And here I think of the difficulties that, in various countries, today afflict the world of work and businesses.
I think of how many, and not just young people, are unemployed, many times due to a purely economic conception of society, which seeks selfish profit, beyond the parameters of social justice. I wish to extend an invitation to solidarity to everyone, and I would like to encourage those in public office to make every effort to give new impetus to employment.
– Pope Francis. When he is right, he is right.
Matt Taibbi updates us on what happened since the bailout. It is not good.
It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?
It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.
Read the entire article for the sickening details.
The GOP is back and prepared to threaten a US default.
Republicans are seriously considering a Doomsday Plan if fiscal cliff talks collapse entirely. It’s quite simple: House Republicans would allow a vote on extending the Bush middle class tax cuts (the bill passed in August by the Senate) and offer the President nothing more: no extension of the debt ceiling, nothing on unemployment, nothing on closing loopholes. Congress would recess for the holidays and the president would face a big battle early in the year over the debt ceiling.
From the Wall Street Journal:
Sales of the new iPhone could add between a quarter and half a percentage point to annualized economic growth in the fourth quarterJ.P. Morgan JPM -1.39%’s chief U.S. economist Michael Feroli estimates. That could help to cushion the U.S. economy from other risks in the final months of the year.
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The bottom line: The new iPhone sales could boost GDP by $3.2 billion in the fourth quarter, or $12.8 billion at an annual rate. That is an increase of 0.33 percentage point in the annualized rate of GDP growth. It could be even higher, he says. Even a third of a percentage point would limit the downside risk to J.P. Morgan’s fourth-quarter growth projection of 2%.
Should this come to pass, it could actually help re-elect Barack Obama.
No president, not me, not any of my predecessors — no one could possibly have repaired all the damage that he found in just four years. But [President Obama] has laid the foundations for a new, modern, successful economy of shared prosperity. And if you will renew the president’s contract, you will feel it. You will feel it.
– Former President Bill Clinton at the Democratic National Convention last night. Clinton also noted that, in fact, the economy is in better shape now than it was four years ago. Don’t believe it? Well take a look at these two charts showing the change in GDP and employment over the past four plus years.
The problem with banks is that they tend to blow up on a regular basis. That’s because bankers are playing with other people’s money (OPM). They consistently abuse the privilege and shirk their fiduciary responsibilities. Whenever they get into trouble, government regulators scramble to bail them out first and then scramble to regulate them more strictly. Without fail, the bankers respond to tougher rules by using some of the OPM to hire financial engineers and political lobbyists to figure out ways around the new regulations.
In my opinion, banks are the Achilles’ heel of capitalism. They really do need to be regulated like utilities if their liabilities are either explicitly or implicitly guaranteed by the government, i.e., by taxpayers. Banks should be permitted to earn a very low utility-like stable return. Bankers should receive compensation in the middle of the pay scale for government employees, somewhere between the pay of a postal worker and the head of the FDIC. It should be the capital markets, hedge funds, and private-equity investors that provide credit to risky borrowers instead of the banks.
– Edward Yardeni in this week’s Barron’s via The Big Picture.
The boom, not the slump, is the right time for austerity.
– John Maynard Keynes, quoted by Paul Krugman.
What we thought was that Japan was a cautionary tale. It has turned into Japan as almost a role model. They never had as big a slump as we have had. They managed to have growing per capita income through most of what we call their ‘lost decade’. My running joke is that the group of us who were worried about Japan a dozen years ago ought to go to Tokyo and apologise to the emperor. We’ve done worse than they ever did. When people ask: might we become Japan? I say: I wish we could become Japan.
– Paul Krugman (via Andrew Sullivan)
TED (conference) (Photo credit: Wikipedia)
TED, who’s slogan is “Ideas Worth Spreading” and who has provided hundreds of insightful speeches for years, has decided not to spread one idea. They are refusing to provide access to a talk by a speaker who argues that income inequality is bad for America.
The speaker was Nick Hanauer, and here is part of what he said:
We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Rather they are a consequence of an ecosystemic feedback loop animated by middle-class consumers, and when they thrive, businesses grow and hire, and owners profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.
It is very odd, to say the least, for a forum for free expression to back away from one of their speakers.
The President takes on Bain.
Paul Krugman offers his prediction on the failure of the Euro. Not over years, but over months.
The jobs situation is bad. But how bad, and how much can Obama be blamed and how much credit should he get for the recovery in jobs so far? It is not at all obvious. Here are the statistics:
(image via CNN Money)
When plunder becomes a way of life for a group of men living in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.
– Frederic Bastiat, French writer and economist, quoted by Bill Moyers. (via the Quotation of the Day Mailing List)
… in early 2010 austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you’re right: It does and he did.
Now the results are in — and they’re exactly what three generations’ worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.
Furthermore, bond markets keep refusing to cooperate. Even austerity’s star pupils, countries that, like Portugal and Ireland, have done everything that was demanded of them, still face sky-high borrowing costs. Why? Because spending cuts have deeply depressed their economies, undermining their tax bases to such an extent that the ratio of debt to G.D.P., the standard indicator of fiscal progress, is getting worse rather than better.
Meanwhile, countries that didn’t jump on the austerity train — most notably, Japan and the United States — continue to have very low borrowing costs, defying the dire predictions of fiscal hawks.
– Paul Krugman. Fortunately, the “bond vigilantes” in the US did not get their way. They constantly decried deficit spending (during the financial collapse) as inflationary. It simply hasn’t happened.