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Posts Tagged ‘Great Depression’

The American Prospect

Jamelle Bouie

May 2, 2012

The super wealthy apparently believe that they deserve constant deference.

Greg Sargent is rightfully stunned by the entitled petulance of Wall Street bankers who are shocked—shocked—that President Obama would do anything other than praise their indispensable brilliance:

Wall Streeters are so upset about Obama’s harsh populist rhetoric that they privately called on him to make amends with a big speech — like his oration on race — designed to heal the wounds of class warfare in this country. […]

Of course, their exaggerated weariness notwithstanding, the “wounds of class warfare” haven’t been borne by Wall Streeters, who remain fabulously wealthy even after causing the worst downturn since the Great Depression. If there’s anyone waging class warfare, it’s the radicalized representatives of the rich, who have successfully engineered government to enhance their wealth at the cost of our shared responsibilities. As such, the actual victims of class warfare are the ordinary Americans who face stagnant wages, rising costs, and a tattered safety net.

After going through the insanity of Wall Street complaints, Sargent ends his post on this note:

One wonders if there is anything Obama could say to make these people happy, short of declaring that rampant inequality is a good thing, in that it affirms the talent and industriousness of the deserving super rich. It certainly seems clear that they won’t be satisfied until he stops mentioning it at all. [Emphasis mine]

If you think the bolded section is an exaggeration, you should take some time to read Adam Davidson’s New York Times profile of Edward Conard, a former partner at Bain Capital—Mitt Romney’s investment fund—who now works as an apologist for the ultrawealthy. Conard believes three things. First, that millionaires and billionaires earned every penny of their wealth through merit and hard work:

God didn’t create the universe so that talented people would be happy,” he said. “It’s not beautiful. It’s hard work. It’s responsibility and deadlines, working till 11 o’clock at night when you want to watch your baby and be with your wife. It’s not serenity and beauty.”

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Crowd at New York's American Union Bank during a bank run early in the Great Depression. (Photo: Public Domain)

Inviting Chaos: The Perils of Toying With the Debt Ceiling

Friday 27 May 2011
by: Ellen Brown, Truthout

[T]hreatening to default should not be a partisan issue. In view of all the hazards it entails, one wonders why any responsible person would even flirt with the idea.
Alan S. Blinder, Princeton professor of economics, former vice chairman of the Federal Reserve 

A game of Russian roulette is being played with the national debt ceiling. Fire the wrong chamber of the gun, and the result could be the second Great Depression.

The first Great Depression led to totalitarian dictatorships, war to consolidate power and concentrations of capital in the hands of a financial elite. The trigger was a default on the global reserve currency, in that case the pound sterling. The US dollar is now the global reserve currency. The concern is that default could create the same sort of global panic today. Dark visions are evoked of the president declaring a national emergency, the Federal Emergency Management Agency (FEMA) plans locking into place, camps being readied for protesters and the secret government taking over.

This may all just be political theater, but do we really want to get close enough to the economic precipice to find out? The conservative ideologues toying with the debt ceiling are doing it to force cuts in the budget, a budget that was already approved by Congress. Congress is being held hostage by a radical minority pushing a risky agenda, one that is based on an economic model that is obsolete.

High-Stakes Gambling

On May 16, The Wall Street Journal published an opinion piece titled “The Armageddon Lobby,” which claimed that a “technical default” on the federal debt was just “political melodrama” and not really a big deal: “[B]ond markets can figure out the difference between a genuine default when a country can’t pay its bills and a technical default of a few days if it serves the purpose of fixing America’s fiscal mess.”

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The Third Depression

THE NEW YORK TIMES- By PAUL KRUGMAN
Published: June 27, 2010

Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer.

But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence. As a practical matter, however, America isn’t doing much better. The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels.

Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around the edges of Europe to justify their actions. And it’s true that bond investors have turned on governments with intractable deficits. But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which has been far more reluctant to take the hard-liners’ medicine.

It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.

So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.

And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.

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U.S. Intel Chief’s Shocking Warning: Wall Street’s Disaster Has Spawned Our Greatest Terrorist Threat

By Chris Hedges, Truthdig. Posted February 17, 2009.

The Director of National Intelligence argued that Wall Street, rather than Islamic jihad, has produced our most dangerous terrorists.

We have a remarkable ability to create our own monsters. A few decades of meddling in the Middle East with our Israeli doppelgnger and we get Hezbollah, Hamas, al-Qaida, the Iraqi resistance movement and a resurgent Taliban. Now we trash the world economy and destroy the ecosystem and sit back to watch our handiwork. Hints of our brave new world seeped out Thursday when Washington’s new director of national intelligence, retired Adm. Dennis Blair, testified before the Senate Intelligence Committee. He warned that the deepening economic crisis posed perhaps our gravest threat to stability and national security. It could trigger, he said, a return to the “violent extremism” of the 1920s and 1930s.

It turns out that Wall Street, rather than Islamic jihad, has produced our most dangerous terrorists. We will see accelerated plant and retail closures, inflation, an epidemic of bankruptcies, new rounds of foreclosures, bread lines, unemployment surpassing the levels of the Great Depression and, as Blair fears, social upheaval.

The United Nations’ International Labor Organization estimates that some 50 million workers will lose their jobs worldwide this year. The collapse has already seen 3.6 million lost jobs in the United States. The International Monetary Fund’s prediction for global economic growth in 2009 is 0.5 percent–the worst since World War II. There are 2.3 million properties in the United States that received a default notice or were repossessed last year. And this number is set to rise in 2009, especially as vacant commercial real estate begins to be foreclosed. About 20,000 major global banks collapsed, were sold or were nationalized in 2008. There are an estimated 62,000 U.S. companies expected to shut down this year. Unemployment, when you add people no longer looking for jobs and part-time workers who cannot find full-time employment, is close to 14 percent.

And we have few tools left to dig our way out. The manufacturing sector in the United States has been destroyed by globalization. Consumers, thanks to credit card companies and easy lines of credit, are $14 trillion in debt. The government has pledged trillions toward the crisis, most of it borrowed or printed in the form of new money. It is borrowing trillions more to fund our wars in Afghanistan and Iraq. And no one states the obvious: We will never be able to pay these loans back. We are supposed to somehow spend our way out of the crisis and maintain our imperial project on credit. Let our kids worry about it. There is no coherent and realistic plan, one built around our severe limitations, to stanch the bleeding or ameliorate the mounting deprivations we will suffer as citizens. Contrast this with the national security state’s strategies to crush potential civil unrest and you get a glimpse of the future. It doesn’t look good.

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Republicans Clearly Are Willing to Let This Country Collapse if They Think it Will Win Them Elections

By Doug Kreeger, AlterNet. Posted February 4, 2009.

It is abundantly clear that the Republican leaders are going to do everything to prevent Obama and the Dems from doing anything constructive.

Last week, we witnessed how the Republicans will help serve this country in the worst crisis since the Great Depression.

By standing together in opposition to the stimulus package, they showed the world that they haven’t at all joined the momentum of the new administration, rather they are still playing politics and are focused on the 2010 elections. Their objections to the stimulus have nothing to do with trying to solve this crisis.

I was always struck during the Bush Error (otherwise known as Era), that the axis of evil title was slapped onto any entity not aligned with their inane response to any issue they faced. Whether it was Iraq or Hurricane Katrina, time and time again we were expected to take their word through blind faith and or outright deceit.

Now the remaining cronies have sunk to an unthinkable new low. It is abundantly clear that the Republican leaders are going to do everything to prevent anything constructive from happening. They will be sure our damaged nation does not get fixed on Barack Obama’s watch, the public be damned.

Last week, Obama’s plans were debated in Congress. His goal of creating 2 million to 3 million jobs in the next two years through a massive rebuilding program of our crumbling infrastructure, was countered by the Republicans’ revised stimulus plan. Their plan was not detailed beyond more tax cuts.

Here’s the catch: The Republicans said their plan would create 6 million jobs. Really. Remember “Mission Accomplished”? Just saying something doesn’t make it true.

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