The US Economy is Set for a “Double-Dip” Recession
by Paul Craig Roberts
Happy news! The government has come up with a 5.9 percent GDP growth rate in the fourth quarter of 2009. The recession is over.
Or is it?
Statistician John Williams has informed us that 69 percent of this growth, or 4.1 percentage points, is the result of inventory accumulation. That leaves a 1.8 percent growth rate, and the 1.8 percent is likely due to the underestimate of inflation and other statistical problems.
The Federal Reserve’s own monetary evidence contradicts the recovery assurances from Fed chairman Ben Bernanke. The Federal Reserve continues to pour massive reserves into the banks. The monetary base, which consists of currency in circulation and bank reserves (the basis for new loans), has surged from $850 billion in 2009 to $2.2 trillion on February 24.
Despite this potential for massive new money creation, the broadest measure of money growth is still contracting.The banks are too impaired and so are consumers for the banks to create new money by making loans.
It is a truth universally acknowledged that predatory bankers in possession of great fortunes are in want of media lackeys, especially after savaging the American Dream. Actually not, considering the corporate media outlets reinforcing the clownish social gospel from Lloyd Blankfein of Goldman Sachs: conglomerates do good, indeed “God’s work.”How would any CEO richer than Midas know God’s mind or presume entry to heaven, according to a more reliable source, any more likely than a camel through the eye of a needle?
Propaganda aside, hear the hosannas this Great Recession isn’t so bad, no national tragedy, no generational plague, barely involving predatory lending. When viewed correctly this healthy downturn “will improve all of our lives by bringing us back to the original vision of the American Dream.” In the meantime, hard times cleanse debtors and clear books: thus, mystical free markets self-balance, punishing those lovers of excess and betrayers of contracts. Verdict; blame consumer spendthrifts for toppling our shining city on the hill. Rich people, not so much.
The media loves tough love that regains more than lost affluence but transcendent virtues: self-control, family togetherness, even, brace yourself, Yankee introspection. This Sunday CNN blessed us with its Pollyanna sermonette, profiling a perky Bernie Madoff survivor happier than ever. She’s not bitter towards this thug, so outlandish he dared capture, awash instead in wise acronyms, like SNT – Stop Negative Thinking. Unfortunately, no empty platitudes wash away unarguable research testifying joblessness and foreclosure can kill, with an array of anxiety disorders sharpened by depression, addictive and abusive behavior, divorce, even suicide – no endorsement for positive thinking. Note, those justifying pain always have jobs.
Frédéric Bastiat must have been looking toward the future of the United States today when he said, “When plunder has become a way of life for a group of people living together in society, they create for themselves in the course of time a legal system that authorizes it, and a moral code that glorifies it.”
I fear the federal government will plunder much of our private wealth, retirement plans and personal savings through hyperinflation, financial controls and confiscatory tax rates all in the name of protecting the public from a future debt crisis unless the states can secede from the Union and the crushing Washington debt load.
The first actual secession following several attempts by the New England states took place in the South and it ended with the defeat of the Confederate States of America. Now secession is again in the news and this time it may be the only solution to surviving the coming Washington national debt crisis.
We need to forget the causes of the earlier War Between the States, regional differences, slavery, tariffs and other related issues. The new secession effort will be state based but a national movement all across the United States ranging from Vermont to Georgia, Texas to Alaska etc. Economic survival and prosperity rather than regional issues will be motivating factor.
Last week, the House approved another increase in the national debt ceiling. This means the government can borrow $1.9 trillion more to stay afloat and avoid default. It has been little more than a year since the last debt limit increase, and graphs showing the debt limit over time show a steep, almost vertical trend. It is not likely to be very long before this new ceiling is met and the government is back on the brink between default and borrowing us further into oblivion. Congressional leaders and the administration acknowledge that the debt limit will need to be increased again next year. They are crossing their fingers that the forecasts are correct and they will not need another increase sooner, even before the 2010 midterm elections.
Continually increasing the debt is one of the logical outcomes of Keynesianism, since more government spending is always their answer. It is claimed that government must not stop spending when the economy is so fragile. Government must act. Yet, when times are good, government also increases in size and scope, because we can afford it, it is claimed. There is never a good time to rein in government spending according to Keynesian economists and the proponents of big government.
False Profits: Recovering From the Bubble Economy By Dean Baker PoliPoint Press, 2010
He who feels punctured must once have been a bubble.
- Lao Tzu, Tao Te Ching, 6th century BCE
As the nation struggled to recover from the worst economic downturn since the Great Depression, the people who got us here are desperately working to rewrite history. The basic story of this economic collapse is very simple. The Federal Reserve Board, guided by its revered chairman, Alan Greenspan, allowed an $8 trillion housing bubble to grow unchecked.
- Dean Baker’s “False Profits”
The delicious double-entendre of Dean Baker’s most recent title is enhanced by the book’s cover photo of a trio of false prophets, Ben Bernanke, Alan Greenspan and Henry (Hank) Paulson, all of whom are thoroughly excoriated within the book’s pages for their responsibility in feeding, prolonging, misdiagnosing and incorrectly responding to the 2007-2009 financial meltdown and the associated economic collapse. However, the book also chronicles the loss of $8 trillion of housing “wealth,” $1.4 trillion in annual demand, whatever financial security the vast majority of baby-boomers ever had, “increases” in homeownership rates and any other widespread economic gains associated to the post-2000 period.
Truthout has published Dean Baker’s columns about net job losses for 2000-2010, a decade that also saw a 26 percent drop in the stock market, the elimination of the $236 billion federal budget surplus President Bush inherited and its transformation into a record deficit and the overall deliquesce of any societal and most people’s personal economic “profits.”
Jean Saint-Vil: Canada should own up to hosting 2003 summit to plot Aristide’s overthrow
Last week, CBC’s Radio One’s The Current featured a panel discussion that included Ottawa-area resident Jean Saint-Vil, who is active with the solidarity network Canada Haiti Action. Afterwards, we invited him to visit at the Straight Goods News Ottawa bureau.
Media coverage of and political reaction to the Haitian disaster don’t offer much perspective on the situation. Saint-Vil explained that Haitian realities that go beyond the stereotypes of endemic poverty and corruption. He pointed to a racist subtext that subtly portrays Haitians as incompetent and ignores a centuries-old history of oppression and foreign meddling.
Saint-Vil said, for instance, that Haiti has never recovered from reparations it was forced to pay to France, totaling $40 billion in modern currency. Returning that money to the Haitians would help them recover much better than a patchwork of foreign “aid” with all the vested interests and strings inevitably attached.
Jean Saint-Vil talks to Pat Van Horne about Haiti’s realities, part 1
Shortly after the start of Campaign for Liberty, Congressman Paul gave a special order speech on the House floor in July 2008 entitled “Something Big is Going On,” where he laid out how our country had gone off a sound economic path, and he again predicted what would turn out to be the greatest economic crisis since the Great Depression.
In this follow-up to that momentous speech, entitled, “Is That All There is to a Recession?”, Dr. Paul argues that, contrary to establishment thinking, we are by no means out of the woods. Urging a return to common sense and sound money, Congressman Paul looks at what lies ahead for our country if we continue to spend beyond our means and rely on a fraudulent money system. Prosperity is waiting for our nation, but its return hinges on our ability to change our way of thinking in order to pursue liberty.
(Thanks to Minnesota Chris for the full playlist!)
Everyone knows that the too big to fails and their dishonest and footsy-playing regulators and politicians are largely responsible for trashing the economy.
But the military-industrial complex shares much of the blame.
Nobel prize winning economist Joseph Stiglitz says that the Iraq war will cost $3-5 trillion dollars.
America is also spending a pretty penny in Afghanistan. The U.S. admits there are only a small handful of Al Qaeda in Afghanistan. As ABC notes:
U.S. intelligence officials have concluded there are only about 100 al Qaeda fighters in the entire country.
With 100,000 troops in Afghanistan at an estimated yearly cost of $30 billion, it means that for every one al Qaeda fighter, the U.S. will commit 1,000 troops and $300 million a year.
Sure, the government apparently planned the Afghanistan war before 9/11 (see this and this). And the Taliban offered to turn over Bin Laden (see this and this). And we could have easily killed Bin Laden in 2001 and again in 2007, but chose not to, even though that would have saved the U.S. hundreds of billions of dollars in costs in prosecuting the Afghanistan war. But this essay is about dollars and cents.
Remember teaser rates and option ARMS? Well, the downward pressure is a time bomb that is about to go off…again.
hat tip: Brasscheck
Now the real “fun” begins
In a boxing match, a good referee will take a boxer out who’s been hit so hard, he’s staggering.
Why?
The potential damage from follow up blows to someone already in a weakened state is exponentially higher than from the first one.
Unfortunately for the credit market, there’s no referee to call a time out.
A second blow in the form of a second major wave of real estate loan defaults is on its way – and nothing can stop it.
My guess is that the credit market is being propped up now during the lull so that the banks can sell off their holding to suckers (us) before the real carnage begins.
Imagine two trainers propping up a nearly unconscious fighter as his opponent warms up for one final blow and you’ve got a good idea of the situation we’re in.
Here’s how it looks from the trading floor – from the mouths of people who know what’s going on and aren’t afraid to say so.
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