The "Depression-Sized Event" Continues

Robust private sector demand will return only once the balance sheets of over-indebted households, overborrowed businesses and undercapitalised financial sectors are repaired or when countries with high savings rates consume or invest more.,/i>
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Stated another way, our economy has been losing value and heading down the tubes for a lot longer than people are letting on. What people don't seem to realize that bubbles do not represent actual growth in wealth. The recession started a lot earlier than we credit it. It was just hidden underneath inflating real-estate values.

"Forget what the CNBC squawkers tells you."
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Who in their right mind listens to those people?

Too many. Apparently

Michael forgot to mention Obama's specific promises with respect to the "stimulus". Remember how the unemployment rate wasn't supposed to shoot up that much? Curiously, Swampland posters never seem to mention that little promise.

@gysgt. You nailed it. Only crazy people believe Kudlow knows anything.
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The problem is that most people mistake articulateness and attractiveness for expertise and intelligence. Television enables us to makes those mistakes at a massive scale.
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If you want logic and facts, better to read what someone has written. The act of writing forces one to be logical. The desire to persuade in writing forces one to be concise.
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Which brings to me to the question of the day: what in the h3ll has happened to Barack Obama? Here is a guy whose writing reveals someone who is clearly logical. I read his book. I bought into his argument.
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But since he has become President he has stabbed me in the back on the environment, gay rights, financial oversight, and - soon - health care.
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Read any thing the White House puts out, such as today's announcement on giving homosexuals a tiny, tiny bit of job benefits to gay partners, and it becomes clear that there is no logic to their positions on domestic policy issues. They are just pandering to the right wing.
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Given that Obama is smart enough to sustain a logical argument across two entire books, and it is clear that something has intervened to short-circuit the promise he sold during the election.
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The only major thing that that is different between the campaign and his Presidency is Rahm Emanuel, who has a long history of screwing the Democratic base. It is time for Obama to find someone with some actual courage - not the false courage of a foul-mouthed bully - to guide the White House. There is plenty of time for Obama to recover, but he is going to need to find a new captain for his team to do it.

Two words, "fear" and "monger".
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And no, we shouldn't listen to the boys that cry "Wolf."
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The whole premise that in the computer age we should use the measurement "industrial output" as a 1:1 indicator in comparison to 1929 is ridiculous.
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Furthermore, this arbitrary pegging where "100" in June 1929 is equal to "100" in April 2008 is absurd and unexplained. Food comes from farms, not the grocery store, and economic collapse comes from ____? You can argue over that, but the answer is not "arbitrary numbers on some guy's chart."

And furthermore, just because "CNBC squawkers" are wrong, doesn't make the competition's squawker right.

Completely OT but like the oddball canary in the crazy coal mine expect to see more of this from republican leaders-
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http://blogs.citypages.com/blotter/2009/06/bachmann_spews.php
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"Rep. Michele Bachmann continued her non-stop conspiracy spewing this morning with yet another doozy. This time she said she is so afraid of 2010 U.S. Census abuse that she will only fill out how many people live in her household. Why is she so fearful of the evil U.S. Census? ACORN might have a hand on it and she knows they'll misuse her data."

What's with the amazing MSM silence on SCO (Shanghai Cooperation Organization) meeting?
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Here are a few quick links I found:
http://www.thaindian.com/newsportal/world-news/medvedev-calls-for-rules-to-admit-new-sco-members_100205548.html
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http://www.chinadaily.com.cn/world/2009-06/17/content_8292873.htm
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http://news.bbc.co.uk/2/hi/asia-pacific/5076032.stm

Come on guys, you can admit it--Obama had to have the stimulus--had to have it done, and he made some specific promises. And they haven't panned out.
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Michael Scherer, please explain why that was left out of your post.
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At some point, Swampland is going to have to look at the IG firing, which is starting to stink. Yeah, Obama Administration fires a guy looking at an Obama political supporter pocketing taxpayer money. Hope and change. Hope and change.

Gee, I seem to recall 53_3 posting something a while back, calling me stupid because there were "green shoots" etc. Now it seems like that was all so yesterday.
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So 53_3, please explain, if the economy was getting so much better, why unemployment is going to surpass what the sainted one said it was going to be without the "stimulus". Can you.
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Thought not. What was the word, idjit?

I love Michele Bachmann. She is like a chocolate dessert at your favorite resturant. You know it's bad for you, but you just can't help yourself from ordering it. When will the Republicans get around to touting her as a possible Presidential contender?

Michael Scherer:
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Wolf also writes:

The great likelihood is that the world economy will need aggressive monetary and fiscal policies far longer than many believe. That is going to be make policymakers – and investors – nervous.
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Two opposing dangers arise. One is that the stimulus is withdrawn too soon, as happened in the 1930s and in Japan in the late 1990s. There will then be a relapse into recession, because the private sector is still unable, or unwilling, to spend. The other danger is that stimulus is withdrawn too late. That would lead to a loss of confidence in monetary stability worsened by concerns over the sustainability of public debt, particularly in the US, the provider of the world's key currency. At the limit, soaring dollar prices of commodities and rising long-term interest rates on government bonds might put the US – and world economies – into a malign stagflation. Contrary to some alarmists, I see no signs of such a panic today. But it might happen.

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Economists and policymakers speak a great deal to the phenomenon of "confidence". This year you referred me to the book entitled "Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism", for which I am still extremely grateful, Michael Scherer. The authors of this excellent treatise make a very reasonable case for a return by economists to a predictive theory that takes into greater account irrational economic phenomena such as this "confidence".
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What non-economists imagine as "confidence", however, isn't primarily their own anecdotal, perceived level of confidence, or even really that of the working/consuming public at large --an important point that is somewhat obscured by the authors of "Spirits" in their attempt to describe economic theory in laypeoples' terms. In a rather odd coincidence, almost all discourse in mainstream media involving the effects of "confidence" on economic activity seem to only obliquely reference the population whose confidence is truly and profoundly important, both in economic theory and in practice: the people in our society who are given responsibility for managing vast, unimaginable sums of wealth.
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When Wolf offhandedly refers to "policymakers and investors" being "nervous", i.e. anxiously uncertain about the future value of their wealth, he means that set of people (it's also interesting to note that, in his honesty, Wolf barely distinguishes between policymakers and investors, an assumption that may be quite troubling to ordinary Americans, and at the very least is contrary to common notions of democratically-derived institutional legitimacy). When he speaks to the credit crunch that is the lynchpin threatening all other economic activity --production and consumption alike-- by warning of a potential "private sector still unwilling to spend", he means that set of people. When Wolf considers that gargantuan deficits will lead to a "loss of confidence in monetary stability worsened by concerns over...public debt", he's speaking to the psyches of that set of people. The concerns he considers inevitable are those of a small group of organizations, families and individuals tasked with great wealth --not us.
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What we (and Martin Wolf) are really talking about when we're contemplating the role of confidence in our political-economy, Michael Scherer, is the aggregate perspective of this --not to be a Marxist, but there's no other word for it-- class of people.
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Cross-posted at Economist Yves Smith's blog "Naked Capitalism", financial services consultant and writer Leo Kolivakis gets a little more specific about this class of important people who have apparently stopped looking forward to the future (as in future earnings on capital), and are suddenly looking backwards in an obsessive survey of previous dismal months of earnings performance.

What caused this sharp departure from conventional practice?
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Why would investors suddenly abandon their convenient forward-looking ceremony and instead take their cue from the dead past? Why give up the predictive powers of precise positivism in favor of poor historicism?
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In our view, the reason is systemic fear.
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Systemic fear has little to do with the habitual apprehension that constantly punctures capitalist greed. Business as usual is always uncertain, and investors are forever fearful about profit. They are concerned that earnings may not rise as quickly as they hope or that they might fall, that volatility will increase or that interest rates will rise. But these fears, no matter how intense, are self-contained. They concern the level and pattern of profit, not its existence.
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Occasionally, though, there arises a very different and far deeper type of fear: the terrifying thought that profit might cease to exist. This latter fear is associated with systemic crisis—that is, with periods during which the very future of capitalism is put into question. It is what Hegel meant when he spoke of the bondsman's “fear of death”:

For this consciousness [of the capitalist bound to the steering wheel of a megamachine gone wild] was not in peril and fear for this element or that [such as falling profit or rising volatility], nor for this or that moment of time [like a sharp market correction or a declaration of war], it was afraid for its entire being; it felt the fear of death, the sovereign master [the ultimate wrath of the ruled]. It has been in that experience melted to its inmost soul, has trembled throughout its every fibre, and all that was fixed and steadfast has quaked within it [will capitalism survive?] [Note 9]

The first time capitalists were gripped by such systemic terror was during the Great Depression of the 1930s. The second time is right now.

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What do you make of that, Michael Scherer?
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What do you make of the idea that the possibility of global Greater Depression hinges on what goes on in the somewhat irrational psyches of a relatively small set of folks no better or worse than you or I or everyone else?
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What do you make of this conjecture that this "nervous" behavior Martin Wolf predicts on the part of "policymakers and investors" --people who the control wealth of nations-- may not be temporal, but existential?
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Perhaps even more important, what do you make of the possibility that the gravity of this situation (combined with current communications technologies) may render the vast power of this class of people perilously exposed to the majorities now tragically affected by this arrangement?
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What of "pitchforks" then, Michael Scherer?
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Thanks for reading and considering this, and I truly do look forward to a response, if you have the time and inclination.

A quick re-cap: Walpin was appointed to his job by President Bush in 2007. As part of an investigation into Johnson's use of federal AmeriCorps funds -- dating to when Johnson ran St. HOPE Academy, a Sacramento non-profit -- Walpin found that Johnson had misused over $800,000. He took the rare step of recommending that Johnson be barred from receiving federal funds, pending a criminal investigation -- a move that ended up endangering the city's ability to get federal stimulus money after Johnson took office as mayor early this year. Walpin also publicly announced, during the mayoral campaign, that he was passing his findings on to the US Attorney's office and suggested that Johnson might be guilty of a crime -- an apparent breach of protocol. The local US attorney, also a Bush appointee, found no criminal wrongdoing in the case. And his successor, Lawrence Brown, formally complained to an oversight body for inspectors general about Walpin's work on the St. HOPE probe. Brown charged that Walpin hadn't even conducted an audit to determine how much money had been misspent by St. HOPE, and that he had withheld key exculpatory evidence. Brown accused Walpin of acting "as the investigator, advocate, judge, jury and town crier" in the case. In short, it's hard to avoid the conclusion that Walpin overstepped his authority in going after Johnson. And his background hardly suggests that he's the kind of politically independent, non-partisan watchdog the IQ job requires. He's a member of the conservative Federalist society, and once introduced Mitt Romney at a meeting of the group by saying that Romney's state, Massachusetts, is run by "modern-day KKK ... the Kennedy-Kerry Klan."

http://tpmmuckraker.talkingpointsmemo.com/2009/06/white_house_explains_ig_firing_--_will_it_be_enoug.php?ref=fpb

Stuartzechman-

I am intrigued. You identify a a small group of "them", individual "policymakers and investors" who run the financial world. That sounds almost like Glenn Beck's whispers about "them" who are out to control "us." Is it possible that the left's loathing of business (investors) and the right's loathing of government (policymakers) are just reverse sides of the same coin? Are we mere citizens actually in danger from both sides (even a conspiracy of the financial/government complex?). I agree, get the pitchforks.

spob:
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http://www.factcheck.org/politics/making_sense_of_stimulus_spending.html

Spob: WTF is your point? Seriously.
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As those who stayed awake during Econ 101 know, if private consumption and investment go into the toilet then government spending MUST increase in order to limit or prevent a decline in GDP.
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The primary fault-line in economic thinking today is between those who generally learned something from the past 75 years of economic history and those who learned everything they know from bumperstickers and Ayn Rand novels.
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Now if you want to join the chorus of economic illiterates in the GOP who first argued and then voted against the stimulus package on the ground that it was bad economic policy, knock yourself out, Spob. I'm curious to hear the "intellectual" rationale for that argument.
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But blaming Obama for not delivering on a "promise" to keep unemployment down (I must have been sleeping when Obama guaranteed quarterly, if not monthly, economic-indicator numbers)? What are you a 5 year-old?

[Walpin]'s a member of the conservative Federalist society, and once introduced Mitt Romney at a meeting of the group by saying that Romney's state, Massachusetts, is run by "modern-day KKK ... the Kennedy-Kerry Klan."
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Stay classy, Walpin.
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This is the guy you want to go to bat for, Spob?
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Starting to remind me of the GOP defenses of Billy Dale. That poor, innocent public servant who lost his job after (admittedly) commingling tens of thousands of dollars in his private bank account.

What are you a 5 year-old?
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No, he's actually a parrot. He takes his marching orders from Hot Air and delivers them here unedited....

moderatelyinterested
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You identify a a small group of "them", individual "policymakers and investors" who run the financial world.
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Please read my post again, as you seem to have confused my reading of the facts with that of Martin Wolf's:

...[prolonged] aggressive monetary and fiscal policies...[are] going to be make policymakers – and investors – nervous.
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There will then be a relapse into recession, because the private sector is still unable, or unwilling, to spend.
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The other danger is that stimulus is withdrawn too late. That would lead to a loss of confidence in monetary stability worsened by concerns over the sustainability of public debt, particularly in the US, the provider of the world's key currency.

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That sounds almost like Glenn Beck's whispers about "them" who are out to control "us."
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Inappropriately read, I'm sure that some of what I've written may almost sound like any number of people, including Ronald Reagan, Kim Jong-Il and/or Judy Garland.
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The fact of overleverage, including the millions of homeowners who are now underwater, or burdened by ridiculous credit card debt, is very real, even if everyone remained supremely confident.
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This is unrelated to what I've written, but also an incomplete description of "the fact". "Overleverage" on the part of homeowners really isn't as bad of a problem for the economy as the sh*tpile of securities derived from them that the largest banks are accounting for as "capital" instead of actual mortgages on real property, or the shares in securities based on insurance policies underwritten so as to pay out even larger sums upon mortgage-backed securities' appearance of default.
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Simply put, the banks and quasi-banks are the real problem, not the homeowners of worthless homes, and credit card debt holders. Think of it this way: if homeowners' misfortunes were truly the issue to be resolved, why wouldn't there be a $700 bn TARP for them, instead of for financial institutions? If it were as simple as saving the economy by stopping mortgages from going into default en masse, then why give away money to banks, when we could lend money to homeowners (at almost zero rates, like TARP II), who would then pay their mortgages on time to the banks (or Ditech, or whomever)?
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According to your theory, we would be just fine and dandy if somehow all of these people could pay their mortgages back as scheduled...but that's not really what the real issue is. That's not the true problem with "overleverage".
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Is it possible that the left's loathing of business (investors) and the right's loathing of government (policymakers) are just reverse sides of the same coin?
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Is it possible that fifteenth-century Spanish Jews' loathing of government (torture) and the Spanish Inquisition's loathing of Jews (Jews) are just reverse sides of a mirror image of the same coin?
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Is it possible that every problem is not capable of convenient reduction in which the truth is "somewhere in the middle" of political stereotypes?
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Is it possible that facile centrism (proudly labeled "moderation" by its smug adherents) is its own disastrously flawed ideology?
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Thanks for responding to my post, moderatelyinterested.

"Is it possible that the left's loathing of business (investors) and the right's loathing of government (policymakers) are just reverse sides of the same coin?"

You could look at it that way. “The left” “loathes” business when it uses its wealth and power to change US law to what serves its parochial interest by buying government officials with campaign cash, thereby undermining representative democracy and public policy that benefits average Americans. The right “loathes government” as a political devise to convince the poorly educated and disaffected to support them politically and their ability to help business subvert representative democracy and public policy that benefits average Americans.

"What's with the amazing MSM silence on SCO (Shanghai Cooperation Organization) meeting?"
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Thank you Rose!
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I posted this spooky Hedges' piece yesterday, and despite my own radical tendencies, was left praying he's overstating things:
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http://www.truthdig.com/report/item/20090614_the_american_empire_is_bankrupt/

Stuart:
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According to your theory, we would be just fine and dandy if somehow all of these people could pay their mortgages back as scheduled...
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Is that not true? Being overleveraged means defaults among consumers and institutions multiply tens or hundreds of times through the derivatives that financial institutions had been using to swell their capital streams. Obviously it was a bad idea and much too risky to create so many derivative, but if more people could pay their debts, then the losses would be reduced. How does that not help solve the problem?
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I don't think you should downplay consumer debt. The global economy is based heavily off consumption: consumption of services and realestate for the US economy, and consumption of goods for economies with large exports like China. If consumers have too much debt or are paying too much for staples like energy, food, and health care, then the economy tanks. Repair consumers balance sheets or reduce the cost of staples, and consumption rises again.
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Right now the countries with high savings rates are continuing to save while the countries that used to be consuming are no longer consuming. This is bad for the global economy. Someone somewhere will need to reinvigorate consumption, either by creating new classes of consumers where none previously existed, or by restoring consumption where it had fallen off.

Michael Scherer:
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Thanks so much for responding to commentary; it is always greatly appreciated.