The graphs above from a piece by U. Of Cal economics professor Brad DeLong show the lost Gross Domestic Product from the financial crisis which began in 2007 until now. Here’s a key quote from his short piece "When Do We Start Calling It "The Greater Depression?"
Cumulative output losses relative to the 1995-2007 trends now stand at 78% of a year’s GDP for the United States, and at 60% of a year’s GDP for the Eurozone. These are extraordinary magnitudes of foregone prosperity–prosperity that we were all confident was in our grasp back in 2007: nobody back in 2007 was forecasting anything like what the decade starting in 2008 will turn out to have been like; nobody back in 2007 was forecasting any extraordinary decline in the rate of growth of potential output that statistical and policymaking agencies are now baking into their estimates. These magnitudes made me conclude at the start of 2011 that “The Great Recession” was no longer adequate: it was time to start calling this episode “The Lesser Depression”.
It’s not just here, though. If you comb through the short economic pieces I’ve been posting for a while, many of them have been about Europe and the strange gavotte the Continent is locked into, an Austerity Two-Step blessed by Germany and weirdly by France ( see “The Fall of France" by Paul Krugan) while the Southern and Eastern periphery fall into disrepair and political disrepute. Krugman’s been following Europe closely, especially because he has been at odds with the German Austerity program in which nations like Greece and Portugal have had to agree to harsh loan repayment terms and severe restrictions on national budgets if they wished to be "bailed out. As a consequence, Krugman notes:
On Europe: Like the United States, the euro area — the 18 countries that use the euro as a common currency — started to recover from the 2008 financial crisis midway through 2009. But after a debt crisis erupted in 2010, some European nations were forced, as a condition for loans, to make harsh spending cuts and raise taxes on working families. Meanwhile, Germany and other creditor countries did nothing to offset the downward pressure, and the European Central Bank, unlike the Federal Reserve or the Bank of England, didn’t take extraordinary measures to boost private spending. As a result, the European recovery stalled in 2011, and has never really resumed.
Here’s another quote, this time from Edward Hugh at A Fistful of Euros
Another argument used to justify the “Japanisation” of the Euro Area idea carries much more clout, and that is the one being used by Paul Krugman based on working age population dynamics.
“If you’re worried that secular stagnation might be depressing the natural real rate of interest — the rate consistent with full employment — and you think that demography is a big factor, Europe looks really terrible, indeed full-on Japanese.”
The basic idea is that working age population dynamics play a big part in determining movements in aggregate demand and hence inflation (see my secular stagnation summary here). This idea received support from a research paper published at the start of August by a group of IMF economists – “Is Japan’s Population Aging Deflationary?” (authors Derek Anderson, Dennis Botman and Ben Hunt). The first part of the abstract runs as follows:
“Japan has the most rapidly aging population in the world. This affects growth and fiscal sustainability, but the potential impact on inflation has been studied less. We use the IMF’s Global Integrated Fiscal and Monetary Model (GIMF) and find substantial deflationary pressures from aging, mainly from declining growth and falling land prices. Dissaving by the elderly makes matters worse as it leads to real exchange rate appreciation from the repatriation of foreign assets. The deflationary effects from aging are magnified by the large fiscal consolidation need.”
Bottom line, despite all the denials from Mario Draghi that the Eurozone is not another Japan there are plenty of grounds for thinking that it will be.
"Turning into Japan" means the economy stays flatter than an Obama leadership moment for years. Japan’s fall into a classic liquidity trap destroyed their economy for a decade - it’s still not back - and has resisted all efforts to put it back on track.
Simply put, as the economy goes bad, people start saving rather than buying because they’re waiting for the other shoe to drop. Interest rates fall because with no one buying, no one’s borrowing, either, That makes interest rates drop (because there’s no demand for loans). When the rate hits 0% (and it has in the past, both in Japan and here. Right after the worst part of the 2008 crisis, folks were buying US Treasuries with a 0 interest rate and had to pay a fee to buy them, making for a *negative* interest rate in practice. IOW, they were so terrified, they were buying safety, and the hell with yield (that is, making money from the interest) there’s no weapon left in the fiscal or monetary arsenal to boost the economy.
That’s where Europe is headed. Here’s a Larry Summers quote from a piece in today’s NY Times entitled "A Long Way From Recovery, Europe Tries To Find Its Way":
“Europe is at risk of secular stagnation,” said Lawrence H. Summers, a former United States Treasury secretary and former economic adviser to President Obama, referring to a situation in which very sluggish economic growth becomes the new norm. Unless governments find a solution, he added, “there is little chance that reasonable and rapid growth is going to return to the eurozone.”
The fresh downturn has worsened tensions between European leaders and Chancellor Angela Merkel of Germany. Ms. Merkel continues to stand by an austerity program that she considers essential to financial stability, but that many critics now say is only deepening Europe’s woes and leaving it at risk of losing a generation of growth.
That means the PIIGS (Portugal, Ireland, Italy, Greece and Spain) of Europe are coming back with a vengeance, only it’s likely to be worse. Italy’s debt ratio of 132.6% debt to GNP is scary. Only Japan’s is worse at 227.2%. If you’re curious, the US debt is at 101.53%, third highest, but we also have a far more robust economy that everyone else. Italy’s economy is faltering, and it’s becoming harder and harder for them to handle their debt.
So, take it to the bank, Europe’s in trouble. Since they’re a huge trading partner of ours, that puts us in trouble, but it’s not just about jobs and money. Whether an economy is healthy or not changes the resources a country can bring to bear in any number of theaters. Over the next few installments, I’ll try to bring all of this together in a way that makes sense so that one can see why Ferguson, Mo. is the product of the same forces torqing the Israsel/Gaza conflict, the Russia/Ukraine mess, and the rise of the Ultra-Right once again in Europe.
Jim Kagen, a dear friend and someone whose mind I respect enormously, sent me the piece below. Jim had been a member of the Lindsay mayoralty administration, and so, too, had Jay Kriegel, who was a senior advisor to Lindsay, the writer of the piece below. Jim thought it worth sending it on to me. Rather than copying the text he sent, I found the link to it on the Daily Beast.
Some of us remember the riots during the ‘60’s, but a lot of people forgot this part:
(from the Kriegel piece) “The FBI advised President Johnson that the outbreak of riots was a coordinated attack by black militants to overthrow the U.S. government as part of a communist-inspired conspiracy—the terrorism of its time.”
That was a pretty scurrilous piece of advice, but not much different from the Ferguson Police Dept.’s behavior in which, as Rev. Al Sharpton pointed out, they managed to post a vidoe of Michael brown in a convenience store but somehow couldn’t find a way to file the police report on the incident, despite laws requiring them to do so.
Here’s the key paragraph:
"Among the most significant elements of the commission’s report was the discussion of police practices. It was rooted in the commission’s findings that, contrary to the FBI report to the president, the basis for many of these urban outbreaks was long-standing, racially-based aggressive police practices that alienated minority communities. Isolated incidents of abusive police behavior, often the shooting of an unarmed black male, then triggered community eruptions. The resulting police overreaction often inflamed the situation and resulted in the deaths of unarmed citizens, the commission found. Rather than the FBI’s conspiracy of outside agitators, the Kerner Commission found that fault often lay within our own police forces."
Keep in mind the Kerner Commission report was published in 1968. Not much seems to have changed.
What’s Wrong With This Picture?
I’ve no idea whether this photo is staged or not. I’m not sure it matters. Someone shot the photo will the full knowledge of the people in the room. The White House presumably released it because someone - the Press Secretary? - thought it was advantageous to do so.
The President, fingers to temple, appears to be listening closely to Eric Holder’s words regarding the events at Ferguson, MO. We’ve seen variants of this shot throughout President Obama’s years in the White House. Clearly, this is the way he wants folks to think of him: sagacious, tempered, restrained, thoughtful and concerned.
Meanwhile, Ferguson’s burning to the ground, ISIS is chomping through the Middle East like a deranged Pac Man, Republicans still forward narratives of him as a secret Muslim, and blame him for everything, including, apparently Katrina and the Ukraine crisis, not to mention unemployment and government gridlock, and while this is going on, Democrats make sure he’s nowhere around as they run for office. This is especially true of the Senate races, where Democratic control of the Senate is at risk.
Given all that, how can the White House be so out of touch they believe a shot of a contemplative President is a good thing when what the country is yearning for is leadership, especially passionate leadership in which POTUS not only leads the way via the bully pulpit, but makes others pay politically for standing in the way of grave necessities.
ISIS and Ferguson are two issues which should be galvanizing him, bringing him to the fore with energy and conviction. If he can not make a principalled and passionate stand on these two things, what is it exactly he does for a living?
This President, once revered for his rhetoric seems to have left it all under the pews in Rev. Wright’s church. We need him at last to approach being presidential. One wonders if he understands what that means.
Bruce Bartlett, a man of impeccable Republican credentials (He’s worked for Kemp, Reagan and both Bushes), has found himself shunned, an exile from the Right, because he’s had the audacity to buttress his arguments with facts. Oh, and one more thing: he eventually came to despise George Walker Bush.
The following quote from his piece today in The American Conservative, is a stunner:
On the plus side, I think I had a very clear understanding of the economic crisis from day one. I even wroteanother op-edfor theNew York Timesin December 2008 advocating a Keynesian cure that holds up very well in light of history. Annoyingly, however, I found myself joined at the hip to Paul Krugman, whose analysis was identical to my own. I had previously viewed Krugman as an intellectual enemy and attacked him rather colorfully in an old column that he still remembers.
For the record, no one has been more correct in his analysis and prescriptions for the economy’s problems than Paul Krugman. The blind hatred for him on the right simply pushed me further away from my old allies and comrades.
The final line for me to cross in complete alienation from the right was my recognition that Obama is not a leftist. In fact, he’s barely a liberal—and only because the political spectrum has moved so far to the right that moderate Republicans from the past are now considered hardcore leftists by right-wing standards today. Viewed in historical context, I see Obama as actually being on the center-right.
No. 1, Numero Uno, Primo is Bartlett’s recognition that Paul Krugman’s economic analysis AND Keynesian ideas were accurate. The world is suffering from a demand problem, and that calls for spending, not austerity. (Yes, the deficit hugely matters. The question is when to address it, not whether it should be ignored) No. 2, and equally stunning (and reflects perfectly progressive anger with Obama), the President ain’t no liberal. No how. No way. It’s possible he’s not really a Democrat. I’ve been saying for years the guy’s actually a Rockefeller Republican, which hasn’t ‘zactly endeared me to a lot of Obama fans.
That Bartlett’s remarkable piece - and all of you should read it. Bartlett has a lot to say - was published at all, much less within The American Conservative - suggests things are changing more than any of us thought possible. We most likely won’t see visible evidence of that change for several years, but compelling ideas have a way of worming into one’s thoughts, subtly influencing words chosen, sometimes re-arranging the order and thus the meaning of constructed argument.
FWIW, I’m much more aligned with Bartlett than I am with the current Democrats. I’ve never voted for a Republican Presidential candidate ever, but if things continue the way they’re continuing, I may find my self there after all, especially if there are a bunch of Bartletts hanging around. Of course, I’ve the usual caveats: no bringing religion into politics, no intrusion into the bedroom. no swooning over tumescent defense budgets, and no voter suppression. Other than that, I’m really a mainstream republican kind of guy.
Consider the following quote:
Conflict is part of the human condition: there are limited resources, there are differing interests and cultures and tribes and value systems, with different conceptions of the good, vastly different priorities and first principles. Democracy is the system we’ve come up with to resolve those inevitable conflicts, but there is no such thing as a placid equilibrium in which those conflicts somehow disappear, or are only articulated in the gentlest fashion. That’s the point.
Conflict is the underlying constant of human society. The question is what we do with it. It’s only a slight exaggeration to say that either we have people killing each other in the streets like dogs, or we have people running attack ads against each other. Bureaucracy, parliamentary procedure, extended multi-lateral talks, the back and forth of campaign ads, are largely glory-less enterprises, in the grand sweep of history, they are beautiful, sublime achievements, they represent nearly unthinkable progress and point the way towards a future of full human flourishing.
That’s from Chris Hayes. I found it via Digby who was making a point about the debates and the media critiques of same. Hayes’ elegant language wondrously floats above partisanship (despite Hayes being a staunch lefty). What are politics, after all, but a means of channeling physical violence as a means of securing power into a (mostly) non-violent expression.
So everyone needs to settle down. It was regrettable South Carolina Representative Joe Wilson loudly interjected “Liar!” into Obama’s State of the Union address, but it was a lot better than Representative Preston Brooks (also from South Carolina. What is it about the Palmetto state?) caning Senator Charles Sumner to the floor of the Senate Chamber. Deciding Biden was “rude” because he visibly (one might seven say risibly) reacted to Ryan’s unsubstantiated claims (I’m being moderate here) seems quaint compared to the every-day savagery of political combat these past 16 years in both chambers. Whatever Biden did was hardly on the level of the impeachment travesty foisted on everyone during the Clinton administration.
It was also a whole lot better than the pornography of a sitting president acting like a sitting duck.
Nationwide GOP Voter Registration Fraud Scandal Widens, Becomes Criminal Matter in Florida
Potentially fraudulent forms in 11 FL counties; Concerns emerge in other states; RNC scrambles to contain damage
Latest developments in rapidly expanding story…
A major element of the Republican National Committee’s overall attempt to game the 2012 elections by trying to affect who gets to vote and who does not, has just been stopped dead in its tracks.
Along with it, a criminal election fraud complaint has now reportedly been filed with law enforcement in the state of Florida against a Republican firm, owned by a paid Mitt Romney consultant, which was hired by the GOP to carry out partisan voter registration operations in at least five battleground states.
We’re living in an Orwellian paradise. Organizations grant themselves monickers like "True The Vote," articulate their organizational purposes in virtuous prose: (from True the vote’s website)
Unfortunately, Americans have lost faith in the integrity of our nation’s election results and fraud and law-breaking has become all too common in our electoral system. We hope to change that perception. True the Vote is a citizen-led effort to restore truth, faith, and integrity to our elections.
…..and then focus all their energies in challenging, intimidating and otherwise restricting the votes of minorities, young adults and anyone else who might choose Democrats over Republicans.
Question: what does the word “conservative” mean to present-day Republicans? What is it they’re conserving?
From Michael Powell’s piece in today’s NY Times Turn Out The Lights On The Mets
What’s our choice? To root for the triumphalist Yankees is to describe an impossibility, like walking through Manhattan chanting: “Goldman Sachs! Goldman Sachs!” Instead, we adopt the mien of Scottish highlanders facing the English army — loss is assured, but let’s go out with panache and a touch of humor.
We’re all suffering from a newly discovered disease “BuliMets.” Classic symptoms, really. Watch a game, throw up. Watch another. Throw up……….
I stole this entire post from Professor Juan Cole at his blog Informed Comment because I could never have done this so pithily.
(Taken from his biography on his site) Juan Ricardo Cole is a public intellectual, prominent blogger and essayist, and the Richard P. Mitchell Collegiate Professor of History at the University of Michigan.
2. Higher taxes on the middle class.
3. Lower taxes on millionaires.
4. War with Iran.
5. Intervention in Syria.
6. Make Egypt understand what the rules are.
7. Annoy both Russia and China. Brand the Russian Federation no. 1 enemy of the United States for no known reason.
8. Free skin dye kit for every American who wants to enjoy the tremendous advantages of becoming Latino in America–including the chance to join the ranks of all our past Latino presidents (who had this unfair advantage).
9. Cold fusion
10. Airplane windows that can easily be opened in flight whenever there is a fire on board at 30,000 feet. Also, free parachutes for all the passengers who will be sucked through the open window.