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Bear Country - Hard Times Getting Worse
By Stephen Lendman
8-20-11
 
Financial markets provide early signals of future economic conditions, good or bad. Currently, they're flashing red.
 
On August 19, economist David Rosenberg reported the bad news about major world stock markets in bear territory, including Germany, France, Italy, Spain, Netherlands, Switzerland, Russia, Belgium, Portugal, India, and others heading there, including Japan, China and America.
 
They signal hard times getting worse, what Main Street Americans knew since 2008, mired in Depression. Tipping points for others now are evident. Low bond yields when financial stocks crashed are "classic sign(s) of (further) credit contraction."
 
Mortgage rates also hit a record 4.17% low. Even so, "existing home sales collapsed at a 17% annual rate so far in 2011," providing more proof of America's greatest ever housing Depression, or as Rosenberg put it:
 
"The housing market is completely broken....in a full-fledged depression and will likely take at least another two years before" bottoming. Even then, recovery will be slow.
 
In fact, credit demand, tougher lending rules, homeownership, and cyclical spending "are undergoing a profound shift." Household frugality and force-fed government austerity created "a potent deflationary (Depression) brew."
 
It explains "why Treasury yields are....melting like an ice cube on a Houston sidewalk" in summer. Counterintuitively, however, it's happening at the same time inflation is hammering food, medical costs, college tuitions, transportation, and until oil prices recently fell, gasoline and other forms of energy.
 
At the same time, consumer and business sentiment are plummeting, the latter falling five of the last six months from 113.4 in February to 24.2 currently, its lowest level since February 2009. In addition, new Gallop poll figures show only 26% of Americans approve of the way Obama is handling the economy at a time growing numbers of Americans disapprove of him overall.
 
Given his public trust betrayal during deepening hard times, it's surprising why any support remains, except among those he enriched at the expense of all others.
 
Rosenberg also noted how the Philadelphia Fed Index (a reading of general business conditions covering the Philadelphia, New Jersey and Delaware region) crashed to - 30.7. In fact, all its components were negative, what he called "a one-in-10 event," signaling worse to come nationwide.
 
"I can hear the fat lady singing," he said, adding: "Isn't it incredible how so many folks are still in denial?"
 
Despite his responsibility for deepening worker pain, Obama's three-day bus tour feigned concern for lack of jobs and economic conditions when his policies harmed, not helped.
 
Yet in boilerplate stump speeches, he said, "I'll be putting forward, when they come back in September, a very specific plan to boost the economy, to create jobs, and to control the deficit," incomprehensively conflating budget cutting austerity with stimulus.
 
It shows what contempt he and Congress have for workers when they most need help. On his watch, real unemployment reached almost 23%. Over 25 million have no jobs. Most others have low-pay, poor (if any) benefit temporary or part-time ones.
 
An entire generation of young people, including college grads, has little hope of decent jobs and careers. Bipartisan complicity threw them overboard to wage wars and dole favors on corporate crooks who line politicians' pockets generously in return.
 
Yet, on August 16, a New York Times editorial fronted for Obama, headlining: "His Anger Is a Start," saying:
 
Obama got nothing "but a cold shoulder," trying to bargain with Republicans. Now, touring rural midwest cities (not troubled big ones that might run him out of town), he's confronting "his opponents for their refusal to consider any new revenues to tackle the the deficit and their insistence on deep near-term spending cuts that will only cause more economic pain. His anger is long overdue."
 
Fact check:
 
Last December, Obama surrendered to Republicans on tax cuts for rich Americans, sweetening the deal with nearly a trillion dollars of corporate and other handouts, almost entirely shutting out working people.
 
Later, he proposed his own social benefit cuts, heavily impacting Medicare, Medicaid, and other vitally needed programs, promising more to come.
 
Public anger is long overdue. An uber-hawk conservative elitist, his is duplicitous, loathsome and repulsive, politically directed to win votes based on rhetoric, not good government.
 
In fact, under his leadership, incestuous extremism hit new highs, showing the political bankruptcy of America's ruling class, governing like crime bosses, not legitimate leaders, their ugly agenda destroying social America.
 
On August 15, mainstream economist Nouriel Roubini asked, "Is Capitalism Doomed?" saying:
 
"A financial and economic crisis caused by too much private-sector debt and leverage led to a massive re-leveraging of the public sector." Corporate profits recovered, not working households.
 
Now a combination of problems threatens much greater trouble. "Even fast-growing emerging markets (and) export oriented economies" relying on them "are experiencing sharp slowdowns."
 
"Until last year, policymakers could (pull) new rabbit(s) from their hat(s) to reflate asset prices" and corporate profits. "Now they have run out of rabbits."
 
"So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct."
 
Cutting jobs to lower costs reduces demand. It also lowers income, increases inequality, and ignites anger. Working households are affected, including the fast disappearing middle class, "feeling the squeeze of falling incomes and opportunities."
 
Today's economic model is dysfunctional. Returning to "the right balance between markets and" public good is essential. It needs social safety net protections and job creation through "fiscal stimulus aimed at productive infrastructure investment. It also requires more progressive taxation, (as well as) breaking up too-big-to-fail banks and oligopolistic trusts" to stop systemic self-destruction.
 
"The alternative is....unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability."
 
Yet political Washington's policies produced this combustible mix, heading America for an inevitable train wreck they're too brain-dead to recognize or shift gears to prevent.
 
Indeed Marx was right calling free-market capitalism anarchic and ungovernable. Alienating working people, it prevents a humane society, producing instead class struggle between haves and have-nots.
 
He predicted what's clear today. Unrestrained competition over time produces a handful of winners. Powerful oligopolies or monopolies end up controlling production, commerce and finance. Exploitation increases, producing growing depravation.
 
Crises erupt. Booms create bubbles, busts, then Depressions. Eventually fed up workers react. Recognizing their collective power, they replace a dysfunctional system with a self-managed one - a socialist revolution based on greater freedom, inclusion and equality.
 
Systemic contradictions have a way of resolving themselves. They either implode on their own or through uncontainable revolt. Either way they end.
 
Hard-line political Washington hastens either outcome. Sound alternatives, not taken or considered, could prevent it. As a result, the worst is yet to come.
 
Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.
 
Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.
 
http://www.progressiveradionetwork.com/the-progressive-news-hour/.
 
 
 
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