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Today's Top News
Banks 1, America 0
For the vast majority of people in the country, who derive the vast majority of their income from working, the economy looks really awful. But the economy is not looking bad for everyone.
As we are constantly reminded, the financial crisis is behind us and the banks are back in their feet. In fact, they are more than just back on their feet. In many ways they are doing better than ever. The most recent data from the commerce department shows that the financial industry profits now account for more than 31.5% of all corporate profits. This is a higher share than at any point during the housing bubble years.
Of course, it is not that hard to make profits when you get to borrow money from the Fed at almost no interest and then lend it back to the government at 3.5% interest. Suppose the state of California was given the privilege of not only borrowing $1 trillion from the Fed at near zero interest but also using the money to buy Treasury bonds paying 3.5% interest. The $35bn in annual interest rate subsidies would take care of California's huge budget deficit pretty quickly.
But hey, California is just a big state. It's not a Wall Street bank. Congress is not going to tolerate special treatment for state governments.
The "save the banks" crew continues to peddle a seriously misleading story, mostly without challenge. They tell us that we had no choice. If we didn't give the banks trillions of dollars in their hour of desperate need, then the situation would be even worse.
There is no doubt that a complete collapse of the financial system would have complicated the recovery. However, handing the banks trillions, no questions asked, was not the only alternative.
Last year we faced a situation in which nearly every major bank faced bankruptcy: they could not pay their debts without the help of the government. Rather than just make below market loans, with few or no conditions, we could have made loans conditional on changing the way the banks did business. This would mean prohibiting them from dealing in complex derivative instruments, limiting leverage and seriously cutting executive compensation. (How does a $2m absolute cap – counting bonuses, stock options and other perks – sound?)
We could have done this because the US government held all the cards. If they didn't get money from us they would have been out of business. We could have told them to run around Wall Street naked, to walk on hot coals, to wear stupid looking hats, the choice was shutting down their banks and looking for new jobs.
Instead, we just handed them the cash, no questions asked. Now the banks are bigger and badder than ever and paying out big bonuses, just like before. As things stand, they will be an even bigger drain on the economy in the years ahead than they were in the years leading up to crash.
And, if anyone thinks that the banks have learned something about safe business practices, they have not been paying attention. What the banks have learned is that if you wreck your bank, and incidentally bring down the economy in the process, you can just send your lobbyists to Congress and the White House with empty bags and ask to have them filled up with money. The lesson is that Congress will say yes.
The politicians and the media can be counted on running to protect the banks in their hour of need. While tens of millions of people losing their jobs or their homes is just an unfortunate aspect of the modern economy, the collapse of Citigroup, Goldman Sachs, or Bank of America is a tragedy that our elites just can't fathom.
So, be prepared to endure many more years of high unemployment, under-employment and declining real wages. Upwards of two million people are likely to lose their homes in 2010 and 2011. But the good news is that the economy is recovering and the banks are alright.
- Posted in
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41 Comments so far
Show AllI could have sworn that for last month and the month before, the news also reported that unemployment rose to 9.8%. But if another 260,000 (NYT reported 263,000, I think) lost work, the number should be at least 9.9.
Is this Orwell-style manipulation of memory through the news? If so, why? Maybe either the government preset 9.8 because anything higher would cause a panic, or because they just don't know how to calculate the unemployment rate.
Remember also the discussions about an $800 B bailout, when there had already been 2 or 3 bailouts of similar size before--the news reports kept pretending that the current bailout was the only one.
And when you more than double the GDP with the stroke of a pen, does this so-called bailout money even exist, or is it just (inflationary) numbers on a page? Half the problem with the credit default swaps was that all the money that was "lost" was money that never really existed to begin with.
If it is all inflationary, what's going to happen when this magnitude of inflation finally spreads to all areas of the economy?
One major paradigm shift the Raygun Regime implemented was revising the methods for calculating inflation, unemployment, etc.
By downplaying the rate of inflation, Gov. and corporations can justify lower interest rates and lower compensation and COLAs for workers, social security recipients, etc.
If the unemployment rate were calculated the same way it was during the first great depression, the US would now be approaching the 25% unemployment rate of that era.
More and more people are onto the unemployment numbers magic. In the back of their minds they know the banks and financials are doing just fine with the treasury looting. Soon, it will be common knowledge that it is all being done on purpose, a willful neglect that can't be blamed on the Bush admin. Then things will get 'interesting'
u6 is about 17%. Bad, but much better than 25%. Most people, and especially the politicians in power, much prefer the u3 number of 9.8%. This is only natural.
Take a deep breath and try to relax. You're sounding rather scatter-brained. We can all worry about inflation in the future, not now. You can google up past unemployment numbers if you're confused. To "double GDP with the stroke of a pen" makes no sense. You have you're GDPs or pens confused.
"To "double GDP with the stroke of a pen" makes no sense." --- Actually you make no sense. Inflation is part of GDP, so lowering it makes GDP numbers higher than they are. I understand why you have no problems with inflation - you know nothing about it.
Unemployment numbers are severely under-reported too. The change to low wage service jobs is completely unreported, and so are the harms of unbalanced trade, bailouts and globalization. Inflation doesn't solve any of these, it makes them worse.
If you know anything then you know that playing around with inflation guesstimates over the LOOOONG haul can give one any number one wishes for GDP DECADES from now. I do know that a touch of inflation generally works out well for an economy. If inflation starts to pick up a bit too much in a few years, this can be dealt with.
nobody: the old adage comes to mind: that figures don't lie but liars sure can figure
i think the simplicity of the bank bailout scam has stumped the average citizen's sense of logic when it comes to comprehending the bank scam - er - i mean bail out
let me explain:
1. the banks anounce - after years of telling us everything is ok - that they are in some "trouble" never defined and that the world will end should they fail
2. the government - who doesn't have 24 trillion sitting around - agrees to help but the only way they can help is to loan the "money" from the banks who - by their own admission - have no money
3. the government then loans this ficticious money from the banks - keeping in mind that it doesn't even exist - and then the government "gives" it to the banks, no questions asked
4. here we sit paying the interest on this otherwise unpayable amount of money that never existed in the fisrt place to bail out banks who stole the real money - when it did exist
5. now we are paying interest onthis ficticious money while the banks anounce record profits
any questions...
Between his usual lack of possible courses of action leading to a solution and that last paragraph, DB sounds like he's pretty much given up any hopes we'll ever break the completely blatant Corporatism choking us 99%ers - and pretty much the rest of the Earth - to death...
Hope and Change, RIP, 10-05-09
I'd say the score is more like Banks 100, People 0.
Unemployment's been creeping upward during the summer only because of the availability of summer-related jobs, which will soon end. The BLS U3 number is 9.8%. But as I've harped on, the more realistic figure is the U6--17.0%. But even that number is effected by the Reagan and Clinton eras's manipulating of how unemployment is measured; so, if we look at Shadowstats alternative measure (how unemployment would be measured by the unemployed), we have about 21.5% un- and underemployed workers out of a labor pool I put at 200 Million, or about 43 Million people. (My pool counts all people between 18 and 65 as desiring full employment, while understanding that many past 65 and between 16-18 MUST work fulltime to live. The US Census Bureau puts current US population at just over 304 Million, which means over 14% of the populace is un- underemployed.) And I predict the situation will worsen as retail sales continue to fall dramatically causing ever more retail outlets to close and declare bankruptcy--expect a huge wave after what will be very dismal holiday retail sales. Baker doesn't note the sharp and unexpected decline of capital equipment sales, which signals more manufacturing job losses. And a lot of folks will lose their unemployment benefits at the end of the year unless congress provides another extension.
If I remember correctly (?) the biggest factor in declining equipment sales was aircraft, which is not perhaps a major predictor of equipment sales as a whole. (Just trying to find a hint of a bright side.)
There's also the massive downturn in auto sales, which seems to have been anticipated, after Cash for Clunkers ended.
I was going to add a segment that discussed unemployment in the context of reducing the USA's amount of carbon pollution centering on overcapacity of essentially unneeded retail outlets of all sorts that showcases the great mistake of suburban sprawl--a point Kuntsler would applaud. Related to this is the fact that growing economies cannot continue for much longer on our increasingly finite planet. IMO, the USA will never again have enough jobs for those desiring fulltime employment, as technologies have caused the extinction of many jobs that previously provided fulltime work.
The very inconvenient truth is all economies will need to contract to allow for much (80%+) lower carbon emissions and increasingly finite--and expensive--raw materials.
"The very inconvenient truth is all economies will need to contract to allow for much (80%+) lower carbon emissions and increasingly finite--and expensive--raw materials." ---
Really? Does China know this? The have no cap and trade, they are the largest polluter, including CO2. They have the largest population too. Have you shared with them your Grand Plan?
There is enough nuclear energy for thousands of years... No contraction is necessary at all, at least in the US. The pain is self inflicted by the way of globalization, legalized bank fraud and government corruption. These are the real problems. I suggest everyone start thinking really hard about them.
There are hopeful signs from China. For instance they will very soon fly past us in wind power.
Thank you for the "signs". Do you sell magic too?
No, but I have some low-lying land in Florida I'd love to sell.....just kidding.
"I suggest everyone start thinking really hard about them."
You must re-examine your own first. The planet is already in an Overshoot condition because of the insistence of infinite growth on a finite planet; it is physically impossible regardless of what China does under the tuteledge of multinational corporations. The excesses you allude to are just another form of externality.
It's very hard to reconcile inconveneint facts, especially when they directly effect you. The Climate Crisis isn't China's fault, nor is the overly polluted state of the planet in general. But if solace is required, China's development policy is also destabilizing China politically, a fact acknowledged by China's government. The Real US economy's been shrinking for almost 20 years, a fact masked by the unproductive (negative as I see it) growth of the Casino Economy that's responsible for GDP rise till now, which is to say that GDP is a "chimera stat." Measures such as the Genuine Progress Indicator show the US standard of living has declined to about the level of 1968.
It would be very nice to be upbeat about something, but there is little factual basis for such feelings.
Actually, the standard of living in 1968 was not all that bad.
It was good if you were white, male and undraftable, like Darth Cheney. I was 12, lived in the very unique town of Davis, California, and distributed flyers for Bobby Kennedy's campaign. I loathed Nixon, yearned for McCarthy, and felt somewhat vindicated by Watergate. But the politics was vastly different then--the corporatocracy had yet to become dominant and politicos still had to respond to commonfolk. The difference between now and 41 years-ago is rather stark in many ways.
"The Climate Crisis isn't China's fault" --- Fault doesn't matter. Pollution is simply shifted from here to there, along with industry and jobs. This is the result of too many "heroes" who think they are "saving the world", while in reality they are being used as political dupes against their own country. The tragedy of good intentions...
"There is enough nuclear energy for thousands of years... "
There is enough solar energy for billions of years.
Yeah, and your electricity STILL doesn't come from there. Actually for every ten hours on your computer, two are nuclear. If you don't like it, don't use it, get off the grid, don't drive, see where the solar wind takes you. The sun have been there forever, windmills and solar panels too, do you expect to get different results by doing the same thing? Study rare earth metals, who controls them, how RARE they are, why "green" energy can't work without them, inform yourself. Look at energy density, etc, etc. Just hopey-dopey is not enough.
The smell of death is everywhere.
"The smell of death is everywhere."
Isn't that like the "smell of napalm in the morning; the smell of victory"?
It's called the Class War, and we commonfolk are losing bigtime.
And Goldman Sachs continues to bend the rules:
http://baselinescenario.com/2009/10/03/a-short-question-for-senior-officials-of-the-new-york-fed
Never forget that Obama abandoned support for Cramdown Legislation that would've allowed homeowners to have their mortgages renegotiated by a bankruptcy judge.
Obama chose instead to offer a "voluntary" program for the banks.
As a result less than 9% of mortgages have been reworked.
Cramdown wouldn't have cost taxpayers a dime and might've saved potentially a million families from living in their cars.
Obama showed his absolute allegiance to the banks who believe they can squeeze out a few more pennies in profit even with a record number of defaults.
This was THE KEY MOMENT that ensured the problem would spiral out of control and bury the U.S. economy for at least the next decade.
The banks prevented the Fed. Accounting Standards from being changed to reflect 'mark-to-market'. That way, banks can claim imaginary value to their defaulting properties, and claim bigger losses on paper than they would with 'cram-down' to market value.
Also, we have gotten very minimal board representation on the banks. According to Professor Richard Wolff, without board representation, no positive changes can take place. We saved their businesses, we should get some form of controlling or at least oversight voice.
http://www.rdwolff.com/
The banks blocked the Fed Accounting Standards Board from re-establishing 'mark-to-market'. The banks could claim imaginary losses on their forclosing properties, which make the 'cram-down' market value for the properties much less attractive.
Also, we got paltry board representation on the banks. According to Professor Richard Wolff, without board representation, we sacrifice all regulatory/oversight capabilities. We saved their businesses, board representation is not too much to ask. Any 'buyer' in the private sector would expect the same.
http://www.rdwolff.com/
"Of course, it is not that hard to make profits when you get to borrow money from the Fed at almost no interest and then lend it back to the government at 3.5% interest."
This has to be the largest and longest-running scam in the history of this country!
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it’s issuance.” -James Madison
“I still can’t get over the whole Federal Reserve racket.” -Richard Russell, Dean of Newsletter Writers
"This has to be the largest and longest-running scam in the history of this country!"
Yep, the priciple act--transfering wealth from the poor to the rich throgh the rich's financing of government by owning its debt goes back to 1787 (and in the UK, to Elizabethen times)--and it can be very powerfully argued that the whole reason for the 1787 constitution was to allow just that to occur because under the Articles of Confederation--Constitution 1.0--there was zero chance of that happening.
Regardless of how good the quotation is.......I found this information in Wikiquote;
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it’s issuance.” -wrongly-attributed to James Madison
(origin of the mistake was apparently just an editor's error, actually written by Olive Cushing Dwinell author of 'The Story of Our Money'...)
Fret not, people, there's always a day of reckoning. In the case of the banks, it probably won't be too long from now.
The day of reckoning requires some form of retribution or punitive action, unfortunately our current government at every level is loath to live up to its responsibility of policing and enforcement when it comes to anyone with money.
I fear the only retribution that can come is the total destruction of the dollar and collapse of the federal government due to bankruptcy. This outcome is being fueled by the left and the right - the left in the form of more taxes combined with ever larger increases in spending, larger government programs without the elimination of existing programs or problems and the idea that there is an unlimited supply of money. The right does the same thing by eliminating taxes but increasing spending, launching corporatist programs disguised as healthcare, starting and never ending wars of aggression and generally spending like there is no tomorrow.
Both sides left and right in politics and society are fueling the headlong rush into dollar destruction and federal default. I say more power to them, bring on the destruction of the dollar and the feds and return to a private currency and states rights - we will all be the better for it.
(sigh* ???) to Not bob,about "...bring on the destruction of the dollar and the feds and return to a private currency and states rights - we will all be the better for it." It may be too late but we will ALL not be better off....those on Social Security as well as those of us very close to 65 and counting on the money we contributed to it for the last 30 plus years, will not be better off..... in fact there would be a world of pain for many years for everyone. There needs to be some sort of well thought out transition at the very least. Not that I expect to see any consensus on ANY problems we have created in America....those days seem to be long gone.
We can't even get The Attorney General, Eric Holder, to prosecute those who have done more ACTUAL damage to America than anyone else, EVER.
The main guys in The Bush Administration are the ones who have done more actual damage to our country than anyone in history.
And Eric Holder allows the Don Siegelman case to go forward, when Siegelman is not guilty, while not prosecuting Karl Rove & his criminal cronies in Alabama who have been instrumental in ramrodding Don Siegelman.
More than anything, we need to figure out how to EDUCATE a very high percentage of Americans about this topic (and other political/economic topics, too).
One example of how I have learned so much more during the past few years, is by listening to Thom Hartmann's radio program, and reading his books and articles.
(I listen to many other people too, such as Rachel Maddow and Mike Papantonio, etc. etc., but the single best source of solid background facts is Thom Hartmann. Ralph Nader's views and facts are very similar.)
If a much higher percentage of Americans are not educated with TRUTH and FACTS about these topics, then the U.S. is probably sunk.
NR16020 proposed "More than anything, we need to figure out how to EDUCATE a very high percentage of Americans about this topic."
Actually, I think at this point that a few targted assassinations would be a better bet. The problem with education -- as good as that is -- is that it does not necessarily translate into action. Furthermore, with the media being the handmaiden of the Corporate and Financial elite, good luck with that education program.
Assassinating a few Wall Street Bankers and their lobbyists and toadies in Congress, on the other hand, would announce the public's determination to put an end to the abuses in terms that these people understand. Anything less than that, and the American public can expect an unending stream of hosings -- whether educated or not.
Lock and Load...
The title is wrong.
It should be: Banks 1, America -1.
Helix writes---
"Assassinating a few Wall Street Bankers and their lobbyists and toadies in Congress, on the other hand, would announce the public's determination to put an end to the abuses in terms that these people understand."
I suppose you've given some thought to the political consequences of such actions were anyone actually capable of carrying out your program?
Actually, meanwhile, some of us believe that there have been a few such political assassinations in the past few decades: Paul Wellstone, Hale Boggs, JFK, RFK, that guy from Missouri, etc., etc.
All "Leftish." What makes you think that the Left has the same capacity for this kind of work after all these decades of putting up with this bullshit?
-30-
It doesnt matter what the problem is, there is 99% of US, and 1% of THEM.
The American People have the power to change whatever it is that they wish to change! A LEADER will be found who will UNIFY the American People in order to rebuild this country.
The traitors that have sold out this country will be dealt with in the appropriate manner.