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U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit
Mark Pittman and Bob Ivry, Bloomberg
The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.
The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.
(24 November 2008)
Related from AP (Bush sees more moves like Citigroup bailout):
President Bush argued Monday that the government’s dramatic rescue of Citigroup was necessary to “safeguard the financial system” and help the economy recover, and he said there could be more such moves if other institutions need help.
Kunstler: Zombie Economics
James Howard Kunstler, blog
All the activities based on getting something-for-nothing are dead or dying now, in particular buying houses and cars on credit and so it should not be a surprise that the two major victims are the housing and car industries. Notice, by the way, that these are the two major ingredients of an economy based on building suburban sprawl. That’s over, too. We’re done building it and the stuff we’ve already built is destined to loose both money value and usefulness as the wrenching transition goes forward.
All this obviously begs the question: what kind of economy are we going to live in if the old one is toast? Well, it’s also pretty obvious that it will have to be based on activities productively aimed at keeping human beings alive in an ecology that has a future. Once you grasp this, you will see that there is no reason to despair and more than enough for all of us to do, so we can recover from the zombie nation disease and get on with the next chapter of American history — and I sure hope that Mr. Obama will get with the new program.
To be specific about this new economy, we’re going to have to make things again, and raise things out of the earth, locally, and trade these things for money of some kind that we earn through our own productive activities. Don’t make the mistake of thinking this is optional. The only other option is to go through a violent sociopolitical convulsion. We ought to know from prior examples in world history that this is not a desirable experience. So, to avoid that, we really have to put our shoulders to the wheel and get to work on things that matter, and do it at a scale that is consistent with what the world really has to offer right now, especially in terms of available energy.
(24 November 2008)
Homer-Dixon: Deflation’s big game
Thomas Homer-Dixon, Globe and Mail (Canada)
When the economy spirals downward, it feeds on itself. But if we set our sights on the right prize, we can work together to prevent things from getting even worse
—
Deflation. It’s the economists’ dread word, and in the past week it has leapt from a dusty back corner of their lexicon to the front pages of our newspapers.
Deflation refers to a sustained drop in prices caused by falling economic demand – a situation where unemployment of both people and capital soars and where the standard monetary tools that policy-makers use in response, such as interest rate cuts, stop working.
In the worst case, deflation becomes its own cause. People become afraid their incomes might fall in the future. Or they see their savings being ravaged by the stock market collapse. So they stop spending and instead hoard their money. As demand for goods and services drops, companies’ profits plummet, leading to layoffs, reduced working hours, and yet more declines in stock prices.
… The world economy appears to be on the cusp of this kind of vicious cycle. It has entered a synchronized downturn, with economic demand falling fast in every region.
Most policy-makers and commentators understand that deflationary cycles are self-reinforcing. But few grasp another key characteristic: Deflationary cycles are, at their core, what social scientists call a collective action problem. And this characteristic has important implications for how we should respond.
(24 November 2008)
Bailouts Dwarf Spending on Climate and Poverty Crises
Sarah Anderson and John Cavanagh, Foreign Policy In Focus
The financial crisis is only one of multiple crises that will affect every country, rich and poor alike.
There’s also the global poverty crisis. Tens of millions of people across the developing world are expected to fall into extreme poverty and joblessness as a result of an economic mess originating in the United States. This is bad news for workers everywhere, as it means even more brutal competition in the globalized labor pool.
And then there’s the climate crisis. If we don’t do something about that one, we could find out what a real meltdown feels like.
Yet the richest nations in the world appear fixated almost entirely on the financial crisis, and specifically, on propping up their own financial firms.
A new report by our organization, the Institute for Policy Studies, finds that the approximately $4.1 trillion that the United States and European governments have committed to rescue financial firms is 40 times the money they’re spending to fight climate and poverty crises in the developing world.
(24 November 2008)
Perelman: Where did the economic crisis come from? (Audio)
Michael Perelman, Internet Archive
A talk for the San Francisco Peace & Freedom Party on the economic crisis. Michael Perelman is professor of Economics at California State University, Chico, and the author of multiple books on economics. His website at Chico.
(22 November 2008)
Entertaining historical perspective on where the economic crisis came from. Perelman is a leftist economist, but his some of the views are becoming increasingly mainstream. Not dogmatic, so it may be interesting to a wider audience. -BA
Reality Meets Ideology (YouTube)
Peter Schiff Was Right 2006 – 2007
This is a set of clips of Peter Schiff from 2006 and 2007. I added labels and 2008 predictions to the first video.
(2 November 2008)
Recommended by Big Gav:
BA:
An incredible series of clips. If you’ve ever felt discouraged trying to explain peak oil, watch these clips of another prophet meeting jeers and snorts of disbelief. Others have passed this way before.
In a series of clips fromm 2006 and 2007, Peter Schiff, president of Euro-Pacific Capital, tries to explain that recession was on the way, that financial companies were unsound and the sub-prime crisis was only beginning. Maintaining the view that all is rosy are heavy-hitters like Arthur Laffer (advisor to Ronald Reagan and namesake of the famous Laffer curve).
This is how paradigms die. Could there be other issues on which the conventional wisdom is mistaken?
Peter Schiff was an economic adviser for the Ron Paul campaign. He opposes Obama’s economic plans.
