Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

February 23, 2009


Telegraph, UK - Metropolitan Police Superintendent David Hartshorn has said police are bracing themselves for a "summer of rage" against the economic crisis. Supt Hartshorn, who heads the Metropolitan Police's public order branch, said he feared there could be "mass protest" at rising unemployment, failing financial institutions and the downturn in the economy. . . Up to 120,000 people marched through Dublin on Saturday in an emotional and angry national demonstration over the Irish Government's handling of the economic crisis. In the UK earlier this month, hundreds of oil refinery and power station workers carried out a series of wildcat strikes over the use of foreign workers. And across the Channel in France, a million people joined demonstrations to demand greater protection for jobs.

Pro Publica
- The money in the stimulus bill slated for transportation and infrastructure--a touch under $100 billion--is likely to be one of the stimulus' biggest job-generators. But we crunched the numbers and found that states with high unemployment are actually getting less money per-capita or even per-unemployed worker than states with low unemployment. Details

Sam Stein, Huffington Post -
Appearing on ABC's This Week with George Stephanopoulos, Gov. Arnold Schwarzenegger giddily embraced the idea that more money would be available for California should his GOP colleagues -- like Govs. Mark Sanford of South Carolina and Bobby Jindal of Louisiana -- refuse stimulus funds. "Well, Governor Sanford says that he does not want to take the federal stimulus package money. And I'll say to him, I'll take it," Schwarzenegger said. "I'm more than happy to take his money or any other governor in this country that doesn't want to take this money. I'll take it, because we in California need it."

U.S. District Judge Richard Holwell
has told the Treasury Department it has until March 23 to give Fox Business Network information on how it has spent its bailout money.

Robert Reich - While it's true that the New Deal didn't end the Great Depression, three points need to be impressed on the hard-pressed conservative mind:

1. The New Deal relieved a great deal of suffering by establishing social safety nets -- Unemployment Insurance, Aid for Dependent Children, and Social Security for retirees. . .

2. FDR's public works spending did help the economy somewhat. By 1936, U.S. the economy was showing some life. Unemployment was declining and consumers were beginning to buy. But FDR cut back on public-works spending, and the economy sank back into its former torpor. A warning to Obama: Don't worry about so-called "fiscal responsibility" when aggregate demand still falls far short of the economy's total capacity.

3. The Second World War pulled the nation out of the Great Depression because it required that government spend on such a huge scale as to restart the nation's factories, put Americans back to work, and push the nation toward its productive capacty. By the end of the war, most Americans were better off than they were before its start. Yes, the national debt ballooned to 120 percent of GDP. But the debt-GDP ratio subsequently declined -- not just because post-war spending dropped but because the economy continued to grow as war production converted to the production of consumer goods. Lesson: The danger isn't too much stimulus, it's too little stimulus.

Mark LeVine, Al Jazeera - The roots of this crisis can be traced back to the economic policies of the 1980s. For a generation the growth of the US economy has been disproportionately driven by the availability of cheap consumer goods and investment credit. This system, which peaked with the rise of the securitization of highly risky sub-prime mortgages in the last few years, enabled an investment system to emerge in which the debt to equity ratio was an outstanding, and totally unsustainable, 100 to one.

As Nouriel Roubini, a New York University economist who was among the first to predict the collapse we are now experiencing, explains it, the largely unregulated debt system created a "credit chain".

This debt-to-equity ratio was so unstable that even a one per cent fall in the price of the final investment at the end of the chain "wipes out the initial capital and creates a chain of margin calls that unravel this debt house of cards".

The world economy similarly depended on a growth formula based on a debt-equity ratio of five to one. This means that in order for countries to maintain real GDP growth of two to three per cent, available credit would have to expand by 10 to 15 per cent. . .

So far, the Obama administration has sought to inject enough money into the US economy to ease up the restrictions on credit and stimulate the economy through tax breaks and infrastructure programmes.

What few Americans, politicians and ordinary citizens alike, have thought to consider is whether the financial system that the new administration is trying to rescue - essentially, the "American way of Life" - should even be saved. . .

Obama's biggest challenge will be to figure out how to create millions of jobs while steering the US economy away from the economically and environmentally unsustainable model of growth that helped generate the present crisis.

To do this will require more than spending hundreds of billions of dollars on rebuilding crumbling infrastructure and encouraging "green" technologies.

It will require designing an architecture for a 21st century economy that much more equitably distributes limited resources among an expanding population than has the debt/consumption system that is now collapsing globally.

Chris Bryant, Financial Times - European leaders on Sunday outlined sweeping proposals to regulate financial markets and hedge funds and clamp down on tax havens as they sought a common position to combat the global economic crisis. . . In a joint statement, they endorsed a plan to create a comprehensive regulatory framework that covers "all financial markets, products and participants - including hedge funds and other private pools of capital which may pose a systemic risk".

Forbes - Las Vegas edged Detroit for the title of America's most abandoned city. Atlanta came in third, followed by Greensboro, N.C., and Dayton, Ohio. Our rankings, a combination of rental and homeowner vacancy rates for the 75 largest metropolitan statistical areas in the country, are based on fourth-quarter data by the Census Bureau. Each was ranked on rental vacancies and housing vacancies; the final ranking is an average of the two. . . Boston and New York are among the lone bright spots, while Honolulu is the nation's best with a vacancy rate of 5.8 percent for homes and a scant 0.5 percent for rentals.




Anonymous Anonymous said...

“The Second World War pulled the nation out of the Great Depression because …” the world’s other industrial powers were in rubble. The US had the market for manufactured goods to itself for at least a decade.

Helping things along was a return of trade. Prior to the war trade between nations had largely stopped because most countries adopted protectionist measures that effectively stopped imports(meant to save jobs at in the respective countries, ironically — that other country’s imports are your country’s exports, and vice versa).

After the war the barriers were down, any demand for manufactured goods meant that American co.s got the business.
As mentioned, the US had the market for manufactured goods to itself for a decade, and dominated that market for another couple of decades — into the seventies. Then along came Japanese autos and consumer electronics, Airbus, China, etc. — and the relative position of the US slipped. This positional change is only now being really felt.

We were able to fool ourselves for 20+ years, convincing ourselves that we were still on top of our game, by taking on enormous amounts of debt and continuing to live the high life.
In hind sight, it’s amazing that other countries subsidized our delusion. It’s especially amazing to me that it does not bother ‘liberal’ economists like Reich and Krugman that Chinese factory workers, who make (maybe) 30 cents an hour, have been subsidizing out-of-control consumption in the US. Where’s the ‘economic justice’ in that arrangement?

Long post short, the US enjoyed what economic (and political) dominance it had post-WW II because we made stuff. President Obama’s plan (embraced by the likes of Reich and Krugman) — to have 3 … or 4 … or (who knows? eventually) 20 million Americans engage in massive public works, painting bridges, filling potholes, whatever — will do nothing to improve the US relative status in the world.

With unemployment and hardship spiking upward, I’m all for the gov’t’s making sure nobody starves or freezes to death — but providing the bare necessities to the least fortunate among us (’dinner napkin’ calculation: 5 million unemployed X $10K worth of emergency assistance each per year = $50 billion) would not create the kind of massive gov’t Krugman and Reich envisage.

February 23, 2009 8:54 PM  

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