As far as our economy's concerned, what we're witnessing is a "
A Recovery In Name Only."
With every passing day (see: "Head's Up," at the very bottom of this diary), the latest information I'm reading on our economy is telling me--happy news and deliberate spin aside--that things are getting worse, or they're soon going to get much worse, not better. Apparently, Nobel Prize Winning economist and global warming/climaticide expert--and my pick for the most important person on the planet at this moment--Joe Stiglitz, is now telling us that he wholeheartedly agrees with my sentiments. Former Fed Chair Paul Volcker echoes many of Stiglitz' positions on this. Paul Krugman concurs (see link in first sentence of this diary). Simon Johnson, as far as 90-plus percent of our population's concerned (see: "Our Two-Track Economy"), as well.
More about Stiglitz' latest, and quite important, statements on all of this in a moment. But, first...
WHERE ARE WE?
HEALTHCARE. Paul Krugman, in "Baucus and the Threshold," asked us, Friday: Where do we draw the line on Max Baucus' excuse for health care reform? Many folks, from President Obama on down, are placing their initial hopes for a major effort aimed at a permanent, long-term fix for our economy to start with health care reform legislation currently in our legislative branch. By most accounts here, this effort to successfully navigate this through to successful fruition is a contorted mess right now, at the very least. Here we are in mid-September, and nobody really knows whether we'll even be close (let alone, successful) in our efforts to get past the first step of this matter anytime soon.
UNEMPLOYMENT/EMPLOYMENT. Unemployment numbers are still tanking--or going sideways depending upon which numbers you're talking about--at best, with ongoing, weekly unemployment insurance claims stuck in the high 500,000 range for over three months, and overall unemployment rates are expected to enter into the double digits (and I'm only talking about the Bureau of Labor Statistics' U.3 index, not the more accurate, and much greater numbers posted in their U.6 index), and remain there throughout 2010, according to Calculated Risk's projections. Yes, across the board, jobless projections are worse for 2010 than they were just a couple of months ago, although only some are outright telling us this truth. (And, before you tell me about unemployment being a lagging indicator of an economic recovery, I'd suggest you read Stiglitz' most recent commentary on this, below.) IMHO, it pretty much slams the door in the face of those politically bereft observations. Furthermore, this isn't a real recession, it's just another set of results--albeit perhaps the biggest "set of results" yet--from another economic bubble bursting.
U.S. AUTO INDUSTRY/MANUFACTURING. The Cash-for-Clunkers program was a very short-lived failure, and auto exec's are already starting to forewarn us that September's sales numbers are going to be worse than awful.
RESIDENTIAL REAL ESTATE/MORTGAGES. Some of our most highly-respected states' attorneys general are now--emphatically--telling us that the residential mortgage meltdown is still exploding, and it's getting worse, not better. If folks are looking to housing to lead us out of the recession, they should consider looking elsewhere. Option ARM/"Pick-a-pay" mortgage portfolios are absolutely imploding in the finance community, and like our government's efforts to backstop the mortgage industry, the private sector mortgage industry balance sheets are expected to get worse, not better, as well. The GSE's (government-sponsored enterprises, such as Fannie Mae and Freddie Mac) and the FHA are beyond bankrupt.
COMMERCIAL REAL ESTATE. And, next-to-last, but not least, the commercial real estate bust is going to bite our economy in the ass so hard, in coming months, that the FDIC is now in the process of hiring a bevy of appraisers that specialize in the market. You know all those office buildings we're hearing about that are experiencing 20% vacancy rates? At least temporarily, taxpayers are going to own many of them! Hey, look at the bright side of things, with foreclosures in an ongoing downward spiral at record proportions, that empty office space might bring new meaning to the term: dual use.
CONSUMER SPENDING/CONSUMER CREDIT. You know that myth you've been hearing about the consumer saving more these days? Well, if you're in the top 10%, income-wise, it's true. But, what about the other 90% of us? Forget about it.
Consumer spending is tanking at depths never before measured.
The dearth of consumer and small-business credit continues to get worse, not better, contrary to some misinformation being put forth in the blogosphere. Throughout most of the year, even the numbers being reported--which are nowhere near as bad as the reality on the street--are blowing out the false meme that bank credit's getting better, which is still being preached by many. [http://www.nakedcapitalism.com/...
Make no mistake, consumer credit is falling off of a cliff].
There is one American who's seen this all coming for years. Unfortunately, folks in D.C. are downright going out of their way to ignore him while the rest of the world treats him like a rockstar! Some, like Paul Krugman, call him: "...an insanely great economist, in ways you can't really appreciate unless you're deep into the field."
Krugman, also in the brief article, linked immediately above, calls him "...a giant among economists." I couldn't agree more. That's why when Stiglitz adds something new to the dialogue which is especially important, I think it's critical that we take a listen to what he's saying, even if some misguided souls in D.C. are not.
STIGLITZ' LATEST: "Nobel winner Joseph Stiglitz predicts recession's end: not now, but 2012"
Nobel winner Joseph Stiglitz predicts recession's end: not now, but 2012
Sam Gustin
(AOL) Daily Finance Blog
Sep 17th 2009 at 11:40AM
Did you hear? The recession is over! Or at least it will be in the foreseeable future! And several of our leading economic sages have said so, so that makes it true. Or does it? Not when there's a prominent naysayer like Joseph Stiglitz. The Nobel-winning economist, a former head of the World Bank and now a professor at Columbia University, has a blunt -- if characteristically bearish -- warning of more economic turbulence ahead.
Stiglitz's outlook is anything but rosy. Americans must prepare for the recession to continue until 2012 -- practically, if not technically -- he said this week in an interview with DailyFinance...
--SNIP--
...Stiglitz paints a picture of a U.S. economy that has stanched the most serious bleeding but remains deeply wounded. "I think we would be lucky to be out of the recession by 2012," Stiglitz says. "2010 may be a year of positive growth, though far weaker than would be necessary to get unemployment down significantly." Central to the grim diagnosis, Stiglitz says, is the lack of new jobs -- an argument echoed by the Organisation for Economic Cooperation and Development, which this week said high unemployment in the world's wealthiest countries could last years...
...Stiglitz says. "2012 is an optimistic view of when we could be over the travails. The technical term 'recession' is two quarters of negative growth, and we're likely to have positive growth this quarter and next quarter -- but that's not what most people mean by 'out of recession.' Most people mean, 'Are jobs plentiful? Is unemployment low? Are wages strong?' And in those core ways, we are far from being out of the recession..."
--SNIP--
..."The couple million homes in foreclosure, commercial real estate, high unemployment, mean that some people are not going to be able to repay loans that are outstanding. The banking system is by no means out of the woods. There is reason to believe that there will be continue to be bankruptcies of the banks."
Stiglitz is particularly troubled by the continued failure of small to medium-sized banks that provide the lifeblood of capital to the country's small businesses. "That will impair the 'real' sector, and create more unemployment, and contribute to the vicious weakness and downward cycle of the economy."
But, the Nobel Prize winner doesn't stop there...throughout the article, he rips Wall Street--and particularly Goldman Sachs--a new one.
...he reserves special contempt for Goldman Sachs and the $13 billion injection it received from the U.S. as part of AIG's counter-party bailout last year.
Stiglitz continues on to focus upon Goldman's "too-big-to-fail" status asking at what point does that morph into potential conflicts of interest? And, then he just comes out and says it...
..."The main problem that Goldman raises is a question of size: 'too big to fail.' In some markets, they have a significant fraction of trades. Why is that important? They trade both on their proprietary desk and on behalf of customers. When you do that and you have a significant fraction of all trades, you have a lot of information."
Further, he says, "That raises the potential of conflicts of interest, problems of front-running, using that inside information for your proprietary desk. And that's why the Volcker report came out and said that we need to restrict the kinds of activity that these large institutions have. If you're going to trade on behalf of others, if you're going to be a commercial bank, you can't engage in certain kinds of risk-taking behavior."
IMHO, the fact that Joe Stiglitz is now focusing upon Goldman's potential front-running capabilities says a lot as to where this story of absolute greed is being navigated today.
In fact, over the next few days, I'm almost positive we're about to find out some new facts relating to (as Harry Truman put it so well) "...the history we don't know..." that will make our heads spin...
# # #
(JAMES STEWART'S "EIGHT DAYS"...HEAD'S UP: What may be, perhaps, the most definitive piece published to date on our economic mess, at least from a historical perspective, by Pulitzer Prize-winning journalist James Stewart, will be available for public review on Monday at the New Yorker's website. I've been hearing downright incredible buzz, and from many folks whom I hold in high regard, about this piece for the past couple of days. Entitled, "Eight Days," here's more about it at the: New Yorker's News Desk. You'll need a subscription to read the piece until then, but here are links to some snippets and related insights from others, since even the preliminary reports on this 19,000-word, 24-page article are quite amazing--lots of new information--right here, and here. I'll be running out and buying a newstand copy of it right after I post this diary.)