Submitted by Jesse of Le Café Américain
“The banks must be restrained, and the financial system reformed, and balance
restored to the economy, before there can be any sustained recovery.”
Often a closing comment from our blog, essentially this is what Robert Reich is saying in his recent essay on the economy.
The median wage must generally increase for consumption to resume, and for this to happen the heavy taxes of the financial sector and the oligarchs on the real economy must be lowered significantly in proportion to its size.
There is reason for pessimism that this can happen voluntarily. I have come to the conclusion that there is a pathological drive in some small portion of the population to acquire and control and devour rather than consume, even to their own destruction.
The law sets limits on the speed on highways to protect the many from the reckless and willful behaviour of the few. That we ought not to set limits on the banking system is a remarkable bit of speciousness.
There are obvious questions of how to limit, and how to detect and prevent and prosecute violations, but few can argue that not regulating traffic is the best solution to the difficulty of the task. The comparison of highway regulation to economic commerce and financial transactions is more valid than obtuse. And there are many Wall Street bankers guilty of at least manslaughter in this most recent episode of reckless defiance of the common good for the sake of personal profits.
The comparison of this latest epidemic of bad economic behaviour is strikingly reminiscent of the Gilded Age at the end of the 19th century and the Roaring 20’s. As you may recall both periods were followed by economic dislocation and a world in flames.
Why we allow this sort of bestial behaviour to ravage the many, in the mistaken support of ‘free markets,’ where nothing these people touch can remain free and effective and efficient for long, is truly an accomplishment of propaganda and those blinded by ideology.
Robert Reich
When Will The Recovery Begin? Never.
Thursday, July 09, 2009
The so-called “green shoots” of recovery are turning brown in the scorching summer sun. In fact, the whole debate about when and how a recovery will begin is wrongly framed. On one side are the V-shapers who look back at prior recessions and conclude that the faster an economy drops, the faster it gets back on track. And because this economy fell off a cliff late last fall, they expect it to roar to life early next year. Hence the V shape.
Unfortunately, V-shapers are looking back at the wrong recessions. Focus on those that started with the bursting of a giant speculative bubble and you see slow recoveries. The reason is asset values at bottom are so low that investor confidence returns only gradually.
That’s where the more sober U-shapers come in. They predict a more gradual recovery, as investors slowly tiptoe back into the market.
Personally, I don’t buy into either camp. In a recession this deep, recovery doesn’t depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped.
Problem is, consumers won’t start spending until they have money in their pockets and feel reasonably secure. But they don’t have the money, and it’s hard to see where it will come from. They can’t borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water — owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving. Those who can’t are hunkering down, as they must.
Eventually consumers will replace cars and appliances and other stuff that wears out, but a recovery can’t be built on replacements. Don’t expect businesses to invest much more without lots of consumers hankering after lots of new stuff. And don’t rely on exports. The global economy is contracting.
My prediction, then? Not a V, not a U. But an X. This economy can’t get back on track because the track we were on for years — featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere — simply cannot be sustained.
The X marks a brand new track — a new economy. What will it look like? Nobody knows. All we know is the current economy can’t “recover” because it can’t go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.
My Reference Frame 
Posts
This is the era of Les Enfants Perdus — and our society is lost (primarily) because of the corruption of The Bush Coup — there is no denying that fact.
It may be true that the damage done by Bush can be connected to previous administrations and ageless policy faults, but The Bush Journey has undone the spirit of America by allowing our financial system to implode. Perhaps this process was done in the name of conservative politics, maybe patriotism but without doubt, the abuse of absolute power and the absolute corruption that exists is systemic and the Multi-Trillion Dollar problems un-fixable.
There will be many economists who will go back to dog-ear'd textbooks and bring up the glimmer of hope as they mis-use the prospect of another jobless recovery (which may occur in 6 months) — but as they fly that limp patriotic flag of surrender, the reality is that the vast amount of jobs lost, are not coming back anytime soon and that there is no hope on the horizon for at least a decade.
The jobs of the near future are no different than the jobs of today and the major problem in this, is that fewer jobs will be available for a greater supply of unemployed people, who will grow increasingly hopeless and then desperate.
Are the jobs of the future to be found at auto plants, in building homes, in servicing derivatives, by daytrading, to clean windshields at the gas station, to operate elevators in discount malls, in delivering newspapers or various jobs that continue to fall into the obsolete zone, where outdated inefficiency eradicates the connection between productivity and GDP output.
Bottom line, this recession is in the early stages and will painfully unfold into something very new and something that will be looked back on as the post-internet recession, where the efficiency of corruption brought America to its knees. I fully anticipate that The Obama staff will do its part to build upon the Bush Foundation and talk BIG about CHANGE and then as with Bush, bullshit people to a point where they surrender to the fact that the future is hopeless and that there is no recovery ahead!
Full Disclosure: I'm too burned out to edit this…