How bailing out the rich created the Depression
The other day, Krugman wrote that we're in the beginning of a new Long Depression.
Forgive me, but he's wrong: this isn't the beginning, it's been going on for about two years now.
During a Depression there are periods where GDP grows. There are periods where jobs grow. It's just that the periods of job growth don't last.
There were opportunities to end the Depression before it really dug in its heels. The last one was at the beginning of Obama's term. Kicking out of the Depression required two things.
The first was an adequate stimulus. This didn't just mean a large enough stimulus, though the one offered was not large enough, it meant one properly constructed. Tax cuts for ordinary Americans are not stimulative, because folks like banks who have pricing power (you must have a credit card, loans, etc...) will simply take that money away by raising rates and fees. And it doesn't mean short term shovel-projects, it means making commitments which will last for years so that businesses, when making plans know that hiring is worth it because those employees will be needed for more than a year or so.
Likewise the US has some serious problems with the structure of the American economy. The cornerstone of the stimulus had to be reducing US dependence on oil because as long as the US economy is so dependent on oil, full fledged growth is simply not possible. The days of $20/barrel oil aren't coming back, and every time the price of oil gets too high, it puts great pressure on the US economy (and every other modern nation.)
The second thing which had to be done is to force the banks to actually eat their losses. Wipe out the shareholders and let the bondholders take their losses. All the money plunged into the banks (and it was much more than the TARP money, which was the smallest part of it) was wasted. Banks are not lending, and restoring lending is what the bailouts were sold as doing. Moreover they have raised borrowing rates and fees on those who need credit most, soaking up money which otherwise would be helping the economy rather than simply being sopped up to plug holes in bank balance sheets.
The trillions of dollars spent attempting to bail out the banks weren't just wasted, by keeping zombie banks alive they made the situation worse. Further by not wiping out the wealth of banks and those rich folks who made foolish investments which wrecked the world economy, they created a political problem: to whit, as Durbin said—the banks still own Congress. (Along with the military industrial complex, pharma and various other monied interests). Because monied interests still own Congress, they have made it impossible to fix America's structural problems.
Six percent of GDP could have been saved by doing health care reform properly, but that didn't happen. The current "financial reform" bill under consideration is so week that I don't know of one credible outside analyst who thinks it is sufficient to make sure there isn't another financial crash, and on and on.
Historically speaking periods of high concentration of wealth only end when the rich lose it in a huge crash. They are never ended by, say, high marginal taxation—high marginal taxation only occurs after the losses have occurred as those who saw the run-up do their best to make sure it can't happen again.
That lasts until the generations who saw the mania and crash start dying off and losing power. So you start seeing really serious decreases in marginal tax rates and slashing of financial regulations when the generations who lived through not just the Great Depression but the Roaring twenties were no longer around.
The cliche that a crisis is an opportunity is, sadly, true. But it is only an opportunity if you take it. What politicians, and this includes Obama and Geithner, as well as Bush, Paulson and Bernanke, did, was they protected the rich from their own folly, and made ordinary people pay for it. The wealth of the rich has mostly recovered, corporate profits have recovered, but for ordinary people the economy still sucks and there is no reason to believe it isn't about to start sucking even more.
The financial elites think that what they can do is create an economy with a permanently high unemployment rate and that Americans (and Europeans, for that matter) will put up with it, because what choice do they have?
We are going to have another kick at this can, because the legislation being put in place is not sufficient to prevent another financial crisis. This is a Depression, and it is not going to go away.
Next time I hope we will consider doing the right thing. Make those who crash the system take their losses and break the power of the rich over government.
Be very clear, it's you, or it's them. You break their power, or they will continue to push your wages towards parity with China.
And they are very determined it's not going to be them.
Are you determined it's not going to be you?
...is a big stinky ponzi scheme.
(end the fed) ...and we can end the endless debt.
audit-prosecute-incarcerate
Since I assume you're basing this connection on Keynes' advocating an increase in gov't spending, thus the money supply, but the money doesn't have to come from the Fed. I wonder if you're being sincere here or just trying to bash Keynesian economic policy through a questionable alignment with Fed policy, which itself is aligned with Ponzi without explanation.
Care to toss in a few words to back up your assertions?
"Keynes" is to the "Federal Reserve of the United States of America," as "Speed" is to "Pork."
Sure some pigs may have been known to run fast, but that is not the point.
CTHULHU 2012 "Why vote for a lesser evil?"
that the very wise course Krugman is advocating is pure Keynesian economics don't you?
Hasa Diga Eebowai
At least since 2007 and probably 2006. The reason I think this is that those of us down here at the bottom of the food chain (working class retiree, less than $1k a month pension income) start getting beat up long before anyone else while the middle class remains in a state of denial until it actually begins to affect them directly. In the meantime, they're more than happy to give the turds an extra nudge as they roll downhill.
As long as it's the bottom quintile taking most of the brunt, nobody really gives a crap. It had to work its way up the food chain and start chomping at the middle classes before anyone would admit that we were in a recession and since it's still only the working classes actually being smashed in the train wreck the financial and government sectors continue to try to convince us that it's our civic fricking duty to do with less so they can get more. And unfortunately, far too many of us fall for it. That's where Teabaggers come from.
The Wall Street parasites... making more money than ever during what is a depression no matter how much lipstick you want to smear on that particular pig's ass... and their trained congresswhores flatassed lied and continue to lie about it.
On the Friday before the Tuesday when the Bear Stearns collapse became common knowledge, Bush and Paulson were still describing the economy as "robust" (Lord how I've come to hate that word just because of its overuse by the Bushies) and it hasn't gotten any better under Obama and that nest of Wall Street snakes he's surrounded himself with.
Love your first paragraph. Repukes especially could care less about the less fortunate until they are unemployed for a while. Like my wingnut brother-in-law, who was literally crying in his soup when he couldn't find a job for a year.
Of course, now that he's employed again, it's back to republicanville for him.
If I were a psychopath, I would join the republican party, and get in on the gravy train taking the Teabircher morons to the cleaners.
... so that is what a Republican means when he says all that stuff about "pulling his own bootstraps."
CTHULHU 2012 "Why vote for a lesser evil?"
.
We might as well get used to this ... and worse . The Reich are not at all unhappy about it , I honestly believe the invasions , the occupations , destroying the economy and then bailing out the crooks and criminals , all of it putting this country trillions into debt ... none of this was an accident or a mistake and even now all they want to do is sabotage the government , sabotage the country itself , , this is all part of their scheme to eliminate all social programs including social security ... the so called social safety net , and to basically destroy the middle class , empowering the top 1 % all the more , transferring even more wealth to the top 1 % and to empower corporations all the more . These fascist F'ers are traitors and saboteurs , they should be dealt with as such ,there is no law or justice anymore so what are you ( we ) going to do ? They are at least half the government itself not to mention they have the so called Supreme court sabotaged and in their pockets , damned near have a lock on the MSM and legions of ignorant fools supporting them . It's not good , long term it looks real bleak , bleak to completely hopeless .
Insanity , it is what it is , there is no understanding it .
The banksters make lots of their money by creating bubbles then pulling their cash out, bursting the bubble and leaving the suckers holding the empty bag.
Right?
The American post-World War Two consumer economy was a BIG BUBBLE.
The investors have fled, moving their cash and investments offshore.
Now they're sucking what little is left from the BIG post-WW2 American BUBBLE.
When will government of the people, by the politicians, for the corporations perish from this Earth?
Not soon enough!
It's sad to have to admit this, but George W. Bush was the most successful failure in our nation's history, possibly in the history of all western democracies. He did exactly what hid daddy's friends on the Supreme Court appointed him to do: Start wars based on (false flag?) attacks, cut taxes during those wars,(first time in recorded history), run up massive debt to justify cutting social programs under the guise of controlling the debt amassed by the countless intentionally bad decisions. Wave the flag, scare the ignorant masses with religious imagery, screw the poor, mollify the middle-class with a $300 tax cut, and comfort the wealthy. Like every other business he was involved in, (like the one with bin Laden's brother) he ran the country into the ground. Only this time, his daddy's friends can't and won't help him out of this mess.
Agreed. I wrote something similar as a commentary in my local paper regarding the fact that public employees are doing better than the private sector. The viciousness of some of comments was frightening - in essence "why should my taxes give school teachers a decent salary and benefits when my employer is /has screwed me?" They were incapable of seeing that they are screwed because they don't have the protections public employees (in my state) do.
I hear lots of anger, from the right and from the left - I think we are heading for some kind of confrontation. I do know I'll fight cuts to Social Security and Medicare - my employer has already screwed with my pension so I'll get $3,000 less a year for the rest of my life; I couldn't change that, but I'm not letting the greedy weasels take another cent without a fight.
guise of "globalization" the private sector surrendered time and again the hard won concessions that our parents and grandparents fought for. And the right-wing jerkoffs have successfully pitted the taxpayers against the employees who kept their benefits by claiming their "cushy benefits" will bankrupt the country. They fucked it up with their horrible policies and now want to further cut the social safety net. We should be RAISING the standards for the private sector, not LOWERING the standards for the public employees.
Krugman wrong?
How can that be?
lol
"I know that there are people who do not love their fellow
man, and I hate people like that! " ~ Tom Lehrer (1928 - )
needle on the pine tree when it comes to this stuff, I found this interesting though. This is just one of many theories.
http://en.wikipedia.org/wiki/Debt_deflation
Oh and by the way, what will it matter.
http://www.dailymail.co.uk/sciencetech/articl...
"No man is so foolish but he may sometimes give another good counsel, and no man so wise that he may not easily err if he takes no other counsel than his own. He that is taught only by himself has a fool for a master." - Hunter S. Thompson
Thanks
From today's Guardian UK:
Budget will cost 1.3m jobs - Treasury
It's all the rage now.
Time to pee-on the peons.
When will government of the people, by the politicians, for the corporations perish from this Earth?
Not soon enough!
We've been getting peed on ( trickled on ) for a long long time ,that wasn't enough for them so now it's on to the grand finale ...
Insanity , it is what it is , there is no understanding it .
I can see how they slogan is going to move from "trickle down" to "dump down" since this time for reals there is going to be beaucoup money coming our way. Like dumping millions on us.
That is the funny thing about prepositions, such small words... but such monumental difference they introduce.
We were never "trickled down," we were "trickled on." Biiiiig difference. Which makes me sudder to think about what fun and games being "dumped on" is going to bring our way.
You know somewhere some dudes are getting off on fucking at such massive scale with millions of people at the same time in order to cope with unresolved childhood and personality issues (probably of the daddy persuasion). Our whole existence may basically be to serve as therapy for the elites, awesome!
CTHULHU 2012 "Why vote for a lesser evil?"
it's been a hell of a lot longer than two years.
just because Bushco refused to acknowledge that there was a problem doesn't mean there wasn't.
this has been going on for about ten years now.
if you look at the long con rather than the short one, it's been an ongoing campaign to depress the middle class for about 30 years now.
http://www.telegraph.co.uk/finance/economics/...
mr. welsh puts it quite succinctly "Be very clear, it's you, or it's them. You break their power, or they will continue to push your wages towards parity with China."
$1.03/hour will not go very far in this country, doesn't go that far in china, i wouldn't think.
agitation and propaganda have worked pretty well for the last hundred years, kept those reds at bay, hardly anyone willing to own up to being a socialist, let alone a red.
it is totally time to take a hard look at the democrats, they will never change a damn thing. our peace prize president "bloody barack" obama, will not stop the wars, he will not go on tv and tell it like it is, but he is counting on that fat presidential pension. what we have going on in this country is not dr. kings dream, it is a sad, sick, nightmare.
of course the reactionaries are waiting in the wings, the supposed "left" will roll out the republican boogeyman, keep the troops in line. mr. welsh is so correct it is depressing.
i barely graduated high school, but even i can see how wrong krugman is, and how he defends the same tired status quo. the dead giveaway is when he trots out the tried and true "growth" argument.
"Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses."
my, my, a relapse, how quaint, perhaps someone should explain to the good professor that growth requires energy input, and ours is being input into the gulf.
oh yes, "a rising tide lifts all boats", works great if you have a boat, which i am sure the professor does...
i will give mr. krugman kudos on one point, he does at least say that what we are seeing is "the victory of an orthodoxy that has little to do with rational analysis", unfortunately that orthodoxy is his, and the democrats, and the republicans; that orthodoxy is that somehow, through "stimulus", or cuts (ala john boehner), that humpty dumpty can be put back together again.
recipe !
Tax Cuts: It's a cook book - for sautaying the middle class.
If I were a psychopath, I would join the republican party, and get in on the gravy train taking the Teabircher morons to the cleaners.
"To Serve Man"...
Way back in 2002, i didn't see anything adding up. By 2003, I was thinking the recession hasn't abated, and Bush's economic recovery was a joke.
By early 2005, I was saying we were headed for a great depression, and that the economy sucks. i can still remeber some of my GOP neighbors telling me how nuts I was. "It's a great economy, it is just slow in Michigan." When I told them the only economy we had was a housing bubble, they said I was nuts.
I must admit however, I enjoy pointing this out to them when they start getting wingnutty.
If I were a psychopath, I would join the republican party, and get in on the gravy train taking the Teabircher morons to the cleaners.
had better do something RIGHT and do it soon. It could be a swift action or a well thought out plan, but somebody better do something.
The rich rat bastards who f*cked up our economy, hell, our country get more money (OUR money) to do more damage. Yet in the same breath, Congress cuts off unemployment benefits AND gives more money to the wars.
The sh*t will hit the fan this decade. The CEOs and the Congress critters who enable them better have good security.
NOBODY 2012
Correction , these are not wars , sounds good and they like it , makes it all sound so legitimate and necessary doesn't it ? Ahh yes , fighting the good fight . These are post invasion occupations , not wars and are only to keep the pentagon , the military industrial complex , the profiteers and investors happy while increasing the debt at the same time ... what better excuse to raise the age for social security or eliminate it altogether and to get rid of all "social programs" or so called " entitlement " programs . You see in the new Reich wing / fascist " America the beautiful " it's dog eat dog and survival of the fittest ( of the wealthiest and best connected ), cold as hell , no one is entitled to a thing , you are one of the haves , one of theeeee elite or you are not , in which case you are automatically a low life , a bum , lazy , useless , trailer trash , second class at best and completely undeserving , no one owes you a thing morally or ethically , you are on your own . The corporations are international and or so big and powerful that they give governments ( politicians )orders and dictate the rules to them , they buy and sell politicians and governments , in the US they own the Supreme court now ! They don't give a rat's ass about you , me , about we the people , hell ,they don't even give a rat's ass about the country , you see they don't need us or the country anymore .The war on the middle ( and lower class ) is exactly that , we are under attack , realistically this war looks to be about over , we lost , we didn't even defend ourselves or fight back .
Insanity , it is what it is , there is no understanding it .
Krugman is saying all of the above and did predict this problem. The GOP has intentionally prevented the right kind of stimulus. There is no will like there was in 1932.
What politicians, and this includes Obama and Geithner, as well as Bush, Paulson and Bernanke, did, was they protected the rich from their own folly, and made ordinary people pay for it...
Be very clear, it's you, or it's them. You break their power, or they will continue to push your wages towards parity with China.
And they are very determined it's not going to be them.
Are you determined it's not going to be you?
You seem to be suggesting open class warfare.
"Someday somebody related to some of these sufferers, these victims, these collaterally damaged souls, may try to kill you. And I have to tell you, I think you’ll have it coming." - Christopher Cooper
electoral politics attempts to solve all our problems....
Cue the Kabuki....
war and the rich won.
To paraphrase Warren Buffet, "There is a class war going on, and my side is winning even though it shouldn't be".
Class warfare has been being waged on us for years now... if you can call a one sided fight a war. Maybe it's time to do a little waging ourselves, eh?
Damn straight!
I agree with your sentiment, I wonder just how many of our citizens have the nerve to speak up. Writing letters to the editor, contacting elected representatives, agressively pursuing businesses who scam seem to be too difficult for most people. The "marketplace" has been flooded with cheap, fatty, fast food with little or no nutritional value, relatively cheap booze, and insipid entertainment, and lousy, corporate, "infotainment" that passes for news, and a de-funded, dumbed-down educational system meant to insure an functionally ignorant outcome. Add to that the massive debt the average citizen has racked up and you have a recipe for inaction. Like Dean Wormer said to Flounder in Animal House, "Fat, drunk and stupid is no way to go through life son."
Hell Yes!
NOBODY 2012
The republicans will do whatever it takes to retake power in November, even if it futher destroys any possibility of reversing this depression. If they succeed you can kiss SS and Medicare goodbye.
"Someday somebody related to some of these sufferers, these victims, these collaterally damaged souls, may try to kill you. And I have to tell you, I think you’ll have it coming." - Christopher Cooper
the bottom of the Abyss...
We--as in we, collectively--have been squirming around in the bottom of our Economic Abyss for quite a number of years, to whit:
Saint Ronnie's administration(s) spent more during his two terms than every other president before him, combined.
Saint Ronnie's administration(s) ran the first US trade deficit in our nation's history.
Saint Ronnie was wrapping up his economic train wreck when the thrifts began to fail en masse (oh, and the vaunted bankers won't tell you this, but two of the top ten US banks were so close to insolvency in the early 80s that Paul Volker had to create a special 'asset' for them to show on their ledgers to keep their debt to asset ratios in line with federal regulations--Volker's 'asset' would have instantly become a debt if either bank had had to declared bankruptcy).
Pappy Bush raised taxes and alienated his Republican sycophants. Pappy also oversaw the S&L bailouts, which added to the exploding deficit and our nation's economic instability (of course, most of us remember Neil Bush and the failure of the Silverado S & L).
Pappy Bush spearheaded NAFTA (even though Clinton signed this piece of crap into law).
Clinton raised taxes on the very rich, further alienating the most hedonistic corporatists and the conservatives who like to identify with the very rich. Consequently, millions of dollars got spent trying to 'punish' Clinton.
Clinton's administration(s) saw a staggering increase in the number of US corporations relocating overseas--or wherever they could avoid paying taxes or benefits or a living wage.
Need I say anything about Dubyah's embarrassing tenure and the dire economic havoc he wreaked?!?
Humanity apparently must be pummelled about the head and shoulders with the brutal reality that our 'capitalistic' economic behavior is a giant ponzi scheme which increasingly benefits the very wealthy (less than 400 people worldwide) at the expense of the very poor (numbering in the millions and increasing daily).
For many of us, either functionally illiterate or math challenged (or both), matters economic are confusing, off-putting, 'deer in the headlights,' 'zone out until something interesting comes on the tube' issues. Anytime I hear Krugman or some other 'economist' proffering words of wisdom about the economy, I think, "Oh, noes! Here we go again! Same song, different verse!" How refreshing would it be to hear an honest evaluation of our economic situation, and some real options?!?
If Krugman is off by two years it does not matter. Fact is most of us are in hardship financially for the rest of our lives.
I used to have a couple money markets, stocks, bonds, & an IRA. I am still not in debt but if you knew what I made this year you might cry except you are already crying for yourselves.
Every time a Reagan or Bush becomes president I lose. Blame President Obama? What kind of magic wand is he supposed to wave to erase the effects of # 43?
Nobody is expecting any hyperbolic magic wands... I just want him to stand up and make an honest fight against the Reagan/Bush/Bush policies... to make an open effort to put a stop to the predations of the Wall Street Mafia. Instead, he's surrounded himself with the same kinds of people... even the same people in some cases... that Bush did and carried on many of Bushco's most destructive policies.
If he's not capable of waging an honest fight, he shouldn't have spent two years campaigning on the promise that he could/would do it, that's all.
Trickle-down economics. Now we see what it actually is that's trickling down upon us.
I really hate buzz words even though buzz word is a buzz word! Trickle down economics was the worst!
when it comes to where stimulus would be well applied. You're dead wrong as far as the banks and banking system goes however. The point of saving the banking system was to preserve the lending system so that there would be at least the possibility of getting long or short term loans for businesses. Had they not done this the whole economy might have collapsed into a pile of dust. That did not then nor does it now imply that those banks would have would have a ready supply of healthy businesses to loan money to. Their customers are hurting too. That means they are riskier to loan money to and that drives up interest rates. Restoring the banking system was and is only half the problem. Now they have to stimulate growth so loans will be both needed and justified.
Hasa Diga Eebowai
then refloating them, or having the Fed lend direct, or expanding the Credit Unions (or whatever) is what was needed. Zombie banks, which is what we have, is not what was needed.
People have a tendency to confuse specific banks with the purpose of banks, which is to find good things to lend money for. The major banks haven't been doing that for years and as such needed to be replaced or completely restructured (I'd use the word reform, but it means nothing now.)
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