K-Thug says we’re in a true depression:
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.
[……] [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.
What is the source of this orthodoxy? Is it simply a way to drown government in the bathtub once and for all?
Axel Edgren
One thing I have learned from this age – there is no common sense or common knowledge when it comes to things beyond dealing with car salesmen and the like.
Right now it is common knowledge that the debts are too big, spending is “out of control” and it is time to “tighten the belts”. All of the bowtie-wearing scum agree on this – because it seems obvious, it is an easy position to defend and it resonates with the common people. It also gives some people sexual enjoyment to lower taxes, take away regulation and lower spending – because they know that whenever you do something like this, society will automatically improve.
Wisdom, and true grasp of the complicated systems that surround us, is never common.
I think K-thug is right, and that our apple-cheeked, abstemious and Lutheran desire to appease the common braying for “reigning in” spending is going to destroy all the big and sexy GDP and growth figures that the usual mongrels will always prioritize over any social stability or fairness.
tl;dr – I hate everything and I also hate everyone who don’t hate everything.
Napoleon
Yes.
While I think Obama gets that the orthodoxy is wrong he simply lacks the balls and leadership ability to do something like go on TV and call them out as wrong.
stuckinred
Byrd died.
Napoleon
@stuckinred:
Well you beat the NY Times and WaPo in reporting it.
RIP Sen Byrd.
stuckinred
@Napoleon: MSNBC
PeakVT
Is it simply a way to drown government in the bathtub once and for all?
Yes. THBAEOSATSQ.
Unfortunately, the calls for austerity for austerity get a lot more traction than they should because the appropriate policy response is counter-intuitive to the average shmoe. Combine that with Pete Peterson’s $1 billion effort to take down Social Security, throw in the de facto supermajority requirements of the Senate, and policy failure becomes inevitable.
OT PS: Anyone who lives on the Great Lakes might want to call their state government about this impending disaster.
Allison W.
@Napoleon:
yep. that’ll turn things around – balls, lots of them and a speech. ooooh those speeches.
Napoleon
@Allison W.:
What do you suggest, that he do nothing, which is the alternative? Unless someone pushes back people like Pete Peterson end up setting the talking points. One thing Dems in general, and Obama in particular, have been bad about is talking loud and often about something so that the media picks it up. Somehow they think the press will do it on their own. I have seen Mitch McDonnell almost daily talking about running up deficits, but rarely see Obama. This is the kind of thing he should be giving an Oval Office speech about, and in it he should clearly lay down that a vote against a strong jobs bill is a vote against economic recovery, then lets see if Nelson votes against it.
On Byrd this from Nate Silver on WV vacancy laws:
http://www.fivethirtyeight.com/2010/06/senator-byrd-is-ill-note-on-west.html
Michael
Rule 1:
Lessons and austerity to “change patterns” and “force realistic views” are always to be applied to “little people”. The important are, of course, exempt.
Rule 2:
Severe economic dislocation and financial hardships are “sometimes necessary for course corrections”. And while they may be “temporarily painful”, ultimately, we’re all better off. Of course, any minor change in the tax structure involving a marginal rise in percentage points for the more well to do will “destroy entrepeneurialship, ruin life as we know it, and is a hateful and Hitler-esque imposition of soc!alism”.
Doctor Science
I think there’s another element, which is that individual families are having to cut expenses and debt. It seems logical and intuitive for the government to do just what households have to do — even though, as Krugman keeps pointing out, that makes the economic cycle worse.
We all tend to think — and conventional wisdom emphasizes that we *should* think — of government budgets as being household (or business) budgets writ large. What I’ve learned from Krugman is that no, they are (or should be) *fundamentally* different, counter-cyclical. That’s very difficult to grasp.
WereBear
It’s very true that most people don’t understand it.
A friend of mine, with liberal leanings but living in a most conservative area, is a skilled bookkeeper and frugal saver. She had no knowledge of macro-economics.
I used the analogy of not fixing your car to save money while unemployed. You need the car to get to job interviews, and hopefully, a job.
I don’t know if I convinced her.
SciVo
Crazy thing is, it’s easy to explain. Nobody ever got rich by spending, so market demand is reduced by how much of businesses’ value-produced goes to the top. Reagan’s anti-labor campaign succeeded too well, resulting in an economy dependent on debt bubbles, which always ultimately results in great human misery. Therefore, the best way to jump-start this economy in an actually sustainable way is by using the EFCA to give labor a level bargaining table vs. collectivized capital.
mclaren
The source of this phony orthodoxy is a massive concerted effort to replace conventional economics with crackpot gibberish. The effort has by and large proven successful.
First, confect a Sveriges Riksbank Prize in memory of Alfred Nobel (NOT a Nobel prize, but misrepresented as though it was, and presented by the press as though it was). Then conspire to give it to a string of kooks and cranks who believe in radical laissez faire deregulation of markets using policies that transfer vast wealth from the poor to the rich — Friedrich Hayek, Milton Friedman, and others.
Then members of academia attempt to turn economics into a branch of mathematics, culminating with the Scholes-Merton formula for pricing options, and along the way creating bogus branches of economics like rational expectation theory…all of whose predictions turned out to be wrong.
Then these bogus mathematical formulas were used to generate increasingly insane amounts of leverage in financial schemes of dizzying complexity, which were sold to gullible investors (and even to other financial institutions) as “safe” and “low risk” because of the phony formulas ginned up by charlatans like Scholes and Merton.
It’s no different than an elaborate big con straight out of The Sting. First, you tell the tale…”economics is a science — we have the Nobel prize winning economists to prove it!”
Then you bait the hook — “Using these magic formulas we can mathematically eliminate risk from investing. Look at how much money we can make if you invest with us!”
Finally, you scam the sucker and make off with the loot. And the climax of the sting? “Hoocoodanode? Why, those mathematical formulas were so complex, we had no way of knowing anything could go wrong!”
You create a bogus orthodoxy by corrupting academia, which is startlingly easy to do. Once your corrupt academics start preaching your scam, you just crank up the con and reel in the suckers and walk off with the cash. It’s no different from the old traveling medicine show days when the grifter would claim to be “Herr Doktor Professor Schmidt from the Universitaet of Berlin who has come up with a miraculous new form of snake oil which will make you young and beautiful again.”
See the book The Corruption of Economics for details.
Maude
Here in NJ, the vote will be taken on the state budget. For some reason, Govenor Christie takes pride in trying the failed Reagan themes.
It is also the most toxic state in the US.
Superfund R us.
Napoleon
@Doctor Science:
My favorite conventional wisdom is “the government doesn’t have the money to do that” to which I feel like saying “hey dumb f—, money is a worthless scrap of paper that the government tells you is worth something and which it can print at will, they have plenty of money.” Its like they don’t understand money is fake and all that matters is if the physical assets exist to create wealth and are they being under utilized. If so it is in everyones interest for the government to use the under utilized assets to generate wealth for the greater good”.
Bob Loblaw
@Allison W.:
Yes, Obama should keep saying nothing and hope the problem goes away on its own. After all, he wouldn’t want to risk his otherwise stellar poll numbers with independents on a public confrontation with a nihlistic political party espousing a calamitous and discredited ideology. He should save his political capital for 2012 when the unemployment rate is down to a more reasonable 8.2% nationwide…
rickstersherpa
Not quite. The part of the Government that goes around shooting and locking up people they are still very enthusiastic about, and with ripping up the safety net, I expect they realize that might have to face more and more troublemakers around their meetings. As Toronto, and the Libertard Prime Minister of Canada, Stephen Harper, has shown, there will no scrimping on the part of Government that safeguards property and the security of the wealthy elite.
As Kthug illustrates in his column, as as the history of Bruening’s Germany and Hoover’s U.S. and Japan of the last 20 years also show, this austerity fetish creates a cat/dog chasing its tail cycle. Enconomic slow down creates deficit, fiscal austerity (cuts and taxes) imposed to reduce deficit, austerity causes the economy to contract more and unemployment increases as result of austerity, and as result the deficit increases due to declining revenues and unemployment expenditures. Repeat process proving complete madness.
rickstersherpa
We seem to have an especially large number of absolutely abhorrent political leaders right now. Jan Brewer of Arizona (most illegal immigrants are drug mules), John Kyl of Airzona (the Deficit must be cut, nothing for the shiftless unemployed, but God forbid that Cindy McCain’s heirs don’t get every dime of the fortune she inherited by birth from her parents!); Ben Nelson of Nebraska (where was all the concern about deficits when he was voting of tax cuts. defending the hedge fund manager income, and voting for all these foreign wars. I could go on.
Hard times cause a search for scape goats in countries. The Republicans are starting to line up the following as their designated scape goats: brown people, black people, Muslims, of course Liberals, and environmentalist.
I know a lot of people regard Palin as a joke. I don’t. People thought Hitler was a joke in 1928, and he was. Five years later, not so much. She scares me to death and it really scares me that she has chance to be President under the likely very bad conditions that will exist in 2012.
Nick
@Napoleon:
Except when he does and no one pays attention to him.
Nick
@Napoleon:
How many times do I need to explain to you that the media WANTS Mitch McConnell on and not Obama. It doesn’t matter that he’s the President, they’re not going to let him make the case.
DPirate
@Allison W.: lol
Synchronicity happening here, as I came over to Balloon Juice when I came across this: http://www.sciencenews.org/view/generic/id/60568/title/Neutrino_experiments_sow_seeds_of_possible_revolution_
Seems as though the orthodoxy is getting challenged all over. One passage in particular from this article seems telling to me:
This is the sort of faith in “what we know” that gets us to our economics, physics and religion. Frightened to disagree with the status quo, we build great edifices of bullshit to account for the evidence while clinging to our wrong ideas.
I was reminded of the earlier postings regarding string theory, and thought I would share this. It ought to go into an open thread, but it just dove-tailed so well with this one.
Yes, let us introduce a new force! That’ll be nice for Obama, et al, as all they can really say about the future is “May the Force be with you!”.
Nick
OMFG, HE’S BEEN SAYING THAT FOR WEEKS!!!!!
Nylund
Nearly every macroeconomic model assumes by default, that governments cannot imply borrow forever (the “no Ponzi scheme” assumption). Without this, there is no solution to the mathematical optimization problem as none of the constraints are binding if you can just borrow more money to pay for costs ad infinitum. Of course, at times, it seems like the US is indeed a giant Ponzi scheme, and we just, “know” those don’t work, ergo, if the model doesn’t match the real world, make the real world match the model!
The flip side to this is that every economist knows that a basic aspect of many models is consumption smoothing. That is, save during the good times, and borrow during the lean times. Apparently, some sort of “two rights make a wrong” logic is going on that states, “well, since we didn’t do what we should have during the good times, we shouldn’t do what we’re supposed to during the bad times either!”
Nick
@Napoleon: Does the word ‘inflation” mean anything to you?
kay
@rickstersherpa:
She’s really unpopular. I know it’s hard to tell, she’s been promoted for close to two years now, daily, by media, but not a whole lot of people like her, and the longer she sticks around, the less they like her:
It’s weird spot they’re in, because they have to kiss her ass in the primary, and then distance themselves from her in the general.
She’s vindictive and nasty, judging by her actions in family court (with two different family members) and her various and sundry vendettas in Alaska as governor, so that might be amusing for us to watch.
Walker
The problem with the American people is that they think with the analogy of household finances (a false analogy), when they should be using the analogy of a small business. If they did that, they would understand that you have to borrow/spend money to make money.
Bob Loblaw
@Nick:
They will if it’ll make a good conflict. The president needs to learn how to construct “death panel” type messaging every now and again.
Nick
@Bob Loblaw:
That only works if you’re a Republican. Remember when Alan Grayson tried that? They burned him alive and picked at his carcass for a week.
Walker
In a previous life, I worked for Bechtel cleaning up some of those sites (early 90s). You have Edison, hero of American capitalism, to thank for a lot of that mess.
SciVo
@Nick: Does the word “deflation” mean anything to you? We just had a huge amount of our debt-based currency destroyed when so much leveraged naked mortgage credit default swaps (and other securities) became near-worthless. Monetarism says that price is an effect of currency vs. value. Our value produced has also gone down — witness our outsized un- and under-employment — but not by as much as our currency base, or businesses wouldn’t still be advertising such great sales a.k.a. price deflators. We seriously need to ban naked (non-hedge) derivatives.
kay
@Nick:
Just for the record, I don’t blame Obama for the jobs legislation stalling. Congressional Democrats did their own screwing around, with the campaign finance stuff, when they should have been chopping it up and passing it.
If they can get a 2% increase for physicians, who, the last time I looked, were at full employment, they can get unemployment benefits through, for all the non-physicians.
Nick
@SciVo: We don’t have deflation right now and even if we did, I just simply pointing out the general problem with just printing money endlessly and pretending that all it is are pieces of paper. And why the hell were you babbling about derivatives?
El Cid
This is now a rare time period in which political and economic elites have a good opportunity to wage a flat out attack on the social contract forced upon them in the wake of the Great Depression and World War II.
By focusing on the utterly fake cause of ‘deficits’ with regard mainly to the spending side (with a few token tax hikes to pretend to give a shit about the revenue side of deficits), the rich are willing to endure slow growth periods as long as it re-entrenches their middle working classes back to the relatively powerless and abused state they were in before Depression era, labor-impelled social welfare reforms.
This is class warfare, open and harsh, in the guise of mythmaking.
Today’s Western government austerity programs and boosters are like those punishing South America in the late 1980s and early to middle 1990s via IMF “austerity” or investor favoritism / social welfare and native industrial promotion-attacking programs imposed by the IMF, until Hugo Chavez and Nestor Kirchner of Argentina. In particular those programs aimed to destroy the development of native industrial and national-development oriented policies in favor of multinational investors.
And like the “Structural Adjustment Programs” imposed by the World Bank on much of Africa, attacking public funding of schooling, health, and agricultural support.
What made the policies even crueler was that it was justified in terms of paying back those loans, yet when counting the massive interest charged on those loans, 3rd world nations had actually long ago paid back those loans in full and were actually bleeding resources to hungry Western profiteers.
Thank god for Chavez and Argentina breaking those greed-heads’ backs.
It’s even class warfare if the austerity boosters seem really concerned that deficit mongering on social spending will harm long-term development if they don’t give an actual shit in terms of policy on how this will affect the vast majorities of their populations in the short term.
Class warfare of elites against the vast majority isn’t just for Snidely Whiplash caricatures or snickering Grover Norquists and Dick Cheneys, but from those ignoring the harms that will clearly be wrought upon their own populations.
El Cid
We don’t have deflation yet, we have non-inflation, which is actually harmful to a consumer-driven economy.
We need inflation right now, and those who babble about “inflation” need to shut up because there — is — no — inflation.
SciVo
@Nick: Oh, okay. But so you know, derivatives are a kind of currency. It’s like how when the loans that banks make go bad and they can’t collect on them, that reduces the monetary base of the nation; same with derivatives such as credit default swaps, when they go south.
Nick
@El Cid: Inflation is not good for a consumer-driven economy with no jobs. What the hell are you talking about? Part of Japan’s problems in the 1990s was massive inflation.
El Cid
@Nick: Massive inflation is not the same thing as any inflation.
The reason a consumer-driven economy needs a degree of inflation is to give consumers a reason to buy now — and we really, really, need it now — rather than delay their purchases until any time because prices aren’t likely to rise. And if deflation comes, their incentive to purchase will be to wait until prices lower
There is no inflation right now, there are realistic predictions of continued disinflation, and no realistic predictions of imminent inflation, much less massive inflation.
At present — when long term debt is not the most important issue, and is better served in terms of rising revenues instead of paltry cuts in social spending — the biggest focus must be on growth and on growth which increases the wealth of those who drive the economy, i.e., not the rich.
Doctor Science
Nick:
Part of Japan’s problems in the 1990s was massive inflation.
Wow. 180 degrees WRONG. The problem was *deflation*, as poor Paul K has been trying to tell you.
El Cid
I’m convinced that when most people talk about the problem of inflation as a real or looming problem [in the USA] — and I don’t mean the liars in economic or political elite positions — they mean that right now it’s harder for them to buy things.
It’s a folk definition of “inflation” that has nothing to do with the term as it’s really used.
Davis X. Machina
Nick has his story, it makes sense, and people like him are the heroes in it. The bad guys lose, the good guys win, and that’s almost as good as having a job and a roof over your head, isn’t it?
Napoleon
@Nick:
Pull the money back out of the system and raise rates when that becomes an issue.
El Cid
I like hearing talking points from co-workers and radio callers and such spewing nonsense about how you ‘can’t borrow your way out of debt’ and how ‘we have to balance our budget every month, and the gubmit should too’.
And I’m hearing this from people who run businesses who use short term loans to meet payroll and who make investments in equipment or training because they have a real and estimable likelihood of greater revenue and profit than they would limping along without those loan-based growth opportunities.
And I’m hearing this from people who have car loans which they pay off in 4 or 5 years and who have houses with 20 or 30 year mortgages, who blather about how they don’t believe in being in debt, none of whom could pay off those long-term debts as quickly as they expect the gubmit to balance its books.
SciVo
@Doctor Science: And I just want to pipe in here with my pet theory about why Keynesian stimulus hasn’t gotten much traction there, I think it’s because of zombie banks that never recognized their real estate bubble-popped losses on their balance sheets and so were in reality too uncapitalized to turn workers’ deposits into loans. We have the opposite problem here, in some ways, with corporations sitting on cash that they can’t do anything with because workers don’t garner a large enough share of their value creation to justify business opportunities.
PeakVT
@Nick: Nonsense. Japan experience deflation in 1995 and from 1998 to 2005. In the years where inflation occured, it never rose above 4%. Japan would have been better off if it had more inflation because, like the US in the mid-2000s, it experience massive real estate and stock market bubbles in the mid-1980s. That left everybody with too much debt, a slew of sick banks, and people unable to spend. Eroding all of debt through inflation would have sped up Japan’s recover, which to date hasn’t really happened.
cmorenc
The most galling thing is that back around 1999 and 2000, our country had FINALLY created favorable conditions for both short and more importantly, long-term solvency of the government at then-current tax rates, with realistic prospect of paying down a huge portion of the national debt within a decade. This would have made it possible to responsibly reduce tax rates, even on higher-income earners, even while modestly expanding the social safety net.
But Bush won, and put as his highest priority cutting taxes for the wealthy, with an assist from the Randian charlatan Alan Greenspan at the FED who propped up the idea that this was actually the financially responsible thing to do, because paying down the national debt significantly was actually a harmful economic thing to do. And then there came 9/11 and the willful dive into two wars, neither of them paid for on-the-budget-balance-sheet, only accelerated the dive into unsustainable deficits once more.
Bush and the whole crowd behind him truly created the conditions for the economic disasters that will keep on giving for the next two to four decades, at least, even if we get lucky and have responsible leaders going forward. Which we don’t in nearly sufficient supply, and we’re on the knife-edge of irresponsible sociopathic greedheads retaking full control of government, instead of merely being able to stifle necessary reform.
Redshirt
Said it before, say it again – great game strategy by the Repugs:
1. Tell everyone, all the time, that you’re the part of Fiscal Conservatism, constantly slander the other side as “free spenders” and “tax n’ spend liberals”, etc.
2. Whenever in power, however, spend like crazy, enriching your supporters, boosters, yourself, and whomever else might help you keep power.
3. When the problems get to be too much, let the Democrats take control for a while and try to fix the problems you created.
4. Attack them for attempting to fix the problems – “tax n’ spend liberals”, etc.
5. Repeat
This cycle’s been going on since Reagan, and shows zero signs of slowing down. It’s the trap we’re in.
The way out of course is to hold elected officials accountable. But that’s for Democrats only right now.
liberal
@mclaren:
One thing which I think is totally nuts is this “real business cycle theory” crap.
liberal
@mclaren:
Heh. My wife finally read an article on Citizens United by Gaffney.
Speaking of which…since Gaffney wrote that book, are you a Georgist?
liberal
@Napoleon:
celticdragonchick
@Allison W.:
I don’t suppose that pointing out that it seemed to work pretty well for Reagan would be an interesting rejoinder.
Why is it that so many people here seem to think that the Presidency is a virtually powerless institution and that actual leadership is only a word for firebaggers and Republicans?
liberal
@rickstersherpa:
I’m married to a Nebraskan. She herself is quite liberal, but now that I’m better acquainted with the state, I’d say BN is about as good as you’re going to get.
Just read a blog post somewhere pointing out that while things aren’t great these days, they’re nowhere near as bad as things were in Germany then. Furthermore, the Nazis didn’t actually gain control by winning an election (though their representation in the legislature was increasing at the time).
Finally, ain’t no way the elites that own this country are going to let Sarah Palin become president. As I think DougJ pointed out many times, she’s a grifter, and a grifter only.
Now, what SP represents (large number of disaffected right-wing thugs) is another matter.
Nick
@Napoleon:
You mean like FDR did in 1937?
chopper
@cmorenc:
this. when history is written about these times, the decision to put bush in the white house will be seen as the turning point. the 90’s were good times, but clinton wasn’t interested in making changes to keep things right up in the long run, and the gop was even less interested. at least maybe gore could have made an effort. i dunno.
then we got bush, who seemed hell-bent on taking a country in pretty good shape and driving it into the ground instead. now that we’re dealing with the aftermath, democratic patsies have decided that they’re willing to take the fall for it just to get that sweet, sweet feeling of being in office for a few years. meanwhile the ‘drown it in a bathtub’ crowd is positioning themselves to block everything that could make a difference and have the whole thing fall apart on obama’s watch. it’s brilliant maneuvering. it’d be fun to watch if it were a movie.
then, according to their fantasy, the ghost of reagan and a pure, unadulterated free market will hatch phoenix-like from the ashes. or not, actually. the free market ideology is a death cult. unfortunately we’re all going down with the ship.
liberal
@Nick:
LOL! You’re out of your mind.
You said you cover the financial sector as a journalist?
Nick
@Doctor Science: I meant to say part of WHAT LED to Japan’s problems in the 1990s was massive inflation.
Napoleon
@Nick:
Actually it was deflation which is what could happen here.
liberal
@cmorenc:
I don’t think this is true. IIRC there were huge revenues from capital gains taxes due to the stock bubble. Those revenues evaporated when that bubble burst.
Re the rest of your comment, while Bush certainly didn’t help things (particularly with flushing ~$1T down the toilette in Iraq), IMHO he’s not nearly as much to blame as is Greenspan. Furthermore, the Dems aren’t blameless, either—Clinton signed that idiotic bill decreasing the tax bill for capital gains on homes, and his minions shut Brooksley Born up.
Of course, ultimately it is the Republicans fault, but that’s Ronald Reagan, not Bush, who started us down the deregulation road.
liberal
@Nick:
Nope. What led to Japan’s problem is exactly what led to our problems: a massive real estate bubble.
You can argue that that’s a form of inflation (this time, asset price inflation), but it’s not the same thing.
Walker
@Nick:
If that is all you meant, then we have already had that here. What Japan had was asset-price inflation, not consumer price inflation. Just like our housing bubble.
liberal
@celticdragonchick:
Uh, cuz Obama can do no wrong?
liberal
@Walker:
Heh. Beat you by one comment. :-)
Barry
In the end, the switch from ‘we must bailout’ to ‘stop all* spending!’ (* save for that on the rich and powerful) is simply due to the fact that 99% of the people who didn’t get bailed out might starting asking questions. Questions like ‘I thought that the elites were rich because of productivity, and taking risks upon themselves, and not depending on government handouts – what gives?’ and ‘you know, we were promised a golden era, and the past thirty years have pretty much s*cked – my salary is stagnant at best, I’ve repeatedly lost money in the stock market, and my house is not only not an investment, it’s lost money – maybe we should get rid of right-wing economics?’.
Steeplejack
@Nick:
Inflation is the least of our problems right now. It is one of the scariest economic “boo” words, but right now it is basically flat. In fact, back in February K-Thug made a case for higher inflation.
JohnR
@liberal:
True enough. But, you know, historic repetition is rarely identical. Sure, Germany had wide-spread street battles between communist revolutionaries and fascist reactionaries in the midst of the collapse of the bloody awful Weimar Republic. America is not, however, Germany. Nor is it Italy. Can you gurantee that our relatively massive unemployment and increasing perception of anti-government violence aren’t going to have a similar affect? After all, we’re not the relatively tough 1920s Europeans – we’re soft, self-indulgent 2000s Americans. Perception is reality, especially for the idealogues among us, and it seems to be driving more and more people around the bend toward that happy place where heroic individual and then heroic mob violence is a Good Thing since it will bring back the Golden Age of Good Times For The Right Sort Of People.
I see one political party pushing that, with the enthusiastic help of the blood-lusting media, and the other patsy, uh, party, ineffectually waving its hands and saying “now, now..”.
Anyway, to dismount from one hobbyhorse and mount another, what is the situation here: the country is being bankrupted by people who have for the better part of 80 years been trying to destroy the Evil Socialist New Deal, even to the point of bankrupting the country to achieve that goal (see “nomics, Reagan-“) I know I’m a raving conspiracy theorist and all that, but it does seem like quite an extraordinary coincidence that the people who have been quite explicit about running the country into so much debt that it would have to kill the social programs have now managed to run the country into so much debt that we’re talking about killing the social programs. There’s not a whole lot left of the New Deal, either, unless I’m overlooking a lot.
bumpster
I believe the government needs to spend money on putting people to work. We do not need more prisons. We do not need more bombs and robots. We do not need fantastic high tech transportation systems. I think we need people put to work re-building our highways, rail systems, and bridges. We could also put people to work installing alternative energy sources on government buildings. Finally, our working class is hurt. They and their kids need help with school, recreation, and behavior. Street teams of social workers, golf, tennnis boxing/martial arts teachers, ball sport coaches organizing kids to play and reaching into their homes to give all kids a chance to do something fun that promotes health and sanity. Safe skate parks, art programs, softball, soccer, baseball, and basketball facilities staffed with professional coaches. Fund all this with block grants that are contingent on the schools, social services, probation and cops working under one umbrella.
El Cid
The real threat to the U.S. economy is inflation. Even though there isn’t any and no one is predicting any. Because, well, shut up.
Corner Stone
Austerity Programs are nothing more than the furtherance of redistribution of wealth ~ upwards.
Every time you inflict pain on the middle class the wealthy retrench and end up owning more real wealth. This has been proven again by the recent Recession / Depression.
Corner Stone
@PeakVT:
I think it should be noted that President Obama asked Congress to set up a commission to study SS and they told him a resounding “No”.
Obama then set up his own commission to allow Pete’s Catfood Commission to “study” SS and make deficit reduction suggestions, etc.
Corner Stone
@El Cid:
Not only a good opportunity, but one well planned for. As I have previously argued, the ’80’s S&L disaster was their proof of concept.
They were incentivized, on all levels, to push further and faster.
All the time here we say GWB was the worst ever, but I don’t think it can be denied any longer that his proponents got 90%+ of what they wanted by the end of his second term.
And if they can effectively open the crack of the door into SocSec then they will be close to 100%.
sukabi
the one thing missing from this discussion is what happens when scores of folks are left to fend for themselves…
things are going to get really interesting… and by interesting I mean violent.
tkogrumpy
@mclaren: Very well done. Thank you.
El Cid
@Corner Stone: That’s a good way of describing the slashing & burning of the financial sector at public cost via the S&L’s.
El Cid
@sukabi: If you leave a fairly permanent class of unemployed and underemployed citizens — particularly those formerly accustomed to a much better standard of living — then elites risk real instability to the system.
Electorally, the likelihood that such a huge chunk of the population will vote in the ways that liberals think they should vote given objective interests is pretty shaky at best.
You have a long-term, brutal screwing over of a former middle class by elites, that’s a recipe for some really, really ugly politics. For example, one of the bedrock supports for populist fascist regimes are always small business owners, who feel mistreated and overextended as the most maltreated of workers, but who view themselves as capitalists and daring entrepreneurs abused by non-producers beneath them.
Corner Stone
@liberal:
Or a bridge or two, here or there.
People with jobs, relatively secure jobs, spend money. And for modest income salary jobs, they spend almost all of their money. This produces many more possibilities for the rent seeking elites to scam their points off the working class as the money washes through the system.
Yet they’d rather take their chances on owning it all, and forcing whoever is left to pay for the rights to use what used to be theirs.
tkogrumpy
@Walker: Only a banker would make such a blanket statement. I built my own home by saving a portion of my hourly wage, to purchase land and materials. For an outlay of 60K and five years of part time labor, without involving any bank, I now own free and clear a home worth at least 250K and rising.
sukabi
@El Cid:
that may be true, but it’s the convergence of those folks with the disaffected militia types that has the potential to light things up.
Mostly in my earlier comment, I was thinking along the lines of violent crime / theft / drug trafficking / and the like as more and more folks are trying to make ends meet…
CynDee
@Nick: There is nothing “simple” about what Obama has to do to face and strategize about and convince greedy people of in the course of dealing with the obstacles to peace and prosperity.
tkogrumpy
@cmorenc: This.
Li
@sukabi: Ugly? Not from their perspective.
We have hunting rifles and shotguns.
They have Apache helicopters and terminator robots.
A bit of blood on the streets is easy to wash away. They own the street cleaners too.
eemom
wow. Never thought I’d see the day that a Hitler comparison seemed unfair to fucking Hitler.
Corner Stone
@Li:
And police forces using drones incountry, and “red light” cameras and RFID scanners on tollways, and no-fly lists, and no-knock warrants, and so on and so forth.
Point being, they won’t have to put down a violent insurrection because they will squish it out before it ever starts.
El Cid
@sukabi: No doubt. It was ever thus. The politics of the resentful merge with the thuggishness and violence of the anti-government / super-authoritarian squads, and all with a context of action over thought, and you have your violent populist authoritarian movements.
CynDee
— Applied greed.
@cmorenc: Good post. One point to to never forget, however:
No, he didn’t. Don’t perpetuate the lie.
Walker
@tkogrumpy:
My comments were to address the flaw of using personal finances as an analogy for what the government should do.
You were able to pull off your example because of asset inflation in home prices. Let’s suppose that you did this because of knowledge/skill and not luck. Then you could have made a lot more money by borrowing from the bank because of the interest that you would be paying would be substantially lower than the increase in asset price. The net win for you (in hindsight) is to borrow. Sure, you had other reasons not to do this: no need for that big of house, risk in the market. But if we are simply talking about maximizing return, it makes sense to borrow in this case.
And this is exactly what businesses do. People do not do it in personal finances because of the increased risk, but they could. However, the problem is that policy makers are using the fact that people do not usually make this choice in their personal finances in order to argue that the government should not.
El Cid
A real for true Nobel (I know, it’s a bank thing) Prize-winning economystic on how this devotion to austerity is flat out idiotic. Joseph Stiglitz. (And doesn’t say how this can only be attributed to naked class warfare by elites.)
Even the bits about the cruel assholes imposting “austerity” and “structural” adjustment on 3rd world nations so as to beat them to shit with market ‘fundamentalist’ (hypocritical, but the ideological justification) bullshit.
Welcome to the 3rd world, America. Hope you like your new, imposed ‘austerity’ plans and your long-term suffering. Can’t make the richies pissed off, you know.
Corner Stone
@Walker:
And given the asset inflation depicted, it would have been a decidedly better move to borrow as much as possible and build 3 or 4 houses and then sell them.
Then borrow more and buy 10 or 15 houses and sell them, and repeat the cycle until you’re in the penthouse suite at The Palms in Vegas and you partying with hookers and blow and a couple US Senators, and you’re telling them what legislation you need passed and they’re agreeing with you while rolling naked on the ultra-king sized bed in a pile of $100 dollar bills and some girls named Ginger and Candi are both…
Whew. Got lost in a little flashback there.
tkogrumpy
@Walker: The key word is “blanket statement, and I’m surrounded by destitute small business people who can no longer afford the payments on there skidders and Lobster boats. It should go without saying that I understand that a household is not a nation.
tkogrumpy
@Corner Stone: Precisely. I won’t be walking away from my house any time soon. either.
Corner Stone
@tkogrumpy: I’m actually not disagreeing with Walker in the broader context, or concept.
I personally don’t mind debt if I understand what it actually costs me, or how it may reward me. I believe that way too few individuals can properly assess the cost of risk and/or opportunity costs when making decisions about their personal finances.
So it does not surprise me to see people being so easily goaded into peeing their pants about the deficit. If there’s one thing I’ve heard my entire life, one consistent message, it has been the bogeyman of “the deficit”.
Yog-Sothoth
I doubt that the business class planned this (they just let it happen and made as much money out of it as possible), but now this has opened up a golden opportunity to rewrite the social contract:
No retirement for the middle class
No health care
Permanent high unemployment with consequent lower wages and just enough welfare to contain unrest.
This will happen if we have inflation – the bonds in the SS trust fund will be inflated away along with everything else, then we will be told that it’s all gone and we have to do without.
This will happen if we have deflation – the government will default on its bonds, and we will be told that we will have to do without.
This will also happen if we have deflation, then inflation (my best guess for the future).
Historians may look back at the period between (say) the late 1800s and the early 2000s as an anomaly when the normal human power structure (a handful with fabulous wealth and the impoverished masses) was temporarily replaced with one that permitted a large middle class to exist.
If the economic system does collapse the only real option for TPTB is to double down and try to ‘revise’ the social contract (in the Darth Vader sense). If they succeed, they will control the system for the next 50-100 years. If they fail, they go somewhere else with as much wealth as they can launder. But if the economy collapses and they allow real reform they are simply giving away their power. That will never happen.
goatchowder
The only thing that could force the rich to FINALLY pitch in and feel like they have to pay their share and do some actual suffering, and give them a palpable sense of shame for profiting on other people’s suffering, would be World War III.
The right-wing orthodoxy is right: the only thing that pulled the USA out of the Great Depression was World War II. Why? Because the rich FINALLY stopped fighting reform and taxes tooth and nail, and got gripped with existential terror at being taken over by Nazis, and joined at last in a sense of shared sacrifice with the ordinary working/fighting people of America. At last.
Nobody could take a billion-dollar bonus when “there’s a war on”– the kind of war that actually puts the ass of the RICH on the line, not the kind we have now, where poor folks go and die for rich people’s profits. There was such a social stigma against war profiteering during WWII, that the wealth inequity finally died down.
What convinced me of this sad truth was the graph of wealth disparity. Peaked in the 1920’s, didn’t go down that much during the 1930’s despite all the New Deal programs, and FINALLY went down sharply after 1941. Shit, the wingnuts were right– only with a true threat to democracy– meaning to the rich as well as the poor–, do the rich finally join us poor folks and give their fair share.
I don’t think there will be a WWIII though. What there will be is a complete collapse of the capitalist system, just like the communist collapse in the 1990’s. It will level the playing field, and a new breed of brutal gangsters and thugs will take over, much as happened in Russia.