Relevant and even prescient commentary on news, politics and the economy.

Let’s Play “You Be The Sucker!”

By Noni Mausa

Let’s Play “You Be The Sucker!”

Let’s see. Business and banks have heaps of money – and aren’t hiring, spending their money, or loaning it out. Meanwhile, a few million working-age Americans have no money and no work, and many are young, strong, highly trained and capable. Business is complaining that they can’t get suitable employees for some sectors. But they aren’t training them, and in sectors where wages are low, they aren’t raising wages. Houses stand empty, while thousands are homeless or living in cramped conditions with family or friends. They are all playing “Don’t Make Me The Sucker.” It’s like a game of musical chairs where no-one gets off their chairs except the terminally benign or naïve. You can crank up the music all you want, but nobody’s moving.

And in this game, they’re all correct. If any of them moves without all the others moving, they get to be The Sucker. For instance, what if the unemployed went first? Suppose they went to the zero lower bound of wages and offer to work for free till the economy improves, “to show willing,” as the Brits say. But the losses they would court – loss of unemployment support, loss of time for real job search – are hardly balanced by the slim possibility that the humble homage they pay to the source of all human worth, the employer, will in the future be rewarded by a decent wage and steady work. Giving something for free hardly ever raises its price. In a rising economy this could work, for some. In a stagnant one, the unpaid employee is the sucker.

But the employer is in a fix too. There’s no fence that keeps his success from nourishing the business-slackers around him. If he goes first, and pays his people a living wage, his employees will spend their dollars at the cheapest stores – the ones who didn’t waste their time and money on wages and benefits. The generous employer creates customers for others, not for himself. If he goes first, he’s the sucker.

Even if new employees were his for free, enlarging his business when there are no customers is a recipe for failure. He briefly nourishes other businesses by building a bigger plant, investing in machinery and training, and what comes of it? He gets to be the sucker. Banks trying to make loans in a time of stagnation are obvious suckers. Where’s the profit in loaning at 3.8% when the risks of default are not only high, but controlled by other, unpredictable, even fraudulent actors in the financial arena? If hegoes first, he’s the sucker.

Businesses who need specialized employees are suckers if they try to train them or take them through apprenticeship. Where’s the guarantee that the employee won’t take his skills elsewhere – to a business that can offer higher wages because they didn’t waste money in training? If a business trains first, he’s the sucker. Each one alone is a sucker for trying to do what, in a functioning economy, makes sense. In stagnation, only fools try to go first, and not one in a hundred succeed if they try.
So obviously what we need, right here, right now, is a nation of fools. Can anything get all the players off their chairs in back into Mr. Fezziwig’s dance? Nobody trusts anybody, and rightly. The smaller players can’t do it, and the giant ones hardly need to. But something needs to be done. As our wise Mr. Pratchett said regarding the game foote-the-ball, “…a tactic was for players to cluster thickly around their own goal so there was no possibility of anything getting past them. I regret however that if both teams do this you do not have a game so much as a tableau.”
And a tableau, however individually sensible, is not an economy.

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The Mordant Litmus of Texas?

by Noni Mausa
The Mordant Litmus of Texas?

The other day I was listening to a fascinating interview on US executions.
"So far this year, 5 convicted criminals felt the executioner's
needle. Michael Graczyk watched as they took their last breath. The
reporter from the Associated Press has witnessed more than 300
executions. It's believed he's seen more men and women put to death
than anyone else in the United States."
(Link is here. Audio  is here)

But what caught my ear was the moment in the interview when Graczyk
remarked that in 1982, Texas resumed executions. I thought, there's
another entry for my file "It all started in 1980."

From 1964 to 1982, eighteen years, Texas executed nobody.

In 1964 the US Supreme Court negated all death penalties nationwide in
"Furman v. Georgia" due to unacceptable trial-and-sentencing
procedures. (details here, in case you care.)

States revised their trial procedures and by 1976 the Supremes allowed
that under these new procedures states could resume executions. Yet
Texas didn't use this until 1982 (a single execution), and then things
took off.

However, this post has nothing to do with capital punishment, but with
the economy. And I noticed something interesting.

See, all this led me to look at the number of Texas executions over
time. In this very rough (don't laugh) graph,

there were three peaks in Texas executions -- in the late 1800s, in the 30s,
and today's. Each peak has outdone the previous, and the 2000-2010
numbers were the highest ever.

For those who don't notice it, these eras equate to the Long Depression, the Great Depression, and our current depression.

Now, I realize that an element of the growth in executions is tied to
population growth, and if I had time I could chart that out. However,
Texas population growth can be seen in this chart (, and is shown to be a
long smooth exponential rise since 1800. Taking that into account,
there would still be three big bumps in the distribution of
executions. In my second laughable graph, you can see executions
really take off in the late 90s, leading into the biggest decade ever
-- 2000-2010, 248 executions.

It certainly looks to me like America's deepest recession /
depressions, are linked to Texas executions in some way. But
laughable graph #2

shows that the link is probablypredictive rather than resultant -- something is happening in the society which causes a buildup of personal disasters and/or punitive overreaction, before the bubble bursts.

If this is the case, then laughable graph #2 seems to show a dismally
hopeful trend, as execution rates have dropped since the housing and
finance bubbles burst in 2007-2008.

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Why Economists (On Average) are Terrible Forecasters

by Mike Kimel

Why Economists (On Average) are Terrible Forecasters

My colleague, Rebecca Wilder, had a post at her site entitled Economists are terrible forecasters – why trust them anyway?. The reason why economists as a general rule are lousy forecasters is obvious: there are no penalties to being wildly wrong.

Prominent examples abound. Dow 36,000 anyone? No housing bubble in 2005. I can go on forever, but these aren’t even as as it gets. At least these are bad forecasts of the future. There are plenty of bad forecasts of the past, or even the hypothetical past, too. My favorite example, in fact, of a bad forecast came in 2002, when a group of prominent policy economists, advisors to the then President, told the world that barring the 2001 recession, the US would have enjoyed double digit growth in fiscal 2002. And nobody said peep. It wasn’t front page in the newspapers. It wasn’t in the newspapers at all! Nobody involved paid any price for it, except the public who had to endure the policies “supported” by such an incredibly inane analysis. In fact, just about everyone involved went on to bigger and better things – Governor of Indiana, Dean of the Business School at Columbia, etc.

If there are no penalties to being wrong, there also usually aren’t any benefits to being right. Consider, well, me for example. Regular readers know I don’t make predictions often, but I like to be right when I do make ’em. I can’t think of anyone else who called both the start and end of the Great Recession, in both cases running against the grain, but you aren’t likely to see me on TV any time soon. (I will admit my forecasts weren’t perfect: I misunderestimated the stupidity of the policy responses of both Bush and Obama and thus didn’t expect it to be quite as bad as it turned out.) I can even think of two forecasts made for a then employer that I suspect together cost me a job, despite the fact that the forecasts turned out to be spectacularly right.

Its been said its better to be wrong in the same way as everyone else than to be right alone. That’s certainly true for economists. Unfortunately, that is a bad thing for anyone who listens to economists.

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The Pain of Economic Change

by Tom aka Rusty Rustbelt

The Pain of Economic Change

Michigan is the only state in the union showing a net negative population trend in the recent census report, and is an interesting case study of the pain of economic change.

For several decades after WWII, Michigan enjoyed above average prosperity on the backs of the Big 3 auto makers and the employment model of the United Auto Workers, with lateral benefits and trickle down to construction, tourism, retail, services and health care. Both the private sector economy and local/state government systems were built on the broad foundation of prosperity.

Tax and regulatory systems were not hospitable to non-manufacturing businesses and non-union businesses, but with enough money in the system all of this was tolerable (money can ease many hurts).

During the 70s, 80s and 90s the Big 3 and the UAW threw away about 40% of the US market share and spawned a wave of state “lemon laws,” due to consistently poor design, poor quality and poor service.

Globalization scourged Michigan with the offshoring of thousands of light and medium manufacturing jobs (your Electrolux sweeper is now made in Mexico).

Still, the Big 3 and Michigan were able to recover from every recession, until 2000-2001. By then the Big 3 was enfeebled and the transplants had tremendous momentum in many market segments. Optimism springs eternal, and every tiny sign of improvement was a reason to pine for the “good old days.” Governor Jennifer Granholm (D) (2002-2010) had terrible timing, and compounded the problems with lots of rhetoric about change but very little effort to make any substantive change, waiting for nirvana to return (I have some empathy on the timing problem, but not the inaction).

The 2008 “great recession” was a near death blow for GM and Chrysler, and only the federal government could save the two companies.

Now the pain is real and pervasive; the government sector will be shifting to a new reality and the private sector continues to deteriorate. Any “recovery” make take a generation. There will be much screaming as a new governor (Rick Snyder, R) attempts to introduce Michigan to the new reality.

Michigan is actually ahead of some states (say New Jersey) that totally denied reality until 2008, but that is small comfort. Whatever happens to the national economy though, the benefits are unlikely to roll onto the rustbelt states.

The pain is palpable.

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The trace elements of a nation

from her blog Tunnel Under Snow

A long discussion over on Angry Bear dealt with how economic choices, rational in the short term or in the service of one economic actor, can cumulatively cripple the societies in which these choices are made. Well worth hopping over to read the full conversation, and also taking another hop to read the 1994 address of Sir James Goldstein to the US Congress.
I added to the conversation, and was pleased enough with that comment that I lifted it for here.

For some reason, this discussion is reminding me of the “dead spots” in the ocean where fertilizers poured in and encourage the growth of oxygen sucking algae.
Like so many other issues in economics, the issue of training versus skills versus cost of acquiring those skills rests on a matter of balance. How does a society support the acquisition of skills which are, when all is said and done, not going to be needed frequently enough to support a large number of artisans? I took a tour of an engineering firm a few years ago, where they make to order generators and motors. The men doing this work are all my age now, and will probably be retiring shortly. The workplace was not a factory floor as you would at ordinarily imagine it — instead it was like a very large workshop, and the “coils” inside the motors and generators were actually bent from lengthy slabs of specially shaped copper. I know for a fact that units produced by this company were integral to parts of the space program from the 1960s.
Motors, generators and transformers have shifted over the past 30 years to a very small number of producers, most of them offshore. Although I’m not in the field anymore, at the time I retired there were really only three or four producers of large power transformers, and the lead time for a single transformer might be three years. In some cases, there would effectively be only one producer because the others were not at that time taking new contracts.
In an emergency situation, how do you quickly replace a damaged transformer? They are not kept sitting on the shelf, one of these would be large enough that it would only fit in my two-story house if I removed strategic portions of flooring and walls.
The crisis of American manufacturing is not, I think, primarily one of job loss. It is instead the loss of capacity to rebuild oneself independently in a crisis. That capacity is only partly dependent on the infrastructure — the factory floors and steel mills. More importantly, the working knowledge of how these things are built and the working attitude of coming in every day and bending some more copper into shape, but doing it precisely right, have been punished out of the American workforce I believe.
To become skilled in one of these jobs often requires an opportunity loss of becoming skilled in other areas — in order to train a good machinist requires enough time that the skill becomes the individual’s only resource, and if that resource is no longer in demand, the entire field looks like that oceanic dead zone where there isn’t enough oxygen to survive.
A balanced diet includes many things — sugar and fat and protein in large amounts, and iron and chromium and zinc in tiny amounts. But if a person’s diet includes no trace elements they end up with deficiency diseases.
I think the loss of niche professions is a deficiency disease in a nation. Identifying and supporting these fields of work may not be financially efficient — it’s much easier to eat a candy bar than it is to eat a balanced diet. But the result of always making the candy-bar choice is a particular disease that weakens its host out of all proportion to the size of the elements needed.

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Dealing with the Sunset of the Bush Tax Cuts (Part IV in a series)–the Tax Relief Coalition

by Linda Beale
crossposted with Ataxingmatter

Dealing with the Sunset of the Bush Tax Cuts (Part IV in a series)–the Tax Relief Coalition

The Tax Relief Coalition–another of the myriad anti-tax groups comprised of Grover Norquist’s group and those of similar ideology–is at it again with a letter to Congress (available on BNA) urging the passage of new legislation to pass tax cuts to extend the temporary cuts enacted under the Bush administration. The group is spending millions lobby for its interests with the dubious claim that discontinuing tax cuts for the wealthiest Americans will hit small businesses the hardest. See, e.g., Jensen & Salant, Leader on Bush Tax Cuts Wins Allies to Keep Provisions in Place, (Aug. 20, 2010) (noting that the coalition groups have spent $3.8 million since Jan. 1, 2009 on candidates and advertising, and that the Chamber of Commerce plans to spend $75 million influencing elections in its favor).

Note that the coalition–formed of “trade associations, advocacy groups, and corporations”–calls itself favoring “pro-growth tax policies”. But what it means is favoring tax cuts. It is arguable that tax cuts support economic growth–at best they are a second-rate stimulus compared to direct government spending on public and human infrastructure that provides long-term support for economic stability– such as public transportation, public communication networks, development of alternative energy sources, education (K1-university), and basic research.

These claims that the tax cuts help small businesses are at best dubious. (See, e.g., yesterday’s post outlining various reasons why the capital gains preference has very little to do with stimulating entreprenuership or helping small businesses.) The coalition tries to cast the Bush tax cuts in terms of job creation. But the fact is, the Bush regime had a lousy record for job creation, and the tax cuts that were especially favorable to corporations probably did almost nothing to contribute to job creation. The “American Job Creation Act of 2004” for example, mainly acted as a tax cut for multinational corporations that used the very low taxation of repatriated money to pay big dividends to shareholders even while they were laying off thousands of workers. Similarly, expensing provisions and other tax cut provisions (especially for oil and gas industry and other targeted industrial provisions) mainly gave more money to managers and owners, not workers. Real wages of workers have fallen, while corporations sit on big kitties of cash–keeping the productivity gains for managers and owners and not sharing them with workers and certainly not creating new jobs for new workers.

What about the small company owners that the National Federal of Independent Business brings in to calim that any tax increase is a job killer? See Bloomberg article, above. That’s a superficially self-serving claim that is probably in truth a case of blind greed keeping business owners from admitting that federal dollars spent for unemployment, infrastructure, education and other important programs will actually create a more sustainable economy that will be better for their businesses. A little bit more in taxes now will have positive impact, not negative, on the economy. And those arguments also leave out a few of the details–like the fact that the proposed tax increase on joint returns with $250,000 or more impacts very, very few small businesses.

The hypocrisy is also evident, as coalition members refuse to limit extension of the tax breaks to the lower income group, even while they complain about deficits. The deficit argument is essentially brought out to create fear in average voters and to provide a salient objection to any additional spending that does not directly go to the benefit of business managers and owners, but it isn’t a real concern since it doesn’t enter into the discussion of whether or not to extend tax breaks to the wealthy who don’t need them.

Regretably, the Democrats don’t have much backbone on this issue. Senators Conrad and Bayh, for example, have accepted the idea that it is problematic to raise taxes on anybody during an economic slowdown. That their position doesn’t make sense–a little bit more in taxes on the wealthiest Americans won’t really affect either consumption or investment in new businesses–doesn’t seem to matter.

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New Year’s Tax Resolutions

by Linda Beale

A quote from Amartya Sen, and my New Year’s Tax Resolutions (for Congress and the Obama Administration)

The time between December 30 and January 4 seems to be filled with lists. Along with the ever-present list of “to dos” that haven’t been done and still are hanging around waiting for our attention, there are everyone’s “10 best” lists (e.g., the ten best movies–regretably, I don’t think I saw ten new movies in 2009, so can only say I thought Slumdog was a decent showing) or their opposite (e.g., the ten worst celebrities of the year, every one of them with Tiger Woods and Gov. Sanford firmly placed near the top). And of course there are those New Year’s resolutions that we are supposed to deliberate over and then deliver on when the New Year rolls around–mine is to join my hubby in his morning walk and to give up doughnuts completely.

Not being one to gather quotes all year just for this final celebration, here’s one quote that I believe is worth thinking about as we head into the new year. Amartya Sen writes, in “The Idea of Justice” (Belknap Press 2009), at 32:

Being smarter may help the understanding not only of one’s self-interest, but also how the lives of others can be strongly affected by one’s own actions. Proponents of so-called ‘Rational Choice Theory’ (first proposed in economics and then enthusiastically adopted by a number of political and legal thinkers) have tried hard to make us accept the peculiar understanding that rational choice consists only in clever promotion of self-interest (which is how, oddly enough, ‘rational choice’ is defined by the proponents of brand-named ‘rational choice theory’). Nevertheless, our heads have not all been colonized by that remarkably alienating belief. There is considerable resistance to the idea that it must be patently irrational–and stupid–to try to do anything for others except to the extent that doing good to others would enhance one’s own well-being.”

In light of Sen’s helpful clarity about the ridiculousness of ‘rational choice theory’, I also offer the following as the resolutions that I wish Congress and the Obama administration (and/or various administrative agencies thereof) would make (and follow through on) for this new year of 2010.

1) The Treasury should resolve that it will no longer provide special dispensation to the financial institution powers that be, such as its invalid notice indicating that it would not enforce the law on loss corporations for too-big-to-fail banks, thus allowing too-big-to-fail banks to become even bigger by buying loss banks, and then allowing them to use those losses in direct contravention of the law and avoid paying income tax for years (or perhaps decades). A similar “notice” went out recently–Notice 2010-12–stating that Treasury will continue to fail to enforce the rules under section 956 regarding what constitutes an obligation and hence relieving US shareholders of controlled foreign corporations ( many of them possibly the same too-big-to-fail banks) of further US taxpaying obligations. (This notice continued the nonenforcement decision Treasury had made in 2008, in Notice 2008-91. Too bad decisions do not make a good decision.)

2) The Supreme Court should resolve to deal with the problem of financial institutions claiming patent protection for all kinds of financial software and financial engineering “solutions” and for others claiming patent protection for tax planning strategies by releasing a decision in the Bilski case that clarifies the “abstract idea” exception. The Court should say that no patent can be granted for innovations that merely utilize the positive laws to assert that a transaction carried out in a particular way will have a particular legal result, or for other methods of conducting transactions or of organizing human activity that do not involve the technological arts, as understood under European patent law.

3) Congress should resolve to end the preferential treatment of those few Americans who own most of the financial assets of the country by ending the capital gains preference.

4) Congress should resolve to eliminate the preferential tax treatment of the earned income of hedge fund and equity fund managers (the so-called “carried interest”), and any other “partners” that manage partnerships and earn a share of the partnership’s gains as their compensation (such as real estate partnerships).

5) In order to restore some sort of balance between worker and employer, Congress should eliminate the business deduction for any compensation in excess of 20 times the average salary (about $1 million). The cap on compensation deduction to apply to compensation in any form (stock, assets, cash), whether or not “performance related”.

6) In order to treat the gifts of ordinary Americans to charities of their choice the same as the gifts of multi-millionaires to charities of their choice, Congress should repeal the special rule that permits a charitable contribution deduction for the value of stocks rather than the investment basis in the stocks. Will that limit contributions that are made? Perhaps, though it is clear that contributors do so for many reasons and not merely for the contribution deduction.

7) Congress should resolve to resolve the estate tax situation once and for all, before some do-nothing heir-to-be decides that 2010 is the right time for the wealthy person in his life to go. Congress should enact a modest exemption of $2 million but should make the estate tax rates progressive (beginning at2009s 45%, but moving up to at least 65% for the largest estates).

8) Congress should resolve to revisit the tax brackets. We have an economy in which the average income is around $50,000, but there are individuals who make more than $500 million a year. That spread is so large that it cannot be adequately addressed by brackets that focuse on the first $350,000 or so. Those who make $200 million a year have incredibly more freedom of choice, and the few dollars they pay in taxes are merely peanuts compared to the precious funds from an average family. We need to make the income tax more progressive by adding additional rate brackets–perhaps as many as 3 or 4 more. That would still be a far cry from the income tax system before Reagan took office, when we had top rates more than double today’s top rates. But it would address the dire fiscal need of the country in a way that is doable without creating undue suffering.

9) Congress and Treasury should resolve to clean up the partnership tax rules so that they do not offer such extraordinary flexibility to partners to arrange their affairs to avoid taxation–for example, by eliminating the electivity permitted to partners in many places in the rules (make the remedial method the only method allowed for taking into account book-tax disparities in contributed property) and by changing the way that partners take account of partnership debt (such as being able to get distributions of nonrecourse debt that monetize partnership property appreciation).

10) Congress should re-visit the rules on mergers and acquisitions, so that a tax-free merger becomes an unusual event. Part of the problem we are facing today is that multinational corporations have grown so big that they wield enormous power globally and can sometimes appear to be able to order laws to suit them. Witness the fact that we are well beyond the beginnings of the financial system crisis, and no single piece of legislation imposing new and better regulations on the banks have been enacted. The size of corporations ensures that they will become as focused on raising rents for their managers as they will on making profits for shareholders, and that they will care not one whit for the ordinary American who is their customer, or their low-wage employee, or the resident of a town that they leave derelict when they move to sunnier shores. We say that the rationale for tax-free reorganization provisions is to encourage efficient organization of corporations. But efficiency is not God, and in fact focus on efficiency may leave democracy and fairness far behind. We should give tax-free treatment only to shareholders who get no boot for any of their stock, and only in transactions where a high percentage of the consideration is stock (perhaps 80% or more).

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A Year and Counting: re-regulation of Wall Street

by Linda Beale

A Year and Counting: re-regulation of Wall Street

On Monday night, I participated in a symposium on the Financial Crisis: One Year Later, sponsored by the Center for the Study of Citizenship and others. With me were Larry Ingrassia, Business Editor of the New York Times, and Chip Dickson, CFO of W2Freedom, a private equity fund that purchases community banks. We talked about the causes and potential solutions to the financial crisis and the Great Recession that it had spawned. Much of our focus was on the way financial institutions had grown “too big to fail”, creating a “casino mentality” that assumed that the government would come to the rescue if needed, thus socializing losses while privatizing gains.

As Amity, a commenter on Salon’s post by Andrew Leonard on Wall Street’s risk-taking, noted:

The whole point of society is to moderate and channel wild animal impulses into productive forms. In keeping with that purpose, we as a civilization once saw fit to impose on high finance a series of regulatory restrictions and frameworks for oversight so as to moderate and channel the risk-taking behaviors of financiers.

Then we as a civilization saw fit to remove those restrictions and oversight. The result was as foregone, and as predictable, as if we were stalling an aircraft and letting gravity take over.

I kicked off the discussion session of the symposium with the following question:

It’s been a year now since we were hit with a financial system tsunami, and recognized that we had let banks get “too big to fail” and speculation in derivatives explode. Yet here we are, one year later—we’ve actually encouraged banks to grow larger; we have not yet enacted any regulation of derivatives; we have not yet enacted any tighter regulation of hedge funds and private equity funds or the “shadow banking” system generally, we have not yet formed a consumer financial protection agency—in fact, we’ve done essentially nothing to change the conditions that apply. What does this mean, in terms of the stability of the financial system?

I’m not sure that there is a satisfactory answer to that question. Because it suggests that our political processes are now so beholden to the corrupting influence of the financial behemoths that we will not be able to find the will to rein them in. See, e.g., Robert Reich, so much happening in D.C., so little to show for it, (Oct. 9, 2009) (lamenting the fact that “Congress is overwhelmed with corporate and Wall Street lobbyists”).
(cross posted from ataxingmatter 10/09/2009)

Update: Barney Frank and the SEC on derivatives, Naked Capitalism

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Place your bets, the recession predictions are in

by divorced one like Bush

Come on, step right up, don’t be afraid. Lay that money down.

3 and 1/8 economist out of 4 say
the dastardly deed is done or ending by next month.

After months of uncertainty, economists are finally seeing a break in the clouds. Forecasts were revised upward for every period, with 27 economists saying the recession had ended and 11 seeing a trough this month or next.”

A better-than-expected employment report for July, where employers cut 247,000 jobs and the jobless rate fell for the first time in 15 months, suggests the worst is over.
Whatever the Fed decides, the economists expressed some confidence that the central bank will be dealing with how to manage a recovery, not another recession. They expect GDP growth to remain above 2% at an annualized rate through the first half of next year, and they put the chances at just 20% of a “double-dip” second downturn before 2010.

All in everyone, you don’t want to be left out of the next bubble do you? Or do you?

4) To be sure, the drop in the unemployment rate was a surprise, but it was all due to the slide in the labour force — the employment-to-population ratio gives a more accurate picture of the slack in the labour market and the hidden secret in today’s report was that this metric slid to a 25-year low of 59.4% from 59.5% in June and 61.0% at the turn of the year. Of those unemployed, 33.8% of them have been unemployed now for over 27 weeks — a record amount (was at 29.0% in June and was at 17.5% at the start of this recession).

The Labor Department said Tuesday that the American work force produced, at an annual rate, 6.4 percent more of the goods they made and services they provided in the second quarter of this year compared to a year ago. At the same time, “unit labor costs” — the amount employers paid for all that extra work — fell by 5.8 percent. The jump in productivity was higher than expected; the cut in labor costs more than double expectations.

Data released on Wednesday show the US still facing strong economic headwinds, as retail sales unexpectedly fell, weekly jobless claims unexpectedly rose, and foreclosures continue to roil the housing market.
US retail sales fell 0.1 per cent in July from June, compared with analysts’ estimates of a 0.8 per cent gain.
Excluding auto sales, which were boosted by the popular cash-for-clunkers programme, US retailers fared even worse, dropping 0.6 per cent, compared with expectations of a 0.1 per cent gain on the month, on a seasonally-adjusted basis.
Foreclosure activity in the US hit a new record in July, setting its third monthly record in five months, RealtyTrac reported on Thursday.
Foreclosure filings, which include default notices, scheduled auctions and bank repossessions, hit 360,149, an increase of 7 per cent from June and 32 per cent on the year. One in every 355 US homes received a foreclosure notice in July, according to the online marketplace for foreclosure properties.
The release comes the day after the National Association of Realtors reported that an increase in foreclosure sales led to a record 15.6 per cent decline in median home values to $174,100 in the second quarter from the year before. About 36 per cent of transactions in the second quarter were distressed sales, either foreclosures or short sales.

We never did broaden the discussion.

We haven’t answered the question: How are we going to fix the money from money economy. Yes, we had to stabilize the banks. That we did is not of issue, how we did it is. The approach only reinforced the money from money economy. We are pledged to $23.7 trillion. (BTW, try to go get a loan and see if they don’t ask what you have co-signed onto along with what you personally have borrowed). Our GDP as of 2000 was 1.9% of the financial turn over and the Fed thinks nothing of swapping 1/2 trillion dollars. The issue is not whether it was necessary, it is the casualness with which it was done. You know, that billion here, billion there, soon we are talking real money?

We have not produced any policy that will reverse these trend lines which show that personal consumption has out passed the share of income to the bottom 99% since 1996. A trend that lasted at least 13 years from the depression and was 10 years where my chart ends in 2005 and we hadn’t had the big one yet. We were almost 3 more years past that when this recession started. But hey, the recession is ending.

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