What Economy?

[Crewleader]

July 16, 2009

There's Nothing Left to Recover
What Economy?

By PAUL CRAIG ROBERTS

There is no economy left to recover. The US manufacturing economy was lost to offshoring and free trade ideology. It was replaced by a mythical “New Economy.”

The “New Economy” was based on services. Its artificial life was fed by the Federal Reserve’s artificially low interest rates, which produced a real estate bubble, and by “free market” financial deregulation, which unleashed financial gangsters to new heights of debt leverage and fraudulent financial products.

The real economy was traded away for a make-believe economy. When the make-believe economy collapsed, Americans’ wealth in their real estate, pensions, and savings collapsed dramatically while their jobs disappeared.

The debt economy caused Americans to leverage their assets. They refinanced their homes and spent the equity. They maxed out numerous credit cards. They worked as many jobs as they could find. Debt expansion and multiple family incomes kept the economy going.

http://www.counterpunch.org/

[HCE SuiGeneris]

1. The unrecommend leeches are fast to their task

This article is well worth the read.

K n R

[tomreedtoon]

2. Considering this was from a REAGAN administration guy...

...he is noticeably short on suggestions for correcting the problem. Because, frankly, he'd have to put the blame on some of his old buds. He also offers no hope at all, of course, which has always been the Republican way of life; better to keep the idiots hopeless and scared.

[ixion]

3. uh, PCR has been writing about this all during the * years

and has heaped oodles of blame on the GOP and his old buddies. Perhaps you missed it.

[truedelphi]

4. I'm not sure if your criticism is Fair.

There are economically fair-minded Republicans. A person might not like their attitudes on abortion, or going to war against Iraq, but in terms of economic issues, it all depends on what the person thought about Supply Side.

People forget that Nixon put in place a price ceiling. He would be horrified at what happened in the nineties to Glass Steagall and other matters.

As far as what needs(ed) to be done - rather than letting these too big to fail firms continue on, they should have been put into receivership. That way the contracts regarding the Credit Default Swap contracts would Be void, and money pumped into the institutions wouldn't go to paying off the holders of the CDS's but rather the money could pump up the value of the assets.

Quite importantly, the restrictions should have been legislated back in the moment that Obama took office- if the cows have been stolen because someone left the barn door open, you shut the DAMN door before you put more cows in the barn.

Another thing, the major portion of the money used for BailOut purposes should have been distributed to one bank in each region of the country. Issa points out that we had the legislation already on the books, left over from the S & L crisis. That legislation stipulated that each region of the nation had one bank chartered as a state bank, and that bank was given the funds needed to help out that region and it was stipulated that the money had to be loaned out, not kept for the purposes of the bank owners' interests.

Instead, what we have done is prop up AIG and then eliminate the competition to Goldman Sachs by letting Bear Stearns and Lehman Bros go down.

And worst of all, not one of those financial institutions seems to be loaning money. Even though back in September when they were screaming that the sky was falling, they made a big noise about the fact that they didn't have the money to loan out. Now they have it, from us the taxpayers, and they still won't budge on loaning it out.

[pokercat999]

5. just read today that AIG has another $200B in credit

insurance to European banks covering housing and commercial loans with 25 year maturity dates.

We the tax payers will be bailing out the Euro-banks.

Check out Karl Denninger's article at http://www.denninger.net/ click on "The Market Ticker"

[truedelphi]

6. Credit Default swaps should be stopped. But Geithner, boy oh boy, he

Loves them and until he is moved out of there, no chance that they will be abolished.

And there is probably not a chance that Obama will get rid of his "good buddy" Tim.

So we are screwn and more so every day.

[sendero]

8. There is no way..

... to avoid a depression now. So, hope if it makes you feel better but preparation would be preferable.

Obama had a small window of time in which to avert this, he chose the banks over America. It's too late to fix that decision, so hold on to your job and any money you have, it's going to be a bumpy several years.

[Crewleader]

7. the link to article

http://www.counterpunch.org/roberts07162009.html