ECONOMY-US: Obama to Inherit Legacy of Free Market Free Fall

[Omaha Steve]

http://www.ipsnews.net/news.asp?idnews=45219

y Adrianne Appel

BOSTON, Dec 24 (IPS) - Despite hundreds of billions of dollars thrown at banks large and small, the U.S. economy is in a free fall, just weeks before President-elect Barack Obama takes office, analysts say.

"Most measures of economic and financial activity look like they fell off a cliff in September and October, and have been deteriorating at an alarming rate ever since," says Nariman Behravesh, chief economist at IHS Global Insight.

The bank bailout, which now stands at 335 billion dollars, was supposed to ease credit lending, and jumpstart the economy. But U.S. businesses and individuals report that they are still unable to get loans from banks, and new reports show the economy in very bad shape.

"The bailout hasn't succeeded. The problem is the diagnosis of it as a 'financial crisis'. It is a toxic stew of subprime mortgages that is the problem, and its consequences are to poison the well of finance. Pouring capital into the banks doesn't fix it," Jamie Galbraith, an economist at the University of Texas, told reporters recently.

Galbraith and 120 other economists, progressives and labour leaders sent a letter to Obama urging him to spend 900 billion dollars or more starting in the New Year, to stimulate the economy.

"This crisis is unprecedented since the Great Depression. It will take unprecedented measures," Galbraith said.

Government figures released Tuesday show the overall economy has almost stalled, and between July and September grew at an annually adjusted rate of just 0.5 percent, as measured by the Gross Domestic Product. Healthy GDP growth for the U.S. is considered to be 3 percent or more per year.

Economists estimate that the current GDP is declining at 6 percent.

FULL story at link.

[DJ13]

1. I wish these so called "economists" would understand that

.. there wouldnt have BEEN a "subprime mortgage crisis" if wages had not stagnated for the 20 years before those mortgages were written.

The underlying financial instruments dreamed up by the financial institutions wouldnt have gone bad if the homeowners could have continued paying on their mortgages.

Its not the mortgages that caused the crisis, its the lack of wages to pay those mortgages.