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When Will The Recovery Begin? Never
The so-called "green shoots" of recovery are turning brown in the scorching summer sun. In fact, the whole debate about when and how a recovery will begin is wrongly framed. On one side are the V-shapers who look back at prior recessions and conclude that the faster an economy drops, the faster it gets back on track. And because this economy fell off a cliff late last fall, they expect it to roar to life early next year. Hence the V shape.
Unfortunately, V-shapers are looking back at the wrong recessions. Focus on those that started with the bursting of a giant speculative bubble and you see slow recoveries. The reason is asset values at bottom are so low that investor confidence returns only gradually.
That's where the more sober U-shapers come in. They predict a more gradual recovery, as investors slowly tiptoe back into the market.
Personally, I don't buy into either camp. In a recession this deep, recovery doesn't depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped.
Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water -- owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving. Those who can't are hunkering down, as they must.
Eventually consumers will replace cars and appliances and other stuff that wears out, but a recovery can't be built on replacements. Don't expect businesses to invest much more without lots of consumers hankering after lots of new stuff. And don't rely on exports. The global economy is contracting.
My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.
The X marks a brand new track -- a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.
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182 Comments so far
Show AllThe priority was to steal all the money and save the banksters. It was all a big lie saying that the banks would then give the money to consumers to save their homes, blah, blah, blah. The poor and struggling people of this country get nothing, not even table scraps. Time to dust off the guillotines and hang piano wire from the lamposts.
A new American Revolution!
Hummm, does the Patriot Act continue to be the law?
phasor--
Why not? It hasn't been repealed and Obama has repeatedly signed on to all its provisions, along with signing onto all the deregulation free-market claptrap that got us here. The other leg of the stool is aggressive imperialism and he's enthusiastically signed onto all that, too. The three go hand in hand. Just ask Uncle Benito's ghost; he'll be smiling and nodding benignly.
Rainborowe
The implicit message seems to be we'd better all go deep in debt to buy things we don't need to save the economy for the 'big boys' so they can invest in China. Good-night and turn out the light.
Mr. Reich is a bit wiser than Mr. Krugman. There'll be no recovery until EVERY problem is addressed.
Here's my short list:
(1) Shred NAFTA, WTO
(2) Dissolve the Fed into the Treasury and restore the job of controlling money supply and credit to the people.
(3) Increase the minimum wage to at least $10/hr.
(4) Pass EFCA
(5) 90% Top Marginal Tax Rate on incomes over $3 million
(6) Close all corporate tax loopholes
(7) Put Glass Steagall back in place
(8) End trading in Credit Default Swaps, Eliminate all debts owed thru them
(9) Tax Hedge funds between 35-50%
(10) Cut Defense Budget 50% Immediately
(11) Freeze all Pentagon funding until they can pass an audit
(12) End all wars/occupations and close all military bases
(13) Pass single-payer healthcare
(14) Enact a Public-works program ($3 trillion) to build an entirely new energy infrastructure (solar, wind, thermal and the lines that'll carry the new electrons) putting millions to work.
(15) Force banks to properly state the actual debt on their balance sheets. End government subsidies. If they cannot survive let them fail or let the FDIC reorganize them.
(16) Pass cram-down legislation allowing homeowners to renegotiate mortgages before bankruptcy judges
(17) Imprison every person involved in financial fraud...from the Wall Street Banker to the most powerful in government.
(18) Return control of the airwaves to its rightful owners, the public, and use antitrust legislation to break up media megaliths. The people MUST KNOW WHAT'S GOING ON TO PREVENT RECURRENCE OF THE ABOVE.
I agree with every one of your points.
Excellent points all.
Regarding point No. 5, you should know that in many EU countries, minimum wage is already the equivalent of about $15 per hour.
Excellent list!
Add:
1) Abolish "corporate personhood".
2) Regulate corporate speech - money is NOT "speech" under the First Amendment.
3) Institute "public campaigns" as in Maine and Arizona, where PRIVATE contributions to one campaign are matched by PUBLIC contributions to opposing campaigns.
4) Institute "instant runoff" voting to eliminate the "lesser of two evils" argument.
5) Institute "proportional representation" to strengthen the role of minority parties.
6) Institute "public budgeting" as in (that city in Brazil whose name slips my mind) so public spending priorities are set by the public, not in back-room deals.
Etc, there are more: add a stiff carbon tax to your public works program above, etc.
Dammit, there's a lot of very obvious stuff to do, and frankly lots of people support each one of your ideas. Where's the coalescence into a mass movement to force change?
Thanks one and all for adding to my admittedly incomplete list.
Just goes to show in a few hours a handful of progressives on an obscure website can devise better economic solutions than Wall Street billionaires with fancy Ivy League degrees.
All excellent points and I doubt many people (other than the Fux News whores) would disagree.
But the first problem is the SCOTUS (especially Roberts, "Mr. Corporations-are-People-and-Money-is-Free Speech).
The second is the current composition of Congress: we need better candidates and that requires a level playing field re. the media (as it was before Raygun and Clinton destroyed it and then appointed people like Colin Powell's wingnut son to the regulatory board).
We need public financing of elections. And then, because we know how things get screwed, the last problem is also the SCOTUS--again.
Oops! One more problem: We now have a standing army. When McArthur attacked the bonus marchers the nation was horrified and nothing was attempted again along those lines until Kent State. Now we not only have a standing army of which the N.Guard is a pretty well full-time adjunct and is being sent out of state all the time, and completely militarized, heavily armed and steroid-fed cops, but we have virtually no former G.I.s around--ex military conscript types who have neither drunk the Koolaid nor been rendered crazy by what they've seen and done "over there" and have an acute sense of the real difference between the grunts and the officer class.
Rainborowe
When you say "acute sense" I think you means an emotional or tangible stake. People can exchange ideas, and embrace them conceptually, but until they embrace them like they would embrace something they built themselves with a lot of labor, they can't strongly defend them. The answer is to get everyone to invest their own energy, lots of it, in the sustainable modes of production and public policy. Only then when the elites attempt sabotage will the people defend their institutions, and take the elites out in the middle of the potomac to tread water for several days under the muzzle of a gun.
"Just goes to show in a few hours a handful of progressives on an obscure website can devise better economic solutions than Wall Street billionaires with fancy Ivy League degrees."
Ha ha! Yes!
So where the hell's OUR million-dollar "bonuses"? ;)
None of these are gonna happen. Zilch. They won't give an inch.
+-15% unemployment nationwide by Dec. 31st. Probably +.
YES!!
Great agenda, C. It's a terrific start.
Sign me up!!
I wonder, why not nationalize all banks? Not all controlled by the federal government of course, but turn them over to state, county, and municipal governments depending on size, location, specialty, etc. Why should already rich people get richer off "creating" money through leveraging? Let the governments use the money made from interest as revenue instead...and perhaps eliminate regressive sales taxes while at it, or just use it to fund badly needed services and infrastructure projects.
We're really looking for honesty. So when leftists say public enterprise good, they're really saying public enterprise promotes honesty, equity, justice. Amazingly, the rightsts make the same argument for private enterprise. It suggests that public versus private is an either-or fallacy masking the real issue of honesty versus corruption. We on the far left have been advocating for a long time focusing on the regulation of intent, not outcome or structure. Liberals make it extremely difficult to regulate intent, and conservatives regulate it enthusiastically but incompetently. The two camps thereb y fail to come together to addess the corruption, the liberals being the most responsible for the failure due to their heightened awareness.
I favor public over private just because of the simple accountability a government has vs. a corporation. Of course, accountability also requires a well informed citizenry, which we really don't have. I suppose the notion that corruption would be easier to either prevent, stop, or replace in the public sector than the private sector may be naive, but I really have no reason to trust the profit motive to get people to do the right thing.
I agree with everything on your list but will distill mine down to one:
Make campaign donations illegal (they are bribes) as they are in many true democracies. Then have only 6 months of campaigning on free television. Changes will come fairly quickly especially the greedy individuals that run for office to get rich will have to find real work
Well there is much more to campaign advertising than TV ads. Newspaper ads, op-ed slots, flyers, buttons, lawn signs, bumper stickers, call lists, websites, emails, etc.
Robert Reich has hit the nail on the head. Here's a more thorough description of the problem in video form ...
http://tinyurl.com/aca7o3
Very good video. Interesting tie-in to Silicon Valley startups at the end.
to Cygnus-X1-isaHole:
Your list is exactly what I would advocate as the only way to get out of this overcomplicated mess.
The media is definetely propaganda crap and not worth even looking at, and the people who have stolen money should be given very stiff sentences (including those who are within our government).
I agree that it is absolutely high time that NAFTA was scrapped so that the USA could start manufacturing and farming again. Besides, how much more of the Amazon can we justify destroying for the cattle ranches and biofuel farms?
What have we become, a nation of lazy do-nothings?
I think not!
Also-your comment about raising the minimum wage is right on, although I have a feeling that probably 50% of minimum wage positions would be eliminated if that were to happen.
Oh well, there have been far too many useless dead-end jobs (like McDonalds) and far too much waste throughout our economy!
And I firmly believe that we MUST close all overseas bases and stop all wars, for it is doing nothing but antagonizing other countries that could become real allies, were we to finally get out of their countries and start respecting their boundaries and cultures.
But is any of this going to happen? Of course not!
Instead the American Way of Life is going to go the way of the Romans or the Mayans, with the richest living off in Dubois or wherever their greedy desires take them and the rest of us poor slobs suffering to the bitter end.
Thank you Dr. Frankenstein for pointing out the monster you helped create 20 some years ago is ravaging our village.
You were a big advocate of the globalization brought on by president GHW Bush, made worse by Slick Willy getting fooled (China), unapologetically supported by Dubya, and now Obama still doesn't get it. Somehow the jobs of 250 million people were to be divided up between 3 billion willing to work for slave wages. Common sense folk like Ross Perot were right on this one. He didn't even want us to do NAFTA.
So what has globalization brought us? The destruction of the manufacturing middle class. Not just the sometimes overpaid union jobs, but also the managers, engineers, R&D, contractors... Now its spreading out to the people who build and repair our homes, staff our stores, keep us well, and the shrinking tax base. Finally huge account balances of dollars in China, Japan, the ME and elswhere.
Trade hasn't been fair. We aren't allowed to give a car away in Korea, and Japan has crafted numerous ways to keep American cars out and the Japanese paying more for the same car than Americans do.
Our own "name brands" have off-shored their manufacturing and are now just importers. You can take short courses at universities on how to move your operations to China. But nobody seemed to realize that all these laid off workers would one day not be able to afford their products no matter HOW cheap they are. GM is one of the few manufacturers that tried to keep the old paradigm working. The new GM will take the billions and set up shop abroad like everyone else.
What has globalization done abroad? Short term wealth accumulation in China and India with devastating environmental consequences. Smaller countries ignorantly burning through loans to buy, of all things, American and European food products, and now the money is gone.
Sure, the toxic assets, deregulation, housing bubble, tax cuts, Iraq war, and the big oil/gas price bubble that popped over speculation that Cheney would bomb Iran precipitated the recession, but the fundamental flaw was engineered years ago. Maybe its another symptom that our best and brightest no longer invest in technological innovation, but concoct schemes and bubbles to milk what is left of the system.
So he shouldn't change his mind when he realizes he was wrong?
Unfortunately, the attitude of "past mistakes always color present positions" has become pervasive amongst the "left".
It totally hamstrings any momentum or build-up to a real popular Movement, of course, since MOST people that would flock to "progressive" or "deep reform" movements will have accepted false wisdom in the past.
ANY new social/political/economic/intellectual/philosophical movement MUST, by virtue of its "newness", be periodically invigorated and reinforced by the "repentent" adherents to past movements or ideas.
In my opinion, the attitude of "you're not with us if you weren't with us from the beginning" or "converts not welcome" is one of the main reasons why the USAn "left" or "progressive change" or "social-oriented democratic" or "activists" (whatever you want to label it) Movement has shrunk from a huge, game changing and earth-shaking minority (youth near-majority) in the late '60s and '70s, to a navel-gazing, echo-chamber shouting, PC reactionary, small minority in the '90s and '00s.
This despite the new generations that have been "activated" towards the Movement at University.
Sort of pathetic really.
The good news is that the Movement in other places has been less self-involved and impotent so, Globally, it is FAR from down for the count.
Yes, this is pretty evident when many people who voted for Obama, such as myself, are attacked by those who voted for Nader and McKinney.
But the global left isn't really doing too well...the U.S. spent a couple generations suppressing it, overthrowing its elected governments, seeing to it that its leaders were murdered. The global left is still quite weak, especially in the area it's needed most by the U.S., the Middle East...the leftists (academics, mostly) there are pretty much the only people, besides the rulers, that want to have anything to do with America, not to mention democratic governance.
Yeah.
The idea that screaming "I told you so!" at those who were more hesitant to vote for their true interests in the last election will do any good is wholly bizarre. The only explanation seems to be a purely emotional one involving anger at one's fellows for being weak and resentment at the slowness of their dawning awareness of what we should be after.
That one's opinion should be discounted due to a past vote -which is intended to be SECRET after all- isn't what I'd call "leftist" either.
I disagree about the Global "left" however. Just look at S. America for example. In Europe, I believe that the entrenchment of the social-democratic values short-handed as the "social-welfare State" has obscured the "leftness" of its population through redefinition of "right" and "left".
Remember, it is about democracy vs. not-democracy, the whole "left vs. right" game is just a holdover from where the democrats and not-democrats sat in the revolutionary French National Assembly, after all.
From this POV, I'd say the Global outlook appears quite hopeful, but with a hard struggle and long period of adjustment still to come.
True enough I suppose, but as Honduras shows, progression to the left still meets severe resistance in Latin America. Thankfully this time around, all other Latin American countries are more or less leftist democracies and are all rallying around the ousted president, rather than military dictatorships which would rally around the replacements, with the open support of the U.S. It was only a few years ago when the U.S. immediately recognized the leadership of a coup against an elected leftist (Chavez, obviously). This time the U.S. has called for the ousted leader's reinstatement, and co-sponsored a unanimous UN resolution calling for his reinstatement. And also, just as thankfully, Obama has completely resisted the very loud calls from the right to openly interfere in the crisis Iran is suffering, stemming from its election. We've also suspended all military aid to Honduras.
A change to the left in our foreign policy? Maybe, maybe not. But at least we're finally following our own laws in some cases. I hope the global left thrives and gets stronger while we're not acting like a batshit rightist country.
Reich gets it where Krugman missed it; it's not a normal recession. He even took it the next step (I omitted its mention in my comment under PK's article in the service of brevity), the restructuring of the economy to be sustainable and built around human needs, not artificially generated obsessions. "Cygnus"s last point, control of the media to the citizens, not the 4 right-wing families and the world's largest weapons maker (GE) who now control virtually the entire public debate, is essential, I'm afraid. But always understand; it's not about debate, that's over. It's about a fight to the death for the diseased Upper Class that can't see any point to life but wealth. [Nickleson in Chinatown: How much are you worth, Mr Mulrainy? Are you worth $10 million? What do you do it for? How many cars can you drive, how many meals can you eat, how much better can you live?"]
I suspect that at some point it is not about what these fiends can do with the money but is about making more than their competitors so that they rise in social status in what they think of as their group. Most of them earning figures such as those stop thinking of the common people as worthwhile human beings, but just as some form of biological clutter or possibly a crop to be harvested. As they communicate and create their own financial elite culture, they will likely develop ideas and perspectives that lead them to the conclusion that only the members of their group of multi-millionaires matter. And, in their small groups, they want to improve their social status by becoming even more "successful," usually by screwing the non-wealthy even more (they probably get extra points by making their money in ways which harm, rather than help, the non-wealthy, because that helps prove their disdain for such "inferior beings").
Capitalism and especially corporate capitalism in the US have created so many unhealthy feedback loops, including those flowing from elitist social status competition behaviors described above, that are inconsistent with the general welfare and probably with survival of the human species itself. It is a hell of a mess we have gotten into.
"...stop thinking of the common people as worthwhile human beings, but just as some form of biological clutter or possibly a crop to be harvested."
"Soylent Green is people!"
Sorry i couldn't resist...
your appetite for humor is cannibalistic
… and vilely fulfilling
my aching belly ( laughter )
N.
As long as humans continue to breed and bleed to prop up a world order that was never great and now horribly obsolete, capitalism (as we know it) will stumble thru...with those at the top eating well and those at the bottom starving to death, until the planet is stripped clean.
We can change the world by getting off the junk, living smart, and by teaching others to do the same. It's not a world econony thats tanked, it's a tired planet, over run with humans, crying for mercy.
Banks get a bailout
The top executives still meet in tropical paradise drinking there Mai Tai’s
I know several people in my neighborhood who have lost their jobs, 50,000 would get them out of debt enough to keep their homes. They have no way of getting that kind of money. What if Obama mailed every adult citizen 50,000 dollars?Would that have been cheaper? Could they have paid off their debt, and become consumers again. The credit cards would have gotten their money? Instead my neighbors, 3 of them, will have to file bankruptcy. Who can afford the interest in credit card payments? No bailouts or beaches, or Mai Tai’s for them! I am sure that it will get worse before it gets better. The only people that will be working will be primarily service workers. There are no manufacturing jobs left in the United States.
Where are the jobs!
Capitalism is filled with plenty of double standards. Blue collared workers get punished for the same actions that top white collared leaders get rewarded for. I've heard arguments that bailing out Wall Street is not capitalism. Actually, it is because the double standards are consistent. In capitalism, profits matter more than anything else. Therefore, bailing out will be reserved for only those who have a history of making the biggest profits. This is the kind of training most elitist politicians grew up with and since they feel rewarded for thinking that way and are often rewarded for it, they will do anything to keep this going regardless of the rising casualties among the working class. It's either get rich or get out. It's as if God is money or something.
Bennett Miller
Shreveport, LA
"It's either get rich or get out."
Remends me of the early 70s when Nixon's Secretary of Agriculture, Earl Butz, went around telling farmers to "either get big or get out." They drove a lot of family farmers off the land then.
I did the math. With around 150 million wage earners in the U.S., a grant of $50K each would total $7.5 trillion dollars, about half of what has already been given to or promised the too large to fail financial institutions.
As for an earlier poster's speculation about unemployment being close to 15% by the end of the year, that figure will not, as now, reflect actual unemployment because it does not account for people who have already run out of unemployment benefits. The actual figure right NOW is close to 20% with a government figure of 9.5%. So actual umemployment at a government estimated 15% will be closer to 30%. Pretty staggering. I wonder how high that figure needs to go before there is "social unrest in the streets" needing to be put down by the military.
Unemployment numbers also don't count people who are underemployed, working fewer hours than they'd like.
What's even more clear is that if we utilized a combination of a national dividend, salary caps and Social Credit, we could afford to give everyone nearly 50k/year and maintain a great economy by getting rid of unnecessary employees while enabling everyone to have the means to live well.
As a matter of fact, eliminating private ownership of all natural 'resources', such as land, water, air, timber, EM spectra, etc, while adding use fees for the lot would allow for a guaranteed citizens' dividend of at least 30k/year or better, without changing really anything else. Adjust the use fees according to the scarcity of the 'resource' and we can help the environment as well. I guess this is crazy talk.
The fact is that the problems that plague our society have been solved a long time ago. The only thing lacking is the will of the people to water the tree of liberty with the blood of tyrants. The tyrants have no problem watering the tree with our blood.
"I guess this is crazy talk."
Yeah, crazy, to believe we can organize the productive economy to serve people...
"TINA" - "There Is No Alternative" - we MUST organize the productive economy to funnel power to a tiny minority. That equals freedom.
We can recite twenty six thousand eighty seven clear obvious intuitive reasons why TINA.
Any other talk is crazy talk.
sierra7
As much as I admired Paul Krugman, I must admit, Robert Reich has the subject nailed.
And, I agree with the above "list" of things to begin with.
I would add that the American people in particular better get their heads out of where the "sun don't shine" quick because reality is about to crush most of them.
There is no free lunch.
The elitists throughout history have "used" the common folk for cannon fodder, producers, and victims in their quest for power and wealth.
We mean nothing to them, whoever they may be, in any point in time.
The world economy according to the "Chicago School of Economics" is a rotating rat cage (we are supposed to be the rats, ie, consumers) that goes faster and faster until somewhere in time it disintegrates.
It is now disintegrating.
I would add to the list, get rid of all the whores and prostitutes in our government, which includes the congresspeople and senate members (with very, very few exceptions like Bernie Sanders, etc) and bar ALL lobbyists from those "houses of prostitution."
Our government is corrupt, our economy is corrupt, but it is up to the people to turn it around.
We need a new American Revolution.
Period.
We need a new American Revolution.
Period.
You're absolutely right. Sixty plus years after the end of World War II and American hegemony is over; though the dead man will remain warm and keep twitching for a while until rigor mortis sets in. I have no faith in the people of this country to take the radical action required to remake this nation. The thousand yard stare is in nearly everyone's eyes. Good luck to us all. Keep your doors locked.
Lets round up all the bankers and politicians, dress them in red coats, march them down the road and take pot shots at them from behind stone walls and trees. We could use paint ball guns filled with tar and once saturated, cover them with useless dollar bills then throw them off the deck of the USS Constitution in Boston Harbor.
Sounds like an excellent idea to me rebel!
We might be in for some sort of unrest- notice how gun sales have skyrocketed in the USA lately? However, that unrest may well come from right-wing racist knuckle-dragger types. Keep our doors locked and our guns loaded (for self-defense only). I believe in peaceful civil disobedience, but as Mordechai outlines, I won't hold my breath.
We have borrowed 12 trillion dollars. The money is gone. The creditors will wake up some day and want their money back, but right now they're mostly kind of stupid.
We have sold our environment. We live in a toxic toilet now. Our people are dying of cancer now. What, do you think your grandparents died of cancer too? Of course they didn't. Nor did they have elementary schools filled with deadbrain kids.
The worst of it is what they did to the government. That's the major part of the problem. Do you want a government that isn't bankrupt because it isn't bought and sold? Or do you want to watch dead Michael Jackson all day all the time? Well, it's up to you.
One of my grandparents DID die of cancer.
You must be thinking of our great-grandparents?
The toxic stew (air, water and soil contamination, chemical laden food) that we all live in has been going on for a long time.
It may be getting worse & worse, I grant you, but it's an old problem.
What Penelope said. Nostalgia might be fun, but it isn't anywhere close to the truth.
Just because in the past cancers were not identified as cancers, and were diagnosed as various other ailments, doesn't mean that they were ot caners.
The big flaw is that if a healthy economy requires ever increasing consumer purchase of "stuff" above and beyond replacements and consumables, then we better start thinking of ways to replace such an economy altogether.
My prediction, then? Not a V, not a U. But an X. The X marks a brand new track -- a new economy. What will it look like? Nobody knows.
I studied economics at the 99 Cent Store which, these days, sells nothing but Twinkies and the plastic Jesuses that stand on the dashboard of your car. My calculations indicate that we will have an S shaped recovery: S for shit.
Thanks for another laugh Mordechai. My parents and grandparents lived through he depression and the one thing I noticed was that they all had a great sense of humor. I don't know if it's related but maybe they learned that when you've got nothing you can still laugh.