Category: The New Depression

The problem with Krugman

~ susie

He continues to assume things like “facts” should shape public policy and debate, when really, it’s always a matter of WBS (What Beck Said) – or for that matter, just about any prominent Republican!

The answer to the second question — why there’s a widespread perception that government spending has surged, when it hasn’t — is that there has been a disinformation campaign from the right, based on the usual combination of fact-free assertions and cooked numbers. And this campaign has been effective in part because the Obama administration hasn’t offered an effective reply.

Actually, the administration has had a messaging problem on economic policy ever since its first months in office, when it went for a stimulus plan that many of us warned from the beginning was inadequate given the size of the economy’s troubles. You can argue that Mr. Obama got all he could — that a larger plan wouldn’t have made it through Congress (which is questionable), and that an inadequate stimulus was much better than none at all (which it was). But that’s not an argument the administration ever made. Instead, it has insisted throughout that its original plan was just right, a position that has become increasingly awkward as the recovery stalls.

And a side consequence of this awkward positioning is that officials can’t easily offer the obvious rebuttal to claims that big spending failed to fix the economy — namely, that thanks to the inadequate scale of the Recovery Act, big spending never happened in the first place.

But if they won’t say it, I will: if job-creating government spending has failed to bring down unemployment in the Obama era, it’s not because it doesn’t work; it’s because it wasn’t tried.

Who you gonna believe, me or your lyin’ eyes?

~ susie ~ 2 Comments

Krugman seems astounded that a political figure would go on the teevee and lie. That’s kind of cute, that it still surprises him:

OK, that’s weird. I just taped This Week, which included an interview with Christine Lagard, the French finance minister. In her defense of austerity, she asserted that unemployment in France is down from 9.6 to 9.3. But I looked it up on Eurostat (pdf), which has French unemployment in August at 10.1, up from 9.6 a year ago.

Maybe she has somewhat different data — French concepts versus harmonized? was that a September number? — but one thing is clear: if the unemployment decline isn’t visible in the standard numbers, it can’t be that solid.

Portrait of hunger

~ susie ~ 5 Comments

Before you do anything else today, read this.

And understand that when I criticize the administration and the Democrats in Congress, it isn’t because we “didn’t get Canadian-style health care.” Or that I “congenitally see the glass as half-empty.”

It’s that for so many people right now, the glass is completely empty, and has been for some time. I feel that pain.

Politics isn’t about whether a handful of privileged white bloggers get “a seat at the table,” or whether their policy careers are on track. It’s about hopeless unemployment, worthless education systems, and crying, hungry children.
Continue reading “Portrait of hunger” →

Shouldn’t somebody, you know, do something?

~ susie ~ 4 Comments

Because what we’re doing is clearly not working:

WASHINGTON — U.S. employers shed more jobs in September than had been expected, according to two closely watched surveys, released Wednesday, that cast a shadow over the government’s official September jobs report, which is due Friday.

Private non-farm payroll employment fell by 39,000 jobs last month, according to the ADP National Employment Report. That was somewhat surprising, because the consensus forecast of mainstream economists had called for a gain of about 20,000 jobs.

“I think this is a disappointing result,” said Joel Prakken, the chairman of Macroeconomic Advisers, which crunches payroll data to issue the monthly report. “Economic growth slowed pretty much in the middle of the year … and we think the fourth quarter is going to be a quarter of slow economic growth.”

Another set of dominoes falling…

~ susie ~ 3 Comments

The entire house of cards constructed by the banks and the mortgage industry is falling down, and it’s not going to be pretty. By the time it’s all over, this could make 2008’s previous banking failures look mild in comparison. This latest lawsuit is a civil suit, not criminal. But that doesn’t mean the feds won’t get in on the case if it heats up — and I’m guessing it will:

Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans.

The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

“Defendants have filed foreclosures throughout the state of Kentucky and the United States of America knowing that they were not the ‘owners’ or beneficiaries of the loan they filed foreclosure upon,” the homeowners wrote in their complaint filed Sept. 28 in federal court in Louisville, Kentucky.

The homeowners claim the defendants filed or caused to be filed mortgages with forged signatures, filed foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages.

[…] “RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

As I’ve noted previously, some of the biggest title insurance companies are refusing to insure mortgages in foreclosure — because they can’t be sure who actually has title. Because lenders won’t underwrite a mortgage without it, this will have the likely effect of driving down home prices even more.

This is as serious as it gets.

The only people happy about this are the lawyers, who will be billing for untangling this whole mess. See, this is why you want a tightly-regulated derivatives market. Now the banks don’t even know who owns the mortgages used as collateral. In fact, this can even affect homeowners who are attempting to pay off their mortgages. Who will assign them a clear title?

Watch for the banks for fight any attempt to impose a foreclosure moratorium. This mess is so bad, the administration may finally have to do what Obama was trying so hard to avoid: Nationalize the banks. Stay tuned.

Greed is good

~ susie

Poor, poor corporations. If only we could figure out a way to funnel even more money in their direction — say, some more tax cuts for high income businessmen?

Corporate America finished the second quarter with “near-historic” profits, largely by cutting costs, laying off employees and streamlining operations, the Wall Street Journal reports.

Profits for companies in the S&P 500 soared 38 percent from the same period last year, hitting $189 billion, the WSJ says, the sixth-highest quarterly total ever. S&P analysts expect the trend to have continued in the third quarter.

Since 2008, corporate profits increased 10 percent — but revenue was down 6 percent, the WSJ says. To achieve the impressive quarterly results, companies have had, as the WSJ puts it, to “streamline” their operations. This means firing workers, outsourcing labor and shuttering unprofitable (or less profitable) divisions.

Mostly “less” profitable, but why quibble?

The robust state of corporate profits presents a paradox: companies won’t spend their money until the economy improves, but the economy won’t improve until they spend their money. An increase in hiring, for example, would help drive a recovery. The New York Times reports this “chicken-and-egg” phenomenon, noting that near-zero interest rates have encouraged companies to borrow money and simply hoard it because, as the NYT puts it, “they can.” Combined, companies have $1.6 trillion in cash, the paper notes. In the first quarter of this year, their cash reserves represented the highest percentage of assets since 1964.

“They are still holding on to more cash in the same way that Noah built the ark,” Gluskin Sheff chief economist David Rosenberg told the NYT.