Archive for the ‘Economy’ Category

1971 – the year the USA started going downhill

July 14, 2022


I’ve posted versions of the chart above several times before.  It shows how American wages once grew along with growth in productivity, and how, around 1971 or so, wage-earners stopped benefitting from being more productive.  This fact about the U.S. economy explains a lot.

I saw an Internet post yesterday consisting of charts showing how many more kinds of things changed for the worse in 1971.  Economic inequality, the cost of living, inflation-adjusted wages—all got worse.

There are too many for me to copy and re-post, but here is a sample.


What happened in 1971?  The only major event I can think of is the Nixon administration’s decision to go off the gold standard.  From then, the U.S. dollar was redeemable not for gold or some other precious metal, but for U.S. Treasury bonds – in other words, IOUs.

Economist Michael Hudson has written books about how this decision allowed financiers and bankers to flourish and the U.S. military to finance its wars while the U.S. manufacturing economy faded away and living standards declined.

As much as I respect Hudson, it’s hard for me to believe that this one thing could have caused changes in so many different things so quickly.  Maybe it’s a tipping point caused by a lot of different things coming together at once.

(more…)

Michael Hudson explains what’s really going on

June 20, 2022

.

Michael Hudson is an economist whose books make clear how the United States exercises financial power over the whole world, and escapes the consequences of government budget deficits and balance of trade deficits.  In his most recent book, The Destiny of Civilization, he explains how the U.S. free ride may be coming to an end.

He laid all this out in the podcasts above.  He said the Biden administration is speeding up the inevitable U.S. decline.   Here’s an excerpt from the transcript: 

My job at Chase was to analyse basically the balance of payments of Third World countries and then of the oil industry.  I had to develop an accounting format to find how much does the oil industry actually makes in the rest of the world.  I had to calculate natural-resource rent, and how large it was.  I did that from 1964 till October 1967.  

Then I had to quit to finish my dissertation to get the PhD.  And then I developed the system of balance-of-payments analysis that actually was the way it had been calculated before GDP analysis.  I went to work for Arthur Andersen and spent a year calculating the whole U.S. balance of payments.  

That’s where I found that it was all military in character.  And I began to write in popular magazines like Ramparts, warning that America’s foreign wars were forcing it to run out of gold. That was the price that America was paying for its military spending abroad.

I realised as soon as it went off gold in 1971 that America now had a cost-free means of military spending.  Suppose you were to go to the grocery store and just pay in IOUs.  You could just keep spending if you could convince the owner, the grocer to use the IOU to pay the farmers and the dairy people for their products.  What if everybody else used these IOUs as money?  You would continue to get your groceries for free.

That’s how the United States economy works under the dollar standard, at least until the present.  This is what led China, Russia, Iran and other countries to say that they don’t want to keep giving America a free ride.  

These dollarized IOUs are being used to surround them with military bases, to overthrow them and to threaten to bomb them if they don’t do what American diplomats tell them to do.

(more…)

Ukraine war collateral damage and food prices

April 28, 2022

I’m stocking up on nonperishable food and other supplies in order to be prepared for scarcity this fall.

Both the fighting war and the sanctions war over Ukraine are disrupting world food supplies, and I think it can only get worse. Ukraine and Russia are important exporters of food, and also of diesel fuel, which is important in making fertilizer.

Food prices are already going up. Reasons for this include drought and floods in food-producing regions, disruption of supply chains due to the coronavirus pandemic and the power of monopoly agribusiness.

What this means is that there is no buffer to escape the disruption caused by war.

Maybe I’m wrong, but I have little to lose by being prepared. It is better to do too much than to learn the hard way I’ve done too little.

I also expect the war’s collateral damage to affect food prices, but there’s little I can do personally about that.

Russians will be affected by rising food and fuel prices, but both the USA and Russia have enough reserves and resources to avoid actual starvation.  The worst impact will be on poor small nations that depend in food imports. 

The price of wheat on world markets

(more…)

Ukraine is part of a broader three-way Cold War

April 15, 2022

The war in Ukraine is not just between Ukraine and Russia.  It is part of a larger three-way struggle between three rival imperialisms—the established imperialism of the USA and the rising imperialisms of China and Russia..

The struggle is not exclusively or even mainly a military struggle.  It is also a diplomatic and propaganda struggle.  But it is mainly an economic struggle.

The United States is the world’s most extensive military power and the world’s leading financial power.  Its aim is to keep on being the world’s only superpower—militarily, politically and financially.  Its means is threats of military intervention and financial sanctions.

Source: The Diplomat. Click to enlarge.

The People’s Republic of China is the world’s leading manufacturer and exporter.  Its aim is to dominate its immediate region politically and militarily and to become the world’s leading power economically.  The means is investing in physical infrastructure and human capital, and winning friends by offering economic benefits.  Its master plan is the Belts and Roads initiative, a system of infrastructure construction projects intended to weave together the economies of interior Eurasia.

Russia is less powerful than the USA or China, but it is an important producer of food, fuel and vital raw materials. Its aim is to be recognized as a great power and to dominate its immediate region politically and militarily

The United States has a worldwide network of military bases and alliances, which gives it the power to engage in military and covert actions on every continent.  It dominates the World Bank, the International Monetary Fund and other international institutions and its banks have a chokehold on the world financial economy.

The basis of that power is the supremacy of the U.S. dollar as the world’s medium for doing business, and the replacement of gold by U.S. Treasury bonds as a store of value.

This enables the U.S. to finance its endless wars, to shrug off trade deficits and to impose crippling sanctions on nations that defy it.  But American leaders have foolishly allowed the source of its financial power, its strength as a manufacturing and exporting country, to fade away.

Russia’s invasion of Ukraine was an attack on the U.S.-dominated NATO alliance. Its aim is to keep Ukraine out of NATO, to bar nuclear missile systems from Poland and Rumania and to roll back western NATO troops to their 1997 positions.

The U.S. aim is to get Russia bogged down in a long quagmire war, while meanwhile trying to wreck the Russian economy through economic sanctions—that is, seizing Russian financial assets held in the U.S. allied countries, cutting Russia off from the dollar-based world financial system and blocking Russian imports and exports as much as possible.

With the aid of China, Russia is finding ways to engage in world trade using the ruble and other non-dollar currencies, thus helping to undermine U.S. financial power.  

Then again, with sanctions, the U.S. is already undermining itself.  It is teaching nations they need to figure out how to survive economically without ties to the United States or the dollar-based system.

This economic war is a real war.  People will suffer as a result of it.  Some die.  Some European nations depend on Russian gas.  Many nations depend on Russia for food and fertilizer exports.  Food and fuel prices are already rising as a result of the war and are expected to rise further.  

The most likely result of the conflict is a worldwide economic depression.  The worst possible result is nuclear war.  I don’t see any possible outcome that is of net benefit to the people of any of the three countries.

(more…)

The search for truth in the Ukraine war

April 9, 2022

I think the world is at a major historical turning point.  China and Russia, with their allies and vassals, have begun an attack on a system of economic and military power dominated by the United States, which probably will succeed.  The Russian attack on Ukraine is a ramping up to that larger conflict.

That is why I am so obsessively focused on the war in Ukraine.  Trying to understand the conflict allows me to overcome my feeling of helplessness in the face of the coming catastrophe.

This video interview of Scott Ritter from last Wednesday is a good summary of the situation in Ukraine, which is different from the propaganda version in most U.S. newspapers and broadcast networks.  The meat of the interview begins at the seven-minute mark.  You don’t have to watch the whole thing to get something out of it.  

I think that Scott Ritter, Michael Hudson and the Naked Capitalism bloggers have the best handle on what’s going on.  Both Ritter and Hudson are giving video interviews to virtually anybody who will talk to them, and these interviews should be easy to find.  

Of course what they (and I) say is based on uncertain and incomplete knowledge.  The verdict of history may be different from what I (or you) think now.  But time spent trying to learn and understand is not time wasted.

LINKS

Russia’s invasion of Ukraine in Perspective by Scott Ritter for Energy Intelligence.

The American Empire Self-Destructs by Michael Hudson.

How the U.S. turned being in debt into power

March 22, 2022

SUPER IMPERIALISM: The Economic Strategy of American Empire by Michael Hudson (1972, 2003, 2021)

You’ve shown how the United States has run rings around Britain and every other empire-building nation in history.  We’ve pulled off the greatest rip-off ever achieved.  [==Herman Kahn to the author, in 1972]

The USA as a nation  consumes more than it produces, borrows more than it saves and imports more than it exports.

All the supposed laws of economics say that we should be bankrupt.  But instead we are the world’s dominant economic power.

Michael Hudson’s Super-Imperialism, written 50 years ago, explained how this came to be.  Almost everything he described is still in place today.

U.S. Treasury bonds have replaced gold as the world’s store of value.  The bonds don’t have to be repaid because they are treated as valuable in themselves.

Americans buy oil from Saudi Arabia or electronics from China, and pay for them with dollars.  The only thing of value these dollars represent is Treasury bonds.  So the dollars come back to the United States in the form of Treasury bond purchases, which makes it possible to sustain the twin deficits—the U.S. government budget deficit, and the trade deficit.

It is as if I could go to the grocery store or hardware store, pay for my purchases with IOUs and get the world to use the IOUs as if they were money without ever paying the IOUs off.

So as long as the world is willing to use the U.S. dollar as its basic currency, there is no upper limit on the United States ability to issue money to pay for its wars or bail out its failed businesses.

This has gone on for 50 years, and counting.  It stands to reason that it can’t go on forever.

∞∞∞ 

Hudson’s book is in three parts.

The first part, covering 1917 to 1946, shows how the United States used its position as the world’s leading creditor nation to undermine its economic rivals, especially the British Empire.

The middle part shows how the United States set up the World Bank, the International Monetary Fund and other international economic institutions so as to lock in its dominance of the world financial structure..

The last part shows how the United States went from world’s leading creditor to world’s leading debtor, but in a kind of economic jiu-jitsu, leveraged its debtor status to maintain its economic supremacy.

There are brief epilogues bringing the story up to date, and an introduction that summarizes the main points of the book.  If you just read the introduction, you’ll understand the gist of the book.

(more…)

Oligarchs, sanctions and money laundering

March 10, 2022

As part of the undeclared war with Russia, Prime Minister Boris Johnson has frozen the assets of Roman Abramovich, owner of the famous Chelsea Football Club, and six other wealthy Russians who thought their wealth would be secure in the United Kingdom.

Britain has long been a safe haven for dirty money, and not just Russian dirty money.  That’s because, on the one hand, the origin of money can be concealed through shell companies and offshore tax havens, and, on the other, they feel their money is safe.    

Real estate prices in London, and also in New York, Miami and other cities, are being bid up by foreign oligarchs.  This is of great benefit to bankers and real estate investors, but not necessarily to the general public.  So Johnson’s action is a good thing—right?

Economic sanctions have almost never achieved their goals.

The League of Nations, created after World War One, hoped to stop military aggression by sanctioning aggressors.  This failed in its first test, the invasion of Ethiopia by Italy in 1935.  The United States, more than any other country, has used economic sanctions as a weapon.  But decades of economic sanctions did not bring about regime change in Iran or Cuba and probably will not change Venezuela.

The result of Johnson’s actions will likely drive other Russian oligarchs to take their wealth back to Russia, which would be to the benefit of Putin’s government.

Arbitrary economic sanctions against individuals are contrary to the rule of law.

Tax havens are a serious problem.  But if a chief of state, based on his own personal judgment, confiscates the wealth of a few individuals or blocks their access to their wealth, he does not solve the problem of tax havens.  He merely makes his own country a more risky place to invest.

The Bill of Rights to the U.S. Constitution says nobody should be deprived of “life, liberty or property” without due process of law.  Nobody should have their wealth seized unless it can be proven in a court of law that they have violated some pre-existing law or regulation.

Impartial laws and regulations are needed.

We need laws that prevent oligarchs, dictators and crime lords from hiding their wealth and the sources of their wealth.  We need for these laws to be enforced without fear or favor.  Nobody should be above the law and nobody should be below the law’s protection.

Fun fact: Among those who have hidden their wealth in offshore tax havens are Vladimir Putin (through cronies) and Volodymyr Zelensky.

LINKS

Revealed: the $2bn offshore trail that leads to Vladimir Putin by Luke Harding for The Guardian.  [4/3/2016]

Pandora Papers: Russia dismisses leaks implicating Putin by Al Jazeera. [10/4/2021]

Pandora Papers: Ukraine leader seeks to justify offshore accounts by Al Jazeera. [10/4/2021]

Boris Johnson claims the UK is rooting out dirty Russian money | That’s ridiculous by Oliver Bullough for The Guardian.  [2/25/2022]

The oligarch’s guide to getting around the UK’s economic crime bill by Oliver Bullough for The Guardian. [3/9/2022]

Roman Abramovich Sanctioned by U.K. Govt., Assets Frozen by Alex Ritman for The Hollywood Reporter. [3/10/2022]

UK freezes assets of Abramovich, six other Russian oligarchs by Al Jazeera. [3/10/2022]

The American sanctions on Russia’s economy, explained by Ben Walsh for Vox. [3/9/2022]  What sanctions supposedly will do.

How the West undermines its own sanctions by Casey Michel for The Atlantic.  [3/9/2022]. It’s complicated.

Business monopolies push prices upward

December 30, 2021

Matt Stoller reports that 60 percent of recent U.S. price increases are caused by businesses exercising monopoly power.  He says the recent surge in inflation cost $2,126 per American.

What can be done about it?  Stoller says:

  1. Strengthen laws against price-fixing.
  2. Impose an excess profits tax.
  3. Strengthen anti-trust laws against business concentration in general.
  4. Revive laws against price discrimination against small businesses.

LINK

Corporate Profits Drive 60% of Inflation Increases by Matt Stoller for BIG.

The economic consequences of the pandemic

October 14, 2021

SHUTDOWN: How Covid Shook the World’s Economy by Adam Tooze (2021)

Adam Tooze is possibly the world’s foremost economic historian.  He wrote thick, comprehensive books on the Nazi economy (Wages of Destruction), the war debts crisis of the 1920s (The Deluge) and the 2008 financial crisis (Crashed!).  

His strengths are his international perspective (he is a British subject, educated in Germany who now teaches at Columbia University) and his deep understanding of high finance and how it affects society, politics and the overall economy.

Shutdown is not like his other books. It’s slim, and it is being published while the pandemic is still going on, not from the perspective of history.  This is because he thinks his message is too urgent to wait.

What is his message?

It is that we the public are on the brink of a new era, an era when our worst crises will not be the result of tyranny, corruption and human folly, but blowbacks from our natural environment.

And we are woefully unprepared for this. The coronavirus pandemic had taken 3.2 million lives, including half a million American dead, as of April, when Tooze completed his book.  The number is up to 4.5 million now.

The pandemic resulted in tens of trillions of dollars in economic loss. Yet only tens of billions has been spent on vaccine development, and much less than that on getting the vaccine to the public.

COVID-19 was not a black swan, a completely unpredictable event. It was a grey rhino, an event that many predicted, but were ignored. The climate crisis has bred other grey rhinos—devastating fires, floods, droughts and superstorms.

Tooze wrote that the reason we are unprepared is that the neoliberal policies of the past 50 years have stripped the governments of the USA, UK and much of the Western world of the capacity to respond to emergencies.

The neoliberal philosophy is that, in order to maximize efficiency, institutions should spend no more than they absolutely need in order to function. This means that there is no reserve capacity in case of emergencies, and hospital emergency rooms in the USA are overflowing with Covid patients.

What’s needed, he wrote, is something like the Green New Deal supported by Bernie Sanders, Alexandria Ocasio-Cortez and others.  Governments must spend whatever is necessary to be prepared for the predictable crises that lie ahead, and do it in a way that creates full employment and puts money in the pockets of working people.

The International Monetary Fund has estimated that a successful global vaccination program would add $7 trillion annually to the world economy by 2014.  Tooze said others estimate that such a vaccination program would cost $50 billion to $100 billion. Yet governments of rich countries, which have spent trillions of dollars on economic stimulus programs, say this is unaffordable.

Tooze quoted the great economist John Maynard Keynes: “Anything we can actually do, we can afford.”  

That is, if the human and physical resources to accomplish a goal exist, and the political will to accomplish the goal exists, the problem of finance can be solved.  People generally understand this in wartime.  Why not in peacetime?

(more…)

Matt Taibbi warns of the next financial crash

July 15, 2021

In this interview, Matt Taibbi pointed out that all the signals that warned of the 2008 financial crash are flashing red today.

A financialized economy based on borrowing.  Check.  Financial manipulation out of control.  Check.  “Too big to fail” institutions.  Check.

The response of the federal government to the 2008 financial crash was to bail out the Wall Street companies whose recklessness and fraud created the problem in the first place.

The excuse was that these financial institutions were so vital to the U.S. economy that their failure would bring down the rest of the U.S. economy.  But the bailout gave the speculators assurance that they need not fear either bankruptcy or prison.

Any company that is too big to fail or too complicated to regulate is too big and complicated to be allowed to exist.  The big Wall Street companies should be broken up so that the failure of any one of them will not jeopardize the economy. 

Instead they have been allowed to grow even bigger by mergers. The huge profits they make draws capital away from manufacturing and the rest of the real economy.  Taibbi summed up the situation very well.

He pointed out that the Federal Reserve System is conducting a more-or-less continuing bailout, pumping money into the economy by buying up assets every time the financial markets falter.

This means that, when the day of reckoning comes, it will be so big that bailouts will be impossible.

China pioneers digital currency

May 26, 2021

The case for economic nationalism

May 11, 2021

Political scientist Thomas Ferguson often points out that the United States, unlike other rich nations, has never had a labor party—a political party dedicated to the cause of organized labor.

Instead, Ferguson says, the conflict of political parties in the USA is a conflict of business interests—protectionism vs. free trade, tight money vs. low interest rates, public works vs. low taxes and so on.

That’s not to say that wage earners have no stake in the outcome of elections. Some business interests are more favorable, or less unfavorable, to working people than others.

It is just that no political party or political faction gets far without the backing of some business interest. Labor unions reached the height of their political power during the New Deal, but even in that era, they were only one seat at the table along with others, such as the oil industry (then aligned with Democrats), the real estate industry and so on.

Bernie Sanders tried and failed to make the Democratic Party into a labor party. Now Republicans such as Tom Cotton, Josh Hawley and Marco Rubio hope to win the allegiance of working people through a political program called “national conservatism.”

It is basically the program of Alexander Hamilton, Henry Clay and William McKinley.  If you squint your eyes, it also includes much that Donald Trump talked about doing.

The idea is to concentrate on rebuilding American industry, which of course would be good for manufacturers and investors but also for working people, and not just factory workers.

The elements of such a program would include:

  1. Public-private partnerships to improve technology and productivity.
  2. Use of tariffs to protect key American industries, but also maintain access to key raw materials.
  3. Rejection of trade treaties or international institutions that limit national economic sovereignty
  4. A strong focus on competing with China.
  5. A massive public infrastructure program to rebuild and maintain roads, bridges, harbors, airports, railroads, dams and levees, the electrical grid and water and sewerage systems
  6. Investment in scientific research.
  7. An end to regime change wars and reduction in military spending.
  8. An end to weaponized economic sanctions
  9. Control of unauthorized immigration.
  10. Support for public education, with an emphasis on vocational training and STEM – science, technology, engineering and mathematics.
  11. Tax credits as an alternative to welfare programs.

What is left out?  Stronger labor unions.  A inflation-adjusted minimum living wage.  Reductions in energy use and consumption to fight climate change.

Politically, this is a more feasible program than the Green New Deal.  It probably would be better than what we have now.

In particular, I think anyone who believes in democratic governance has to be a nationalist to some extent, because, at the present moment in history, national governments are the highest level of institutions over which voters have any influence.

I think the world needs more, rather than less, international cooperation, but that’s different from having the world run by the World Trade Organization, International Monetary Fund and global corporations.

Would economic nationalism solve our problems?  No, not by a long shot.  But it could be a step in the right direction. 

LINKS

Rebooting the American System on American Compass, a symposium including essays by Marco Rubio and Tom Cotton.

The Bully Platform , a review of Josh Hawley’s biography of Theodore Roosevelt for American Compass.

(more…)

From an industrial to a medical care economy

May 5, 2021

When I first came to live here in Rochester, N.Y., the local economy was dominated by Eastman Kodak Co. and Xerox Corp.

Now both companies are shadows of their former selves, and the largest employer is the University of Rochester, mainly because of the size and scope of the UR Medical Center.

Our business news used to focus on Kodak’s and Xerox’s latest products, high-tech startups and employment and profits figures of major companies.  Now it’s more about restaurant openings and closings.

The growth of the URMC is a good thing, I guess, although much of it is through acquiring formerly independent hospitals and clinics.  I’m glad of the good care I get from URMC’s Wilmot Cancer Center. 

But it’s not as if medical care is an adequate substitute for a strong manufacturing base.  It’s the fable of the village where people made a living by taking in each others’ washing. 

On the other hand, if we can produce all the stuff we need with less back-breaking, health-destroying labor, and devote more resources to caring for each other, that’s a good thing, not a bad thing.

My friend Steve from Texas referred me to a new book, The Next Shift: The Fall of Industry and the Rise of Health Care in Rust Belt America, which describes the same thing going on in Pittsburgh, Pa.

I don’t know when, if ever, I’ll get around to reading or reviewing it.  My reading and writing speeds are slower than it used to be. But here are some links that give the gist of it.  The author, Gabriel Winant, is on to something.

LINKS

The Rise of Healthcare in Steel City, an interview of Gabriel Winant for Dissent Magazine.

Gabriel Winant’s Book, “The Next Shift,” Portrays a Rust Belt City’s New Working Class by Scott W. Stern for The New Republic.

First Nurses Saved Our Lives, Now They’re Saving Our Health Care by Sarah Jaffe for The Nation.

Adam Tooze on the Biden administration

April 30, 2021

For some Joe Biden has already exceeded expectations. For others his economic program is nowhere near enough to address the climate crisis and American decline.  While his Covid relief package has seen billions dispensed immediately, the Jobs Plan proposes to invest $35 billion in green R&D over eight years – less than Americans spend annually on pet food. 

So how radical is President Biden? Is there such a thing as ‘Bidenomics’?  And does the new President represent a break with the orthodoxy of Democrat predecessors such as Bill Clinton and Barack Obama?

Discussing all those questions on the UK’s Downstream with Aaron Bastani is Adam Tooze, Professor at Columbia University.

He is the author of The Deluge: The Great War, America and the Remaking of Global Order, 1916-1931; The Wages of Destruction: the Making and Breaking of the Nazi Economy and Crashed: How a Decade of Financial Crises Changed the World —all outstanding books.

The video interview runs about an hour, which is long to watch something on a computer screen, but I think it is worth taking the time.  Tooze has a wide range of information, a powerful analytical mind and a sharp tongue.  He takes a global view rather than an American view.

All this makes him interesting.  He is, possibly, a little more inclined than I am to regard politics as a clash of opinions than a struggle for power or a conflict of interests.

(more…)

A chart of two recessions

March 9, 2021

Click to enlarge.

The Employment Situation Is Far Worse Than the Employment Rate Indicates by Calculated Risk.

Will we have a K-shaped recovery?

March 3, 2021

A K-shaped recovery is when the holders of financial assets do very well, and wage-earners don’t.

The recovery from the Great Recession of 2008 was a K-shaped recovery.  The Obama administration bailed out the financiers who helped cause and deepen the recession, and left mortgage-holders to fend for themselves.  

The political result was a decline in the Democratic vote, which made possible Donald Trump’s victory in 2016.  During the pandemic recession of 2020, the response of both Democrats and Republicans was to bail out the financial institutions and Fortune 500 corporations, while giving very limited help to the unemployed, front-line workers and small-business owners.

Evidently President Biden and Democrats in Congress realize that the government needs to do more now than it did then.  That’s good.  But will they do enough?

Here’s what Matt Taibbi has to say:

This is a fascinating moment in American history. On the one hand, generations of elite-focused politics have left a tiny oligarchical minority not only in possession of massively increased wealth, but also political power. Since 2008, we’ve seen increased disparities in income, but also criminal justice outcomes, regulatory attention, access to tax loopholes, political influence (through decisions like Citizens United), vulnerability to surveillance, and rights to transparency, and, lately, speech. With the corporate-friendly Biden administration in office, there’s a clear opportunity for his backers to continue the K-shaped influence distribution if they wanted.

But we may be at the end of the era where even the most rapacious interests feel they can get away with such policies. Between the 2016 election of Trump, the near-nomination of Sanders in 2020, and widespread unrest on both the left and right, it sounds like the Washington consensus is inching toward the realization that they finally have to deliver something significant for ordinary people, if they want to keep their cushy DC sinecures, to say nothing of staying pitchfork-free.

(more…)

Larry Summers says $2,000 is too much.

December 29, 2020

Larry Summers

Larry Summers is one of the USA’s most renowned economists.

He has been chief economist for the World Bank, Secretary of the Treasury in the Clinton administration, president of Harvard University and director of the National Economic Council in the Obama administration.

As Matt Taibbi points out, Summers has consistently advocated for bailouts for failed financial institutions and consistently opposed help for individuals in distress. 

Currently he opposes sending $2,000 stimulus checks to Americans to offset the COVID recession because it would “overheat the economy.”

LINKS

Trump-Pelosi $2,000 Stimulus Checks Are a Big Mistake by Lawrence H. Summers for Bloomberg Opinion.  [Added 12/30/2020]

Neoliberal Champion Larry Summers Opens Mouth, Inserts Both Feet by Matt Taibbi for TK News.

Why Larry Summers MUST Believe $2,000 Checks Are a Bad Idea by Ian Welsh [Added 12/30/2020]

Nearly half of Americans blame GOP for lack of $2,000 stimulus checks by Business Insider [1/3/2021]

Homes of Nancy Pelosi, Mitch McConnell Are Vandalized by CNN Politics.  [Added1/3/2021]

Domestic fossil fuel industries in crisis

December 28, 2020

The domestic U.S. fossil fuel industry is in trouble.  Hundreds of thousands of jobs are at stake.  President Joe Biden will face a choice: try to save them or replace them with something better.  There is a good article in Dissent magazine about this.

In 2016,  [Donald] Trump charged Barack Obama with waging a “war against coal” and promised to bring the sector back to its former glory.

He manifestly failed to do so, but his rhetoric still proved an effective bludgeon against Hillary Clinton in Appalachia during the campaign.  In fact, more coal plants were retired under Trump than in either of Obama’s terms in office.

U.S. coal production had already been declining for years, as cheap natural gas edged it out of the energy mix used in power plants.  Coal jobs had been disappearing for years even before that, as the industry replaced workers with machines.

At its peak in the 1920s, the industry employed over 800,000 people in the United States.  Today, only about 42,000 coal mining jobs remain.

As coal companies have gone bankrupt, they have shed their pension obligations to former workers, leaving the federal government to pick up the bill.  Last December, Congress bailed out nearly 100,000 coal miners’ pensions.

In the long run, this was a good thing, not a bad thing.  Of all the important sources of energy production, coal is the dirtiest.  It generates the most air and water pollution and the greatest hazards to its workers’ health and the public health.  Still, that is no consolation if your livelihood depends on coal.

As energy researchers point out, coal is the canary for other fossil fuel industries. Oil isn’t on quite the same decline yet, but it’s headed in that direction.

The American fracking industry has expanded rapidly in the past decade with the use of cheap credit, and with encouragement from Obama, who boasted of making the United States the world’s leading oil producer.

But the shale oil that fracking produces is only profitable when oil prices are relatively high, and the overproduction of shale gas has glutted global markets.

The combination of a pandemic-spurred decline in demand and a price war between Saudi and Russian producers sent oil prices plummeting this year, resulting in a record number of bankruptcies among American oil producers.  An estimated 107,000 oil industry workers lost their jobs in the United States this year.

While some of those may come back as the economy recovers (whenever that is), many will not. Some energy analysts suggest that the world may have hit “peak oil demand,” as renewable energy begins to replace fossil fuels.  The Houston Chronicle reports that oil production employment in Texas “may never fully recover” as the overextended shale oil sector consolidates and learns to get by with fewer workers.

Source: Dissent Magazine

The fact that the fracking industry, or any other fossil fuel industry, is unprofitable doesn’t necessarily mean it will cease operations.  The economic incentive for an industry in the red is to do everything possible—in this case, extract every little globule of shale oil and gas—to minimize the loss.

Of course, moving away from fossil fuels is a good thing, not a bad thing—also overall.  Global warming is not imaginary.  Greenhouse gas emissions are real.  But what about all the people whose jobs depend on oil and gas?

We need something like a Green New Deal to create useful and sustainable jobs to replace jobs lost.  Without some such program, Americans will be forced to choose between short-run economic survivable and a livable planet in the long run.

(more…)

The coming pandemic economic crisis

November 30, 2020

Joe Biden will be sworn in as President of a nation in which millions are unable to pay their bills and most of the programs to help them will have expired.

There will be much that he can do, with or without the cooperation of the Senate.  But what he will do is another question.

Here’s the deal.  The Center on Budget and Policy Priorities reported that—

  1. Nearly 26 million American adults—12 percent of all adults—reported they sometimes or often had difficulty in putting enough food on the table during the first week in November.  That’s triple the pre-pandemic percentage.
  2. An estimated 13.5 million adult renters—about one in five renters—were behind in their rent.
  3. Nearly 81 million adults—one in three—reported it was somewhat or very difficult to pay their usual bills.
  4. In September, some 31 million Americans met the official definition of “unemployed” or were part of a household of an unemployed person.

Bankruptcy filings are mounting, and that is just the tip of the iceberg.  Many owners of failed small businesses can’t even afford to file for bankruptcy.  State and local governments, meanwhile, are running out of money.

Most of the federal emergency programs to alleviate the crisis will expire at the end of the year.  The $600-a-week supplement to state unemployment insurance expired July 31.  The rest of the unemployment insurance supplement will expire at the end of the year.  An estimated 13.5 million Americans benefit from pandemic-related unemployment relief.

The Senate and House of Representatives are deadlocked  on how to extend emergency programs.

So will the moratorium on evictions decreed by the Centers for Disease Control.  That wasn’t sustainable as a permanent policy anyway.  Property owners who make a living from rental income need that income to maintain the properties and usually to pay for utilities.

And the moratorium on student debt payments decreed by President Trump also expires at the end of the year.  About 32 million Americans had loans eligible for suspended payments. 

Both the renters nor the student debtors still owe the full amount.  They got a temporary suspension of payments, not relief.

∞∞

Joe Biden is the first President to be take office in the middle of a national crisis in which one house of Congress is controlled by the opposition political party.  This limits his freedom of action, but progressives say existing law gives him a great deal of power.

The Higher Education Act gives the Secretary of Education authority to settle all publicly-held student debt and cancel all or part of it.  David Dayan of The American Prospect says that covers 95 percent of American student debt, which is up to $1.5 trillion.  This would help stimulate the economy by making it easier to get a home mortgage or an auto loan.

Biden also would have the authority to forgive up to $50,000 of student debt by executive order.

The Affordable Care Act authorizes the Secretary of Health and Human Services to create a pilot program to cover medical expenses of anyone who suffers from an environmental health problem.   The coronavirus, Dayan said, is an environmental health problem.

(more…)

Snapshots of the pandemic recession

November 30, 2020

.

.

.

.

Source: Center on Budget and Policy Priorities.

It’s still the economy, stupid

November 29, 2020

Bill Clinton and Barack Obama were elected President primarily because of the economic failures of their predecessors.  Each of them faced a backlash in the midterm elections following their victories, at least partly because of their economic policies.

The same thing will happen to Joe Biden unless he can act decisively and quickly to meet the impeding economic and pandemic crises, according to political scientist Thomas Ferguson in an interview with podcaster Paul Jay. 

Clinton ran in 1992 on the slogan, “It’s the economy, stupid.”  But during his two years, he did little to improve the economy.  He pushed through the North American Free Trade Agreement, which had been part of the Reagan agenda and was opposed by organized labor.  He failed to get Congress to even consider a health insurance reform bill.  Republicans won control of both houses of Congress in 1994

Obama was elected during the 2008 recession.  His administration rescued failed banks, but did not fully implement a law to rescue victims of foreclosures.  Republicans won control of the House of Representatives in 2010.

The decisive factor in the 2016 election was the voters, of all races, who supported Obama in 2008 and 2012, but either voted for Trump and declined to vote at all in 2016. 

The notion that racism and sexism were the primary factors driving the Trump vote is not borne out by the data, he said.  Economics was very important too.  Trump’s promise to revitalize manufacturing and impose tariffs on imports gave him just enough votes to squeeze out a majority in key industrial states.

The rural working-class found their lives a little better under Trump and don’t believe the Democrats care about them.  Some of this was the momentum of the economic recovery that had begun under Obama.  Much of it, according to Ferguson, was due to the Federal Reserve System artificially pumping up the economy by holding down interest rates.

He said polls indicate Biden’s margin of victory came from voters in the income brackets between $100,000 and $200,000—not the ultra-rich, but not the wage-earning class, either—who are uncertain about their economic future.  Biden’s message was reassurance and a promise of economic stability.

Trump’s gains among Mexican-American voters along the Texas border were due to so many of them working in the oil and gas industry, he said; some of them found construction work in building Trump’s border wall.

The received wisdom is that big business leaders supported Biden over Trump because they thought Trump is too erratic.  Biden did get a lot of campaign contributions from Wall Street, but much of corporate America supported Trump—the oil and gas industry, the pharmaceutical industry and pollution-heavy industries such as pulp and paper making.

(more…)

Donald Trump’s big accomplishment

October 24, 2020

Trump’s Biggest Economic Legacy Isn’t About the Numbers by Patricia Cohen for the New York Times.  Hat tip to Steve from Texas.

I’m still glad I’m not a young person today

October 9, 2020

A majority of young adults are living with their parents for the first time since the Great Depression by Richard Fry, Jeffrey Passel and D’Vera Cohn for Pew Research Center.

The pandemic has pushed nearly 30 million young adults to move in with their parents by Erica Pandey for Axios.  The pandemic is only part of the story, in my opinion.

Japan’s Shut-ins, Hikikomori, Are Living With Their Parents and Have No Jobs by Yoshiaki Nohara for Bloomberg Business Week.

The U.S. never recovered from the 2008 crash

September 11, 2020

LINK

America’s Current Jobs ‘Great Depression’ by Jack Rasmus.  Important.  Another Great Depression is not only possible, but may already be upon us.

The pre-pandemic Trump economy in charts

September 11, 2020

Click to enlarge.

Click to enlarge.

Click to enlarge.

For good and ill, the Trump economy was a continuation of the Obama administration.  The only thing Donald Trump did, pre-pandemic, that had an immediate effect on the economy was to push legislation to cut upper-bracket taxes.

I thought there would be a recession, not specifically because of any specific thing President Trump would do, but because I thought that all the conditions that brought about the 2008 recession still existed, and that Trump would not try to change them.

I was surprised that the boom continued as long as it did.  I did not and could not have predicted the pandemic, which changed everything.  I don’t think Trump has handled the pandemic crisis well, but it would  have been an economic catastrophe regardless of who was in the White House.

None of this is an excuse for Trump’s failures.  Presidents are not graded on the curve; they are graded on a pass/fail system.

(more…)