The feds are worried about the CRE crash:
Banks in the U.S. “are slow” to take losses on their commercial real-estate loans being battered by slumping property values and rental payments, according to a Federal Reserve presentation to banking regulators last month.
The remarks suggest that banking regulators are girding for a rerun of the housing-related losses now slamming thousands of banks that failed to set aside enough capital during the boom to cushion themselves when the bubble burst. “Banks will be slow to recognize the severity of the loss — just as they were in residential,” according to the Fed presentation, which was reviewed by The Wall Street Journal.
In other cheerful news:
A year after Washington rescued the big names of American finance, it’s still hard to get a loan. But the problem isn’t just tight-fisted banks.
The continued disarray in debt-securitization markets, which in recent years were the source of roughly 60 percent of all credit in the United States, is making loans scarce and threatening to slow the economic recovery. Many of these markets are operating only because the government is propping them up.
But now the Federal Reserve has put these markets on notice that it plans to withdraw its support for them. Policy makers hope private investors will return to the markets, which imploded during the financial crisis.
The exit will require a delicate balancing act, government officials said.
“You do it incrementally, where and when you think you can, and not sooner,” said Lee Sachs, a counselor to the Treasury secretary, Timothy F. Geithner.
The debt-securitization markets finance corporate loans, home mortgages, student loans and more. In good times, they enabled banks to package their loans into securities and resell them to investors. That process, known as securitization, freed banks to lend even more money.
Many investors have lost trust in securitization after losing huge sums on packages of subprime mortgages that had high default rates. The government has since spent more than $1 trillion trying to restore the markets, with mixed success.
And until something is done to reshape the market does business, no one in their right might would trust this stuff. At any rate, it is going to be both tragic and funny to watch Atrios and the rest of the DFH crowd be right about a double-dip recession.
The problem is that DC has absolutely no will to change the system. The banks own Congress. We are all screwed. Bring on the Sarahpocalypse.
A lot of times what motivates us DFH’s is that we find more convincing arguments to be more convincing than less convincing arguments.
Like the argument that very little taxpayer money, if any, would ever be lost in the programs to prop up our collapsing
casinoderegulated banking industry. Ha ha, I was such a dumb DFH.
They are only understanding this now? Obama’s team is more incompetent than I thought.
As I mentioned yesterday…I think I’ll just go cut my wrists because we are totally fucked, folks. I’m just glad I have put my little nest egg into the least risky thing possible. I’d been doing it incrementally anyway, since I’m getting fracking old. But the minute I made up what had been lost, I rolled it all over into the low interest but high security fund. And the sad thing is that it will probably tank, too.
nowback then? sigh
The biggest annoyance is that with the limited short-term memory of too much of the electorate, a significant portion will blame Obama and the democrats for failing to rescue the economy rather than the preceding eight to twelve years when the seeds of disaster were being sown. True, a great many of them understandably have difficulty focusing beyond the fact that they are still feeling pinched now, and that the 2008 election didn’t seem to cure anything overnight. But Obama didn’t exactly help himself by latching onto Geithner so tightly and doing so many things early-on that seemed uncannily just like doing the bidding of the GOP big-business big-financial Wall Street crowd behind the mess, bailing THEM out as a first priority. AIG bonuses being a great example. It cost Obama dearly that by spending so much early political capital standing behind boy wonder Geithner through G’s tax problems that he couldn’t afford to hold onto Daschle as HHS Secretary through Daschle’s own problems, which in the long run has proven far more costly in terms of skilled management of the health care reform bills through Congress. Yeah, Daschle has some troubling ties with big Pharma, but nonetheless there would have been far fewer near-disasterous hairpin turns and counterproductive compromises with Daschle on-board than not.
It would be galling indeed if as a result of a double-dip recession, the GOP is able to recoup if not a majority, then a block big enough to effectively roadblock anything much in the way of anything further Obama tries to accomplish. Because the GOP behavior on health care reform indicates that they intend to do just that with just about ANYTHING that comes up while he’s president, with the possible exception of military and war expenditures.
Calc’d Risk has been all over this for months. Pretty obvious, if you ask me (no one does), that the economy is still fucked when so many shopping centers are empty. Everywhere I go I see ghost malls.
Reading these sorts of things, I’m always curious whether the people being denied loans are genuinely low credit risks or are just accustomed to a world in which everyone’s extended credit as risk is magically waved away on the back end. The unprompted meteoric rises in my credit card limits have stopped (limiting my ability to draw cash advances and flee the country), but that’s my only anecdotal data point.
FYI, Pantload’s back on the Ayers wrote Dreams train along with everyone else who doesn’t understand sarcasm.
Bob In Pacifica
How about a public option for a banking system? How about a single-payer bank?
This is exactly why I don’t care if Obama gets blamed. He brought this on himself.
Brick Oven Bill
Re: “…said Lee Sachs, a counselor to the Treasury secretary, Timothy F. Geithner.”
Who is Geithner’s new ‘Councilor’ Lee Sachs?
Former Bear Stearns investment banker rising to head of its Global Capital Markets department. Transferred to the government late in the Clinton Administration. Whether there are blood ties to Goldman Sachs is unknown. Surely he is not a lobbyist.
Here is some better counseling for Tim. Stop messing with the free market. Acknowledge HBD and recognize that different groups will have different outcomes, and that this is OK, as your job is to provide equal opportunity, not equal outcomes.
A delusional government trying to play God is largely responsible for getting us into the housing bubble in the first place. Stop it. Fire your investment banker councilors and replace them with men of integrity, such as Captain Sullenberger or Captain Phillips.
We need integrity and transparency in the financial markets, not self-interested financial engineering by the world’s smartest men, who, in practice, are a bunch of greedy idiots.
General Winfield Stuck
The double dip recession is the greatest threat to the dem majority in congress, and Obama’s approval rating. I’m not smart enough to predict if it will or won’t happen, but know how to cross my fingers.
But it is still looking like it might be impossible to put the regulatory genie back in the bottle. When the system has been primed for quick and easy bucks, it will be like coaxing water to run uphill.
And when personal bank accounts get worrisome for average joes and jolies, people do all sorts of desperate things, like putting back in power the greedy wingnuts who caused the disaster in the first place. Welcome to the Funhouse.
CRE is well and truly fucked, and it’s not showing yet.
We recently moved. Our existing landlord, like almost all of them, was trying to maintain lease rates and offered us a re-up at about parity, which we laughed at. In short order, we found better, cheaper space. At which point our existing landlord made a comparable offer.
This was a drop from $26/sf to $17/sf. We also got comped several months rent and a HUGE construction allowance – factor those in and we’re very well below $17/sf.
Now figure that drop across all commercial RE, factor those future cash flows against inflated mortgages, mix in a liberal dose of CDOs, note that the economy has *worsened* since we moved….
The big guys, we found out during our move, were trying o hold the line on rent reduction. They are taking vacancy over dropping rental prices. That’s burning cash to avoid a nasty cash flow reset. If this is a short term downturn, that’ll work. Extend it long enough, and they will simply fold – not only will they not be able to escape the reset, they will have burned a ton of cash doing so.
Completely fucked, like a homeowner paying the mortgage with credit cards and counting on the easter bunny to deliver a wad of cash.
General Winfield Stuck
@Bob In Pacifica:
We could call it Manny’s Payday Loan Inferno.
It’ll all be OK, once the starving and enraged masses come to realize that banker flesh can be prepared using standard pork recipes, and the rape gangs realize that the wives and daughters of bankers can be coerced into using their considerable bedroom talents for scraps of food.
Sadly for the bankers, the police and military that they rely upon for their physical protection from the righteous rage of their victims tend not too work when they’ve not been paid.
It’s true that the handouts started under Bush, but Obama continued them.
@Brick Oven Bill:
As if the government isn’t all about providing unequal opportunities for the rich and well-connected.
Chad N Freude
@Brick Oven Bill: Coherent, logical (whether one agrees or not) (although Sullenberger and Phillips as financial advisers is a bit over the top). Impostor! What have you done with the REAL Brick Oven Bill, ?
@General Winfield Stuck:
This is my concern. Your average joe or jolie isn’t all that bright (see video of any number of August town halls).
As for me, I now do all my investing with the firm Mason and Spade.
The Moar You Know
From where I sit in sunny San Diego, here in the heart of the biotech ghetto, the closest occupied building to me is now three buildings down the street from me. Almost every single building on my entire street has either a “for lease” or a “for sale” sign out in front of it. And none of them are moving – not one single lessor or purchaser has moved in within the last five months.
I think, if anything, the problem in CRE is understated.
@The Saff: When the nation is demanding a better solution to health care than the ones Dems are providing, I’m not sure what will propel them back towards Republicans.
I’ve seen a few guys in my office start hitting the free market kool-aid again, and I have no doubt we’ll see some slippage among Obama Republicans. But I just can’t see the nation voting for another reincarnation of Bush four years, or even eight years, down the line.
I’m also curious (although not too curious) about how many more of these market shocks the financial titans can take. We bailed out the banks once, but I can’t see us plowing another trillion dollars into the clusterfuck a year down the line. At a certain point, that’ll just be political poison. Either the Dems will balk and the money won’t flow. Or Republicans will take an election cycle, and stall out funding in a fit of free-market ideological fury.
Either way, the gravy train can’t keep trucking on forever. If the system doesn’t stabilize, it’s going to implode. And, at the height of the market mess, even Goldman Sachs was teetering on the brink of collapse.
Sorry, I don’t go for right wing psychobabble — sometimes we do want the government to insure equal outcomes. Not always. But that’s why sense is better than inane sloganeering. Also, ACORN.
Me either. However, I’m still concerned that the average voter doesn’t know the history of the current economic mess. And I wish I had more faith that the Democrats in Congress will have the guts or the will to pass some meaningful legistlation that will do a better job of regulating Wall Street.
[Sigh]. I don’t know. I try to hope for the best but news stories like this don’t help.
One major problem with CRE is that it’s very overbuilt. Add the recession and it has pulled it all together.
As I’ve said before, however, I think all the doom and gloom forecasters are wrong. I know 3d quarter GDP will be positive. I think 4th quarter will show about 2% real increase, and starting next year we’ll see 3-4% GDP gains. The reason for the larger gains will be Stimulus the Sequel and the Health Care bill. The bill will pass, and even if it’s the worst model currently existing it’s going to dump a LOT of money into the economy. Money thrown in and SPENT stimulates.
Unemployment will be ugly for a while. The 4 week moving average of initial claims peaked a while ago (which in every preceding recession has coincided with the bottom) but the rate will continue to be high for a while. Two reasons for this. First the historical: on the way down firms quit hiring, then cut hours, then cut employees. On the way up firms quit cutting employees, then increase hours, and only add employees as things are enough higher to do so. Not till that last do the unemployed numbers decline.
The second reason is specific to this recession. There are a LOT of people who have quit. (We went from ~62% workforce participation to ~59% over the last two years. We’d increased from 57% in the 1970s and passed 59% on the way up in the mid-1980s.) Thing is a lot of people not presently counted in the unemployment rate will regain hope, start looking, and continue to keep the unemployment rate DESPITE increasing numbers of jobs.
(For this reason I’m going to keep an eye on various total employment numbers. They’re going to give a better picture of the ‘truth’ than the rates.)
Bottom line – we’re near the bottom and I don’t expect a double-dip or doldrums. It’s not pretty now, some things will be ugly for a while, but we’re looking upslope now.
Well, this is interesting. Seems that regulation works! A very fascinating study from UNC that shows that those states that had strict anti-predatory lending laws on mortgages have fewer foreclosures! Amazing how that works, isn’t it?
@The Saff: It would be a really really really big help if the Democrats quit voting for Republican ideas, particularly when those ideas have a history of epic fail.
Scrambling to fix the AMT while the unemployment rate doubles was one of the most absurd mis-prioritizations of 2009. The failure to raise taxes on the top income earners, when the deficit yawned wide, was another big blunder.
It’s obnoxious hearing the GOP complain about Democrats failing to fix what the GOP broke while using ideas the GOP demands but won’t vote for. Small wonder people don’t think the Democrats are doing any better than their Republican counterparts.
Exactly. That’s part of how Reagan won in 1980. That, and Paul Volcker working to stave off hyperinflation, which led to transient economic pain that, along with Teddy Kennedy’s nomination challenge and refusal to heal the wounds in which he’d spent the better part of a year salting, gave us the wonderful Republican governance we know today, by cementing the wiring of DC as a Republican town.
The health care bill basically doesn’t kick in until AFTER the next president takes office (whethe BO again or otherwise). I don’t think it will do anything for the economy before that.
It’s true that Republicans have a very short memory, and they created this mess. It’s absurd to think that Obama should have fixed everything in eight months.
But you can’t let Obama and his team off the hook. They have continued the “policy” of shoveling vast amounts of taxpayer money onto Wall Street and and into the banking system with no serious effort yet at fundamental reforms. And the window of political opportunity may already be closed.
He should have tackled this before or in tandem with health care. This has been my biggest disappointment with the Administration. The price for this delay may be very, very high. We may end up like Britain in the 1970s–a zombie economy.
The AMT needed fixing as it hadn’t been adjusted since its adoption; even DFHs like Atrios agreed on the need to fix it and the hit would have reached deep into the middle classes. The Republicans gleefully worked to block reform, of course.
That being said, the Dems could have and should have worked on other things as well.
The thing about the DFH (and I am one myself sometimes) is that they’re ALWAYS predicting doom and gloom. When they’re right, they look amazing, but the missed disaster predictions are forgotten. It’s hard to keep stressing over the rather real concern of peak oil when it gets predicted over and over again. At some point, we just stop listening.
It’s what happens when you let the DLC/Blue Dog crowd that’s controlled Democratic politics since the Clinton era dictate policy. It was Rahm Emanuel who gave us NAFTA, which along with the Rosty non-scandal (which would never have rated a news article had it been a Republican congresscritter) and the DADT sellout, demoralized the Dem base in 1994. It looks like he’s trying to do the same thing for 2010.
Precisely. Yet there are doom junkies out there who can’t handle anything that isn’t a doom fix.
I remember when the economics blogger Bonddad was one of the more popular diarists on Daily Kos. Yet, recently, he fell out of favor to the point where he was hounded off the site — even though his methodology hadn’t changed one bit. Why? Because he dared state that things, while not even close to perfect or even good, were slowly improving.
Totally off-topic, for which I apologize, but if the spirit moves you:
@Napoleon: Depends on which bill gets passed. That’s part of the problem of making definitive statements – there are competing and strongly supported bills which have different elements.
Much of HR3200, for example, kicks in pretty quickly. So does the HELP committee’s version. The Baucus bill, on the other hand, currently does as you say – not till 2013.
Nonetheless, the passage of the bill will have an effect even in the worst case as people and organizations ramp up to deal with it.
@Phoenix Woman: I saw some of that in housing bubble blogs. It wasn’t enough that the prices were too high, it wasn’t even enough to say that the structures built on home prices could cause a problem. Instead people started a doom auction where each post had to make the one before it seem tame until the phrase, “This will make the Great Depression look like the dot com boom,” was a cliche.
…and then they wondered why no one listened to them before the collapse…
The AMT was targeting families in the six figure range. And the AMT had been patched previously, under Bush and under Clinton. Rather than just adjusting the damn thing for inflation, we play this game where we estimate a bigger budget than we’ve really got, then give everyone a tax cut we “need”.
All that said, we made cuts to state budget relief, unemployment insurance, and food stamps so we could continue giving people making over $150k / year a tax credit. $150k / year might not be as much as it sounds, but it’s still a damn lot more than you earn while unemployed. It’s a bad prioritization when we all recognize the budget is strapped.
@Kirk Spencer: Whoops, need to correct. HR3200 has Y1 as 2013 as originally submitted. At least one of the three committees changed that to 2010, but it’s NOT a certainty.
HELP set Y1 as 2010.
Yeah. We’re screwed.
The a$$holes running Wall St. and Washington have no social or national conscience.
There is no political will to end the business as usual climate which results in this type of looting and undermines trust in the system.
There is no political will to do something substantial to address Medicare costs or the lesser issues with Social Security. Hell, the ‘fiscally conservative’ party (lol) has put changes to Medicare off the table in a cynically political move to embarrass Obama.
Throw in the CRE mess, and we’re looking at a lot of pain spread over the next 5-15 years.
I’m going to go stock up on whiskey.
This thread was depressing me, then I thought of Sarah Palin as President and that cheered me right up.
Really? I don’t go to shopping malls.
it seems to me that with most real estate where i live (commercial or otherwise) everyone wants to believe the collapse of the market is simply a “not here” thing. we’ve got neighbors that are asking close to $300,000 for their home. i doubt it was ever worth that, even at the height of the bubble. america has a reality problem that no one wants to face.
also totally off topic-
my wife and i went to carrabba’s last night for our anniversary and i noticed they had a dessert called the “John Cole”: two scoops of vanilla ice cream, caramel syrup and cinnamon pecans.
so what is that, accurate or way off-base? is our host mostly vanilla with polymerized sugar sauce and spicy nuts?
General Winfield Stuck
And once again Bj’ers, it is time This Week In Wingnut Zen
General Winfield Stuck
forgot to say OT, again. solly.
General Winfield Stuck
There is no such thing.
There is a coherent argument to be made against Hate Crimes legislation.
Unfortunately, most Republicans wouldn’t recognize a coherent argument if it bludgeoned them in the face with a sack of philosophy books.
The Moar You Know
@General Winfield Stuck: GIMME SOME LEGISLATION!
I never got along with the girls at my school
Filling me up with all their morals and their rules
They’d pile all their problems on my head
I’d rather go out and fuck the dead
‘Cause I can do what I want and they won’t complain
I wanna fuck I wanna fuck the dead
Middle of the night so silently
I creep on over to the mortuary
Lift up the casket and fiddle with the dead
Their cold blue flesh makes me turn red
‘Cause I can do what I want and they won’t complain
I wanna fuck I wanna fuck the dead
And I don’t even care how she died…
But I like it better if she smells of formaldehyde!
Never on the rag or say leave me alone
They don’t scream and they don’t moan
Don’t even cry if I shoot in their hair
Lying on the table she smiles and she stares
General Winfield Stuck
I agree, but the theory lives.
@Phoenix Woman: I’m glad that people are taking up donations, but WHY THE FUCK IS THIS EVEN NECESSARY?
We spent over a half a trillion on defense every year, and that isn’t counting the supplemental bills for hundreds of billions for our current wars.
Why the fuck do we have soldiers needed donated socks. Seriously, wtf?
So the first time Obama bails out wall st. he tells the assembled that he’s the only thing standing between them and the pitchforks.
He tells them the truth, they turn around an continue along on their merry path, and the oligarchs start playing with with Teabaggers.
If there’s no double dip, it makes life difficult, but not impossible, because at least the economy isn’t utterly hollowed out. If there is a double dip, Obama only has one option, he says you had a chance at avoiding the pitchforks, now you have a choice between pitchforks and handcuffs.
the oligarchs have been funding populist outrage, but they might not like it when it turns on them, they would have little option but to throw some of their own to the wolves
General Winfield Stuck
OT, but I just have to find little rays of sunshine wherever I can. And this is one:
I love him forever for this.
General Winfield Stuck
You go Al!
Person of Choler
Also sprach John Cole, #50, “We spent over a half a trillion on defense every year, and that isn’t counting the supplemental bills for hundreds of billions for our current wars.
Why the fuck do we have soldiers needed donated socks. Seriously, wtf?”
The fact that the military supply system is controlled by the government might have something to do with it.
It would be interesting to see what the methods of Costco, McDonalds, or Walmart could do to improve the provisioning of food, clothing and other non-lethal military supplies.
Even against the headwind of adverse economic factors, the odds were surprisingly much better than even that Carter would still have managed to pull off reelection by narrow single-digits in 1980 had his administration successfully pulled off the “October surprise” of the Iran hostage rescue mission. It’s easy to forget that as nervous and annoyed as much of the country was about the Carter Administration, that for most of the fall 1980 campaign a modest but sufficient majority of the electorate was even more worried and nervous about whether Reagan possessed sufficiently sound judgment to be trusted with the Presidency, most especially whether he was too hard-edged an ideologue with hawkish attitudes toward foreign policy might blunder us into unnecessary wars.
Nonetheless, the particular way the hostage rescue mission failed unfortunately reflected quite badly (and accurately) on the characteristics of Carter’s decision-making, especially a tendency toward unsound micromanagement. The mission failed only in part because of having the bad luck for the helicopter squadron to run into a sandstorm at the critical rendez-vous point in the remote Iranian desert, which crippled enough (not all, but enough) of the helicopters to render the military rescue mission nonviable to continue on to Tehran. THE PROBLEM WITH CARTER’S DECISION-MAKING IN THIS RESPECT is that they decided to limit the number of helicopters sent on the mission to a number they believed consistent with what the international community would accpt as a bona fide “rescue” mission, rather than a larger number that might be perceived as an invasion force mission in part designed to initiate an attempted overthrow of the new Iranian regime. What this did is to take away the needed margin of redundancy for the mission to be viable in case some of the helicopters encountered unexpected problems. So a mission which could have hugely reassured and strengthened Carter’s image as a trustworthy, resolute manager of the country’s fortunes had it succeeded, instead came to reinforce a generalized image of “fail”, priming a critical sector of the electorate to be much more willing to give Reagan a more favorable look, if only Reagan could do something, anything to reassure them that the country would not be trading feckless for reckless. And that’s just what Reagan famously was able to do in the one debate he and Carter had one week before the election (with opinion polls neck-and neck with Carter having a very slight edge in many going in) – but with a sea change going out within the final week before the election.
The country might have been spared much of the damage the wingnuts have inflicted on us over the past thirty years if only Carter had sent another half-dozen helicopters with the hostage rescue mission. Had they reached Tehran and even got half the hostages home (even with heavy loss of soldiers and other hostages), the country would have perceived this as a necessary gamble, and a huge, even though flawed with heavy casualties, victory.
Did you order it? I’m not sure I could eat a “john cole”
At first I gave President Obama some leeway on his selection of Geithner because Geithner does know where the bodies are buried. It does appear that we have more of the same, protect Wall Street first.
For those dirty hippie libs brave and daring enough to read from actual, you know soc_ialists and stuff, there are two remarkable essays in Monthly Review.
From Lessons from the New Deal Public Employment Programs, by Nancy Rose:
Nothing before or after the 1930s has matched the magnitude of the FERA, CWA, and WPA—programs that provided work each month for several million people, paid decent wages, and developed innovative projects in construction, the arts, and the production of consumer goods.
The economic crisis that began in December 2007 warrants a similarly ambitious response. The job creation anticipated as part of the American Recovery and Reinvestment Act of 2009 is a start. However, we can do much better. Important lessons for the current era can be learned from the earlier New Deal programs. I will elaborate what I see as six main lessons.
1. A Large and Innovative Public Employment Program Is Possible
The FERA, CWA, and WPA show that it is possible to implement expansive and creative public employment programs. During the Great Depression, when the labor force totaled approximately fifty million, from 1.4 to 4.4 million people each month were put to work on these programs. A range of projects was developed. The myriad construction projects throughout the country are reminders of this, as are the plays, murals, posters, and other works of art.
Job creation programs were brought back, on a smaller scale, during the 1970s. The recession of 1969-1970, which ended the long economic expansion of the 1960s, led to the Public Employment Program (PEP) in 1971. Three years later the Comprehensive Employment and Training Act (CETA) replaced the PEP, as well as other War On Poverty work and training programs, with an all-inclusive program. It included Public Service Employment (PSE), which continued the job creation program of the PEP.
Job creation is important, but it is not sufficient. In order to give both women and men real choices about combining work in the home with jobs outside the home, we also need progressive family and labor market policies. All we have to do is to copy programs that are already in effect in Canada and western European countries. A family allowance, instead of welfare, would help enable parents to more easily spend time doing this valuable caring labor. A paid six-month family leave would make it easier for both women and men to take care of infants as well as family members who are ill. Flexible work hours would allow women and men to reduce hours of wage labor in order to spend more time working in the home. Universal federal health care would enable everyone to obtain quality health care regardless of their welfare or labor market status. Federally supported quality child care, including subsidies for child-care workers, would recognize the social responsibility for children and similarly eliminate this expense as a barrier to wage-labor. And an adequate supply of low cost housing would help provide shelter for all people.
Money for these programs could come from a truly progressive income tax, a tax on the sale of assets held for a short period of time (which would also discourage speculation), and the military budget. And those responsible for the financial industry fiascos, not taxpayers, should be forced to repay the billions of dollars that they squandered.
And if you’re stupid crazy ultra left patchouli insane librul and want Andrew Sullivan to scream at you and interrupt you at any appearance on the TV box, you could read Monopoly-Finance Capital and the Paradox of Accumulation:
Under monopoly-finance capital, we thus see an intensification of the paradox of accumulation. Superimposed on top of the deepening tendency to overaccumulation in the real or productive economy is the further contradiction of a system that increasingly seeks to promote growth in production as a secondary effect of the promotion of speculative financial assets. It is as if, in Marx’s famous short-hand, one could indefinitely expand wealth and value by means of M[oney]-M′, instead of M-C[ommodity]-M′ — skipping altogether the production of commodities in the generation of surplus value, i.e., profit. This is a potent sign, if there ever was one, of the system’s increasing irrationality.
The fact that the root difficulty remains a rising rate of exploitation of workers is indicated by the fact that, in 2006, the real hourly wage rate of private, non-agricultural workers in the United States was the same as in 1967, despite the enormous growth in productivity and wealth in the succeeding decades. In 2000-07, productivity growth in the U.S. economy was 2.2 percent, while median hourly wage growth was -0.1 percent. Wage and salary disbursements as a percentage of GDP declined sharply from approximately 53 percent in 1970 to about 46 percent in 2005. Yet, as if in stark defiance of these trends, consumption at the same time rose as a percent of GDP from around 60 percent in the early 1960s to about 70 percent in 2007.39 Such contradictory developments were made possible by a massive expansion of household debt and the creation in the end of a household bubble, rooted in the securitization of home mortgages. The bursting of the “housing bubble” was the inevitable result of the destruction of the household finances of the great majority of the working population.
Ha Ha. Would that y’all would be so lucky. With guys like Barney Frank opening up barn-door loopholes for the derivatives industry regulation right now, there are many future ass-rapings to come.
“If you pump enough liquidity into a corpse, it will get up and walk – pump in more still, and it will dance; that does not mean that it has Fred Astaire’s career before it.”
– Eric Kraus, Moscow-based hedge fund manager
This thread makes me sad. Voting for Little Bitsy makes me happy. Don’t forget to vote for Little Bitsy!
Between the coming option ARM reset wave, CRE problems, the fact that w/o Uncle Sam things would really be going to hell, rising unemployment, and no possibility of exporting our way out of this mess, things are not “slowing improving.”
The solution is to read the details behind the predictions.
Dean Baker (blogging over at Beat the Press (@TAP)) made two predictions that saved me money: that we were in a bubble in the late 1990s, and that we were in a bubble in the early 2000s.
He didn’t just “predict”; he gave sound numbers, based on fundamentals, for his predictions.
Damn straight. Don’t forget the money that’s not directly from the Treasury, but rather from the Fed. Might not be from the taxpayers per se, but…
1. I wasn’t old enough at the time, but my extremely liberal parents (who were pretty aware of things like “pick the lesser evil”) thought things were so f*cked up they voted for Anderson and (IIRC) Commoner.
2. Much of Reagan’s agenda (deregulation, inflating the military budget, luring the Soviets into Afg) actually started under Carter.
Problem with that analysis is that the GDP growth has to come from somewhere.
A large chunk of GDP since the mid-1990s has been generated by bubbles. The housing bubble in particular created a large amount of work, as construction is very labor intensive. What’s going to replace that?
Knowing something like that makes you an ultra-left doom & gloom hippie.
@Person of Choler: Yes, modern business methods of huge for-profit retailers are what we need. I know just the guy to make it happen: a successful and highly motivated young entrepreneur with a military background, named Milo Minderbinder. Our troops will never lack for Egyptian cotton again.
@liberal: Ask yourself a counter-question. What caused 3d quarter to be positive? (It will be. I’m offering wagers on some very conservative lists to which I belong and nobody is taking them – I keep winning when I put the money down.)
OK, I see I need to point out a pretty important thing here, too. Employment =/= Economy. They’re connected, they’re not matched. In fact, an economy tends to recover BEFORE employment improves. To understand why, I’m going to show a simplified sequence:
Recession begins. Firms quit expanding – no new hires beyond replacement.
Recession deepens. Firms end overtime and reduce hours.
Recession deepens more. Firms start cutting employees.
If long enough, people who didn’t get work give up and are no longer counted on unemployment rolls.
Recession bottoms. Firms quit cutting employees. This shows up in four week average of initial claims.
Recovery begins. Firms start increasing hours.
Recovery continues. Firms start filling cuts.
As these people go off the unemployment rolls, people who gave up think they might have a chance. Unemployment rate remains high.
Recovery continues and returns to strong. Firms fill out, then expand. Unemployment numbers decline
I don’t expect the recovery of the first quarter of next year to be due to jobs. Jobs FOLLOW the recovery. We recover because people have more confidence that they won’t be next on the block. So they’ll spend – and as they spend the businesses grow again.
Not all boats float equally. Real estate – commercial and otherwise – is massively overbuilt and still overpriced. This will act as a drag on everything else. There is still a lot of funny money (CDSs, etc) that will make people gunshy about investing and growth. But generally speaking we’ll grow.
Major sparks for the first quarter are, again, passage of the health care bill (even if it’s ramp-up actions), passage of Son of Stimulus, and the slow-acting elements (such as tax breaks) of the earlier stimulus finally taking effect.
Fish fidlledy dee. Do not worry, simple minded, well meaning but naive and deluced s o s h u l i s t s. The free market macroeconomists have assured us for months that their free market, rational expectations, equilibrium macro models. along with their strict geometrical reasonings, show that commercial real estate cannot go into the dumps.
Nothing to worry about, it certainly could not be another prediction failure from the unregulated free market always knows best macroeconomics crowd.
no, didn’t order it – dessert is my wife’s domain and she wished to go elsewhere. i would’ve thought an adult beverage would be more appropriate. wonder how that mix goes…
@lonesomerobot: a john cole adult beverage, that is.
I know all that. I also know that recent recessions have been marked by _extremely slow_ recovery of employment.
While I think we need more stimulus, I’m not going to hold my breath waiting to see a large second package passed.
@liberal: You’re writing plural when it’s singular. Only one recent recession was marked by extremely slow recovery of employment – the one where Bush simultaneously used NON-keynesian recovery methods (surprise, keynesian process works, misean does not); ran a ‘money to the wealthy’ economic policy; sent a crapload of money OUTSIDE the US without a trade;…
Look at other recessions – in particular look at Reagan’s (1981-1982). Look at the recovery when he did all the things today’s Miseans say will kill the recovery – raised taxes, kicked out a stimulus, etc.
I’ve said a bunch of times in a bunch of places. The track record of the keynesians is very good, and where the miseans are in opposition their track record sucks. This is one such place. If Obama’s administration will go keynesian (as they mostly appear to be doing) our recoveries will look like most of the rest instead of Bush’s 2001-2002 jobless recovery.
I just look forward to conservatives once again having to talk about Obama’s huge, dominating, frightening package.
Person of Choler
hob #68, “Yes, modern business methods of huge for-profit retailers are what we need.”
I know, I know, business evil, Walmart make mainstreet cry and so forth.
Nevertheless, these companies seem to have the techniques of procurement and delivery logistics pretty much in hand. Walmart somehow manages to get stuff (I don’t say its good stuff) from god knows where in China to places like Yankton, South Dakota quite briskly and efficiently. The Milo Minderbinders in today’s military procurement chain could learn from civilian experience.
Wile E. Quixote
Fixt. Getting down on your knees and sucking Wall Street’s cock just like the filthy whores in the Bush administration did is not “change that we can believe in”. Lyndon Johnson once said that he had Hubert Humphrey’s pecker in his pocket, from what I’ve seen of this administration Lloyd Blankfein has President Obama’s pecker in his pocket.
Nope. There’s two: the early 1990s Bush recession, and the recession in 2001.
And there’s good reason to think this recession is going to be like those two, not like the ones previous.
@Person of Choler:
The reason federal procurement sucks is that the business sector will never (politically) permit the government to take advantage of its natural monopsony.
@liberal: Yep, I’m going to retract and agree about two, not one. First, I pulled data (instructions follow) and it reflects what you said. HOWEVER, I note that in 1992 employment kicked off again somewhat simultaneous with Bush’s breaking his no new taxes promise. For that reason I’m still going with an expectation of relatively early job growth. The current administration tends to be keynesian except as they get constrained by idiots in Congress.
Numbers for those that want to chase it themselves:
Go to the bureau of labor statistics site (www.bls.gov). Go to the databases and tables page, choose employment statistics, choose “monthly employment, hours and earnings – national” one-screen database search.
choose all employees, thousands, total non-farm, and run it. Change the data to a start year that is earlier than 1990 (you can go back to 1930, but I think there’s a change in accounting in the 1970s which makes all numbers prior to that risky for comparison – but I digress.)
The early 1990s recession ended in March of 1991.
Chad N Freude
@Person of Choler:
Well, if they can get stuff to South Dakota, then, Afghanistan would certainly present no problem for them.
Person of Choler
The reason federal procurement sucks is that the business sector will never (politically) permit the government to take advantage of its natural monopsony.”
So what is to prevent the Democrats in Congress and the Democrat who is President from stopping the nefarious business monopsony from messing up military procurement? The Good Guys are in charge now, you know, and they should be able to solve this problem along with all the others.
Chad N Freud says,
“Well, if they can get stuff to South Dakota, then, Afghanistan would certainly present no problem for them.”
Exactly. Once the stuff is procured the supplies get delivered just as they do now. Procurement, ordering, and inventory control seem to be more of a problem than shipping the last leg of the delivery route. And procurement, ordering, and inventory control are what the big nasty companies are quite good at.
At any rate, it is going to be both tragic and funny to watch Atrios and the rest of the DFH crowd be right about a double-dip recession.
Yet another instance of “This is the way things are, like it or not” (dirty fucking hippies), versus “This is the way I want it to be, so it MUST MUST MUST be that way you traitor, fingers-in-ears lalalalalalalala shutupshutupshutup!” (Repigs)
I’ll tell you what is to prevent this from happening.
The Pentagon absolutely does not want procurement with any of the features of efficiency or accountability that are absolutely necessary in a for profit company.
Remember, the DoD is effectively unauditable and the brass likes it that way. This is true no matter which party is in power.
What we’ve seen here in my little corner of DoD since the new administration has come in are attempts to get procurement costs under control by instituting more stringent controls on firm fixed price contracts (i.e. demanding we get our internal cost estimates right the first time and not providing additional contingency funds at the time of contract award).
It’s too early in the game to see if this will have much impact on the typical cost overruns of our procurements, and I’m not sure if it will have any effect at all on adressing the logistics problems of supplying troops in the field.
Just my .02