IT’S A DEPRESSION | The Big Picture

Yes, it is:

Finally, you know it’s a depression when, 33 months after the onset of recession…

• Wages & Salaries are still down 3.7% from the prior peak
• Corporate profits are still down 20% from the peak
• Real GDP is still down 1.3% from the peak
• Industrial production is still down 7.2% from the peak
• Employment is still down 5.5% from the peak
• Retail sales are still down 4.5% from the peak
• Manufacturing orders are still down 22.1% from the peak
• Manufacturing shipments are still down 12.5% from the peak
• Exports are still down 9.2% from the peak
• Housing starts are still down 63.5% from the peak
• New home sales are still down 68.9% from the peak
• Existing home sales are still down 41.2% from the peak
• Non-residential construction is still down 35.7% from the peak

Folks, in a normal recession-recovery cycle, practically all these indicators are making new highs at this juncture of the business cycle.

Busted: Stories of the Financial Crisis | The Nation

The problem with the economy, is that no one is willing to come to terms with the failures of Capitalism:

This raises our last question; fittingly, it is the same as the first, the part Lanchester never quite answers. We know why everyone owes everyone: because there was fresh dough to be made in extending credit, until there wasn't. What we don't know is, Why can't anyone pay? Why didn't property values ascend forever? Why didn't the market just keep expanding? This is not a question answered by Johnson and Kwak either. It is, let's say, above their pay grade (or perhaps far below). To tell the story, one would need an account of where value actually comes from. This is not impossibly complex; unlike the niceties of derivatives, it's not rocket science. If value is generated by people laboring to produce stuff that gets sold, and profit comes from exploiting the productive value of labor—this is a simplification, of course, but not a mistake—sooner or later people will have to labor productively to make good on any extended credit. By people I mean people.

But this becomes decreasingly likely, until it is impossible. Promises to do all that work later will reach limits, particularly as companies cut labor costs, replace workers with machines and outsource work to overseas markets. New value, arising only from the discrepancy between wages and productivity, appears elsewhere when it appears at all (witness the growth of India and China). Or it appears to glimmer in the future: credit is the name for spending it now. But even the future has a limited number of hours, technically. Meanwhile, over in the finance sector, where the money seemed so recently to reside, there is only a genteel, bloody struggle over how existing value is divided; no new value is created. The gap between value that can be realized and "fictitious capital"—claims on future value, all those derivatives purling through the purportedly new economy—has become a chasm. No one can vault over it any longer.

But the economy made its tiger's leap out of the stale factory and into the open air of finance for a reason; we can't just return to the fading industrial base with an oops shrug. We have no new line of widgets to labor over and sell. This is why ours is a real crisis, not just a panic. This is why we have seen exactly what the analysis grimly promised: shortages cheek by jowl with surpluses, unemployed workers stacked up next to unused factories. We deferred this reckoning once, twice, three times, depending on your measure. Certainly the most recent credit bubble was pure deferral, pure delusion: Wile E. Coyote out over the gap, legs spinning. He hovered there for a while, and lots of people pretended the laws of physics had been revised, even as he started to plummet. Boom. By boom I mean bust.

Versions of this plaint have been made frequently enough by "mainstream" economists, seemingly unaware they're borrowing the lineaments of an account they've spent careers disavowing as a mystery cult. Well, there are no atheists in foxholes. Or, as a friend says, Marxism is like gold; in an economic crisis, everybody runs to those who have it. Not surprisingly, economists cannot borrow, even at low levels of interest, the insights most needed: the basic understanding that capitalism's flaws are internal to its own logic and can't be whisked away by another round of financial regulation or everybody promising to be less of a creep. It is indeed a compulsion, and it ends poorly.

Ezra Klein - The scariest jobs graph you've seen yet

Ezra's right. Even if the economy revs up and generates the highly unlikely number of 500,000 jobs a month, it will take 3 years to get back to where we were before the recession began. As it stands, things are likely to malinger as they are today for the next two decades.

The End of Men - Magazine - The Atlantic

This is pretty interesting, but I'm not sure if it is really an accurate picture of reality. The idea that anyone is succeeding in this economy feels pretty misleading.

After the New Economy — Crooked Timber

Apparently being a creative type, or a knowledge worker has been a sham all along.

The conventional wisdom of the late 1990s was that the New Economy was an unprecedented miracle about to transform us forever. The conventional wisdom after the party ended and the recession and scandals began was that it had all been “a mix of collective folly and outright criminality.”

Microeconomic and Macroeconomic Excess Supply - Grasping Reality with Both Hands

A Macroeconomic explanation for what we already knew. We are in a downward wage and price deflationary spiral. There is an excess supply of goods and labor and low demand from consumers (who are broke) and employers (who are trying to maintain profits). Economic equilibrium looks more like entropy to me.

[via Yglesias]

It's the Voodoo Economics, Stupid

This essay is a good take-down of supply side economics:

Trickle-down economics died yesterday morning at 10AM. The cause of death was a data release from the US Census Bureau, but trickle-down had been ailing from lack of empirical support for decades. Also known as "supply-side economics," trickle-down was the love child of Ronald Reagan, Arthur Laffer, and Jude Wanniski. It is survived by Larry Kudlow and Co., and the editorial page of the Wall St. Journal.

The genius of this scheme is that the wealthy sell the middle class on tax cuts, and the promise of a rising tide, while funneling all of the economic gains upward to the top 1%. It would be interesting to see how this philosophy has fed the rise of our debtor culture by setting unreasonably high expectations of upward mobility while undermining the earning potential of anyone who actually works for a living.

[via Kevin Drum]

Jim Cramer Gets Serious

Ordinarily he and his show seem to exist solely for the entertainment value of the boo-yah (limited thought that might be). But now he seems to be getting kind of serious:

In the "Stop Trading" segment, Cramer said the nation's central bank is "asleep" and should immediately "relieve the pressure" on financial firms and the nation's home owners who are facing big increases in their mortgage payments as 'teaser' rates expire. Many thousands will "lose their homes," he warned. "This is not the time to be complacent."

I'm honestly shocked that he'd be making these statements. My impression of Wall Street is that it represents the most libertarian anarcho-capitalist extreme of the Christ, Capital, Consume triumverate. They put greed and profit first, and if the little guy gets squashed, too bad. Cramer on the other hand seems to be predicting the next great Depression should the Fed fail to protect consumers and homeowners. Can this be right?

I'm both confused and impressed.