Robert Reich: No Double-Dip Because There Was No Recovery
Robert Reich says there's no truth to the idea of a double-dip recession, because most people never recovered from the first one:
More people are out of work today than were last year, counting everyone too discouraged even to look for work. The number of workers filing new claims for jobless benefits rose last week to the highest level since February. Not counting temporary census workers, a total of only 12,000 net new private and public jobs were created in July -- when 125,000 are needed each month just to keep up with growth in the population of people who want and need to work.
Not since the government began to measure the ups and downs of the business cycle has such a deep recession been followed by such anemic job growth. Jobs came back at a faster pace even in March 1933 after the economy started to "recover" from the depths of the Great Depression. Of course, that job growth didn't last long. That recovery wasn't really a recovery at all. The Great Depression continued. And that's exactly my point. The Great Recession continues.
Even investors are beginning to see reality. Starting in February the stock market rallied because corporate profits were rising briskly. Investors didn't mind that profits were coming from payroll cuts, foreign sales, and gimmicks like share buy-backs -- none of which could be sustained over the long term. But the rally died in April when investors began to see how paper-thin these profits actually were. And now the stock market is back to where it was at the start of the year.
[...] Forget the Neo-Hoover deficit hawks who say we have to cut government spending and trim upcoming deficits. We didn't get into this mess and aren't remaining in it because of budget deficits. In fact, the only way to reduce long-term deficits is to restore jobs and growth so government revenues rise and expenses like unemployment insurance drop.
[...] The central problem is lack of demand -- and that's what has to be tackled.
But we still have Rocky Road left over...
Diabolus est Deus Inversus
lack of demand..." Says it all really. And without disposable income there will be no rising demand.
Hasa Diga Eebowai
spiked Kool-aid. If you want people back to work then you need the big money back in the game. Until all those toxic assets that can't be properly valuated which are still sitting on the banks books they refuse to write down stay there at inflated prices, no investor, not one is going to buy them. That means no new investments, no new business, no new hiring. We should have let the banks fail and let prices fall back to where they should have and then we would have had a short hard V shape recovery. But no, we're going to keep trying to pump dollar air into this over inflated tire now riddled with unpatched holes. Stimulus doesn't work especially when you have been deficit spending on a exponential scale for 40 years straight.
Sometimes doing nothing is the best medicine, they call a correction "a correction" for a reason, because the market was inflated, you don't stop a correction that needs to happen. The correction is the medicine, by trying to not take your medicine you just make things worse and eventually the patient dies. It's laughable when people suggest we are just stimulating wrong, that if we had taken another approach it would have worked. No, no it wouldn't have we would still be in the boat we are in today. We are stuck between a liquidity trap and a debt trap. Ignoring long term debt and our massive interest payments is the dumbest idea in the long history of dumb ideas.
The velocity of money has been dying since the 1980's because we have been inflating our way out of every f***ing mess we have gotten into. See for yourself.
Federal Reserves Money Multiplier Chart
http://research.stlouisfed.org/fred2/series/M...
It couldn't be more crystal clear, the more the FED inflates the worse it gets.
Goodnight, Frau Blücher
disposable income takes a new meaning when 7-11 starts stocking pitchforks,,,, and torches.
Right you are, I'm thinking this is a great time to begin manufacturing of fine quality pitch forks and torches.
Goodnight, Frau Blücher
This would be the opening for a true progressive to point out the inevitable results of Reagan-Greenspan-Friedman(s)-Bush of 'the free market' and its resulting cannibal capitalism, and propose that the government, society and economy should be serving the public interest as their primary purpose.
can't seem to demonize Reagan. O.k. so if they wan't to let Reagan go nameless and blast everyone else for their rediculous free market ideology - I say have at it.
But, amazingly silent isn't it? We hear more from former Reagan administration economists about how they destroyed the economy than we do from democrats.
http://maxkeiser.com/2010/07/18/ote63-on-the-...
i recommend this interview. dr. paul craig roberts.
.
It was Poppy Bush that labelled Reaganomics "Voodoo Economics".
There were 2 new deals in the 1930's and they both failed. WWII pulled us out of the hole and what got America back on the path to wealth was we sold weapons in exchange for the worlds gold under the Cash and Carry program. Later after the warring world ran out of gold they continued the sales under the Lend Lease program. So few people realize that is how America became wealthy.
Goodnight, Frau Blücher
And increased arms sales are the only concrete action taken by the WH to "double exports" .. a cornerstone of their economic recovery policy.
Democracy is too important to be entrusted to politicians.
Rise Up!
Protest!
FDR stopped the first stimulus way too early and contraction ensued. VR, where the eff do you get your numbers?
[[There were 2 new deals in the 1930's and they both failed. WWII pulled us out of the hole...]]
Nonsense. That is easily debunked anti-New Deal revisionism.
FDR's New Deal policies didn't need WWII to pull us out of The Great Depression. They were already doing a remarkable job of pulling us out of it before we shifted to wartime industries.
Had FDR not bowed to "conservative" demands to take his foot of the government spending pedal in that infamous '37-'38 period, the downward trajectory of the unemployment rate would have taken it well below 10% before '39. Pretty damn good considering where it was and where it was headed when he took office.
Unemployment Rate Historical Chart (Pre/Post Depression and WWII Era):
http://en.wikipedia.org/wiki/File:US_Unemploy...
Same with GDP growth post-New Deal and pre-WWII.
For GDP growth figures, you can go to this site…
Bureau of Economic Analysis:
http://www.bea.gov/national/index.htm#gdp
…which would lead to a link to the file for this:
Table for Annual/Quarterly GDP Growth, 1930 to Present:
http://www.bea.gov/national/xls/gdpchg.xls
1930_-12.0
1931_-16.1
1932_-23.2
1933_-3.9
1934_+17.0
1935_+11.1
1936_+14.3
1937_+9.7
1938_-6.3
1939_+7.0
1940_+10.0
1941_+25.0
1942_+27.7
1943_+22.7
1944_+10.7
1945_+1.5
1946_-0.4
1947_+9.8
1948_+10.3
1949_-0.7
1950_+9.9
1951_+15.5
1952_+5.6
1953_+5.9
Doesn't look to me like pre-WWII recovery GDP growth was doing all that badly from '34-'37 and, like the unemployment rate, only saw a set back during the "conservative" government spending hiatus of that particular time period. If anything, despite the forced demand elements at work during our direct involvement in WWII, the aftermath of our involvement in the war took its toll in slower growth for several years thereafter than previously.
In stark contrast to the typical anti-New Deal revisionist spin, the historical records suggest that the recovery from The Great Depression was moving along just fine before we got involved in WWII and would have continued and been sustained even BETTER if WWII hadn't been necessary.
Yet Wall Street still manages to give itself billion dollar bonusii. It's only their fear that the Bush tax cuts will expire that are preventing them from creating more jobs.
[**gack**gaw**hackhack**]
Serious question: how does the expiration of personal income tax cuts provide a disincentive to investment? I don't see the connection.
Hasa Diga Eebowai
Holy Jebus, did I really need to add a snark tag?
for certain bloggers, dear. You know who they are...
from the logic underlying your normal posts. My bad.
Hasa Diga Eebowai
No worries. If I cared what a Canadian libertarian thought about my opinions I'd be all broken up. Alas, I don't...
and investment houses didn't fix our problems? Who could have guessed?
I think jobless claims jumped recently because many corps just ended their fiscal year and laid more people off. Just happened at the company where I am a contractor. They eliminated 700 positions; 5 percent of the workforce. Even though they are profitable, they didn't meet "analysts' projections" for net profits.
Over the last 3 decades, the USA has decimated our manufacturing base, making it even harder to recover in this recession.
People that are working or have not been affected that much in the last two years are saving and de-leveraging their finances. And for good reason. Banks are going to have to do the same as they are all fucking insolvent.
Short and long term credit is at a standstill. See insolvent banks.
There are still millions of homes that are not in foreclosure, but people are delinquent in their payments.
Profitable companies are not spending in the labor market, and if they are, they are hiring contractors. And when larger pools of the labor market are people who normally had the security (such as it is) of a regular company position are very tentative to spend. Relates to above saving and de-leveraging.
We flat out HAVE to cut the military budget, create more stimulus jobs rebuilding our infrastructure and start plowing serious money into renewable energy, education, anti-poverty funding and renewing our manufacturing base.
i agree with your comments. sometimes i feel like we may need some "deflation" as far as the housing market. this refusal by the bankers/wall street to consider mark to market has prolonged/delayed the downturn/bottom along with other variables. this is probably due to the securitization of mortgages. our so-called economy has moved abroad we now have to re-invent ourselves and relatively quickly. the private industry has no loyalty to we, the people....only to wall street.
well, they could, but the reality would be shown to the world at large...
Like Howard Dean, Robert Reich has inexplicably been left out of the Obama loop. Stuck with the likes of Geithner/Summers and Emanuel.
Revoke Bush tax cuts for the wealthy and eliminate corporate tax loopholes. Trickle down economics has failed to stimulate investment and jobs in America which was the premise for giving the rich and big business windfall tax cuts. Vote.
This is not my father's America
The American public thinks they are rugged individualists, who come to conclusions based upon sound reason and a rational thought process. The truth is that the vast majority of Americans act like a herd of cattle or a horde of lemmings. Throughout history there have been many instances of mass delusion. They include the South Sea Company bubble, Mississippi Company bubble, Dutch Tulip bubble, and Salem witch trials. It appears that mass delusion has replaced baseball as the national past-time in America. In the space of the last 15 years the American public have fallen for the three whopper delusions:
Buy stocks for the long run
Homes are always a great investment
Globalization will benefit all Americans
http://www.zerohedge.com/article/guest-post-m...
Economic Anthropology, anyone?
First, we called them "Panics," e.g., The Panic of 1907 (when someone's 'knickerbockers' got all in a twist). Apparently, someone figured out that 'panic' just didn't set a good tone.
Then, we called them "Depressions," e.g., The Great Depression. Again, the wise among us realized that 'depression' is just not a word one wants associated with a long period of economic distress.
Now, we call them "Recessions," and watch all the learned economists pontificate at length about how this recession 'is over' or how we're 'now seeing a recovery' and 'things will be much better soon.'
Ha!
This economic catastrophe is far from over. We have yet to see how bad it's going to get. Semantics cannot disguise that fact.
that the terms depression and recession have specific meanings within the discipline of economics don't you? Or did you just find them all lumped together in your thesaurus?
Hasa Diga Eebowai
What I 'do realize,' Peter G, is that you are on my ignore list. Consequently, I do not see anything you post, except for your title bar and "Peter G is on your ignore list" in the body of your comment. Perhaps others herein are interested in what you have to say; me, not so much.
I'm content to point out why you're completely wrong to everyone else.
Hasa Diga Eebowai
The Panics of 1819, 1837, 1857, 1873, 1893 and 1907 were all followed by Depressions that lasted roughly six years each.
All it takes to be considered a Recession is to have two successive economic downturns, and so were in the past recoverable fairly quick.
But we seemed to have entered another era of stagflation, as they called it in the Carter years.
Of course on the inflation end of it is our weakening currency value, and China dumping their goods on the US and other trading partners, driving down the costs of said goods, and that's after taking our jobs that were outsourced to them.
But since they underwrite our national debt, along with the Saudis and the Kuwaitis we're rapidly gaining as a nation a heavily armed, mercenary, peripheral nation status.
Diabolus est Deus Inversus
you'll be the world's greatest North Korea. Not exactly Ad Astra as policies goes is it?
Hasa Diga Eebowai
is there a tongue in check there?
statusquObama, change you can only pretend in
Why are you always humming
Don't know the words?
Diabolus est Deus Inversus
For anyone who thinks 'demand' is the problem, let me remind you that we've all been well trained to be consumers. We LIVE to consume (and, our collective obesity should be a big clue about that)! If we but had the RESOURCES necessary to continue our consumption...
Those who seek to obliquely blame the consumer about this economic catastrophe will continue to harp on this issue, and they'll continue to be wrong.
Since the collapse of the housing market, almost everyone's main source of equity, which severely limits their borrowing power, coupled with high unemployment and high debt loads means that people don't have the wealth to spend exactly how does your argument work? People want to spend money therefore they have it? I'm guessing economics isn't your main interest is it?
Hasa Diga Eebowai
Borrowing against equity is the problem, not the solution.
Democracy is too important to be entrusted to politicians.
Rise Up!
Protest!
In the last thirty years, wages for the lower 80% have been stagnant.
What increased dramatically for that group was debt, mainly but not exclusively in real estate.
However the topmost tier has made out like the bandits that they are.
Production capacity has been overdone and we are swamped with consumer goods.
Still, demand could be heightened again if there were solvency, which there is not. The equity in real estate that was assumed is vaporized for very many.
The claim is made that it is a lack of liquidity when solvency is the problem.
On the other end of the problems that are racing down the tracks at us are the ecological parameters. When critical materials and energy constrain production capacity, demand will exceed production.
statusquObama, change you can only pretend in
Alice, my point exactly. When we consumers are not solvent, when we don't have financial security, we cannot even THINK of buying non-essentials. Well, we could for a while, back when we had jobs, and banks were quick to dole out their credit cards. The banks seduced us with reasonable interest rates and nominal fees--which quickly skyrocketed to exorbitant interest rates and outrageous fees.
Now, most everyone I know carries some amount of credit card debt, but cannot make payments. Most of my friends cannot even afford health insurance, and many of them have had to ask food banks and other charity organizations for assistance.
We are among the thousands of 50-54 YOs who cannot get jobs, have no retirement security to speak of (we all know what happened to our retirement portfolios), and we are routinely denigrated by the wealthy conservatives and their political hacks.
I can still wield a mean pitchfork, though. Just hope it doesn't come to that.
people are saving more then the recent past and they are paying on debt. so consequently, we do not have enough "consumerism" which as we all know is a large part of our economy. many were sold that
some economic "protectionism" was bad and unamerican. so while people were chasing easy dollars/credit.......jobs/corporations were being OUTsourced/relocating. not only have millions of jobs gone abroad we've also seen a multi-billion dollar reduction in tax revenue. wall street/bankers/global elites wanted the "global economy".........well here it is at the expense of the middle class.
In July, 325,229 U.S. properties received a notice of default, auction or bank repossession, up 4 percent from June but down almost 10 percent from a year earlier.
See full article from WalletPop: http://srph.it/aDMbUL
The over-hyped American Recovery and Reinvestment Act of 2009 earmarked only $72 billion of the $787 billion appropriation of taxpayer dollars to projects to improve the country's infrastructure.
Meanwhile, multi-national corporations avoid taxes, sheltering $700 billion in foreign earnings to end up with a measly $16 billion (2.3%) tax bill. GM is among those companies, yet it took almost a half billion dollars in bailout loans. Boeing and KBR Halliburton are among the defense contractors that avoid taxes, while enjoying government contracts worth tens of billions.
http://www.huffingtonpost.com/janet-tavakoli/...
The 64 million dollar question is....what industry in the United States will be the one to lead this country OUT of the recession/depression? Burger manufactoring? Of course that is with 85% Argentinian beef. I have tried to be a good'leftie' and I was filled with HOPE. However, Rahm Emanuel, an Robert Gibbs have ruined my hope. In fact I do not see much hope anymore, the song said it perfctly Meet the new boss, same as the old boss. Sooooo come Monday this OLD leftie will cash out what is left in the Stock Market. It is a shame that business is sitting on 2 trillion in cash yet in the desire to make this president a one term wonder they will sacrifice the country and NOT invest a dime! With a White House that is affraid to attack Rush, Hannerity, yet seem to love to attack their base this administration will NOT receive my support anymore...I am done.....I give up!
Reich should be in the President's cabinet, but alas, no, he's a progressive, so it's under the bus for you, Robert!
[[...a total of only 12,000 net new private and public jobs were created in July -- when 125,000 are needed each month just to keep up with growth in the population of people who want and need to work.]]
Why is the knee-jerk reaction in mainstream media to blame Obama/Dem economic policies for lower than expected job creation in June and July when another job-killing event is still right there in front of our noses?
Namely, a little something called the Deep Water Oil Disaster that severely crippled the peak job creation season of an entire quarter of the USA, the Gulf Coast, for the entire Summer. Tap-tap...Hello? Has everyone forgotten that already? I never hear it mentioned as a factor in the low job creation of May-July on any mainstream media program.
From fisheries to vacation/resort destinations to tourism at every level, how may people do you suppose were NOT hired this Summer in hotels, restaurants, recreation centers in the states bordering the Gulf AND in states through which tourist typically travel to get to those Gulf destinations (and eat, recreate and lodge along the way)?
100,000? 200,000? More?
With all the Obama-bashing that went on DURING May, June and July about how Obama's shameful inability to don a deepsea suit and "plug the hole" himself was going to lead to HUGE job and business losses in the area...I just wonder why everyone hasn't factored that event into actual job and buinesses losses ever since and for whatever reason can only see job weakness in that time period as a failure of the stimulus or some other bogus scapegoat.
The one thing they all have overlooked was a world war. What are we going to do if we have to gear up for another big war? We have no steel mills to produce the steel for the tanks, trucks, and artillery. How about the airplanes we will need. Are we going to import all of the equipment we will need? The other countries will be busy with their own war supplies. They won't want to stop and produce ours. It will take years to get our steel mills up and running, since they are so out of date. And you know there will be another one because of all the greed.
Our military may save our butts yet. http://newsjunkiepost.com/2010/07/10/fidel-ca...
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