Tuesday, June 28, 2011

The Coming Economic Collapse: Analysis and Solutions

Three very good articles this week about America's coming Greater Depression and what it means for everyone. One local angle from Lansing Online News' Bonnie Bucqueroux. Another is from the Wall Street Journal's Paul B. Farrell. After that is a guest op-ed from today's New York Times by - as of today - the former special inspector general for the Troubled Asset Relief Program (TARP), Neil M. Barofsky.

And finally, a quality 5-point solution to the coming crisis provided in PDF format (to download and share) by economist and unapologetic New Dealer, Webster G. Tarpley.

The GOP Education Agenda: Why earning a diploma will no longer buy you a job or a middle-class life
David Waymire of Martin Waymire Advocacy Communications was a staunch Snyder supporter, but he is now concerned about the depth of his proposed cuts to our state’s college and universities. In his view, Michigan’s future prosperity demands investing in education as the key to attracting “knowledge industries.” Waymire’s recent Facebook post said, “Of the top 16 states in per capita income, all but two are in the top 16 in college attainment. The other two are oil states. College is the only path to prosperity…the cuts being proposed now, combined with diligent efforts to lower the quality of life in our cities, will ensure we never become one of those top 16.”

A college degree has long been the key to building a strong middle class, but the 2008 economic meltdown and the right-wing assault on public education and collective bargaining are conspiring to undermine Michigan’s prosperity for the foreseeable future. Just as NAFTA initiated a race to the bottom for Midwest factory workers, the new austerity promoted by the GOP will gut public education, while deflating the wages and benefits for college-educated workers and then, by extension, everyone else.

Tax the Super Rich now or face a revolution
Our top 1% honestly believe they’re immune, protected from the unintended consequences of beating down average Americans for three decades with the free-market, trickle-down Reaganomics doctrines that made them Super Rich.

They honestly believe those same doctrines will protect them in the next depression. Why? Because they have megabucks stashed away. Provisions for the long haul. Live in gated compounds with mercenaries guarding them.

They believe they’ll continue living just fine in a depression. But you won’t. Nor will your retirement. Neither will the rest of America. And still the Super Rich don’t care, “except in the abstract, because they aren’t directly affected.”

Warning: The Super-Rich Delusion has pushed us to the edge of a great precipice: Remember the Roaring Twenties? The Crash of 1929? Great Depression? Just days before the crash one leading economist, Irving Fisher, predicted that stocks had “reached what looks like a permanently high plateau.”

Yes, he was trapped in the “Great Gatsby Syndrome,” an earlier version of today’s Super-Rich Delusion. It was so blinding in 1929 that the president, Wall Street, all America were sucked in … until the critical mass hit a mysterious flash point, triggering the crash.

Yes, we’re reliving that past — never learn, can’t hear. And oddly it’s not just the GOP’s overreach, the endlessly compromising Obama, too-greedy-to-fail Wall Street banksters, U.S. Chamber of Commerce billionaires and arrogant Forbes 400. America’s entire political, financial and economic psyche is infected, as if our DNA has been rewired.

The Collective American Brain is trapped in this Super-Rich Delusion, replaying the run-up to the ’29 Crash.

Where the Bank Bailout Went Wrong
TWO and a half years ago, Congress passed the legislation that bailed out the country’s banks. The government has declared its mission accomplished, calling the program remarkably effective “by any objective measure.” On my last day as the special inspector general of the bailout program, I regret to say that I strongly disagree. The bank bailout, more formally called the Troubled Asset Relief Program, failed to meet some of its most important goals.

From the perspective of the largest financial institutions, the glowing assessment is warranted: billions of dollars in taxpayer money allowed institutions that were on the brink of collapse not only to survive but even to flourish. These banks now enjoy record profits and the seemingly permanent competitive advantage that accompanies being deemed “too big to fail.”

Though there is no question that the country benefited by avoiding a meltdown of the financial system, this cannot be the only yardstick by which TARP’s legacy is measured. The legislation that created TARP, the Emergency Economic Stabilization Act, had far broader goals, including protecting home values and preserving homeownership.

These Main Street-oriented goals were not, as the Treasury Department is now suggesting, mere window dressing that needed only to be taken “into account.” Rather, they were a central part of the compromise with reluctant members of Congress to cast a vote that in many cases proved to be political suicide.

The US and the world are gripped by a deepening economic depression. There is no recovery and no automatic business cycle which will revive the economy. This bottomless depression will worsen until policies are reformed. The depression results from deregulated and globalized financial speculation, especially the $1.5 quadrillion world derivatives bubble. The US industrial base has been gutted, and the US standard of living has fallen by almost two thirds over the last four decades. We must reverse this trend of speculation, de-industrialization, and immiseration. Current policy bails out bankers, but harms working people, industrial producers, farmers, and small business. We must defend civil society and democratic institutions from the effects of high unemployment and economic breakdown.

. . . This program will create 30 million jobs in less than five years. It will end the depression, rebuild the US economy, improve wages and standards of living, re-start productive investment, and attain full employment with increased levels of capital investment per job. Most orders placed under this program will go to US private sector bidders. Because of the vastly increased volume of goods put on the market, inflation will not result.

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