Right back where we were in 2004

Stirling Newberry argues that the failure to achieve real reform of the financial system means we are in the same place we were just before the 2007-07 crisis: central banks’ “easy money” policies, coupled with a paucity of real investment opportunities, is already resulting in continued stagnation of the real economy and wages, and increasing reliance on offshoring to countries with lower wages, benefits, and safety regimes. In the process, Newberry performs the inestimable public service of slapping down the pretensions of Niall Ferguson.

Newberry begins by noting where the hot money is going now.

Everyone knows that money is rushing into oil, ahead of an expected economic rebound later this year. Since no one has good futures, and because last year they were running over 100 dollars a barrel, more buyers are being forced to the spot market.

This dynamic is unchanged since 2004: no one knows what will lead the recovery, but everyone knows it will involve burning more oil. So buy oil.

Take the time to go through the last paragraph slowly, so that you fully understand it, recalling what Newberry wrote a few weeks ago:

the fight, in economic ideology, was over how much of the investment in the future should be handled by a very wealthy elite, and what fraction should be handled by the public through government. The ideology of the time was that the wealthy elite . . . was always right, and the public was always wrong. This theory has been proven false. The economic destruction of the New Depression, and Depression is the correct word, will extend for years, and has wiped out the fictional gains of the last 30 years. We are now exactly where we would have been without this experiment in a dictatorship of the propertariat, and we have nothing to show for it but a surplus of posh apartments and private jets.

OK, here’s the last paragraph from Newberry’s latest:

now that money can rush back into oil, and into stocks, the cost of public borrowing long term must rise. It's a matter of supply and demand. Previously the supply of safe places to park money was limited, and now it is not. The very decision to put rebound ahead of restructuring is closing the window of change. We are, in essence, right back to where we were before the credit explosion -- around 2004 or so -- ready to charge up the same hill of loose money from the central banks; going into rent seeking parked money; and choking of expansion, wages, employment, and capital formation beyond offshoring of old capital to lower wage and benefit areas. There is an immediate need for a second round of economic policy, one which actually sits in Congress by another name: the energy bill which is proposing, not "cap and trade" since 85% of all the allowances are to be given away, but "a new NIRA," that is a massive industrial policy based on specific regulation.

As I wrote near the end of January, Saving the financial system without a national industrial policy is worse than useless.


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I truly believe we are fighting to get

back to the status quo. I believed in the idea and message of change and I still do but until we get rid of the same ideas that got us into this mess we are just going to maintain status quo. We will kick the ball down to the next generation to deal with the massive problems that we created.

Why don't we hear any more talk about minimizing the influence of big money and lobbyists in Washington?

Oh, yeah, the people who talked about that are in power now enjoying the fruits of power.

President Obama was right about one thing any change in this country will have to come from the bottom.

But the objective is....

But if the objective is the complete destruction of the American economy, which will yield the greatest profit to those holding various credit derivative schemes, and allowing for a humongous fire sale afterwards, then everything is going according to "schedule."

Truly, we Americans deserve this situation - from the unions supporting Reagan over Carter back in '80, to the 2000 election (even though it was obviously stolen) going to Bush, when Nader ran, to the recent election going to the status quo candidates, rather than Dennis Kucinich or Cynthia McKinney.

This gets back to the analogy between ...

... current conditions and the New Deal that ToqueDeville recounted on Docudharma in Thunder From the Left - How Progressive Dissent Shaped the New Deal ...

If we were looking back on the Great Depression and the New Deal based only on the first two years of the Roosevelt Administration, we would be looking back at a flop.

It was the Second New Deal, after the 1934 mid-terms allows the New Dealers to push for reform and the progressive dissent from the left generated the political pressure to get it through that gave us:
* Emergency Relief Appropriation Act
* Public Works Administration (PWA)
* Works Progress Administration (WPA)
* Formation of National Labor Relations Board (NLRB)
* The Wagner Act
* Public Utility Holding Company Act
* Social Security Act

We are in a quite similar situation today.

Dictatorship Of The Proletariat?

Come now, comrade, dictatorship of the proletariat? You play loosely with the legacy of comrade Stalin. And if you know what's good for you, take my advice, don't play loosely with comrade Stalin.

[As an aside, and more seriously, the real Lavrenti Beria, Stalin's head of the Soviet secret police, actually said something along these lines to the head of a delegation of Poles inquiring into the disappearance of thousands of Polish officers that had been in Soviet custody in 1940. Stalin had authorized their liquidation which was subsequently carried out by Beria's operatives.]

Actually, the present model is far closer to that produced during the Great Depression by Schacht and Hitler in Germany. The model of massive public support for private capital we're now experiencing is far more akin to that typical of National Socialism than to communism. After all, that's what state capitalism is, fascism.

no way

we have zero nationalism going on...it's kind of like if they can sell America down the river, well, they will jump right on that one.

Maybe Not The Real McCoy

No genuine nationalism perhaps, but certainly the same phony nationalism National Socialism gave Germany, its IG Farbens and Krupps, and its people. Its the same abuse of tragedy - Reichstag Fire/9-11 - to justify the suppression of liberties, the same positing of phony casus belli - Gleiwitz/WMDs - to justify military aggression, the same depersonalization and torture of enemies - the Commissar Order/Abu Graib and its White House authors. I could go on and on with the parallels. Ours is a form of fascism alright; it certainly isn't parliamentary democracy. If you think we're in a democracy, try finding a sponsor in Congress for a resolution condemning the expansion of Israeli settlements on the West Bank. The American people would support such a resolution, but your "freely elected representatives" won't. Their just lobby chattle, filth.

Corporatism perhaps?

brain boggle on terms. I guess I'd get an F in political categories, oh well, to me, it's who is writing the checks and who is getting them.

How about corporatism or global corporate feudal lords.

Did you miss the play on the word?

Newberry wrote "dictatorship of the propertariat" not "dictatorship of the proletariat."


Looks like comrade Beria stepped in doggy poop. :-(

well then, invest in revolution money

They are focused in generating billions by trying to replace cash with some online transaction system and they are targeting that lucrative market called dog walkers.

Great posting & Newberry is so spot on

Newberry is so correct, and, as usual, Krugman is his usual flibbertigibbet self, all over the landscape, far more of a "political economist" (or looney tunes, as most, if not all, of the Nobel Prize recipients in economics have been).

To quote Alan Greenspan (whoever thought things would get so primitive that anyone would be quoting Greenspan!!), extreme credit leads to extreme amounts of speculation which leads to economic collapse (or words to that effect).

And, as so correctly pointed out, we're back at the same place because the anti-Roosevelt administration, the Obama Administration, is carrying on the Bush Administration (and the Clinton, and previous Bush, and Reagan's) policies, a total destruction continuum.

It has taken me many years of reading and studying to appreciate that the three truly economic weapons-of-mass-destruction (and major fraudulent legislation) were: the Monetary Control Act of 1980, the Gramm-Leach-Bliley Act of 1999 (Financial Services Modernization Act) and the Commodity Futures Modernization Act of 2000.

At this point, we must truly embrace the radical, it is time to review Henry George and the present exemplar of his really human and economic democracy philosphy, JW Smith (ied.info).