demandside

And a memory of William Jennings Bryan and the Cross of Gold

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A severe introduction to an economy that is failing.

Forecast Friday all week

Recast original call – underlying weakness exposed by the unravelling of the housing bubble.

•    Revealing underlyingeconomy with no support •    Burdened by high energy and food prices •    Retarded by inefficient health care •    Threatened by overhanging personal and federal debt.

Predicted weak economy, strong commodity and Treasury prices, a stable stock market.

Recession began in November 2007, nearly five months ago.  I used to be a complete outlyer on this; now as we go forward into the recession, analysts seem to be backdating their calls more and more regularly.  We have gone from a certainty of no recession, only slow growth, into, yes, we entered a recession in December or January.

The point of recession talk is partly to distract us from looking directly at what is going on and partly to create the illusion of a quasi-natural phenomenon of economic tides.  In fact the economic and social misery have been the fruit of supply side seeds we planted.

Republicans have been in the White House twenty of the past twenty-eight years.  During their time in office, the federal debt has ballooned, wage rates have stagnated, the industrial plant has fallen apart — both private and public, financial operatives have distorted wealth into the kinds of accounts they control, and corporations have taken over the rule-making bodies and the tax laws to benefit themselves.

This is only the economic side of so-called market capitalism.  What is in reality a corporate control of government and economic life.

The corporate control of foreign policy has us in a soul-dissolivng war, supporting a set of dictators, intimidating or bribing our allies, and doing our best to obstruct most of the world’s free peoples.

The corporate control of domestic policy has allowed a so-called unitary presidency, a anti-democratic government of secrecy, lies and manipulation.

We come to the next step in our democratic process not knowing what this morally defunct regime has in mind for its last acts.

Nothing is more emblematic of its power than that it has not been indicted and tried for its crimes.  Nothing is less encouraging for the future than that it retains a vestige of dignity and a scrap of respect.  This is allowed only by virtue of its machine of disinformation and its massive corporate backing, not from any moral legitimacy or competence.

The Administration is doing the same job on the economy id did on Iraq and its veterans and on New Orleans and on the environment.  It has forced through its tax cuts in a time of war, pilloried financial common sense, eliminated government  oversight wherever possible, and we wonder why things are falling apart.  They are falling apart because they were designed that way.  It is no accident that we appear at the end of the Bush years with the worst economy in three-quarters of a century.

It is Forecast Friday all week.  Today is the outline –

Employment recession will be deeper and longer than we previously called for.  We will paint the numbers on Friday

The banking sector — the financial sector — will continue to melt down.

The Fed and Ben Bernanke have done nothing but funnel money into rat-holes.  Bernanke and the administration are stalwart.   They continue to stand ready to let the bad bets and wreckage of the financial high flyers be dumped on the American taxpayer.

Seven months into it, the Fed’s program of engineering a soft landing for a weakening economy has turned into a bailout of major banks and an opening of the vaults to trading firms who have no government-insured accounts to protect.

Meanwhile the doofus president sits on the edge of the stage and claps wildly every time there is a swoosh of the cape or a waving of the magic interest rate wand.  Nothing happens, but the applause is deafening.

Last week after enabling the highly suspicious and ill advised bailout of Bear Stearns, the Fed desperately cut interest rates again.  Bloomberg reported quote The biggest commodity collapse in at least five decades may signal Federal Reserve Chairman Ben S. Bernanke has revived confidence in U.S. financial firms.

“‘Bernanke took care of the commodity bubble,’ said Ron Goodis, the retail trading director at Equidex Brokerage Group.  ‘Commodities are coming back to earth.  The stock market looks OK, and Bernanke is starting to look a little better.’”

Commodities bubble was, indeed, the word of the week.  It shows how much I listen to the news that I didn’t realize the term was cascading from every rafter.  Ten days ago nobody had heard of it.  By Friday everybody had a post on their web site. Commodities are now down to their level six weeks ago.  Is that the epic collapse?  We’ll see.  Meanwhile, only time will tell whether the stock market bump was just brokers making arrangements for more massive short selling via the Fed’s new liquidity.

Tuesday, tomorrow, we’ll deliver our promised Ron Paul rant plus a short comment.  Paul will be extolled by many as prescient when the crisis unfolds, but although he can tell the ship is sinking and has an idea of the cause, it is unclear whether forcing it to carry masses of heavy metal will help or not.

The only strength of the economy is people with tools building, making, educating, healing, serving, protecting and working in productive ways.  None of this money stuff — whether Beernanke’s cheap money or Paul’s hard money — does anything other than get in the way.  Money is a medium of exchange and the less we empower its handlers, the better.  The health of the economy is the store of value.  The economy — people, tools, facilities, institutions working — not money.

Wednesday we will come back to the banking crisis or financial sector meltdown.  How bad can it get?  Bernanke and the Fed are seven months into this thing and have “done all they can be expected to do.”  A huge commodities bubble has grown up and apparently is collapsing – though that remains to be seen – during this time.  Things are worse rather than better.  The balance sheet of the central bank is at risk as the Fed is stupidly enabling the Big Houses on Wall Street.  Is there anybody in Congress or elsewhere who can get a place to lead? The few timid comments about additional regulation need to be replaced by radical restructuring and prosecuting the guilty.

Thursday we’ll have fun just listing the things that could be done.  How we could rebuild.  How we could get the incentives right.  How we could collect from the beneficiaries for this free Fed insurance for bad ideas.  Do we have to give cheap money only to the banks?  What if every household got a 5% Visa card?  There are a lot that would be politically palatable to the taxpayer and citizen, although perhaps not practical considering the corporate hands on all the levers of the government.  There’s even where I get you to agree to a dollar a gallon gas tax, and be happy about it.  Don’t believe me?  Check back on Thursday.

Friday we’ll try to peer ahead.  A banking sector in dysfunction and a housing market where the bottom seems to be receding rather than getting closer as we fall makes things interesting.  The specific numbers on inflation — and we’re going to push the dedicated podcast on inflation into April — on employment, on unemployment, on GDP and on GDP adjusted for federal borrowing.  All coming up this week.

This is Alan Harvey. From the Demand Side.

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Continuing the reading of Demand Side Economics:  Theory and Evidence

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Investment advice for what it’s worth.  Inflation, dollar weakness, commodity bubbles

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Continuing the reading of Demand Side Economics, Theory and Evidence

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