cross posted in orange
As you all know it's election season, and for that reason I am advised by some Democrats to shut up about the dire issues of the day that all of Washington D.C are failing all of us on. They say to wait until they don't have to care about us or these issues. By that time they will be on their way to "sequestering" and slashing Social Security and Medicare in their sellout grand bargains. They say unless good words are heard our President can't spread his wings and fly like a bird on to victory in 2012.
I think that the President will probably win regardless of what I say or do on a blog; that is probably true but mainly because a small percentage of voters are voting for Mitt Romney for Mitt Romney instead of just casting a vote against this President. Mitt Romney doesn't really have much to campaign on, in a campaign on Bain he set forth himself. You can find important insight on these matters in Cassiodorus's accurate diary which also questions the overall Mitt Romney focus and its purpose.
So that begs the question as to why can't more of us talk about something other than Mitt Romney? Why can't some of us point out that there is no real economic debate in this presidential campaign like there hasn't been for the past few years in Washington D.C? It's why Congress has single digit approval ratings. After all, whether we want to talk about it or not, the public knows it and has been paying attention in some fashion.
"Despite months of negative advertising from Mr. Obama and his Democratic allies seeking to further define Mr. Romney as out of touch with the middle class and representative of wealthy interests, the poll shows little evidence of any substantial nationwide shift in attitudes about Mr. Romney. "
It's important to try to talk about the only real solutions to this deflationary spiral, mortgage, and foreclosure crisis. It's going to be here after the election and balancing the budget and austerity for a fake crisis is like spitting in the face of these voters. When are we going to stop talking about public debt? We're not talking about the real deficit crisis at all via debt deflation 101.
And so it needs to be pointed out how bleak the real economic situation is regardless of whether there is a presidential campaign or not. The unemployed and their suffering do not wait in the era of net jobless recoveries; not even for polished up stats that really do nothing to make them feel better and why should they? Yves Smith shows this is the case.
While the result may indeed be a technical recovery, with official unemployment at over 8%, and U-6, the broad measure of unemployment, showing more deterioration of late than the headline figure (it’s now at 14.9%), there was hardly much cause for cheer. Both in 2010 and 2011, improvements in economic performance that were hailed as real recoveries faltered. With youth unemployment high, working young adults saddled with high student debt loads, household formation low due to more multi-generational households and older adults contending with diminished wealth thanks to hits to home prices and retirement savings, consumers were not able to be the drivers of renewed growth unless their wage and employment situation improved in a marked fashion. And that just isn’t happening.
Nouriel Roubini is predicting 1.2% growth at best for the second quarter. Ed Harrison pointed out on his Credit Writedowns Pro service that manufacturing ex autos is already in recession and that inventory building on the basis of the expectation of continued demand is the only thing that is keeping the US out of an actual recession. We’ve had falling disposable income with households initially treated as a blip (they went into savings and/or increased credit card debt). But as Ed also points out, without a change in incomes, you eventually see the decline translate into a fall in retail sales. And that’s where we seem to be now.
The way out of it would be to have government spending make up the slack. but that remains anathema; indeed, DC is fighting over how much to blunt the impact of the so called fiscal cliff, the cut in stimulus that will result if Bush tax cuts and recessionary spending measures expire at the end of 2012. Even if the full 3-5% GDP hit is forestalled (my tax mavens point out that large sections of the tax code are renewed each year, so the drama may be a tad overplayed), the continued talk of a Grand Bargain suggests that bloodletting from an already weakened patient is still on. And this cheery scenario of course does not consider the big uglies lurking in the wings, like a Eurozone crisis of some sort (Creditanstalt 2.0) or an attack on Iran (even with a new pipeline reducing the importance of the Strait of Hormuz, it’s still an important choke point, and Saudi refineries are also within striking distance of Iranian missiles).
About this fiscal cliff coming up, many of us here predicted the Bush tax cut sellout would keep coming back to bite us, but so many deluded themselves into thinking that was a good deal. It wasn't. It led to the debt ceiling debacle and the Grand Bargain and it's sequestration which will trigger a 1. 2 trillion spending cut domestically and on defense(supposedly).
In times of low demand, and debt deflation, this was the stupidest outcome to an entirely predictable debacle we were all told would never happen. It was a complete failure of leadership all around. Had the President and Congress had any brains on this matter they would have listened to James K. Galbraith and stated truthfully and emphatically that the debt ceiling is unconstitutional, period. It is. These are facts.
We're in a summer that only Salvador Dali could paint, a reality so twisted that one almost yearns for the simple verities of the War on Terror or even the invasion of Iraq. Then as now, to be serious one must be a "hawk." (The dove is a weakling, a loser, and the owl for practical purposes does not exist.) So let's review some of the strange and mysterious faces of this ugly, vicious bird.
The debt ceiling was first enacted in 1917. Why? The date tells all: we were about to enter the Great War. To fund that effort, the Wilson government needed to issue Liberty Bonds. This was controversial, and the debt ceiling was cover, passed to reassure the rubes that Congress would be "responsible" even while the country went to war. It was, from the beginning, an exercise in bad faith and has remained so every single second to the present day.
Today this bad-faith law is pressed to its absurd extreme, to force massive cuts in public programs as the price of not-reneging on the public debts of the United States. Never mind that to force default on the public obligations of the United States is plainly unconstitutional. Section 4 of the 14th amendment says in simple language that public debts, once duly authorized by law and including pensions, by the way, "shall not be questioned." The purpose of this language was to foreclose, to put beyond politics, any possibility that the Union would renege on debts and pensions and bounties incurred to win the Civil War. But the application is very general and the courts have ruled that the principle extends to the present day.
The fact that we are going through this again and will be every two years shows that politicians don't know what they are talking about on any matters related to debt historically or today. This was pointed out by Matthew O'Brien of the Atlantic referencing a chart from Global Financial Data on 10 year bold yields over the years.
Remember when the U.S. was supposed to face a fiscal crisis within two year's time? That was a year and a half ago. Well, markets apparently haven't gotten the memo. Borrowing costs are at an all-time low. As in, they have never been lower going back to 1790.
And this isn't a story about reserve currency status, either. Every advanced country that can print its own money -- and even some that can't -- have seen their bond yields fall to levels that would have been mostly unthinkable over the past century. The chart below, from Global Financial Data (via Barry Ritholtz), shows the borrowing costs for the U.S. (red), Spain (purple), Switzerland (pink), France (light blue), and Japan (orange) since 1900.
The psychological scars of the Great Recession are still with us four years on. Investors just want a mattress to stuff their cash into. Nowadays, we call mattresses "government bonds". Here's the basic idea: Countries that can print money should always give you your money back. They can't default, unless they want to. And with inflation at eighty-year lows, that's not much of a concern either.
It's nice to see the Atlantic pointing out some Monetary reality everyone in Congress and this Presidential campaign and their fake long term fiscal crisis know nothing about. Its embarrassing, and unlike a lot of what I read out there, this actually matters. It hurts people.
I call this deficit terrorism for a good reason; it is. After all, it wasn't always a dynamic where children went homeless in this country and that can be directly tied to austerity. IT can also be tied to injustice in not throwing the bankers out, but throwing the families who were defrauded by the bankers out. No substantial principal write downs for these families either, because we are told by this administration they were "irresponsible" and not "savvy" like Jamie Dimon who lost over 5 billion dollars recently.
I also don't expect Justice for all the players in the huge LIBOR manipulation scandal from our DOJ or the municipal bond auction rate rigging. I can only hope the cities taking legal action have more initiative than AG Eric Holder. We all know about the sham of a foreclosure settlement buying Schneiderman off for the bankers in the ultimately non existent mortgage task force too.
Yes none of these financial Robber barons pay for anything in what we know as America these days, but guess who does?
After hurricanes Katrina and Rita hit in 2005, advocates for the homeless were horrified to find that the storms had left one in 50 American kids without a home, a record high, according to a report by the Coalition for Family Homelessness. But only a few years later the financial crisis outperformed nature in casting catastrophe on poor Americans. After record foreclosures, layoffs and budget cuts that hit poor families the hardest, America is a country where one out of 45 kids doesn't have a home. That totals 1.6 million children in 2010 without a permanent place to live, an increase of 448,000 in just three years. Forty percent of the kids are under 6.
"As a society, we bear responsibility for creating this second disaster and for responding to its aftermath," concludes the report, before detailing how many states fall short in working to prevent family homelessness and in taking care of families who've lost their homes.
An interesting fact about family homelessness: before the early-1980s, it did not exist in America, at least not as an endemic, multi-generational problem afflicting millions of poverty-stricken adults and kids. Back then, the typical homeless family was a middle-aged woman with teenagers who wound up in a shelter following some sort of catastrophic bad luck like a house fire. They stayed a short time before they got back on their feet.
In the 1980s, family homelessness did not so much begin to grow as it exploded, leaving poverty advocates and city officials stunned as young parents with small children overwhelmed the shelter system and spilled into the streets. In New York City, the rate of homeless people with underage kids went up by 500 percent between 1981 and 1995. Nationally, kids and families made up less than 1 percent of the homeless population in the early 1980s, according to advocate and researcher Dr. Ellen Bassuk. HUD estimates put the number at 35 percent of people sleeping in shelters in 2010.
Austerity has multiplied child homelessness x 35. Oh yes, let's get that fiscal house in order. Let's suck income and assets out of the private sector during what many are calling a depression because underneath the hood income inequality is on par with the great Depression. The children suffering from all of this are terrified.
That is why I call all of this talk about balancing the budget while people are unemployed deficit terrorism, plain and simple. It matters not if one just wants to close their eyes or not learn about our fiscal and monetary system while treating bond vigilantes and confidence fairies as real while playing the board game, "I love the 90s." It's NOT the 90s. We're in economic hell.
That has a human cost. Humans suffering are tantamount to idle resources wasting away. That is the crisis. That is what we can't get back. That's what they don't want to talk about in Washington D.C at all. This is why Occupy can't go away and must not go away. No one is paying attention to this except for them.