1 Boring Old Man

The thing I’ve been trying to get my mind around is something like "How big was this crash?" and "Was there really a danger of another Great Depression?" Since our economy is cyclic [going through business cycles], how can we be sure that this wasn’t just a "garden variety" Recession instead of something that was spinning out of control [like the 1929 Crash that was followed by the Great Depression]?

 

That’s not the whole story. My guess is that the dramatic burst in the Market during the period from 1980 to 2008 also reflects the massive Deregulation of our economic marketplace, so it’s almost impossible to partition all these factors for a mortal like me – the deficit spending, the deregulation, the economic bubbles, the hedge funds, the derivative markets, and who-knows-what else. But back to the original point, one thing suggesting that this was a dangerous crash was the magnitude of the fall  of the Real DOW [50%] in a very short time.

The CPI is the marker for inflation. It’s the cost of a fixed package of goods, and it rises over time. Rampant INFLATION [see the late 1940’s above] means that money is losing its value rapidly. Things are stable when it’s a slow steady upward climb. Notice the Inflation/Deflation period after World War I. But the big story is the 1929 Crash and its aftermath – known as a DEFLATIONARY SPIRAL. The CPI plummeted and stayed down, an index of the panic that characterized the Hoover years. Hoover was unwilling for the government to intervene, and the pain just kept coming. FDR’s massive intervention with the New Deal reversed the fall, but it recurred when he backed off in 1937 – a lesson repeatedly highlighted by our modern economists: Don’t back off too soon!

The significance of the CPI in this Recession can’t be over-emphasized. Looking at the longitudinal data above, this parameter hasn’t fallen like this since the Great Depression. In fact, the fall last year was even more abrupt than in 1929. As much as I wouldn’t like to give Bush credit for anything, the massive intervention after Lehman Brothers failed seems to have stemmed the tide, though the election of a Democrat as President at the same time may have been a factor. The fall of the CPI is the biggest evidence that this Recession was not going to be self-limiting.

The changes in the GDP and UNEMPLOYMENT are typical of Recession, though the numbers are ominous in a qualitative sense. There is no Recession since WWII with a rise in UNEMPLOYMENT like this one and the GROSS DOMESTIC PRODUCT fell at an alarming rate and stayed low for several quarters.

Some have called this THE GREAT RECESSION, and that seems an apt term, given that things continue to improve. There are three things that have worried me during this particular economic cycle. First, there is no safe buffer. Reagan/Bush/Bush have run up the National Debt so there’s little room to borrow heavily to combat economic downturns. Secondly, the Deregulation of our Markets leaves us wide open for further Bubbles and other Market manipulations like the Derivative debacle. Finally, the Republican Party which has been the champion of Capitalism seems to have lost its mind and is now championing a kind of Free-Market Capitalism that almost got us this time, and could literally take us out next time.

Why does John Bolton hate journalists?
at-Largely
by Larisa Alexandrovna
August 05, 2009

FYI, from one of the Neo-Con cabal, John Bolton [our form UN envoy who was laughed at the world over]. Remember, this penned garbage is from a man who thinks diplomacy involves a bomb and the United Nations should be destroyed. Keep that in mind when considering Bolton’s opinion, because he is absolutely no expert. Bolton writes:

‘The Obama administration characterized Bill Clinton’s unexpected visit to Pyongyang to secure the release of two American reporters, held unjustifiably by North Korea for nearly five months, as a private, humanitarian mission. Secretary of State Hillary Clinton has insisted that the fate of the women who strayed into the North [whether accidentally or deliberately is still not clear], should be separated from the unresolved issue of the North’s nuclear weapons program.
But North Korea has seen it very differently. Former president Clinton was met at Pyongyang’s airport by notables led by Kim Kye Gwan, the North’s long-time chief nuclear negotiator, an unmistakable symbol of linkage. In Pyongyang’s view, the two reporters are pawns in the larger game of enhancing the regime’s legitimacy and gaining direct access to important U.S. figures. The reporters’ arrest, show trial and subsequent imprisonment [twelve years hard labor] was hostage taking, essentially an act of state terrorism. So the Clinton trip is a significant propaganda victory for North Korea, whether or not he carried an official message from President Obama. Despite decades of bipartisan U.S. rhetoric about not negotiating with terrorists for the release of hostages, it seems that the Obama administration not only chose to negotiate, but to send a former president to do so."

Bolton’s conservative ideology has roots in Yale experience
Yale Daily News
by Ross Goldberg and Sam Kahn
April 28, 2005

When John Bolton ’70 LAW ’74 took the podium for his commencement speech at the height of campus demonstrations against the Vietnam War, he was not out to please the crowd. Calling the event "an exercise in ideological self-congratulation," Bolton laid out the future of American politics for his left-leaning classmates. "The conservative underground is alive and well here," he said. "If we do not make our influence felt, rest assured we will in the real world."

Thirty-five years later, Bolton, who mocked audience hecklers in his speech, still displays a conservatism that is no less controversial. Currently President George Bush’s ’68 nominee for U.S. Ambassador to the United Nations, Bolton’s confirmation has been delayed after three Republicans on the Senate Foreign Relations Committee unexpectedly declared last Thursday that they needed more time to consider Bolton’s credentials. Despite the administration’s repeated declarations of support, Bolton’s nomination remains in jeopardy…

But while several of Bolton’s Yale classmates said they remember him as intensely conservative, they do not recall that he was abrasive as some of his current detractors portray him. "Compared to the persona you see on the news, he was very much a subdued, thoughtful, cordial sort of guy," Bruce Krueger ’70, one of Bolton’s roommates in Calhoun College, said. "The kind of behavior I’m reading about, doing the work of the administration’s bulldog, that’s out of character for him."

Bolton arrived at Yale via an unusual trajectory for that time. The son of a fireman, Bolton was raised in a working class Baltimore neighborhood. He won a scholarship to McDonogh, a prestigious Maryland prep school, where he excelled and began his political career as a conservative, running the school’s Students for Goldwater campaign in 1964.

In 1966, Bolton enrolled at Yale and, over the next four years, experienced drastic changes in campus culture. He entered the all-male University as a stalwart supporter of the political status quo, and graduated from a co-ed school embroiled in turmoil. During Bolton’s junior year, 47 students seized control of a building to protest a firing they claimed was discriminatory. During his senior year, indignation over the trial of Black Panther party Chairman Bobby Seale led to demonstrations, clashes with the police and the suspension of two months of classes.

Confronted with a loud liberal majority on campus, Bolton stuck by his conservative beliefs. At the height of the civil rights movement, Bolton questioned the constitutionality of open workplace laws, though he supported desegregation from a public policy standpoint, classmate Charles Jefferson ’70 said. An advocate of engaging in Vietnam, Bolton combined hawkish foreign policy with a critique of big government verging on libertarianism — an ideological stance he has held with little variation throughout his political career. "I remain convinced that government is not an effective problem solver," Bolton wrote in an article for the Class of 1970 25th reunion book. "I would still rely on people and markets"…

With liberal sentiment against the Vietnam War dominating campus discussion, he had no shortage of opponents, said Burtis Dougherty ’70, a friend of Bolton’s. "[Conservatives] were nowhere near as vocal and certainly nowhere near as listened to as they would have liked to have been," Dougherty said…

Though Bolton supported the Vietnam War, he declined to enter combat duty, instead enlisting in the National Guard and attending law school after his 1970 graduation. "I confess I had no desire to die in a Southeast Asian rice paddy," Bolton wrote of his decision in the 25th reunion book. "I considered the war in Vietnam already lost." Bolton entered politics in 1972 as a White House intern for Spiro Agnew and received a political appointment with Ronald Reagan’s victory in 1980…

Major Meltdown
the left coaster
by Turkana
August 8, 2009

From the U.S. Geological Survey, this is Washington’s benchmark South Cascade Glacier, in 1928 and 2000:

And in 1979 and 2003:

And here is USGS data on Alaska’s benchmark Gulkana Glacier and Wolverine Glacier.

As CNN reports:

U.S. scientists monitoring shrinking glaciers in Washington and Alaska reported this week that a major meltdown is under way.

A 50-year government study found that the world’s glaciers are melting at a rapid and alarming rate. The ongoing study is the latest in a series of reports that found glaciers worldwide are melting faster than anyone had predicted they would just a few years ago. It offers a clear indication of an accelerating climate change and warming earth, according to the authors.

Since 1959, the U.S. Geological Survey, which published the study on its Web site, has been tracking the movements of the South Cascade glacier in Washington and the Wolverine and Gulcana glaciers in Alaska. The three glaciers are considered "benchmarks" for the conditions of thousands of other glaciers because they’re in different climate zones and at various elevations.

"These changes are taking place in Washington State and Alaska in three different climate regimes," said Edward Josberger, the lead researcher on the study with the USGS Washington Water Science Center in Tacoma, Washington. "So we feel it’s definitely something going on, probably on a global scale, and of course, if you look at other such measurements around the world and put it all together, yes, glaciers are retreating and retreating rapidly."

RUSH: Big, big, big news on the global warming front, but this is going to serve as a great example to what I was talking about earlier.  You have Obama and his followers, and you’re not going to talk his followers out of him with standard political jargon or criticism because they’re not with him because of politics.  He’s not running a political campaign. He’s leading a movement out there.  By the same token, manmade global warming is a total hoax.  It has no basis in fact, and yet it has acolytes out the wazoo.  We have people going out and living their lives and changing their lives to account for this hoax and this manmade global warming that’s destroying the planet, that they have been led to believe they are responsible for in part, and so they gotta do things to absolve themselves of their sin.  So, they’re putting in these screwy little spaghetti lightbulbs, they’re driving strange cars, they’re using something other than toilet paper in the bathroom, whatever number of things.  No matter what you tell ’em, they go out and watch Gore’s movie.  You can point out every factual error in Gore’s movie.  "No.  It’s bad.  It’s bad.  That movie is the truth." 

Rush Limbaugh 02/27/2008

THE VICE PRESIDENT: I have not seen Al Gore’s movie.

JONATHAN KARL: Doesn’t surprise me.

THE VICE PRESIDENT: He didn’t invite me to the showing.

JONATHAN KARL: The premiere, huh?

THE VICE PRESIDENT: Not that I had planned to go anyway.

JONATHAN KARL: But what’s your sense, where is the science on this? Is global warming a fact? And is it human activity that is causing global warming?

THE VICE PRESIDENT: Those are the two key questions. I think there’s an emerging consensus that we do have global warming. You can look at the data on that, and I think clearly we’re in a period of warming. Where there does not appear to be a consensus, where it begins to break down, is the extent to which that’s part of a normal cycle versus the extent to which it’s caused by man, greenhouse gases, et cetera.

But I think we’re going to see a big debate on it going forward. But it’s not enough just to sort of run out and try to slap together some policy that’s going to "solve" the problem. Kyoto I think was not a good idea —

Vice President Cheney 02/23/2007

President Bush dismissed on Tuesday a report put out by his administration warning that human activities are behind climate change that is having significant effects on the environment. The report released by the Environmental Protection Agency was a surprising endorsement of what many scientists and weather experts have long argued — that human activities such as oil refining, power plants and automobile emissions are important causes of global warming. But it suggests nothing beyond voluntary action by industry for dealing with the so-called "greenhouse" gases, the program Bush advocated in rejecting a treaty negotiated in Kyoto, Japan, in 1997 calling for mandatory reduction of those gases by industrial nations. "I read the report put out by the bureaucracy," Mr. Bush said dismissively when asked about the EPA report, adding that he still opposes the Kyoto treaty.

President George W. Bush June 4, 2002

As Economy Turns, Washington Looks Better
New York Times

By DAVID LEONHARDT
August 7, 2009

^{WASHINGTON — What if in the end they got it right? What if, amid all their missteps and all the harsh criticism, the people in charge of battling the worst financial crisis since the Great Depression — Ben Bernanke, Timothy Geithner, Lawrence Summers, Henry Paulson and the rest — basically succeeded? It is clearly too soon to know for sure. But the evidence is now pointing pretty strongly in one direction: history books may conclude that the financial crisis of 2008 turned out to be far less bad than it could have been and that Washington deserved much of the credit.}

^{The Labor Department announced Friday that the economy lost fewer jobs in July than in any month since before Lehman Brothers collapsed last fall. Credit markets no longer look anything like they did after Lehman’s collapse and are in considerably better shape than just a few months ago. Stocks are up almost 50 percent from their March low. “It’s over,” the economists at Barclays Capital declared Friday, referring to the Great Recession. The news has been good enough that the Obama administration spent Friday trumpeting its record. More telling, however, is the fact that even Nouriel Roubini, the prophetically pessimistic economist who saw the crisis coming (and doesn’t think the recession has yet ended), is now praising policy makers. He recently urged that Mr. Bernanke be reappointed as Federal Reserve chairman, saying he helped avert a “near depression that seemed highly likely after the financial collapse last fall”…}

^{And the Obama administration, having failed in its early weeks to calm the financial markets, eventually managed to do just that. It pushed for a stimulus bill, over unanimous Republican opposition in the House, that is certainly imperfect but that has already saved more than 500,000 jobs, according to separate estimates by two prominent research firms, IHS Global Insight and Moody’s Economy.com. The White House also endured withering criticism from liberals who argued that credit markets would remain dysfunctional without a government takeover of banks.}

^{“Bernanke, Obama, Geithner and Summers were intelligent enough to know that the right-wing crowd was crazy to say, ‘Let the banks go bankrupt,’ and confident enough to ignore the left-wing ‘Nationalize the banks’ crowd,” said Robert Barbera, a longtime economist and author of the recent “The Cost of Capitalism,” which criticizes the Fed for allowing the housing bubble to grow so large. “I give them very high marks”…}

^{As for the stimulus, economies in countries that enacted relatively large programs, like the United States, China and Australia, have survived fairly well this year, relative to forecasts. Countries that enacted smaller programs, like France, Italy and India, have not done as well, as Christina Romer, a top Obama adviser, pointed out this week. But the best clue may be history. Washington did not respond proactively to the financial crisis of 1929, and the Great Depression ensued. Japan didn’t respond to its 1990s crisis with much force, and its economy languished…}

^{Just look at the record. Washington may be in the process of proving that it can halt an economic crisis. But it utterly failed to keep that crisis from occurring.}

Given that this was a dangerous Recession on the way to a Depression, there were some pretty hard choices. We could’ve done the Republican thing – cut taxes and let the financial institutions fail. We could’ve done nothing. We could’ve done the F.D.R. thing with a massive intervention – nationalizing banks and pouring money and made up jobs into the economy.

• This Recession followed a number of financial bubbles, particularly the housing bubble, that will continue to afflict the building industry for some time. We are way overbuilt, so new starts will probably lag for quite a while.
• Americans have been living on credit. Debt service and bankruptcies will continue even when the economy picks up.
• The Derivative Market [something new] is still unregulated and chaotic.
• The Automobile industry is in the toilet in a big way.
• The Financial industry is aggressive and as yet unrepentant.
• The Republican Party and the Right seems to really want Obama to fail.
• The Health Care Industries continue to bleed the economy.

When the Recession became apparent in September of last year, I felt blind-sided. I was preoccupied with the coming Presidential Eection, and the wealth of information coming out about the Bush Administration [confirming what we’d been speculating about all along]. For a time, I found myself getting up to speed on things I knew nothing about – Derivatives, Economic Bubbles, Credit Default Swaps, the Commodotites Futures Modernization Act, Deregulation. As I pored over these unfamiliar topics, I began to see why things had fallen apart, I began to read about The New Deal and the Great Depression.

The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables.

They even have pictures of it in the economics books:

In actual practice, the GDP falls quickly, then Unemployment rises drastically. At some point, things turn around, and these parameters reverse. Following an initial rapid decline, Unemployment reaches some point where there’s a slow fall until the next crisis. People who write the paragraphs in the economics books under the figures are quick to point out that the time between peaks and troughs is variable – unpredictable. What made the Great Depression different was that it didn’t terminate on its own.

So, is what we’re going through just the "business cycle," or was it caused by all the things we thought about, or some mixture of both?  Do we have to do something to turn it around? Or does it correct itself, by itself? Why is the economy so obviously cyclic? In this case, the plunging CONSUMER PRICE INDEX suggested we were flirting with a panic-driven DEFLATIONARY SPIRAL…

Geithner Said to Lose His Cool at Regulators’ Meeting
New York Times
August 4, 2009

Treasury Secretary Timothy Geithner blasted top regulators in an expletive-laden tirade amid frustration over President Barack Obama’s faltering plan to overhaul financial regulation, Reuters reported, citing a Monday story in The Wall Street Journal. A person familiar with the meeting said that Mr. Geithner told regulators “enough is enough,” the newspaper said. The meeting took place last Friday with Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro and Federal Deposit Insurance Corp. Chairman Sheila Bair.

The Treasury Secretary said regulators had been given a chance to air their concerns, but that it was time to stop, the newspaper said, citing the person. A Treasury Department representative had no immediate comment. The Fed, the S.E.C. and the F.D.I.C. did not immediately return calls seeking comment.

Mr. Obama in June unveiled a financial regulatory overhaul, sometimes called the biggest since the 1930s. Among other things, the plan would give the Fed added powers, award the government more power to break up troubled companies and create a new agency to oversee consumer finance. Many major banks and industry trade groups however have criticized the plan, as have some regulators wary that any redistribution of power would reduce their own.

According to the newspaper, Friday’s roughly hour-long meeting was unusual because of Mr. Geithner’s repeated obscenities and his aggressive posture toward regulators generally deemed independent of the White House. The newspaper said Mr. Geithner told attendees that the administration and Congress set policy. It also said the Treasury Secretary, without singling out officials, raised concerns about regulators who have questioned the wisdom of giving the Fed more power. Ms. Schapiro and Ms. Bair have argued that more authority should be shared among a council of regulators.

Debunking the unbearably stupid
by kos
Aug 02, 2009

You see Barack Obama’s totally real Kenyan birth certificate that is not photoshopped and completely believable unlike those phony Hawaiian documents? I mean, if there’s one country that you know won’t scam you, it’s Kenya!

Yet some people persist in casting suspicious glances at the document. User CatM in the comments:

• First, the hospital is Coast Provincial General Hospital (sometimes said to be Coast Province General Hospital), not Coast General Hospital.
• Second, Kenya was a Dominion the date this certificate was allegedly issued and would not become a republic for 8 months.
• First, the hospital is Coast Provincial General Hospital (sometimes said to be Coast Province General Hospital), not Coast General Hospital.
• Third, Mombasa belonged to Zanzibar when Obama was born, not Kenya.
• Fourth, Obama’s father’s village would be nearer to Nairobi, not Mombasa.
• Fifth, the number 47O44– 47 is Obama’s age when he became president, followed by the letter O (not a zero) followed by 44–he is the 44th president.
• Sixth, EF Lavender is a laundry detergent.
• Seventh, would a nation with a large number of Muslims actually say "Christian name" (as opposed to name) on the birth certificate?
• Eigth, his father (born in 1961) would have been 24 or 25 when he was born and not 26.
• Ninth, it was called the "Central Nyanza District," not Nyanza Province. The regions were changed to provinces in 1970.

Old Redneck in a recommended diary (omitting duplicates from above):

• The document is dated 5 August 1964 — a Saturday.  From what I can find, Kenyan guvmint offices close early on Friday and are closed on Saturdays.  Oooops […]
• This piece of paper certainly looks nice and new to be 45 years old — unless the Kenyans were using acid-free paper back in 1964.  Heh, heh.