Michael Hudson, interviewed by Paul Jay for the Real News, argues that the Fed’s QE3 is shoveling money to the banks not meant to create jobs, but a way to give banks even more speculative capital and prepare them for another meltdown:
from the transcript:
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington.
Most central banks around the world preach fiscal discipline. Inflation is their biggest concern. And even when they do enter into some stimulus policies, the final objective is still the issue of lowering debt. Well, one central bank in the world apparently has a growth agenda, and that’s in Argentina.
Now joining us to talk about this is John Weeks. John just was in Argentina not very long ago. He’s a professor emeritus at the University of London School of Oriental and African Studies. He’s the author of the book Capital, Exploitation and Economic Crisis. He runs JWeeks.org. And he now joins us again from London. Thanks, John.
JOHN WEEKS, PROFESSOR EMERITUS, UNIV. OF LONDON: Thank you.
JAY: So what did you make of what the central bank’s doing in Argentina?
WEEKS: It’s tremendously important, because in the 1990s Argentina was the epitome of a neoliberal monetary policy. It had something called a currency board, and that currency board involves taking the foreign exchange you hold, which is, in the case of Argentina, dollars, and that your domestic money supply is rigidly tied to the amount of dollars you hold. Of course, the amount of dollars you hold is a result of your imports and exports, the balance between the two, and so in effect you have no independent monetary policy. And it tended to be quite deflationary, that is, it tended to cause not only very low inflation, but actually negative rates, and also very slow growth.
At the end of the 1990s, the disaster that that policy had inherent in it was realized, and in 2001 and 2002 Argentina could no longer maintain that policy, because what it meant, basically, is that if you began to lose dollars because you were—Argentina was running a trade deficit, it meant you had to contract the economy, because you had to take your domestic currency out of circulation, more and more of your domestic currency out of circulation. And that led initially to a severe recession in the economy. When that could no longer be maintained and they temporarily went off the currency board, you had hyperinflation for a year.
Okay. The current government of Cristina Fernández has repudiated that policy. They have introduced a new central bank law (they had actually been practicing it, but they formalized it in this last March, just two months ago) which completely ends the currency board regime and replaces it with a central bank that facilitates a growth-oriented policy of the government. And it also is concerned about inflation, but inflation no longer becomes a constraint, the tail that wags the whole dog.
Paul Jay says until police and their political masters are held responsible under the criminal code, it can all happen again:
from the transcript:
It’s been two years since the Toronto G-20, two years since more than 1,000 people were arrested, hundreds of them brutally clubbed and violently assaulted by police. There’s been a series of reports looking into the police activities. First the Ontario Ombudsman issued a report. Then there was a civilian report looking into the activities of the RCMP, then the Ontario Independent Police Review Director, and now the Independent Civilian Review into matters relating to the G-20 summit—that’s the report issued by the civilian oversight board responsible for the Toronto Police.
Now that all the reviews and reports are in, the question remains: have people responsible been held accountable? And can it all happen again?
But before we dig into all of that, let’s remind ourselves what the G-20 was all about. Let’s take one more look at the big picture.
The 2010 G-20 in Toronto was a declaration by the global governing elite that the economic crisis, largely triggered by banks and financial institutions, would be paid for by ordinary people everywhere. It was also a declaration that force and the violation of basic civil rights would be used against those who protest and resist bearing the consequences of a crisis they didn’t cause. The more than 1,000 arrests at the Toronto G-20 was a statement by the governments of Canada, Ontario, and Toronto that mass protest would be met by mass arrests.
As I pointed out in a previous report, the missing words in the G-20 declaration were higher taxes on the wealthy and higher wages for workers—both obvious solutions to the stated goal of fighting deficits and dealing with a serious lack of demand in the economy.
What the G-20 leaders did agree to was this: “[The] advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016″—we know that means cuts to pensions/social services and other austerity measures. We see this plan being played out across Europe and North America and other countries. The arrests at the G-20 were made in defense of this global strategy.
And now reports from the Ontario Independent Police Review Director and the Ontario Ombudsman have made it clear: the police services responsible during the G-20 violated citizens’ right to free assembly and used excessive force in doing so.
Krugman wipes the floor with the two pro-austerity guests:
And the segment where Krugman detailed his view of the current situation to the BBC host:
UPDATE: There was another segment with Paul Krugman and an ex finance minister of Greece. It’s at the 6 minute mark:
And here’s the entire BBC program:
As I have pointed out previously, one of the cherished right-wing claims – that there is no poverty in America or what poverty exists is negligible – is a fantasy.
Yesterday, the US Census Bureau released the 2010 figures on poverty in America (the full report can be found here). This is significantly more recent than the 2007 pre-Lesser Depression data used by the right-wing Heritage Foundation in its own report on poverty.
The data is depressing. The Census Bureau summarizes:
The U.S. Census Bureau announced today that in 2010, median household income declined, the poverty rate increased and the percentage without health insurance coverage was not statistically different from the previous year.
Real median household income in the United States in 2010 was $49,445, a 2.3 percent decline from the 2009 median.
The nation’s official poverty rate in 2010 was 15.1 percent, up from 14.3 percent in 2009 ─ the third consecutive annual increase in the poverty rate. There were 46.2 million people in poverty in 2010, up from 43.6 million in 2009 ─ the fourth consecutive annual increase and the largest number in the 52 years for which poverty estimates have been published.
In other words, there are 2.6 million more people in poverty today than a year ago. That’s two million, six hundred thousand people. And for the rest, the median income has actually declined. That certainly qualifies as evidence for the death of the American worker.
As has been reported virtually everywhere, the Bureau of Labor Statistics’s August jobs report is out. It sucks:
Nonfarm payroll employment was unchanged (0) in August, and the unemployment rate held at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major industries changed little over the month. Health care continued to add jobs, and a decline in information employment reflected a strike. Government employment continued to trend down, despite the return of workers from a partial government shutdown in Minnesota.
The number of long-term unemployed (those jobless for 27 weeks and over) was about unchanged at 6.0 million in August and accounted for 42.9 percent of the unemployed.
Even more fun:
In August, average hourly earnings for all employees on private nonfarm payrolls decreased by 3 cents, or 0.1 percent, to $23.09. This decline followed an 11-cent gain in July. Over the past 12 months, average hourly earnings have increased by 1.9 percent. In August, average hourly earnings of private-sector production and nonsupervisory employees decreased by 2 cents, or 0.1 percent, to $19.47.
This in a time when, via the Center for Economic and Policy Research, “the the U.S. economy is currently short about 10 million jobs (14 million using a less conservative estimate).”
The relevant post on the White House blog by Katharine Abraham led with, “Today’s employment report shows that private sector payrolls increased by 17,000 and overall payroll employment was flat in August.”
See that? They picked the figure that increased, put it first, and rendered it numerically. For the real number, they described it in terms of an abstract metaphor.
The White House blog post finishes:
The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision. Therefore, as the Administration always stresses, it is important not to read too much into any one monthly report.
Yeah, those figures do tend to get revised. Downward.
This isn’t a big deal or anything, but I take it as symptomatic of a larger underlying condition. You remember how the Obama campaign used to be the group that spoke the truth? How Obama himself was able to say in public that in times of hardship, when people got bitter, they “cling to guns or religion”?
No more of that. He and his advisors have certainly acclimated to their new environment. “To our most valiant brother,” says Shakespeare’s Claudius, “So much for him.” Insert your own Obama-Hamlet comparison at your leisure.
The employed work multiple jobs to stay afloat (slightly less in 2010 than 2009, but I do not know what the figures are/will be for 2011), and businesses try to only hire the employed or recently unemployed. The result is to create a class of long-term unemployed with few prospects.
The Downward Spiral blog summarizes the current state of the Lesser Depression succinctly:
Now it is finally conformed: the recession that began in 2008 never ended. Trillions of dollars were borrowed and spent by the federal government that merely bought us a couple of years of stabilization before the crash resumed. Don’t give me any guff about how it’s not “officially” a recession unless we experience two consecutive quarters of negative GDP. First of all, as I’ve written before, without the insane levels of federal deficit spending, GDP levels would still be deeply in the red. Secondly, all of that nonsense about a “jobless recovery,” was just that–nonsense. Without jobs, people don’t earn money, hence they cannot go to the mall and spend, hence our consumer based economy cannot grow. It’s as simple as that.
No telling what next month’s figures will be, of course. But given that reports of consumer spending’s health in July were somewhat exaggerated, and worldwide industry is taking a sharp turn for the down, my general belief is that, perhaps, the market cannot continue to go up indefinitely.
Here we go again?
From the NY Times:
The United States is in the grips of its gravest jobs crisis since Franklin D. Roosevelt was in the White House. Lose your job, and it will take roughly nine months to find a new one. That is off the charts. Many Americans have simply given up.
But unless you’re one of those unhappy 14 million, you might not even notice the problem. The budget deficit, not jobs, has been dominating the conversation in Washington. Unlike the hard-pressed in, say, Greece or Spain, the jobless in America seem, well, subdued. The old fire has gone out.
In some ways, this boils down to math, both economic and political. Yes, 9.2 percent of the American work force is unemployed — but 90.8 percent of it is working. To elected officials, the unemployed are a relatively small constituency. And with apologies to Karl Marx, the workers of the world, particularly the unemployed, are also no longer uniting.
Nor are they voting — or at least not as much as people with jobs. In 2010, some 46 percent of working Americans who were eligible to vote did so, compared with 35 percent of the unemployed, according to Michael McDonald, a political scientist at George Mason University. There was a similar turnout gap in the 2008 election.
And this clueless bit:
Why populist anger over the poor economy is leaning right, rather than left, this time around is a bit of a mystery. Perhaps it is because Democrats, traditional friends of labor, control the White House and the Senate.
Clueless because the real issue is the corporate embrace of the Democratic party added to the fact the Republican party is 100% owned by companies like General Electric, Goldman Sachs, and their ilk. The 99% screwed in this economy have almost zero political representation. Not because that group doesn’t care (certainly a large number are demoralized). Rather it’s because the groups that supported the 99% have been methodically broken down (e.g. unions, offshoring jobs) while the media has been co-opted through mergers with giant corporations that could care less about normal people. And lobbying jobs and jobs in these giant corporations serve as landing places for politicians and their staffs, encouraging them to toe the line to grab their six or seven figure job post-politics. Read the rest of this entry »
Has anyone told the White House press corps about the economic downturn. We have 8.9 percent of the workforce unemployed, more than 8 million people unemployed who would like full-time jobs, and millions more who have given up looking for work altogether.
The reason is simple: there is not enough demand in the economy. When we cut government spending, there is less demand in the economy. As we used to say in intro econ class: Y = C+I+G+X-M. That means that GDP is equal to the sum of consumption, investment, government spending and net exports. If we cut government spending, then we have reduced demand, unless we think there are a lot of firms who will be inspired to hire people because the government is cutting back its spending.
Moody’s estimated that the original Republican plan for $61 billion in cuts would lead to a loss of 700,000 jobs. Goldman Sachs had a similar number. Since the final deal had a bit less than two-thirds of these cuts, the implication is that somewhat more than 400,000 workers will lose their jobs.
And the remarkable part of the story is that these newly unemployed workers are not even mentioned in the coverage in the NYT, the Post, or it seems anywhere else. Hey why ruin a great budget drama by talking about the people who will have their lives ruined?
The Obama administration has continued the fantasy of education as a solution to economic problems. Yet more evidence of this in a recent report refuting the idea that we need a whole slew of people trained in science and math and etc. Most of the actual jobs that are available are in the lowest paying and lowest skilled areas of the economy.
About 3.5 million of the jobs lost in the downturn were in high-wage industries, but fewer than 200,000 of the jobs created in the last year were in those same industries. Over half of the jobs created since the economy bottomed out were in the lowest-paying industries. . . .
“[T]he job opportunities currently available to workers have deteriorated compared to what was available before the recession.” The NELP data flatly contradict the idea that the economy is currently facing a structural “mismatch” where workers don’t have the skills that employers are demanding. The recession-related job losses were concentrated in high-wage industries and the new jobs have been in low-wage industries, leaving millions of workers from middle- and high-wage industries high and dry.
See also an earlier post of mine at Education Policy Blog about why education does not create jobs.