The Mutilated Economy-By PAUL KRUGMAN — we’ve done ourselves immense long-term damage…
The Mutilated Economy
By PAUL KRUGMAN
New York Times OpEd
November 8, 2013
Five years and eleven months have now passed since the U.S. economy entered recession. Officially, that recession ended in the middle of 2009, but nobody would argue that we’ve had anything like a full recovery. Official unemployment remains high, and it would be much higher if so many people hadn’t dropped out of the labor force. Long-term unemployment — the number of people who have been out of work for six months or more — is four times what it was before the recession.
http://research.stlouisfed.org/fred2/series/UEMP27OV
These dry numbers translate into millions of human tragedies — homes lost, careers destroyed, young people who can’t get their lives started. And many people have pleaded all along for policies that put job creation front and center. Their pleas have, however, been drowned out by the voices of conventional prudence. We can’t spend more money on jobs, say these voices, because that would mean more debt. We can’t even hire unemployed workers and put idle savings to work building roads, tunnels, schools. Never mind the short run, we have to think about the future!
The bitter irony, then, is that it turns out that by failing to address unemployment, we have, in fact, been sacrificing the future, too. What passes these days for sound policy is in fact a form of economic self-mutilation, which will cripple America for many years to come….
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… the evidence is overwhelming that by failing to respond effectively to mass unemployment — by not even making unemployment a major policy priority — we’ve done ourselves immense long-term damage…
MORE:
http://www.nytimes.com/2013/11/08/opinion/krugman-the-mutilated-economy.html?_r=1&hp=&adxnnl=1&rref=opinion&adxnnlx=1383887959-9G6mPRoyOQYJOgXNkPJe+Q&
http://www.dailykos.com/story/2013/11/08/1254018/-Krugman-The-Mutilated-Economy
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Whose well-informed insights and pleas repeatedly fall on deaf-- and willfully negligent-- ears.
The 1% see the handwriting on the wall and know we are discontented with the entire process out here. As we all well know, there are paid shills pumping up whatever the talking point of the day is on both sides. They read and see.
Let just say, by design, they know damn well that they are stretching out any type of real recovery, because when we (there's that royal we again) really start winning - and we have to, to much is being said and done on the internet tubes not to be marginally unaware - we do not get future funding for the messes that will have to be cleaned up. There's no there there. Which also means that it is just that much longer for them to scream and shout and pout and stamp feet that what we are doing isn't working, so give the reigns back to "them." Loverly...
Look at the 1980s - we're still putting out that fire as we speak. We were on a way to some semblance of a Recovery with Clinton and we had to live through the Dark Ages of Modern Politics just to hammer home and we do need to stand together and say No when we need to, Yes, when we should. Me included.
Now all that's gone and future funding too. Looks like we're gonna need you whiz kids to step it up and find this decade's new necessary/need/want, so y'all can make billions of dollars and fund true Social Justice projects and pay taxes without having to be asked, like what Dr. Bronner's CEO is doing. The future is your hands, run with it 
Title VII supposedly regulated the derivatives business, but in reality it did no such thing.
First, it keeps calling derivatives swaps. All swaps are derivatives but not all derivatives are swaps. (Read this: http://en.wikipedia.org/wiki/Swap_(finance)) You could, theoretically, trade derivatives for twenty years and never sell a swap - commodities traders do this. It would be very rare to do so, because swaps are good for hedging risk, but you could.
But most importantly, it didn't stop people from selling hazardous derivatives. It is completely legal to create a derivative based on bets against mortgages you don't own (the instrument is a "synthetic collateralized debt obligation"
and sell it to people. I have read the prospectus for the synthetic CDO the Goldman Sachs scandal revolved around. I really wish Congress would have called me to testify, because my opening statement would have been something like this:
"Distinguished members of the panel, our friends at Goldman, Sachs explained very clearly in this prospectus (holding aloft the document) that what happened to make all these losses happen, was supposed to. The term 'synthetic exposure to the mortgage market' is used repeatedly in this thing. Synthetic exposure means someone bought a huge pile of securities called a naked credit default swap and used them as the underlying securities in this other bond called a synthetic collateralized debt obligation, or CDO. A credit default swap, or CDS, is kind of an insurance policy taken out on a loan, in this case a mortgage. If the homeowner for some reason can't or won't pay back his loan, the CDS will cover his loss. There are a couple of differences between a bona fide insurance policy and a CDS, namely that the person selling a CDS doesn't need to have the money to pay you back on hand - that person will generally buy another security to hedge the CDS - and the person buying it doesn't need to own the mortgage it's written against. If he doesn't own the mortgage that's when the CDS is considered naked. If he does own the underlying mortgage the CDS is called "covered," but that's not what we're dealing with in this hearing. We good so far?
"At this point we have a basic understanding of what we're dealing with: Goldman Sachs bought insurance policies against the default of mortgages it didn't own and had no intention of buying, and compiled them into a bond called a synthetic CDO. It then sold shares of it to investors, thus entering into what's called a 'counterparty arrangement" with them. The way this counterparty arrangement works is very simple: if the people way down on this derivative's food chain make their payments and pay off their mortgages the investors make money and Goldman loses, and if the borrowers default on them then Goldman wins.
"If any member of this panel, if any member of the visitor's gallery, any viewer on C-SPAN, or any of the other witnesses to this hearing believe that Goldman, Sachs, one of the oldest and most profitable firms in the financial world, would enter into a transaction of any kind with the intent of losing money, they need to quit smoking that shit.
"Thus ends my opening statement. I will now entertain questions."
Seriously, though, a derivatives regulation that would have solved anything would have banned all derivatives whose underlying assets are other derivatives (these are called CDOs and collateralized loan obligations, or CLOs) and any naked derivative. We don't allow people to sell houses with known holes in the roof without disclosing their presence, but we allow derivatives dealers to sell the equivalent of houses that are burning to the ground right now without disclosing the presence of the fire. This needs to change.
