Tag Archive for ‘Economy’
Like a broken clock taking its twice-a-day victory lap, the New York Times weighed in this morning on Detroit’s bankruptcy. The reason? It’s finger-pointing time. And, when money is the issue, the Times’ ink-stained fingers reflexively point to banks, all of which are big, bad, and beyond the reach of regulators. And now it looks like the Times’ suffers from an ink-stained brain too.
Our nation’s former “paper of record” today pronounced that “this much is clear”: (1) the banks that “abetted” Detroit’s profligacy will have to eat only 25% of their bad bets whereas the city’s pensioners will lose 90%, (2) “municipal officials are prey for Wall Street,” and, (3) the preferences shown to banks during bankruptcy proceedings are both “unfair and economically destabilizing.”
But those of us with ink-free brains need to focus on the facts and ignore the hysteria emanating from Manhattan’s West Side. As Detroit finalizes its descent into nothingness, you, wherever you live, will be expected to chip in. Municipalities have for years pushed labor costs into the future by promising more lavish defined-benefit pensions than the defined-contribution plans offered in the private sector. Don’t be surprised when your uninsured, hard-earned 401k becomes the apple of Detroit’s municipal unions’ eyes as they demand you share their pain. The banks, well-versed in these never ending government shell games, had the foresight to protect themselves. Bad banks!
And when a city elects Kwame Kilpatrick—he of the 25+ felony convictions—as its mayor, how can it then complain when Wall Street beats it at its own shady game? Kilpatrick seems to have spent most of his career as a predator, engaged in exactly the type of preying the Times accuses Wall Street of.
To give credit where due, maybe the Times had a point bemoaning the preferential treatment of banks in bankruptcy. Lenders will only lend when they have reasonable reassurance they will be repaid. Let’s put down our pitchforks and torches for a second and, as the first step in the Times‘ peasant revolt, abolish those annoying bankruptcy code preferences. That way no lender will abet the next one hundred Detroit’s who borrow themselves into the abyss.
On October 2, 2010, the Wall Street Journal ran an article detailing the results of the most recent NBC/Wall Street Journal poll. The article was entitled “Americans Sour on Trade,” but what Americans are really souring on is free trade: 53% of Americans now say that free trade agreements have hurt the United States, with less than 10% saying they have helped. The tea party is even more opposed to free trade than the general public, with 61% of tea party supporters saying that free trade agreements have hurt America.
And anti-free trade sentiment is building: in 2007, 46% of Americans said that free trade agreements have hurt the country, and in 1999 the figure was only 32%. A decade of outsourcing of professional jobs has dramatically eroded the support of wealthier Americans for free trade, with 50% of those earning over $75,000 per year now saying that free trade hurts the U. S., up from 24% in 1999. And both 83% of blue-collar workers and 95% of professionals and managers cited outsourcing of jobs to foreign countries as a factor in America’s current economic downturn; no other factor was cited more.
Of course, the people are right. As Paul Craig Roberts has tersely noted, “The American economy has gone away. It is not coming back until free trade myths are buried six feet under.” Unfortunately, the consensus of our bipartisan elite in favor of free trade remains strong. But at least the American electorate is no longer buying that particular bill of goods.
The immiseration of working people has not resulted from worsening crises of overproduction of goods and services, but from financial capital’s power to force the relocation of production for domestic markets to foreign shores. Wall Street’s pressures, including pressures from takeovers, forced American manufacturing firms to “increase shareholders’ earnings.” This was done by substituting cheap foreign labor for American labor.
Americans cannot get any truth out of their government about anything, the economy included. Americans are being driven into the ground economically, with 1 million schoolchildren now homeless, while Federal Reserve chairman Ben Bernanke announces that the recession is over.
The “defects” that commentators keep finding in private-sector economics aren’t defects at all—bad guesses, stupidities, rapacious maneuvers and all the rest. They reflect the nature of the people—humans, that is—who engage in economics. People are people, wherever they live, whatever they do.
After half a century of fighting encroachments upon freedom in America, journalist Garet Garrett published The People’s Pottage. A year later, in 1954, he died. The People’s Pottage opens thus:
“There are those who still think they are holding the pass against a revolution that may be coming up the road. But they are gazing in the wrong direction. The revolution is behind them. It went by in the Night of Depression, singing songs to freedom.”
Despite our high expectations, Vice President Joe Biden’s first months in office were disappointing. This, remember, is the man who opened the more recent of his two futile runs for the presidency by saying of Obama that he was “the first mainstream African-American who is articulate and bright and clean and a nice-looking guy. I mean, that’s a storybook, man.”
There is no economy left to recover. The U.S. manufacturing economy was lost to offshoring and free-trade ideology. It was replaced by a mythical “New Economy.”
The “New Economy” was based on services. Its artificial life was fed by the Federal Reserve’s artificially low interest rates, which produced a real-estate bubble, and by “free market” financial deregulation, which unleashed financial gangsters to new heights of debt leverage and fraudulent financial products.
So here, as if on cue, it being a new day and all, came the Obama administration Monday to announce new arrangements for the way the country does business.
The new big idea: Tell all those banks how much they’re going to be allowed to pay executives; let them know the gravy train leaves the track here and now; Washington has their number.
Economic news remains focused on banks and housing, while the threat mounts to the U.S. dollar from massive federal budget deficits in fiscal years 2009 and 2010.