling schools, roads and bridges in the US, among many other problems, Americans have a right to ask why Republicans should be allowed to run a lemonade stand let alone the federal government -- because what they are doing is the opposite of good government. (That sound you just heard? Grover Norquist's head exploding...)
-- The Grameen Bank has begun a micro-lending project in Queens, NY. When we had Muhammed Yunus on for his book salon a few weeks ago, he talked about some of the work they have been doing around the world and were starting to do in parts of the US. I love the thought of giving the people who need the help the most the power to change their own lives -- not under an onerous burden of hiked interest rates and hat in hand begging for financing, but a loan given in the spirit of helping them to help themselves...with the promise of their success paying forward to the next person who needs a hand. That is a true community model that I would love to see replicated across many communities here where loans and hope have been in altogether too short supply for far too long.
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Evening Christy
Krugman has been painting a mighty bleak picture, amongst many others…! 8-(
Hi Christy, pups
That’s a breath of fresh air, yet, how long before the IRS or SEC trys to intervene…?
Another choice - flee! The economy down here is quite strong and unemployment (at least outside the aboriginal community) is essentially zero in that those wanting jobs can get them. The Kangaruble is now at about US 0.93 up from 0.49 six years ago. Mostly that reflects a decline in the US $, but also reflects a strong export economy.
We’ll put a shrimp on the barbie
Umm, it’s the housing bubble stupid. And the fact that the regulatory authorities didn’t do their jobs. All the other stuff you list are decidedly second order contributors.
I read the following the other day and asked myself why I bothered to get sober, it makes ya want a stiff drink;
http://elainemeinelsupkis.type.....y_matters/
How much of a problem is it to move to OZ?
Hmmm… and you do have tropical climes up north…! ;-)
Actually, it is an excellent piece.
Not in the form of 29 percent credit cards I hope. /s
The problem with the fix is as follows. It’s like trying to make a blanket larger by cutting off one end and sewing it on the other end.
Banks and financial institutions have no credit or capital to “sell”. Lots of their “equity” had to be toss in the bin as worthless. So the fed fix is to lend them more!
It’s given a drunk more wine! This is actually producing exactly the OPPOSITE effect. But these fools really don’t get it. They think if the sell some cheap money it will…. create jobs and spending. hahahaha. They’ve been hawking that crap for decades with “tax cuts” and it doesn’t create jobs or spending. It only creates speculation and trading of “securities” like derivatives which have nothing to do with main street.
You too? I figger if we stayed saober the nlast eight years, we can saty sober for good.
Speakin’ of good…… good link.
Ahhh… the old Polish Blanket, eh?
The Grameen approach might really be worth a close look, given the rate at which credit to not-so-wealthy (and even wealthy, actually) people is starting to dry up. It will certainly be interesting to see how the Queens project works.
CNN
Kiss the suburban commuter economy good-by. A tank of gas for $80-100 will further kill housing prices.
Our economy was driven by this fake bubbles which supposedly allowed people to make money from “nothing” and pump it into the economy as spending and ultimately as job creation. To the economy drivers it doesn’t matter what the bubble is, as long as it slowly deflates instead or bursts. But they always burst and so its a boom and bust.
Our booms don’t create good jobs anymore, most spending on nonsense like vacations, luxury items and junk from china which only helps the shareholder side of these “american” corporations.
The Fed can’t do much these days I suspect. Even Wall Street is not responding to these lowering interest rates and you get little pump and dump cycles in stocks and then the slide continues.
There are two shoes left to drop that I can point to.
The first is corporate default rates ticking back up to historical norms of 3%. They’ve been around .3% per year in the recent past but portfolios now are starting to show signs of stress.
That will be the catalyst for the next shoe which is the failure of financial institutions that act as counterparties to credit default swaps. They will not have enough cash to pay the purchasers of the credit default swaps which act as insurance against bankruptcy.
Both of these markets are huge.
Dugg you, Christy
Citibank will tumble. Hey Mr Ruben… What were ya doin Mr Ruben?
I hate to bring it up, but that is what the “New World Order” is all about…Bush41 talked about it in his inauguration speech. They ultimately want a one government world, and in order to achieve that, they have to breakdown the fabric of society…worldwide, and reestablish it in the way that it benefits those who survive economically. It is not a conspiracy “theory”….the whole thing is a conspiracy. All of it. It is planned. Those who become destitute are forced to work for the rich in order to survive.
They won’t achieve it, although they are really trying.
Yeah — Ian hit the housing bubble, too — but that’s already a tidal wave, the rest of it was the next up line in my mind…
Do you think so? My best friend was an AVP there, and is now retired, she thinks that it is impossible for it to go under…I’m not so sure…
Banks begged to be able to play in all sorts of cool financial instruments. And now they are taking huge hits on them and some will fall.
All of these problems are simply the result of people being berated with all of this bad news. Just ask Mary Matalin.
More good news for Republicans, though!
I read rumors that Citi is in deep doo doo. The SWF are not going to play for them.
lol…yeah…umm…people just get upset when you present them with the facts…what a piece of work.
“Berated with bad numbers”
Hi Christy,
Yes, the list above sucks Big Time, but the two things I point to as ticking time bombs (not the nuclear terrorist kind) were the endless credit card schemes and people thinking the stock market was as safe as bank CDs.
Oh did I mention easy credit? kablooey.
Dubai might not want to bail them out.
Right, thanks. Yeah, great characterization, “berated.”
I’ll listen to Warren Buffet’s opinion on what kind of economy we are in before I listen to any politician named matalin or bush or…
OT:
It was an extraordinary event at the standing-room-only Town Hall Meeting: “Is Impeachment Necessary to Protect the Constitution?” at Judson Memorial Church on Sunday. If you weren’t able to be there, you missed amazing talks by Bruce Fein, Elizabeth Holtzman, and Scott Horton which stressed that not only is impeachment NECESSARY to protect the Constitution, but NOW is the time to do it. Special guest John Nirenberg of “March in My Name” was there to remind us of what one person can do, and we heard messages recorded especially for the event by Congressman Robert Wexler and retired CIA analyst and courageous activist Ray McGovern. These messages will be available for you on AskNadler2Impeach.org tomorrow.
The person who most needed to be there was Congressman Jerrold Nadler. His arguments to date for not moving on impeachment hearings were disproved by these Constitutional experts. Most people in the audience were either disappointed, angered or outraged that Congressman Nadler chose at the last minute, not to appear. If you feel that the Congressman has made a mistake by not showing up, please let him know by calling or, if you’re in CD 8, by emailing your message.
I think Tweety wants to get laid. /s
These fools do get it. They transfered the country’s wealth to private coffers in the name of government contract firms, oil companies, banking/financing industry. We’ve been fleeced by them for decades. These fools will continue to milk us to their last day in office, and then some.
Hoover/Bush wait and see approach is more like passing the buck and making others look bad. It’s like watching a prson drowning and going under for the third time and you just don’t want to be bothered saving them so you do nothing and let them drown or maybe someone else will come along and take action, like Roosevelt, the socialist.
Actually, the Fed-worship with which we have been afflicted the last couple of decades now is a product of just this opposition, as monetary policy tends to be passive with respect to the workings of particular markets —just pour in a Fed open market operation or rate cut, and wait and see— as opposed to fiscal policies that direct relief to the needy people and functions.
(Now, tax cuts, those are perfectly fine fiscal policies to our overlords, of course.)
Exactly, initially started under Clinton’s watch… Per wiki;
Yeah, I saw that Nadler dissed the meeting. And he’s a BlueAmerica congressman too.
And we have Alfred E. Neuman as President: What, me worry?
That is interesting too…that is exactly what my friend from Citibank told me. She idolizes him. I dunno. On 9/11…guess where W ended up? Nebraska, where Buffet was having some big shindig. Where was Bush41? In NY meeting with Bin Laden’s family. Where was Cheney? In the bunker with Mineta. Where was Norad? Nowhere to be found….
created the BankAmericard in 1958, a product which eventually evolved into the Visa system (”Chargex” also became Visa). MasterCard came to being in 1966 when a group of credit-issuing banks established MasterCharge. The fractured nature of the US banking system meant that credit cards became an effective way for those who were travelling around the country to move their credit to places where they could not directly use their banking facilities. In 1966 Barclaycard in the UK launched the first credit card outside of the US.
Oh, one more thing….where did all that gold bullion go that was in the basement of the WTC….when they found it, they stopped looking for victims.
Where was I? On my way to work. When I got there we saw the building fall.
Awful, awful, awful…
SandrO
You should make sure that Howie Klein knows that Nadler was a no show.
The 911 thingy still does not add up does it? And not enough pols are interested in getting to the bottom of that one either.
KO Time…!
Will do when he shows up here.
…and get into the insurance business.
The Bush Brush Ranch is vast and, frankly, covered with brush.
All current policies lead there. No one wants to look at it. What a shame.
IIRC, the new law allowed banks to have 10% of their regulated funds in the investment side of the operation. About four month ago, there was a late Friday, one line anouncement that the govt was allowing BOA and Citi to move 30% of their regulated funds over to the big shit pile.
Keith’s on fire–contre Hillary…
This is where all the money that YOU don’t see in your life is:
In the United States, in order for an investment fund to be exempt from direct regulation, it must be open to accredited investors only and only a limited number of investors can belong to it. While there is no legal definition of “hedge fund” under U.S. securities laws and regulations, typically they include any investment fund that, because of an exemption from the types of regulation that otherwise apply to mutual funds, brokerage firms or investment advisers can invest in more complex and more risky investments than a public fund might. Hedge funds managed from other countries have similar relationships with their national regulators. As a hedge fund’s investment activities are therefore limited only by the contracts governing the particular fund, it can make greater use of complex investment strategies such as short selling, entering into futures, swaps and other derivative contracts and leverage.
As their name implies, hedge funds often seek to offset potential losses in the principal markets they invest in by hedging their investments using a variety of methods, most notably short selling. However, the term “hedge fund” has come in modern parlance to be applied to many funds that do not actually hedge their investments, and in particular to funds using short selling and other “hedging” methods to increase risk, and therefore return, rather than reduce it.
Hedge funds have acquired a reputation for secrecy. Being outside the regulatory regime that applies to retail funds greatly reduces the information a hedge fund is legally required to make public. Additionally, divulging trading methods and positions would compromise the business interests of many types of hedge fund, tending to limit the information they want to release. [3]
The assets under management of a hedge fund can run into many billions of dollars, and this will usually be multiplied by leverage. Their sway over markets, whether they succeed or fail, is therefore potentially substantial and there is a continuing debate over whether they should be more thoroughly regulated.
For those of you who have accounts with big banks, like Citi, Bank of America, Wachovia, etc. — may I suggest that you switch to a federally insured local credit union?
The government website for credit union oversight is www.ncua.gov. From there you can poke around till you find the place where you type in the name of your local credit union. You can then read their balance sheets in detail. We did that yesterday to see how healthy our credit union is –
the answer? Very very healthy, “well capitalized.” They haven’t invested a single dime in those risky CDO’s (collateralized debt obligations) or SIV’s (structured investment vehicles). The website also informs us that not a single credit union has ever defaulted on paying its customers their deposits.
Second comment — why is it that Mr. K8 and I, who are remarkably dumb bunnies about the finance world, could see this crash coming way back in 2004? Ever since then, I’ve been predicting that FDR and his programs would become a HUGE topic of conversation during the inevitable mess. Sad to say, FDR is a REQUIRED model of behavior for our times (sad, because we’re in such a disastrous mess).
I’ve been reading up, whenever I have the rare time to do so, on the Roosevelt administration and its reforms, as well as the cultural memes drenching the popular media of the day. A mandatory guide to what we need in the coming days, although of course with a twist.
Because as Mark Twain (IIRC, it was indeed his remark) said, “history doesn’t repeat — but it rhymes.”
We are facing another 9/11, and it is the economy, and the policies taking us there are made by the same people.
Amongst other things too, all the barriers were knocked down, and, then Shrub rendered the SEC/IRS Fed oversight negligible…
Yeah, but the guy understands how to manage money…and Bush, not so much. I don’t say I worship the guy, just that he knows a thing or two when it comes to the economy and he has no reason to spout political BS like matalin.
re Hillary’s chutspah..running # 2 behind Obama, offering the latter VP spot. I agree: chutspah, a word I learned as a teenager growing up among Jews in NYC…
Citi too? As I recall, the BofA permit was to allow their purchase of Countrywide to proceed, which if it were completed at that time would have busted the limit. (Now, with CFC worth about $.75, I don’t know …)
Maybe it looked better to name another bank at the same time.
yep—Hillary’s getting skewered, with Chuck Todd now…my pal on Facebook….
I’m very impressed with Obama’s instinct on dealing with his detractors. It shows that he would deal with foes, real or imagined, with the same steady mind. Steady Eddy. I really like that. He doesn’t shoot from the hip, he uses his mind, the most powerful tool. Very impressive and unrattled.
When I heard this, I just couldn’t understand the logic at all. I mean, wth is going on with HRC’s camp? It’s like a band of loose cannons.
But cutting taxes for Bush, his family, and their cronies solves all economic problems. The MBA Preznit said so.
Harvard should try to recover some credibility and recall that degree they “gave” to Bush.
I think whoever’s been advising Hillary should have his/her head examined. One faux pas after another…WTF?
Chutzpah, Bio…! ;-)
I’m sorry, I’m dense…who knows how to handle money?
Hillary went negative and she is not helping herself. It is alienating more voters than it is attracting.
707…MBA…Bwahahahahaaa…Good one!
But it is helping McCain.
Our economy is one without a decent foundation any longer. We don’t make much more than weapons and jetliners and a few SUVs.
Nah. He’s just coasting right now…just wait.
It’sHe’s an illusion.Hey, talk like that just emboldens our enemies (waving to the NSA.) ;)
Three words: Economy….French Revolution. Period/full stop.
Linda Douglass was on Tweety, and she didn’t agree with you: she said going negative has worked for Hillary. That’s how she won Ohio and Texas.
They are working people too, they have families…what kind of crazy world do they want their children to live in…
“Let them eat cake…!” ;-)
Except she did not really win TX.
Hi MrsK8,
Nice bumping into you in these parts again.
I think the FDIC insures bank accounts up to $100K due to bank failure.
SIPC does it for investment accounts and the credit unions have a similar program.
We also make satellites! Now there’s a growth industry - spy and communication satellites.
We do talk on cell phones a lot, but do we say anything?
She didn’t do well in TX.
btw, I just loved this photo — the vivid blue of the sky and the stark white of the tree, along with the placement of the tree just off center. Lovely composition, I thought — and I hope you guys enjoy it as well.
Oh no! KO poking holes in Hillary’s worldly experience stories.
Is “Clinton” an alternate spelling for “Bush” in some foreign language?
I’m sick of this foreign policy credentials crap…did bush have any credentials other than the beer chugging cowboy persona? Obama is certainly more qualified by far than anything that went before him.
Cristy, that photo is a stunner!
Ohio….bwahahahahaha…Ever since Blackwell, I can’t take it seriously. I wish I could, but…really…
Obama won the most delegates in Texas.
She won the popular vote, which should count in the “Democratic” party, no?
yep–someone on MSNBC this morning, perhaps Joe S, said that Hillary’s chutzpah (h/t C Tuttle) was akin to asking Obama being asked to go sit at the back of the bus…ouch!!!
Me too!! Absolutely gorgeous.
Yes, I really like it. I wondered why you put it atop an article about stagflation….but I knew you had your reasons: just cuz. pretty.
As I said, she won the popular vote, which should count in the “Democratic” party, no?
Forever forward, Bush is the floor for Presidential qualifications.
I believe HRC won the primary vote in Texas which accounted for 2/3 of the delegate distribution. The results of the second step caucus is still not reported which accounts for the final third of the delegates.
Bush has proved that you can be president with an IQ under 100, with no success in bidness, no world travel… but you do need to have pull.
He leads in the national popular vote. No poo here, because I will vote for HRC if she is the nominee. I am impressed with Obama’s ability to not get “hooked” into the crappola. I wish Hillary had other advisors…I don’t think they serve her well.
At least you can pretend to do the job, wear costumes, strut around, and take lots of vacation days.
Of course, and I’m not trying to take that away from her at all.
I think the price of fuel has brought the economy down worse than the mortgage crisis. The price at the pump affects everybody, not just those that own(ed) homes. Bush allowing energy companies to dictate policy and manipulate supply to maximize record profits shows how little he cares whether there is a third Bush administration. Just as long as everything is left a mess for a democratic president.
It’s the value of the dollar, destroyed by Bush, more than anything.
Cheenee is headed to Saudi Arabia, probably to try to get them to increase oil production prior to the elections…
Isn’t that…ummm…not supposed to happen…?
Ding. That is my point. If the dollar is worthless…well…what happens next…the Amero?
Hillary moves have been quite divisive (and polarizing) for the Dem party…I must say…
…and now the girl in that 3 AM phone call ad, who is now 18 years old, not only supports Obama but is also his precinct capt. and she’s pissed at how she was used by Hillary’s camp…
OMG, this shows how desperate the Obama people are getting– the little girl in the ad actually supports Obama. So what? She was a tot back then, she was just an actress! Talk about desperate!!!!
BTW, could this have been the impetus for Spitzer’s demise…
pesos, plenty of pesos.
I wish someone would consolidate the actions of Bushco…. all in one place –I’m not talking about Hugh’s list, which is great, I’m talking about the actions that all lead up to the dismantling of society as we “knew” it.
When you look at it that way, it is pretty clear that it has been a systematic agenda that they have been following.
Next, holders of dollars/T-Bills etc. dump them back onto the market for a more stable/appreciating asset like euros or yuan or [pick a currency].
This much “supply” in the market will further exacerbate the falling prices/rates.
Stores in NY are accepting the Euro.