There is No Recession: It's a Planned Demolition

[Karmadillo]

It's worth reading all of this one. Not necessarily the view you'll get from the NY Times, but one that seems to fit well with the existing facts.

http://www.counterpunch.org/whitney08102009.html

It's a Planned Demolition
There is No Recession
By MIKE WHITNEY

Credit is not flowing. In fact, credit is contracting. When credit contracts in a consumer-driven economy, bad things happen. Business investment drops, unemployment soars, earnings plunge, and GDP shrinks. The Fed has spent more than a trillion dollars trying to get consumers to start borrowing again, but without success. The country's credit engines are slowing to a crawl.

Fed chairman Ben Bernanke has increased excess reserves in the banking system by $800 billion, but lending is still slow. The banks are hoarding capital in order to deal with the losses from toxic assets, non performing loans, and a $3.5 trillion commercial real estate bubble that's following housing into the toilet. That's why the rate of bank failures is accelerating. 2010 will be even worse; the list is growing. It's a bloodbath.

<edit>

Unemployment is rising, wages are falling and credit is contracting. All the money is flowing upwards to the gangsters at the top. Here's an excerpt from a recent Don Monkerud article that sums it all up:

"During eight years of the Bush Administration, the 400 richest Americans, who now own more than the bottom 150 million Americans, increased their net worth by $700 billion. In 2005, the top one per cent claimed 22 per cent of the national income, while the top ten per cent took half of the total income, the largest share since 1928.

“Over 40 per cent of GNP comes from Fortune 500 companies. According to the World Institute for Development Economics Research, the 500 largest conglomerates in the U.S. "control over two-thirds of the business resources, employ two-thirds of the industrial workers, account for 60 per cent of the sales, and collect over 70 per cent of the profits."

... In 1955, IRS records indicated the 400 richest people in the country were worth an average $12.6 million, adjusted for inflation. In 2006, the 400 richest increased their average to $263 million, representing an epochal shift of wealth upward in the U.S." ("Wealth Inequality destroys US Ideals" Don Monkerud, consortiumnews.com)

Working people are not being crushed by accident, but according to plan. It is the way the system is designed to work. Bernanke knows that sustained demand requires higher wages and a vital middle class. But Bernanke works for the banks, which is why the Fed's monetary policies reflect the goals of the investor class. Bubblenomics is not the way to a strong/sustainable economy, but it is an effective tool for shifting wealth from one class to another. The Fed's job is to facilitate that objective, which is why the economy is headed for the rocks.

The financial meltdown is the logical outcome of the Fed's monetary policies. That's why it's a mistake to call the current slump a "recession". It's not. It's a planned demolition.

[Atman]

1. This should be common knowledge.

Bush, Norquist, et al, were thrilled to speak of "drowning the economy in a bathtub" BEFORE they got elected. Practically bragged about it. Now, after they've met their goals admirably, people say "Pshaw! Why would anyone want to ruin the economy?" Because they're fucking capitalist criminals. It's what they do. Might as well as why a shark eats seals.

.

[Zodiak]

7. Norquist wanted to drown the federal government in the bathtub, not the economy

n/t

[Atman]

8. You tell me the difference, fundamentally.

He wanted to drown the whole damn thing. They spoke openly of massive social upheaval required to bring about the societal changes they wanted. Bankrupting the government (and keeping all the money for themselves as a hedge against the hard times they would be creating) was just the logical first step. With the government insolvent, everything would have to be privatized, sold at fire-sale prices to desperate states and municipalities. Of course, the Bushies would be the one's there to scoop 'em all up. Again, they spoke openly of this strategy BEFORE Bush's first election theft. I think the fact that we ignored it and no one revolted just emboldened them. Paulsen's tranfer of the final billions from our treasury to himself and his cronies through Goldman-Sachs was the final slurp of money going down the drain before Bush left office.

.

[Zodiak]

19. The difference is whether you are quoting it correctly or incorrectly

....and if you quote it incorrectly and are called out on it without admitting your mistake, it undermines your credibility.

The fundamental difference is that Norquist want to drown the government and hijack the economy.

[Atman]

24. Your concern is noted.

"....and if you quote it incorrectly and are called out on it without admitting your mistake, it undermines your credibility."

There's one on every thread.

.

[Zodiak]

26. what, someone who is wrong, engages in sophistry, and concludes with an eyeroll?

There's more than that in every thread. DU has too many overgrown teenagers.

People interested in the accuracy of what they say versus the incessant need to twist the truth in the interest of "spinning"? Rare....and DU would be damned lucky to have one in every thread.

[bertman]

27. Apparently the direct result of this "planned demolition" is in fact shrinking governments

all over the U.S. If you don't think so, just ask a few Californians--or even my fellow North Carolinians.

A couple more of these "recessions" or an ongoing stint at the bottom of a recession, and there won't be enough tax dollars to support any governments.

What is inaccurate about Atman's quote now? It sounds to me like you were unable to follow the argument. His quote made perfect sense to me.

[dotymed]

35. BUT THERE WILL ALWAYS BE MONEY FOR "DEFENSE"

 We have not had to "defend" ourselves, really,
since the Revolutionary war. Yet we spend more than all of
the other nations combined,on our "military industrial
complex." We could use that money for Universal Health
care or creating good jobs. If the hawks are worried, we
could still outspend the other nations on WMD's, and still
have enough money for the programs I mentioned.

[JenGatherer]

36. You make a good point

but the two points are not unrelated. I think the only thing that is keeping the dollar afloat at all right now (given our current actions of printing the money to pay the interest on our massive debt because we cannot actually pay it) is the threat value of our warheads. China would have called our crap, grade D bonds by now if not for those.

[Laelth]

2. k&r for exposure. n/t

-Laelth

[Voltaire]

3. Yet people of all political persuasion still tout Capitalism as the best system

I don't get it. Haven't gotten it since I was about 10. That was 40 years ago. Capitalism is bad for most humans and we still do it, expecting different outcomes.

[unblock]

4. since when is our system capitalism?

our system is financial anarchy, combined with government redistribution of wealth and power from the masses to the rich and socialized losses.

capitalism requires, among other things, open information so people can make informed decisions and genuine competition so people have genuine choices, both of which our government has worked to seriously curtail over the last several decades. it also requires letting failed businesses actually fail.

capitalism is not necessarily a terrible system at all, i just wish we'd actually give it a try sometime.

[glitch]

5. Good point. nt

[RaleighNCDUer]

11. True, it is Corporatism, not Capitalism.

And an abandonment of the American Revolution which was as much a rebellion against the Crown sanctioned corporations - the Royal Charter Companies, including the British East India Company, the Hudson's Bay company, and even some of the colonies themselves - as against the Crown itself.

[juno jones]

14. True.

Poor Adam Smith is turning in his grave.

Many years ago I read Brian Inglis's "Poverty and the Industrial Revolution". It was a scary read because the abusers of Smith's system said the exact same things back in 1800 as they're saying now.

Somoetimes it seems we are regressing.

[blindpig]

22. wrong

What we are seeing today is capitalism, monopoly, government involvement and all. Capitalism does that.

What we are seeing from capitalism today is not aberration but rather natural progression.

[Flying Dream Blues]

23. Would you please expand on this and make it an OP?

There are a lot of people who could benefit from a little refresher on this.

[Romulox]

9. Even so-called "progressive" economists (Paul Krugman, e.g.) tout this system

--not as the best choice out of several, but essentially as the only choice possible. (Paul is an enthusiastic globalist, who isn't terribly troubled by job loss here in the US--he's one of the "retrain!" chorus.)

These same economists tell us that unless we use extraordinary measures to transfer money from common people to multinational businesses, the "free market" will collapse.

[HughBeaumont]

10. That's always where Krugman loses me - his odious globalism stance.

This doesn't work for anyone except the wealthy and "retraining" is an idiotic and unrealistic canard for workers who cannot afford exorbitant college costs and have bills NOW that need to be PAID. Better jobs have not arrived as a result and it pisses me off that people who should know better still prop up this loser Republican't practice.

[Romulox]

12. Which is why I can't trust a word he says.

Krugman is more about guilt assuasion for the NYTimes Demographic than any real challenge to the status quo, imo.

[Lorien]

34. Most successful societies of today are a mix of Capitalism and Socialism

Pure Capitalism or pure Socialism simply doesn't work. Since Reagan the Fascist elements of our government (the corporations who set most policies) have reduced the Socialist ballast that gave our society some stability, and now the full effects of those policies are finally coming home to roost

[Karmadillo]

18. False consciousness?

http://en.wikipedia.org/wiki/False_consciousness

False consciousness is the Marxist thesis that material and institutional processes in capitalist society are misleading to the proletariat, and to other classes. These processes betray the true relations of forces between those classes, and the real state of affairs regarding the development of pre-socialist society (relative to the secular development of human society in general).

This is essentially a result of ideological control which the proletariat either do not know they are under or disregard with a view to their own POUM (probability/possibility of upward mobility)<1>. POUM (not to be confused with the Workers' Party of Marxist Unification, POUM) or something like it is required in economics with its presumption of rational agency; otherwise wage laborers would be the conscious supporters of social relations antithetical to their own interests, violating that presumption<2>

[GillesDeleuze]

37. here here!

this is capitalism. the horror.

[cliffordu]

6. K&R.

[followthemoney]

13. It is a capital strike/lockout.

The Federal Reserve is independent of the U.S. economy. It is not accountable to the government on monetary policy and its interests are more in line with the top one per cent earners. What is being done is a lockout on a nationwide basis rather than on the basis of a single corporation.

In a democracy the people would have recourse to a national strike but in the tightly bound corporate/state alliance the ruling minority will use violence against the aggrieved majority.

In Bush's first term there was a lockout of west coast ports:

"In seeking to suspend the shutdown for 80 days, Mr. Bush became the first president to successfully invoke the Taft-Hartley Act emergency provisions since President Richard M. Nixon sought to stop a longshoremen's strike in 1971." ... "Mr. Bush said he was worried about the movement of military supplies. The Pentagon often uses commercial shipping lines to send supplies and equipment overseas, and those lines would undoubtedly fill that role from the busy West Coast ports if fighting erupted in Iraq or elsewhere in the Middle East."

http://www.nytimes.com/2002/10/09/politics/09PORT.html?...

[leveymg]

15. Bernanke's prescription for Depression : more efficient foreclosures, better bankruptcies

I'm not kidding - it was the subject of his second major published economics paper.

http://www.democraticunderground.com/discuss/duboard.ph...

[omega minimo]

16. So why were 2 hijacked elections and NOT IMPEACHING the psychotic bastards all Okey Dokey?

[blindpig]

17. The American Middle Class no longer has the Red Army

to defend it.

So long as there was this big scary alternative to capitalism those bastards had to play nice, produce concrete reasons to support capitalism.

With that problem out of the way, with the socialists and communists who caused the New Deal to happen crushed by the post war Red Scare, it's back to bidness as usual, circa 1900.

Ain't no corporatism, or predatory capitalism, it's just capitalism.

[leftstreet]

31. +1

[Jim Sagle]

40. Those of us who happily gulped down the bright anti-red Kool-Aid are not happy with this realization

What's left?

[blindpig]

41. Yep

The red, white and blue velvet glove is off. With production and now markets gone off shore the American Middle Class has become a liability to profits, best to unload the dead weight. Besides, they need soldiers and poverty sure makes the military attractive.

[TahitiNut]

20. Family Income ... the wealthy get wealthier.

Here's the picture of family income distribution through 2007.
The Top 5% take in more than the Bottom 50%.
The Top 20% take in just about as much as the Bottom 80%.

[diane in sf]

21. I call it harvesting the middle class.

[glinda]

25. Well put.

[Greyhound]

28. Shearing the flock over here.

All sheep share a common destiny.
& R

[dem mba]

29. planned demolition sounds like a conspiracy

when in fact what happened was a loose confederacy of unknown parties simply got greedy as fuck at the same time financial trading regulations were lax, corporate internal risk management controls were disregarded and consumer debt was high.

Sustained demand does indeed require a vital middle class, so why would our "corporate overlords" want to destroy them? Whitney's whole article is cogent and sound but is he just being overly dramatic with his last paragraph?

[HCE SuiGeneris]

33. Let's revisit this in two years.

My guess is the Op will mirror reality much more than your "coincidence" theory.

[Orsino]

38. Yes. It was accidental, but also inevitable.

The greedy bastards just meant to squeeze a little more out of us. They were frightened nearly to death when their fuck-ups shut down their gravy train.

[datasuspect]

39. you can offset consumer demand losses with cheap labor

labor is the biggest overhead cost in any company.

if they can make us compete with the third world, they still profit even if we aren't buying shit.

[Wilms]

30. .

[Vidar]

32. K&R

[lonestarnot]

42. Slave labor is a bitch, but apparently some people like it.