An Overview of the Recession
The U.S. economy has been in recession for about a year, according to the research organization that tracks economic cycles.In a statement, the National Bureau of Economic Research said its Business Cycle Dating Committee determined that the U.S. entered recession in December 2007, marking the end of the economic expansion that began in November 2001. That month marked the end of the last recession for the U.S. economy.
It's official. The National Bureau of Economic Research formally announced the US has been in a recession since December 2007. However, it is the Federal Reserve's Beige Book released yesterday which gives us a very detailed look at the breadth of the problems the economy faces. Let's see what the report's overview says:
Overall economic activity weakened across all Federal Reserve Districts since the last report. Districts generally reported decreases in retail sales, and vehicle sales were down significantly in most Districts. Tourism spending was subdued in a number of Districts. Reports on the service sector were generally negative. Manufacturing activity declined in most Districts, and new orders were soft. Nearly all Districts reported weak housing markets characterized by reduced selling prices and low, but stable, sales activity. Commercial real estate markets declined in most Districts. Lending contracted, with many Districts reporting reductions in residential, commercial and industrial lending and tightening lending standards. Agricultural conditions were mixed with a relatively good harvest but concerns about profitability. Mining and energy production and exploration started to soften due to lower output prices.
District reports generally described labor market conditions as weakening. Wage pressures were largely subdued. District reports characterized price pressures as easing in light of some decreases in retail prices and declines in input prices, particularly energy, fuel, and many raw materials and food products.
There is nothing good in that paragraph. Retail sales were down "significantly"; manufacturing activity declined in "most districts"; housing markets are still in terrible shape, lending contracted ... you get the idea. Let's take this information apart piece by piece to see exactly what is going on.
Consumer spending weakened during the reporting period. Retail sales were described as weak or down in the New York, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas and San Francisco Districts. In Kansas City, consumer spending slowed sharply.
Here is a chart showing the year over year percentage change in personal consumption expenditures:
Retail sales aren't much better:
Basically, consumers have been slowing down their spending for a year. That is a very important trend. And it's no wonder -- a little over a year ago consumer confidence started to drop:
Remember -- the credit crunch started in July/August 2007. Also remember the financial markets started to drop about that time which created a second asset class that was losing value (the first being real estate). When the two primary sources of personal wealth start to drop, consumers stop spending.
Activity in the services sector generally contracted in most Districts since the last report. New York, Richmond, Chicago, Minneapolis, Dallas and San Francisco reported deteriorating conditions. Most of these Districts were seeing weakness across a wide range of services, including advertising, architecture, business support, information technology, legal services and temporary help firms.
This shouldn't be a surprise either -- considering the latest release:
Business conditions are deteriorating quickly, the latest indication from the ISM's non-manufacturing report that showed wide declines across readings. The headline composite index fell more than 7 points to 37.3 with new orders, perhaps the most important index of all, falling more than 8 points to 35.4. The business activity index, equivalent to a production index, fell more than 11 points to 33.0. The employment index fell more than 10 points to 31.3 with backlogs down nearly 5 points to 39.5. Prices paid, as it did in the ISM manufacturing report, confirms the extent of the weakness, down nearly 15 points to 36.6 in a drop reflecting declining demand for goods and services including declining demand for energy. Many of the readings in this report, as well as month-to-month changes, are record lows. Stocks dipped and money moved into Treasuries in immediate reaction to the results.
Manufacturing is also suffering:
Manufacturing activity declined noticeably since the last report. All 12 Districts reported weaker manufacturing conditions, to varying extents. Boston, Philadelphia, Cleveland, Richmond and Kansas City reported reductions in orders. Almost all Districts noted reductions in exports. Philadelphia, Cleveland, Richmond, Chicago and Atlanta reported lower shipping volumes. Dallas reported weakness in most forms of transportation. Nearly every District reported decreased demand for construction materials; Cleveland and Chicago noted, in particular, decreased steel production. Several Districts reported multiple plant shut-downs, and expectations for capital expenditure were down.
The ISM manufacturing index has been dropping for the last 4 years:
Industrial production has fallen off a cliff:
And capacity utilization has dropped, indicating we're using less and less of out productive capacities:
Real estate is still a huge problem:
Residential real estate continued at a slow pace nationwide. Sales were down in most Districts, but mixed activity was noted in the Boston, Atlanta and Minneapolis Districts. Boston, New York, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City and Dallas noted decreases in housing prices. Inventories of unsold homes remained high in the New York, Atlanta, Kansas City and San Francisco Districts, but declined in Chicago and Minneapolis. Philadelphia, Richmond, Chicago and Kansas City reported relatively stronger demand for lower- and middle-priced "starter homes."
Here's the central problem. Inventory is still at incredibly high levels (thanks to Calculated Risk for the graph):
Lending standards are tightening:
Large majorities of domestic respondents reported having tightened their lending standards on prime, nontraditional, and subprime residential mortgages over the previous three months. About 70 percent of domestic respondents--down from about 75 percent in the previous survey--indicated that they had tightened their lending standards on prime mortgages.2 Responses differed somewhat by bank size, with about 80 percent of the largest banks, but only 55 percent of the smaller banks, reporting tighter standards for prime borrowers. About 90 percent--up slightly from July--of the 29 banks that originated nontraditional residential mortgage loans reported having tightened their lending standards on such loans.3
As a result, home prices are dropping:
The decline in the S&P/Case-Shiller U.S. National Home Price Index -which covers all nine U.S. census divisions - remained in double digits, posting a record 16.6% decline in the third quarter of 2008 versus the third quarter of 2007. This has increased from the annual declines of 15.1% and 14.0%, reported for the 2nd and 1st quarters of the yer, respectively.
Finally there is employment, which has been dropping for over a year on a year over year comparison:
As a result, the unemployment rate has been increasing for over a year:
So -- we're clearly in a recession. However, remember that a lot of people are on the case (as it were). While I have personally made fun of everybody involved, I have the luxury of doing so. Bernanke has been given the most unenviable task of cleaning up one of the largest financial messes in history. While he is struggling with the task -- he's supposed to be considering the size of the problem. I have disagreements with Paulson, but it's not as though I think he's incapable. Frankly, I think there are times when he is just as perplexed as the rest of us at times.
And for everybody out there who is saying "there is no organized central plan to this problem" -- there isn't one available. There is no book out there that says, "this is how you undo years of financial damage in 3 easy steps." It just doesn't exist. There are a lot of armchair economists out there saying this is a bad idea or that is a bad idea. What these people are forgetting is the previously made point -- no one has a clear plan on what to do because one doesn't exist. It's that simple.
The point of the previous two paragraphs is to point out that we are in clearly uncharted waters in a big way. There are no rules that apply -- we're trying to figure this thing out as we go along. Also remember that no one in the incoming administration has a crystal ball either. While there are a lot of very smart and capable people out there, they don't have the magical "how to fix this crisis in three easy steps" book either. In other words -- it's going to be a long and difficult road going forward.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
I watched C Span 2 yesterday and caught the coverage of what appeared to be a Federal Reserve presentation.
Let me tell you the two men I saw give the presentation have been at their jobs too long!
Knowing one is going to be on C Span 2 should give one pause, and make one realize that now is not the time to do the ivory tower calculus, advanced PHD advance economic mumbo jumbo.
To my way of thinking, the most brilliant person in a field is the person who is smart enough to condense the advance material into understandable form for the masses.
There are very few of us, economic reporters included, who took graduate studies in economics. However, we know a recession when it's here and we know its been here for a year. We know that if you give loans to people who can't afford them that they will default on the loans. We know when we're being talked down to by ivory tower intellectuals who are too dumb to know what is going on with the masses on main street.
These Federal Reserve guys remind me of the ivory tower miliary officers who were backslappers to an administration which has its own agenda for war. Why would we listen to the grunts who were shedding their blood. Hell, no! The little guy doesn't know anything! They just pay the price!
The problem with the American economy is that the wages of American workers haven't kept pace with productivity gains since Reagan's time when Alan Greenspan declared war on wage growth. See Ravi Batra's book "Greenspan's Fraud". It came out in 2004. I subsequently read about a Chrysler plant that was modernized in 2005. The plant built engine blocks. Before the modernization the plant could build 250k engine blocks per year. Afterwards the plant could build 1 million engine blocks. There were 3200 workers at the plant before the modernization but only 800 workers after the reconfiguration. Wages for new hourly employees are $14.00 per hour. The wages of the long time employees is $28.00. The cost of labor crashing. The cumulative purchasing power of the working class is crashing with it. Experts and pundits never mention the relationship between the condition of the economy and the crash in purchasing power resulting from two-tier wage systems, uncompensated increases in productivity, and force reductions? A vibrant economy requires a consumer class made up of workers who enjoy compensation that includes a component of disposable money. The long term prospects are gloomy for an economy that subscribes to a policy of subsistence wages with easy access to borrowed money. We are paying the price for Greenspan's policy of depressed wages, high productivity, and easy borrowing terms. Pay raises that adequately reflect the productivity of workers will give the economy the stimulus it needs.
Real disposable income has increased continually over that time, so has real median household income per family member (because families have less kids now days). Real median wages are a tad below the peak of 2000, but they never fell much off the peak in the 2001 either (and they have historically fallen a lot during recessions) so they've stayed high. I don't think the lack of purchasing power is a problem. The problem is that people took out too much debt to pay up for homes earlier this decade. Those that paid up at the peak (2005 thru early 2007) have problems, but those that bought their house before 2003 or have rented during the entire period have generally fared well.
YeahYeah, the officials have finally admitted after the fact what many of us have already know and in fact, saw coming a decade ago.
This means it is high time to recognize we have gone way past rehab for the credit economy junkies. We are looking at depression ahead folks, with scores of sick, hungry, unemployed, homeless folks wondering WHYWHYWHY all those three-step "fixes" that do nothing but add more unemployment, result in the loss of even more benefits for the employed, increase the size of the massive avalanche of home foreclosures about to hit us imminently, the loss of the social safety net ???
The "recession" is NOT deepening. The abyss has opened up. Now, if only eyes would open up too, we could actually begin to do something constructive!
end of transmission
I'm still astonished that no one saw this coming. Well, I guess that's too strong a statement. If I could sense it then I'm sure the powers that be sensed it. For years, I wondered how in the %$#@ home prices could keep rising dramatically while wages were relatively flat. I guess no one thought it would implode in this manner or maybe they just couldn't figure out a way to do anything about it. It's unclear to me how to deal with these kind of speculative bubbles other than to duck when they burst.
The denial of this economic calamity by those in power indicates the depths of clueless incompetence that has brought us to this point. It is now obvious that free market economics as preached by the Kudlows is hopelessly irrelevant going forward. That is not to say that capitalism is dead just the unrestrained, unregulated and Governmental hands off variety.
Paulson is the wrong man at the wrong time. He is tethered to Wall Street. He and his ilk see Wall Street as the center of the economy and are the ones who are guilty of this multi trillion dollar fraud. That the bailout has been acquiesced to is a huge blow to any recovery. What is not recognized is that the components (companies) of Wall Street are not necessary; their survival is a moot point. The only elements that are necessary are the functions they have facilitated in the market place. If the functions are maintained the dead bodies of the investment banks can decompose a la Lehman. The brokerage portions can be sold off. The Government has stepped into the commercial paper markets and can assume other functions. The GSEs are nationalized and can assume their designated functions. The FDIC is shoring up commercial banks and they are still functioning. BUT, this is not happening and the worm hole of Wall Street will continue to suck vital resources into their cancer ridden corpses. An oblivious Congress is following wrong way Paulson and proposing penury for the people.
There already is a large amount of regulation in our system, although we need more in some areas. Fannie Mae and Freddie Mac are two examples of regulated entities that were a major part of the credit problem. Second, do you consider Citigroup, AIG, Fannie Mae, and Freddi Mac as part of Wall Street? After all, they are the ones that have been bailed out, while Lehman, an investment bank on Wall Street, was allowed to fail. Do you think that Citi and AIG aren't "necessary"?
As I stated, the companies themselves are expendable, just like employees in a recession. All that is required is to maintain the functions they provide either by allowing a better run entity to step in or the Government step in as with the commercial paper function. I separated Fannie and Freddy out of the equation as their bailout was quasi statutory. Just as when banks fail their deposits are protected but the banks themselves are merged with another entity or shuttered. We owe less allegiance to Citi Corp and their fraudulent securities than to Joe's Donuts.
Aside from the credit market fiasco the housing issue is front and center and the overall economic fabric is fraying by the minute. The housing issue is simple; it is in a downward correction. No assistance was required for the ascension thus none is required for the trip back down. In order to build a solid recovery the idea that housing values and economic activity are linked must be dispelled. A house is one each unit of shelter at a given level of comfort. It is not an investment nor is it an ATM. Any appreciation will come over decades not yearly. Equity is something you build not something you spend that is what your paycheck is for. The credit markets should provide conventional financing to qualified borrowers within given economic metrics that insure viable mortgages. How much simpler can that be?
The overall economy is the result of years of a concerted effort to intentionally or unintentionally destroy the Middle Class. The anti working Americans Republican Party and corporate Democratic Centrists have encouraged one way trade treaties, outsourcing of living wage jobs, H1b visas, insourcing via unrestrained illegal immigration and union busting. They have gotten just what they wanted, low wage workers both here and abroad. What they didn’t consider or care about was that those who they tossed aside were also someone’s customers. Now that the living on debt fallacy has blow up surprise, there’s no one left to buy their crap.
Of course housing is an investment. The retirement for a large number of Americans depends on housing prices. Second, the idea that there was some kind of effort to destroy the MIddle Class is ridiculous. The large increase in global trade has been a net gain for Americans and H1b visas is a major positive for our country, not a negative. I've never understood the argument against H1b visas. I don't see the rationale for not wanting to get the best and most hard working talent here in the US, especially when they were students at American schools.
If you'd ever watched some one with years of experience train some one who knows much less than them, and is much less productive for years on how to do their job before they got laid off you might understand.
"The best and most hard working" is a myth. It's the lowest cost. It is difficult for H1B visa people to switch employers so there is no free market for wages.
I do remember one year when there was lots of crying over the H1B visa's being all used up that a separate category was then created for foreigners that graduated from US institutions instead of increasing the overall limit. It was something like only 20k extra visa's. They were not all allocated by the end of the year indicating that the claim was a ploy by those who just wanted to overall limit increased. H1B visa's put hard working, very competent professional Americans out of jobs and in the Industry I am in, it is used to transfer American grown technology overseas. Many H1B visa people are here long enough to learn the technology and then they return to the home country.
H1B visa's were created for special knowledge like the German scientists that worked on the Manhattan project in WWII which resulted in the Atom bomb. There comes a point where it goes beyond being competitive and starts to hurt the US.
Traditional economic solutions and thinking have not worked. I noted some time ago that the Fed and the Federal Government both had their feet on the accelerator and the engine was still stalling. Interest rates have been lowered for some time and the Government has been running 500 billion dollar deficits for 7 years. Doing more of the same in greater proportions will get equally dubious results. Going forward will be impossible without unencumbering the Government. The ruinous Wars and quest for Empire must be abandoned immediately. The resulting defense requirements will be half of the present costs or about $500 billion dollars per year less. This spending cut must be complimented by a tax hike to generate funds and reduce demand. A gas tax of one to two dollars per gallon will yield a price in line with what we recently experienced and will keep consumption down. The monies must be immediately returned via tax credits for homeowners and businesses for the installation of solar and wind generating systems. Other tax credits can be supplied to lower income individuals via a payroll rebate. The monies saved from ending the Wars can be put to use in other more constructive ways as has been proposed. By shifting spending and selectively raising taxes additional borrowing and debt can be avoided. The proposed middle class tax cuts should be made on a temporary basis and upper incomes should be taxed at higher rates.
While SOME are hitting the accelarator, and there's a full gas tank, the gas isn't getting to the engine.
It's like the gas tank (banks and financial institutions) have decided that they didn't like running out before when they were driving EVERYWHERE and going NOWHERE ..... and the solution NOW is to KEEP THE GAS coming from the Fed and Treasury IN THE TANK. They're refusing to send any to the engine - they turned the fuel pump off.
Thus was the point of my post above eschewing the need for those institutions sucking up the bailout money for their own purposes. I remarked that the Government could bypass their miserable butts and perform the functions they are obviously incapable of.
Maybe we should stop expecting "the guv'mint" to run the bus.
Listen carefully ...
(1) "MAKE THINGS" ...
(2) ... "HERE"
(3) No Leprechaun Money for any purpose.
(4) Usury must once-again be against the law.
(5) Borrowing or lending money under false pretenses is a felony.
(6) "Law Enforcement" is never "off the table."
You are not going to turn the country around on a turntable when you implement these things, but on the other hand, it is completely inexcusable for THIS nation of 300 million people ... THIS nation in particular ... even to be "stumbling."
We are stumbling because of High Crime, by hundreds of civil officers, and because other criminals are obstructing justice by preventing lawful impeachment and prosecution. And there are 300 million Plaintiffs out there who have been materially damaged by an intentional tort.
At least the Obama administration won't be constrained by quaint, 18th century economic mythology. Paulson, Bernanke and the rest of the Republican true believers cling to the "free market", "the invisible hand", "creative destruction", "moral hazard", etc. mumbo jumbo. It's easy to understand, it superficially seems reasonable, and it always leads to ruin for too many people.
To this dated ideology, Reagan and the Republicans added the "government is the problem", "tax cuts solve all problems", and "deficits don't matter" insanity. We are now reaping what they have sewn.
So, Paulson is clearly in over his head. Sticking to the right's failed ideology led him to make several potentially fatal errors. Letting Lehman Brothers go under was a big mistake. That started the dominoes falling. Failing to get to the root cause of the mortgage mess early on will be difficult to overcome. Belated efforts to help people in mortgage trouble is too little too late at this point.
Obama's team will come up with ways to hold off a deep depression, but the train for a nasty recession left the station a long time ago. I don't think they have the will power (or the unconventional views necessary) to take the drastic steps necessary to really turn the economy around.
This is all really good news. It would take 5 planet earths to sustain the US consumption/living standard. We are going back to a steady state economy. Zero growth, just maintaining a livable steady state will be the new future. Maybe there will be resources left over for the other 96% of the planet. Capitalism has failed dramatically and will never recover .
Ah, the blame the U.S. for over consumption of the world's resources. No, it does not take five planet Earth's to sustain U.S. consumption. Your thinking is too simple.
What do I mean by that? Without The U.S. buying up everything from all over the world, money would not have made it to other countries (the U.S. consumer bailing out every destroyed first world economy from Europe to Asia). The Marshall Plan? It got the ball rolling on European recovery. Hell, because of the U.S. consumer buying everything the world had to offer, even Soviet-controlled Poland was able to rebuild her railroads.
The U.S. consumer powered the world's economic engine by buying the crap from post-WWII economies. That gave those destroyed countries the capital to rebuild themselves. Unfortunately, the Masters of Financial Disaster (from New York to London to Paris to Rome to Moscow et. al.) forgot to include a global economy recovered enough NOT to depend as much on American consumers spending dollars to enrich every other part of the Globe.
Even the poorest economies benefited. Though, political oppression across Asia, Africa, and South America prevented most wealth from reaching those that needed it. The Western Capitalist Model became perverted. It is feeding on itself. Cannibalizing itself. It no longer works. A new model must replace it.
The New Model?
The new model will be sustainable, renewable, recycled and deindustrialized, to the extent possible. It'll also be organic. Co-operative instead of competitive .I'm not sure how we'll get there, but thats where we're going!
Capitalism and consumerism is the very reason you're sitting in front of the computer of your choice connected to the internet. If this was a socialist state or a third world dictatorship, you would rue the day you criticized our system that's worked for hundreds of years.
So people in Sweden, Germany, France, England, Iceland, Denmark, Finland, Norway, Spain, Italy, Switzerland, Luxemburg, Belgium, Greece, Slovakia, Liechtenstein, Poland, Hungary, The Czech Republic, Romania and even The Netherlands can’t sit in front of the computer of their choice and criticize their Governments?
The present administration is not equipped to deal with this situation. Nor will the Obama administration. IE: We are screwed. Enjoy!
I enjoy Hale's posts here because he takes the arcane language of economics and, with the aid of graphs, explains things in a straightforward manner. As for being in a recession, let's face it... most people are just plain stupid when it comes to economics (okay, they're stupid in other ways too, but that's beside the point here). They run up enormous credit card debt, buy more house and car than they can realistically afford, and fail to realize that they are just one or two paychecks away from being in deep s**t. In a consumption-driven economy, the ripple effect can be severe, which is what we're seeing now. When a smart guy like Hale doesn't know what's going to happen, it's time to raise the drawbridge and prepare for a siege.
The reason this is unprecedented goes beyond the superficial financial problems and abuses. Yes, those triggered the collapse, but the real story behind this downturn has not yet been recognized by conventional economists (Hale included).
The biophysical economists (and their close cousins the ecological economists) know exactly what is happening and why. They have been trying to get their story out for years but the conventionalists insist that they are just a fringe group of no significance.
The true story has to do with the net amount of energy available to do economic work. It has to do with the plateauing of conventional oil production (around 2005) coupled with the decreasing energy return on energy invested (EROEI). We are simply running out of capacity to build wealth (the real kind). We've been borrowing against a future that will not come to pass. Paying back the principal and interest on the debt we have accumulated as a society is going to be near impossible with less net energy available in the future.
http://questioneverything.typepad.com/question_everything/2008/09/current-events---what-is-going-on-in-the-financial-markets.html
You are right, we are in uncharted waters, and neither Keynes nor Friedman is going to save the U.S. economy. The trillions in dollars of bailouts that have already occurred, along with Obama's trillion dollars of stimulus, is setting the stage for a dollar collapse and a far worse situation than currently exists. It will take a recession and create a depression. From which we will never recover.
You are wrong, to state that their is no one with a "magical three easy steps plan", to save the United States economy. I have a 3 step plan that will save the United States. It creates 25 million Green jobs within 5 years, ten times the Obama plan, and "magically" reduces the budget deficit by $100 billion annually. Critical to preserving the dollar and our economy.
http://www.iplanretirement.com/retirementblog/green-jobs/
It is being ignored. Instead, everyone is freaking out, the current and incoming administrations are running around like chickens with their heads cut off. While we accelerate off a cliff. It is not necessary.
I saw the collapse coming since 2002, I know how it happened and why it happened, and I know where we are headed.
http://www.iplanretirement.com/retirementblog/after-stock-market-crash/
Ignore me, laugh at me if you want, just don't tell me no one has a solution. I do. And the solution is Green.
Green jobs doing what? Right now demand is low for alternative energy because of the collapse in energy prices and general worldwide economic growth, particularly construction. The US govt could create some mandates, but it's not conceivable such mandates could create anywhere even close to a net increase of 25 million jobs. I think a net gain of a million over five years would be quite an accomplishment, and would only happen with higher energy prices and a return to somewhere near trend worldwide economic growth.
Yes, demand for alternative energy is declining along with a decline in oil prices, for profit based venture capitalists this is a problem. However, the price of oil is irrelevant, when it comes to non-profit government investments. Government is not looking to make a profit from Green energy. The investment will be returned in increased tax revenue from higher employment, a lowered trade deficit, lower interest rates, lower health care costs and more.
25 million jobs is based on economist Robert Pollin's calculated multiplier of 18 jobs for every $1million dollars in Green investments. This plan generates $150 billion per year in Green investments and reduces the federal budget deficit by $100 billion annually. It is all about taking low job multiplier investments, in oil, military, and prisons, and placing a large portion into high job multiplier investments in Green energy and infrastructure.
What government can do is quit doing things that are good politics and do things that are good public policy. Make gas more expensive by taxing it to death. Force people into electric cars and hybrids. We've done the same thing with tobacco and we have less than 20 percent of Americans who smoke.
Cheap gas won't create green jobs, but expensive gas will. And when gas gets so expensive it will change people's consumption habits meaning they will buy the electric car.
Although you paint a well-considered picture of doom, Hale, I do submit that every coin has two sides.
Looking at the dirty side of the coin, we see that it is impossible to "coin money" out of thin air to "bail out" anything at all. We also see that it is impossible to mothball the industrial capacity of a nation of 300 million people ... trying to substitute "all that money" for "the Real Thing" has been a disaster, even if the world DOES (right now) have to buy petroleum from the Saudis using only the American Dollar.
But what about the other side of that coin? 300 million very pissed-off people who like to "live well." People who quite-clearly understand that they have been robbed by their bank and by their own government. But also, people of the nation that put a "We Can Do It!" poster on my office wall.
I look at that poster every day. "300 million people" is a huge DOMESTIC market, well-known for building bulletproof battleships and bulletproof vacuum-cleaners. Factories are surrounded by factories which are surrounded by factories. We can have that again, without repeating Beijing's terrible environmental mistakes. If we restore our DOMESTIC supply capability, and from now on soberly remember the lessons of Joseph (in the good book) that there really can be "seven years of want," I think that we can make some serious REAL MONEY in the process of "fixing this thing."
Good article, but he's wrong that Paulson doesn't have a clue how to fix it.
Paulson knows, as does Warren Buffett and Alan Greenspan, that the problem was created by the OTC derivatives, and until they unravel that problem of undisclosed lack of values bundled into the securities all over the world and prosecute those players, there will be nothing but chaos for the world. instead, they chose the path of handing out money to Citigroup and others, who then decided to UP their consumer rates and invest in themselves. GEE, why are we not surprised? I don't buy their talk.....they knew exactly what was going on and should all go to prison for a lifetime. including Greenspan. not only is the US economy broken, but so is China's. this will not go down well....these trades effectively robbed the entire world. And they put people in jail for drugs? These financial trades who shorted and swapped have destroyed millions of lives. "Sorry" is not good enough!
You must be logged in to comment. Log in or connect with
