What Caused the Economic Crisis?

As the financial crisis of 2008-09 draws to a close, narratives of the meltdown are flooding bookstores, think tanks are cranking out white papers, and four different congressional committees, along with the official Financial Crisis Inquiry Commission, are investigating what went wrong. Well they might, as the most basic question about the meltdown remains unsettled: Why did it happen?

The only near consensus is on the question of what triggered the not-quite-a-depression. In 2007, the housing bubble burst, leading to a high rate of defaults on subprime mortgages. Exposure to bad mortgages doomed Bear Stearns in March 2008, then led to a banking crisis that fall. A global recession became inevitable once the government decided not to rescue Lehman Bros. from default in September 2008. Lehman's was the biggest bankruptcy in history, and it led promptly to a powerful economic contraction. Somewhere around here, agreement ends.

Capitalism's Dismal Future

Spencer Platt, Getty Images

A homeless man named Roger panhandles in New York City.

By Paul Mattick

Apart from the patently nonreality-based dissent of its Republican members, the Financial Crisis Inquiry Commission could hardly have expected the report it issued in January to arouse much excitement. After a year and a half of research and the testimony of academics and other economic experts, it came up with no more than the already conventional wisdom that the economic downturn that burst into public view in 2007 might have been avoided, having been caused by a combination of lax governmental regulation and excessive risk-taking by lenders and borrowers, particularly in the housing market. The same conventional wisdom assures us that swift government action prevented the Great Recession from turning into a full-blown depression, and that the downturn has given way to recovery, albeit a "fragile" one. No matter how often it is repeated, however, this wisdom remains unconvincing.

Why is the recovery so fragile? Why is unemployment stubbornly high? Why are the banks, newly stocked with cash by that swift government action, so uninterested in advancing it for business expansion? Why is the series of sovereign debt crises in Europe echoed in the United States by collapsing state budgets? Why do politicians call relentlessly for austerity even while the economy remains unable to satisfy the need of millions for housing, health care, education, and even food? The bankruptcy of the putative science of economics already demonstrated by the failure of experts to predict the catastrophe is underlined by their apparent inability either to explain what is happening at present or to reach consensus on measures to be taken in response.

Social experiments to fight poverty: Esther Duflo

Economics for president (obama hires CEO of GE)

Obama Taps GE CEO for Economic Panel

President Obama has tapped another top corporate figure for a key White House role. On Thursday, Obama said he is naming General Electric CEO Jeffrey Immelt to head the newly formed President’s Council on Jobs and Competitiveness. The council will replace the former Economic Recovery Advisory Board, which had been chaired by Paul Volcker, the former chair of the Federal Reserve. Volcker will step down when his panel’s mandate expires next month. Immelt’s appointment has drawn scrutiny in part because he opposed Obama’s presidential candidacy. During the 2008 elections, Immelt donated to Hillary Clinton as well as Republicans John McCain, Rudy Giuliani and Mitt Romney. His appointment follows the recent hiring of former commerce secretary and JPMorgan Chase executive William Daley as White House chief of staff.

Is the US loosing it's influence?

(CNN) -- Opening The New York Times on Friday morning, I blinked. The headline on its lead story, spread over two columns, blared out, "Obama's Economic View Is Rejected on World Stage."

Whether or not you like this president, the headline should make every American wince. Yes, other presidents have experienced setbacks, but it has been a long time since any of them has been so publicly rebuffed in a gathering of the world's major nations. Indeed, since World War II, our presidents have dominated the world's economic decision-making.

Deficits: Real Issue, Phony Debates

Deficits have now risen, yet again, to headline status. Conservatives inside and to the right of the Republican Party frame the national debates by attacking deficits. They want to reduce them by cutting government spending. Liberals respond, as usual, by insisting that overcoming the crisis requires big government spending (“stimulus”) and hence big deficits. Most Americans watch the politicians' conflicts with mixtures of confusion, disinterest, and disdain. Yet deficits pose a real issue for everyone, one that the debates among politicians and their economist advisors miss, ignore, or hide.

When the federal government raises less in taxes and other revenues than it spends, it must borrow the difference. Such annual borrowing is each year's deficit. The U.S. Treasury borrows that money by selling bonds, federal IOUs, to the lenders. The accumulation of annual deficits comprises the national debt, the total of outstanding U.S. treasury bonds. So the first and simplest questions about deficits are (1) why does the federal government choose to borrow rather than to raise taxes? and (2) why does it borrow rather than cut its expenditures? The twin answers are profoundly political. Elected officials are afraid to raise taxes on business and the rich because their profits and great personal wealth can then finance the defeat of officials who do that. Cutting government spending that benefits business and the rich is avoided for the same reason. As the tax burden shifted increasingly onto middle- and lower-income people in recent decades, elected officials have faced rising tax revolts coupled with demands for more government services and supports.

An Obit on Our Hopes---Robert Scheer

All My Bones Shake: Seeking a Progressive Path to the Prophetic Voice

Robert Jensen, a longtime activist fighting for women's rights, racial equality, and global justice, reveals with this book the emotional journey that brought him back to the church after an entire adulthood of religious indifference.


Our world is perched on the verge of chaos, he warns. As political, economic, cultural, and ecological crises peak, the decisions we make are likely to have permanent consequences for our future and for the fate of our planet. In our nation, what underlies this chaos is a spiritual unrest, a stubborn conflict that has gotten in the way of understanding and slowed theological progress to a glacial crawl.

The Rich Getting Richer The Class War at Home (not the one the rich are paying for)

The rich and their paid false prophets are doing a bang up job deceiving the poor and middle class.  They have convinced many that an evil socialism is alive in the land and it is taking their fair share.  But the deception cannot last – facts say otherwise.

Yes, there is a class war – the war of the rich on the poor and the middle class – and the rich are winning.  That war has been going on for years.  Look at the facts – facts the rich and their false paid prophets do not want people to know.

Let Glen Beck go on about socialists descending on Washington.  Allow Rush Limbaugh to rail about “class warfare for a leftist agenda that will destroy our society.”  They are well compensated false prophets for the rich.   

The truth is that for the several decades the rich in the US have been getting richer and the poor and middle class have been getting poorer.  Look at the facts then make up your own mind.

The official US poverty numbers show we now have the highest number of poor people in 51 years.  The official US poverty rate is 14.3 percent or 43.6 million people in poverty. One in five children in the US is poor; one in ten senior citizens is poor.  Source: US Census Bureau.

One of every six workers, 26.8 million people, is unemployed or underemployed.  This “real” unemployment rate is over 17 per cent.   There are 14.8 million people designated as “officially” unemployed by the government, a rate of 9.6 per cent.  Unemployment is worse for African American workers of whom 16.1 per cent are unemployed.  Another 9.5 million people who are working only part-time while they are seeking full-time work but have had their hours cut back or are so far only able to find work part-time are not counted in the official unemployment numbers. Also, an additional 2.5 million are reported unemployed but not counted because they are classified as discouraged workers in part because they have been out of work for more than 12 months.  Source:  US Department of Labor Bureau of Labor Statistics October 2010 report.

The median household income for whites in the US is $51,861; for Asians it is $65,469; for African Americans it is $32,584; for Latinos it is $38,039.  Source: US Census Bureau. 

Fifty million people in the US lack health insurance.  Source: US Census Bureau. 

Women in the US have a greater lifetime risk of dying from pregnancy-related conditions than women in 40 other countries.  African American US women are nearly 4 times more likely to die of pregnancy-related complications than white women.  Source: Amnesty International Maternal Health Care Crisis in the USA.

About 3.5 million people, about one-third of which are children, are homeless at some point in the year in the US.  Source: National Law Center on Homelessness and Poverty.

Outside Atlanta, 33,000 people showed up to seek applications for low cost subsidized housing in August 2010.  When Detroit offered emergency utility and housing assistance to help people facing evictions, more than 50,000 people showed up for the 3,000 vouchers. Source: News reports.

There are 49 million people in the US who live in households which eat only because they receive food stamps, visit food pantries or soup kitchens for help.  Sixteen million are so poor they have skipped meals or foregone food at some point in the last year.  This is the highest level since statistics have been kept.  Source:  US Department of Agriculture, Economic Research Service.

Middle Class Going Backward: Facts

One or two generations ago it was possible for a middle class family to live on one income.  Now it takes two incomes to try to enjoy the same quality of life.  Wages have not kept up with inflation; adjusted for inflation they have lost ground over the past ten years.  The cost of housing, education and health care have all increased at a much higher rate than wages and salaries.  In 1967, the middle 60 percent of households received over 52 per cent of all income.  In 1998, it was down to 47 per cent.  The share going to the poor has also fallen, with the top 20 per cent seeing their share rise.

A record 2.8 million homes received a foreclosure notice in 2009, higher than both 2008 and 2007.  In 2010, the rate is expected to be rise to 3 million homes.  Sources: Reuters and RealtyTrac. 

Eleven million homeowners (about one in four homeowners) in the US are “under water” or owe more on their mortgages than their house is worth.  Source: “Home truths,” The Economist, October 23, 2010.  

For the first time since the 1940s, the real incomes of middle-class families are lower at the end of the business cycle of the 2000s than they were at the beginning.  Despite the fact that the American workforce is working harder and smarter than ever, they are sharing less and less in the benefits they are creating.  This is true for white families but even truer for African American families whose gains in the 1990s have mostly been eliminated since then.  Source: Jared Bernstein and Heidi Shierholz, State of Working America.

Rich Getting Richer: Facts

The wealth of the richest 400 people in the US grew by 8 per cent in the last year to $1.37 trillion.  Source: Forbes 400: The super-rich get richer, September 22, 2010, Money.com 

The top Hedge Fund Manager of 2009, David Tepper, “earned” $4 billion last year.  The rest of the top ten earned: $3.3 billion, $2.5 billion, $2.3 billion, $1.4 billion, $1.3 billion (tie for 6th and 7th place), $900 million (tie for 8th and 9th place), and in last place out of the top ten, $825 million.  Source: Business Insider.  “Meet the top 10 earning hedge fund managers of 2009.”

Income disparity in the US is now as bad as it was right before the Great Depression at the end of the 1920s.  From 1979 to 2006, the richest 1 per cent more than doubled their share of the total US income, from 10 per cent to 23 per cent.  The richest 1 per cent have an average annual income of more than $1.3 million.  For the last 25 years, over 90 per cent of the total growth in income in the US went to the top 10 per cent earners – leaving 9 per cent of all income to be shared by the bottom 90 per cent. Source: Jared Bernstein and Heidi Shierholz, State of Working America.   

In 1973, the average US CEO was paid $27 for every dollar paid to a typical worker; by 2007 that ratio had grown to $275 to $1.  Source: Jared Bernstein and Heidi Shierholz, State of Working America.

Since 1992, the average tax rate on the richest 400 taxpayers in the US dropped from 26.8 per cent to 16.62 per cent.  Source: US Internal Revenue Service.

The US has the greatest inequality between rich and poor among all Western industrialized nations and it has been getting worse for 40 years.  The World Factbook, published by the CIA, includes an international ranking of the inequality among families inside of each country, called the Gini Index.  The US ranking of 45 in 2007 is the same as Argentina, Cameroon, and Cote d’Ivorie.   The highest inequality can be found in countries like Namibia, South Africa, Haiti and Guatemala.  The US ranking of 45 compares poorly to Japan (38), India (36), New Zealand, UK (34), Greece (33), Spain (32), Canada (32), France (32), South Korea (31), Netherlands (30), Ireland (30), Australia (30), Germany (27), Norway (25), and Sweden (23).  Source: CIA The World Factbook:

Rich people live an average of about five years longer than poor people in the US.  Naturally, gross inequality has consequences in terms of health, exposure to unhealthy working conditions, nutrition and lifestyle.  In 1980, the most well off in the US had a life expectancy of 2.8 years over the least well-off.  As the inequality gap widens, so does the life expectancy gap.  In 1990, the gap was a little less than 4 years.  In 2000, the least well-off could expect to live to age of 74.7 while the most well off had a life expectancy of 79.2 years.  Source: Elise Gould, “Growing disparities in life expectancy,” Economic Policy Institute.
Conclusion

These are extremely troubling facts for anyone concerned about economic fairness, equality of opportunity, and justice.

Thomas Jefferson once observed that the systematic restructuring of society to benefit the rich over the poor and middle class is a natural appetite of the rich. “Experience declares that man is the only animal which devours his own kind, for I can apply no milder term to…the general prey of the rich on the poor.”  But Jefferson also knew that justice can only be delayed so long when he said, “I tremble for my country when I reflect that God is just, that his justice cannot sleep forever.”

The rich talk about the rise of socialism to divert attention from the fact that they are devouring the basics of the poor and everyone else.  Many of those crying socialism the loudest are doing it to enrich or empower themselves.  They are right about one thing – there is a class war going on in the US.  The rich are winning their class war, and it is time for everyone else to fight back for economic justice. 

Bill Quigley is Legal Director of the Center for Constitutional Rights and professor of law at Loyola University New Orleans. You can reach him atquigley77@gmail.com

By BILL QUIGLEY

Fair play: Monkeys share our sense of injustice

-Fran De Waal

HOW often have you seen rich people take to the streets, shouting that they're earning too much? No, I thought not. Protesters are typically blue-collar workers yelling that the minimum wage has to go up, or that their jobs shouldn't go overseas. No really, although they should, see Value and cutlure article Lately, however, we have been hearing a new chorus, exclaiming that none of those fat cats on Wall Street or the City should be compensated for bad behaviour. No golden parachutes for those greedy bloodsuckers!

Concern about fairness is always asymmetrical (stronger in the poor than the rich), and the underlying emotions aren't half as lofty as the ideal itself. It is true to say that our sense of fairness seldom transcends self-interest, that it is seldom concerned with something larger than ourselves. Look at how it starts in life. Children react to the slightest discrepancy in the size of their slice of pizza compared to their sibling's. Their shouts of "That's not fair!" never transcend their own desires.

Currency Wars and Accounting Identities

When Dishonesty is the Price of Admission

By DEAN BAKER

There are few areas of economics more boring than accounting identities. This is really unfortunate, since it is virtually impossible to have a clear understanding of economic policy without a solid knowledge of the underlying identities.

Most of the people in Washington policy debates were apparently overcome by boredom before they could get this knowledge. As a result we see some really silly policy debates.

The debate over the value of the dollar against the Chinese yuan is the latest episode in this silliness. The Washington tribal elite has been on the warpath against budget deficits in recent months. They have worked themselves into such a frenzy that nothing will stand in their way: not concerns about unemployment, not concerns about the well-being of our elderly, and not even concerns about basic economic logic.

More Black Americans jobless

The US economy shed 95,000 jobs in September, according to the latest figures from the US labour department. The fall was almost double the previous month's losses.

While the percentage of unemployed Americans remained unchanged at 9.6 per cent, the jobs crisis has had a devastating impact on minority groups, particularly African Americans.

Al Jazeera's Rob Reynolds visted an employment training center in Los Angeles to hear from those affected first-hand

link to video

Obama unveils infrastructure plan

Barack Obama, the US president, has unveiled an ambitious plan to revamp US transport infrastructure in a bid to kickstart the country's ailing economy ahead of forthcoming mid-term congressional elections.

Obama is expected to face intense pressure over the economy in the run-up to the November 2 election, which could see his Democratic Party lose control of Congress under a barrage of Republican criticism.

The $50 billion plan, which was formally announced by Obama on Monday, outlines improvements to the US road system, an acceleration of high speed rail projects, and establishes a centralised "Infrastructure Bank" to coordinate planning and funding the projects.

It targets rebuilding 240,000 kilometres of roads, adding 6,400 kilometres of rail and replacing 240 kilometres of airport runway. The plan is designed to answer critics who have said the American highway network is in poor condition and to create jobs at a time of high unemployment in the US. Almost one in ten Americans out of work and the economy shedding jobs every month.

When McDonald's is Doing more to Help People than....you know its bad.

Unemployment Grows in US

WASHINGTON (AP) -- New applications for unemployment insurance reached the half-million mark last week for the first time since November, a sign that employers are likely cutting jobs again as the economy slows.

The Labor Department said Thursday that initial claims for jobless benefits rose by 12,000 last week to 500,000, the fourth increase in the past five weeks. Wall Street economists forecast that claims would drop.

The four-week average, a less volatile measure, rose by 8,000 to 482,500, the highest since December. There were no special factors that distorted the numbers, a Labor Department analyst said.

France Urged to Repay $40 Billion "Independence Debt" to Haiti

A group of prominent academics and activists, including Noam Chomsky and Naomi Klein, have published an open letter in the French newspaper Libération calling on France to repay an "independence debt" it imposed nearly 200 years ago after Haiti successfully won independence from France. The appeal to the French president Nicolas Sarkozy says the debt could help cover the rebuilding of the country after a devastating earthquake that killed more than 250,000 people seven months ago. The Montreal-based journalist Isabel Macdonald helped draft the letter.

Isabel Macdonald: "With 1.6 million Haitians still homeless seven months after the earthquake, it’s really vital that we recognize that not only are Haitians owed aid money by the West, they are also owed tens of billions of dollars in restitution. This is because Haitians were forced to pay the French government 90 million gold francs, a sum that amounts, according to some analysts, to $40 billion US today, adjusting for inflation and a minimal interest rate, as compensation for the lost property of former French slave owners."

The letter is being published at a time when the international community is coming under increasing criticism for failing to send aid money pledged at the international donors’ conference in March. According to the UN-sponsored Haiti Reconstruction Fund, only two countries—Brazil and Estonia—have paid the fully pledged amount, while the United States, France, Canada and others have failed to send their pledged aid to Haiti.

An open letter to French President Nicolas Sarkozy

The French government has indicated that it is pursuing possible legal action against the Committee for the Reimbursement of the Indemnity Money Extorted from Haiti (CRIME) over a Yes Men-inspired announcement last Bastille Day pledging that France would pay Haiti restitution. 

Dozens Injured in Massive Turnout for Subsidized Housing in Georgia

And in Georgia, a chaotic mob scene unfolded Wednesday at an East Point shopping mall where some 30,000 people turned out to be placed on a wait list for government-subsidized housing. Witnesses say the overwhelming numbers, lack of coordination and the scorching summer heat led to fights amongst line-goers and standoffs with police. A number of people were treated for dehydration, and some sixty-two people were injured. It was the first time the East Point Housing Authority had offered the housing applications since 2002.

Wells Fargo Ordered to Repay Customers for Overdraft Fees

A federal judge in California has ordered the banking giant Wells Fargo to change its policies on overdraft fees and return $203 million to customers who overpaid. In his ruling, US District Judge William Alsup said Wells Fargo had engaged in "profiteering" and "unfair and deceptive business practices" that led customers into paying excessive fees. Wells Fargo drove up fees by processing the most expensive transactions first, instead of in the order of when they took place

Wheat Supplies and Food Fears

	August 9, 2010

As the Russian landscape burns and Eurasia's agricultural zone sizzles in a record heat wave, the agricultural commodities markets are threatening to spawn a food crisis akin to the one in 2008. Mixed signals regarding the size of the global wheat supply and the likely impact of Russian Premier Vladimir Putin's August 4 decision to halt all exports of the grain from Russia for the rest of 2010 are leading to concerns that price inflation in the wheat market could usher another food crisis. The shortage in 2008 left hundreds of millions of people worldwide unable to afford basic foodstuffs, aggravating the overall impact of the later global financial crisis upon poor countries.

A key lesson of 2008 is that volatile global financial markets can result in food commodity price speculation that has dire consequences for the world's poorest. The inflationary trend that slammed poor countries in early 2008 began with a slow but steady rise in commodity trading prices in early 2007. By the summer of 2007, the overall volume of trading on the U.S. food commodities markets had skyrocketed to record levels, signaling that large investors recognized weaknesses in the stock and real estate markets and were seeking safer havens. The result was a phenomenal escalation, not only in the volume of food commodity investment, but also in trading prices.

The Nation: We Have Yet to See The Biggest Costs of the BP Spill

Raj Patel
We’re almost at the happily-ever-after stage of the Gulf oil spill story. The well has been killed, the beaches are being scrubbed and wicked Tony Hayward has been banished to Russia. All that’s left now is for BP to make good on the damage it has caused. The company has set aside $32 billion to meet its liabilities, while doing everything in its power to keep the damages below that figure. But even if it has to pay the full price, it will have won one of the biggest bargains in corporate history. BP’s true debt is far higher than any of the figures that have been floated to date. The biggest costs to the Gulf have yet to be seen.

It was clear early on that BP was as committed to engineering the public perception of the spill as it was to cleaning it up. Soon after launching its clean-up operation, BP banned photographers from taking aerial shots of the slick, citing “safety precautions.” Similar methods continue to be used to prevent media access to key sites, and in its own press releases, BP has doctored photos to make its clean-up efforts appear more strenuous.