Recession – Who Cares?

The soothsayers have slaughtered the ox and are examining the gloppy entrails for signs: Rising unemployment, a falling dollar, weak consumer spending, the credit crisis, a swooning stock market. Could there be something wrong here? Could we actually be approaching a, god forbid, recession?

To which the only sane response is: Who cares? According to a CNN poll, 57 percent of Americans thought we were already in a recession a month ago. Economists may complain that this is only because the public is ignorant of the technical – or at least the newspapers’ standard – definition of a recession, which specifies that there must be at least two consecutive quarters of negative growth in the GDP. But most of the public employs the more colloquial definition of a recession, which is hard times. If hard times have already fallen on a majority of Americans, then “recession” doesn’t seem to be a very useful term any more.

The economists’ odd fixation on growth as a measure of economic well-being puts them in a parallel universe of their own. WorldMoneyWatch’s website tells us that, for example, that “The GDP growth rate is the most important indicator of economic health. If GDP is growing, so will business, jobs and personal income.” And the latest issue of US News and World Report advises, “The key… for America is to keep its economy growing as fast as possible without triggering inflation.”

But hellooo, we’ve had brisk growth for the last few years, as the president always likes to remind us, only without those promised increases in personal income, at least not for the middle class. Growth, some of the economists are conceding in perplexity, has been “de-coupled” from mass prosperity.

Growth is not the only economic indicator that has let us down recently. In the last five years, America’s briskly rising productivity has been the envy of much of the world. But at the same time, real wages have actually declined. It’s not supposed to be this way, of course. Economists have long believed that some sort of occult process would intervene and adjust wages upward as people worked harder and more efficiently.

And what about the unemployment rate? The old liberal faith was that “full employment” would create a workers’ paradise, with higher wages and enhanced bargaining power for the little guy and gal. But we’ve had nearly full employment, or at least an unemployment rate of under five percent, for years now, again, without the predicted gains. What the old liberals weren’t counting on was a depressed minimum wage, impotent unions, and a witch’s brew of management strategies to hold wages and salaries down.

Now if those great and solemn economic indicators – growth, productivity and employment rates – have become de-coupled from most people’s lived experience, then there’s something wrong with the economists, the economy, or both. The clue lies in the word “most.” We have become so unequal as a nation that we increasingly occupy two different economies – one for the rich and one for everyone else -- and the latter has been in a recession, if not a depression, for a long, long time. Not all economists can bring themselves to admit this.

I suspect that America’s fabulous growth in productivity is another illustration of the disconnect between economic measures and human experience. It’s been attributed to better education and technological advances, which would be nice to believe in. But a revealing 2001 study by McKinsey also credited America’s productivity growth to “managerial innovations” and cited Wal-Mart as a model performer, meaning that we are also looking at fiendish schemes to extract more work for less pay. Yes, you can generate more output per apparent hour of work by falsifying time records, speeding up assembly lines, doubling workloads, and cutting back on breaks. Productivity may look good from the top, but at the middle and the bottom it can feel a lot like pain.

When employees are squeezed hard enough, then you have the possibility of a genuine recession as technically defined. People buy less, so growth declines, to the point where even the economic over-class has to sit up and take notice. This is happening in Japan, where a recent Wall Street Journal headline announces: “Growing Reliance on Temps Holds Back Japan’s Rebound: Firms Increasingly Add Part-Time Workers; Spending Power Lags.” The U.S., where consumer spending accounts for 70 percent of the economy compared to a little more than half in Japan, is even more vulnerable to a downturn in personal consumption.

What is this fixation on growth anyway? As a general rule of biological survival, any creature or entity that depends on perpetual growth is well worth avoiding, lest you be eaten alive. As Bill McKibben argues in his book Deep Economy, the “cult of growth” has led to global warming, ghastly levels of pollution, and diminishing resources. Tumors grow, at least until they kill their hosts; economies ought to be sustainable.

Apocalypse aside, the mantra of growth has deceived us for far too long. What it translates into is: Don’t worry about the relative size of your slice, just concentrate on growing the pie! Now, with a recession threatening even more suffering for those who are already struggling, may be the perfect time to get out the pie-cutter again. Too bad that the one leading Democratic candidate who promises to do so now appears to be on the ropes.

Comments

[Buena]

There's no doubt we're in a recession -- just ask anybody whose income is below $300,000.

My husband and I are cancelling our health insurance because the monthly premiums are as big as our mortgage payment and we just can't keep giving Golden Rule money when they cover nothing and our deductible is $5000. I called them and asked for an even higher deductible and they said it wasn't available.

Listen to the candidates and support whoever understands that the middle class is getting screwed. That pretty much leaves out the Republicans, except maybe Huckabee, and gosh, why is it that I don't want a president who believes the Bible is the Last Word on everything?

Without a middle class, this country will fail.

And you Canadians: damn it, stop blaming ALL of us for Bush being president. We did what we could but he stole it twice.

[Brian]

Fortunately, being Americans we can frame our own questions as to which side to be on. All revolutions are replaced over time by even more intense police states so the very people advocating one now are just the ones likely to rise to the new captains post. No thankyou. I think we should work on bringing honesty and dignity back to the neighborhood and support good life affirming values. Build a neighbor a garden rather than wreak their fence. We cannot afford a destructive anarchy where meanness takes over what little dignity we have left. It seems many of the problems of paralysis in Washington has to do with the Corporations and well financed special interests have shaped a government to their liking and aren't about to allow any change. Its bigger than the Republican and Democratic parties constantly fighting each other as there really isn't much difference in who is governing except possibly a big decision as to go to war. Our, government has become, the Federal Governments which really has its own priorities, agenda, and free money from us to do whatever it wants with any constraints only a vote from being given away. While a recession will affect many of the people, it will have little effect on the Government's big agenda items. It may cut costs across some domestic programs, but its going to fully fund the military and police and the key three bodies interest sections. Has anyone ever said "the price of government is government" I don't know. I think the paralysis of health care reform, the insurance and pharmaceutical lobbies, says it all, despite the looming medicare and medicaid(states low income health insurance) inability to fund itself. The special interests are looking closely at quarterly profits reports, and who they need to put in power, not needed long term structural changes perpetually put off. By definition they are at odds with the people who work for them. I don't think its yet grasped how off-the-shelf our government has become in being addicted to its own interests, which parallel the special interests. So its really a mirage that there is a republican-democratic debate in this country. That is just a bunch of noise to distract us from whom is really running the show. I just head on the news this week there are 25,000 lobbyists in washington with expense accounts. I don't know if its accurate, but if it is, thats a big special interest army to be occupying our capital.

[cookie]

I agree with much of what Brian said in his earlier posting except the following:

“If there is a recession, it won't affect the big banks and brokerages that much as they have already written puts and hedges against one and stand to even make money with these bets.”

Although there has been a lot of press on the subprime debacle and its role in the recession, the other shoe has not yet dropped. That shoe is CDS – Credit Default Swaps.

Typically, in a recession, the bond market goes up as the stock market goes down. CDS are a relatively new financial derivative. CDS can be thought of in simple terms as a sort of bond insurance, though they are not insurance in the technical sense. CDS are supposed to protect against commercial bond default. In historical terms, commercial bond default has averaged about 1 ¼%. However, unlike historical financial products, the CDS market is not well regulated and this has meant that the CDS have been issued with no reserves to back them. Current estimates are that there are approximately $45 Trillion worth of CDS, greatly exceeding the total value of the bonds they cover. A default rate of 1.25% means a loss of $250 Billion to the credit sellers. If this happens, a snowball effect will be experienced similar to the current subprime default that has spilled over into the credit markets.

This impending meltdown is another reason why the Fed has been lowering interest rates and frantically injecting liquidity (i.e. running the currency printing presses overtime). They are desperately trying to prevent the recession from bearing deeper and triggering other defaults such as CDS.

The impact on the general population is soaring inflation that will eventually turn into hyperinflation either later this year or next. If the hyperinflation is unable to forestall a massive recession and CDS default, it could lead to significant bank and brokerage collapse.

[Colin]

Capitalism is the natural human system. We tried Communism and it failed because human beings like to compete. I just read an article on polygany (multiple wives) It turns out that under the laws of polygany a rich man would have many wives, but a poor man would have none. A poor man today is actually better under monogamy. Human nature is not kind! Capitalism best mimics human nature. Men are into competition and destroying their fellow man. It gives me a rush to beat another man in tennis, in making money, etc. It is not natural for human beings to share. Why would I want to share my money with people I am not related to? This is the most ridiculous proposition! I have to teach my son to share, but I don't have to teach him to hit other kids, or take what he wants. Those are his natural impulses, get it? In many ways human beings are violent, aggressive beings. To the victor go the spoils. It isn't even important to be smart anymore. Everyone here is smart enough. It is who you know, and if you are lucky that determines who becomes rich in our Killer Capitalism system. Everyone here can "cry" and whine as much as they want, but nothing will change. Life is unfair, and it is brutal. People can fantasize about an ideal world, but it will never come to be. Human beings are "selfish" by nature. The Gandhis of the past didn't survive. Study some Evolutionary Psychology and get real. No one cares about how other people are doing. If is cute and heart warming to say so, but it isn't keeping any of you awake at night. I am interested in truth. You may care about your family (blood) and few close friends in a sporting kind of way, but let's get real here. You have to observe how people behave, and not the b.s. that they say. This whole thing is b.s. and probably just an Ego thing for Barbara. Don't you think B.E. knows that nothing is going to happen. It is just amusing to "dream" and think about it. Everyone, including my relatives, moved to America to make money. This was never some ideal experiment over here. America was always about survival of the fittest. It isn't fair, but that is how I see it. Let's cut this thing down to the bare bones, and see human nature, and human systems for what they are. By the way, save your angry responses. I wish things were different as well. I was raised to share and be kind to others, but I quickly got squashed down by other kids until I got tough, and accepted life for what it is. I think most of you are still in the dreaming, adolescent phase, if you can understand what I am talking about.

Colin

[Colin]

Capitalism is the natural human system. We tried Communism and it failed because human beings like to compete. I just read an article on polygany (multiple wives) It turns out that under the laws of polygany a rich man would have many wives, but a poor man would have none. A poor man today is actually better under monogamy. Human nature is not kind! Capitalism best mimics human nature. Men are into competition and destroying their fellow man. It gives me a rush to beat another man in tennis, in making money, etc. It is not natural for human beings to share. Why would I want to share my money with people I am not related to? This is the most ridiculous proposition! I have to teach my son to share, but I don't have to teach him to hit other kids, or take what he wants. Those are his natural impulses, get it? In many ways human beings are violent, aggressive beings. To the victor go the spoils. It isn't even important to be smart anymore. Everyone here is smart enough. It is who you know, and if you are lucky that determines who becomes rich in our Killer Capitalism system. Everyone here can "cry" and whine as much as they want, but nothing will change. Life is unfair, and it is brutal. People can fantasize about an ideal world, but it will never come to be. Human beings are "selfish" by nature. The Gandhis of the past didn't survive. Study some Evolutionary Psychology and get real. No one cares about how other people are doing. If is cute and heart warming to say so, but it isn't keeping any of you awake at night. I am interested in truth. You may care about your family (blood) and few close friends in a sporting kind of way, but let's get real here. You have to observe how people behave, and not the b.s. that they say. This whole thing is b.s. and probably just an Ego thing for Barbara. Don't you think B.E. knows that nothing is going to happen. It is just amusing to "dream" and think about it. Everyone, including my relatives, moved to America to make money. This was never some ideal experiment over here. America was always about survival of the fittest. It isn't fair, but that is how I see it. Let's cut this thing down to the bare bones, and see human nature, and human systems for what they are. By the way, save your angry responses. I wish things were different as well. I was raised to share and be kind to others, but I quickly got squashed down by other kids until I got tough, and accepted life for what it is. I think most of you are still in the dreaming, adolescent phase, if you can understand what I am talking about.

Colin

[Chickensh*tEagle]

Colin: If it's futile to try to improve society, then why do you even bother teaching your son not to steal? To keep him out of jail until he learns the ropes and can figure out how not to get caught?

[Anarcissie]

cookie: "This impending meltdown is another reason why the Fed has been lowering interest rates and frantically injecting liquidity (i.e. running the currency printing presses overtime). ... The impact on the general population is soaring inflation that will eventually turn into hyperinflation either later this year or next. If the hyperinflation is unable to forestall a massive recession and CDS default, it could lead to significant bank and brokerage collapse. ..."

I think there is an additional problem which makes things a bit more complicated than just the government running its printing presses hot. According to W. F. Hummel (see http://wfhummel.cnchost.com/) printed money is _fiat_ money, but what we have now is something else -- we might call it credit money. The money is not even printed; it's simply believed in. And much of it is created privately.

If this is true, the collapse of the present system might not be hyperinflation but radical deflation, as people stopped believing in the various forms of imaginary wealth they now believe in.

Something like this happened with the subprime mortgage racket. What was supposed to happen was that people with probably inadequate incomes would buy houses with dubious mortgages. If they failed to keep up payments, no problem -- because the price of real estate was constantly rising without regard to value, they or the mortgage bank could always sell the house to someone else and get the money back. But when people stopped believing in the inevitability of rising real estate prices, the game broke down. Then the rackets dependent on _that_ racket broke down. There is a widening circle of breakdown, a sort of economic black hole, that Mr. Bernanke is going to try to stuff with fresh fictions.

As usual, most of the liberal and leftist commentary I see is completely unaware of this problem. They seem to see money as something hard and factual, like gold coins -- we can just take some from the rich and give to the poor and all will be well. It's not like that at all. Most of the money, most of the alleged wealth, is _fiction_. And of course most of the figures published about it, and the things measured with it,partake of the same fiction. It is quite possible now for a lot of it to simply disappear instantly.

[Robin LESLIE]

Neo-liberalism (market fascism) is meeting its nemesis, though desparate efforts will be made to prop it up, like the intensification of incarcerations, criminalising trivial deviance, and workfare (forcing the poor to take vacuous mindless and humiliating tasks) We need to make it absolutely clear, MARKET CAPITALISM IS COLLECTIVE VIOLENCE, the organized pursuit of VICE! It is entirely unsustainable and the sooner we save our people and planet from this destructive violence the better.
I speak from the UK, we need to abandon the so-called Anglo-American reconstructionist Myth (Lie) imposed after 1980!

[Robin LESLIE]

It's not a matter simply of political ideologies! There is a real danger here to ALL of us, and ideas alone aren't going to save us from globalised violence. It's patently clear that we must face up to the violence in ourselves, as well as the violence that is projected through the market system
and political institutions.
The sacrifice of Jesus Christ on the Cross shows us our real and deep-rooted violence and how we need to stop projecting that violence onto others!
Period!

[roger]

" MARKET CAPITALISM IS COLLECTIVE VIOLENCE, the organized pursuit of VICE! "

good morning. so when henry ford offered employment to unskilled labor and paid wages of $5 per day this was violence. when unskilled workers gain entrance to this country and are employed at tyson foods for wages far exceeding any economic prospects they could ever dig up in their God forsaken village in the andes and send hard currency back home to support their starving spouse and children this is violence. when somali immigrants with no education, nor skills, nor english proficiency gain employment in minneapolis as taxi drivers and send wages back home to africa this is violence. your entire argument fails logic.

[roger]

collective violence as expressed in general suppression of worker rights and civil rights is present at many levels in society as a whole. for you to simply point an accusatory finger at capitalism and then without explanation nor introduction include incarceration for what you call deviance is irresponsible. heaven forbid some slob makes a little money. and whatever you do dont hold people to the law.

[cookie]

Anarcissie (cool name) - I am well aware of fiat money. I should have caveated "printing press" with "metaphorically speaking".

Strong arguments can be made as to whether we are headed for inflation, deflation, or an inflationary recession.

I believe we are headed towards inflation. An excellent discussion of inflation vs. deflation and current federal reserve policy can be found here:

http://www.financialsense.com/fsu/editorials/ciovacco/2008/0114.html

[Larry In Lethbridge]

I gotta agree with Colin on may of his points.

How can you get the black population to be a positive contributing factor to society ? I mean if I see one more episode of the " The First 48" where young black men kill for a few bucks, I just may never leave Alberta for the US again.

[Anarcissie]

Inflation will occur if the US authorities can continue to control the situation. But the situation may go out of control because there has already been so much inflation, and so much of it is, as I said, not even printed money but a belief in something intangible.

[Brian]

The tripling of average housing prices around the major metropolitan regions in the past decade is a good example of hyperinflation relative to real earning power of ordinary working people. This has occured during a time they have lost their pensions from corporate America. In a nutshell, their incomes and lifetime savings has been raided by corporate insiders as their government has abandoned them to the wolves. Its a great reallocation of wealth in our time. The 45 trillion dollars worth of credit default swaps,etc., essentially a huge credit cross-holding game across many large institutions is not real money, only promises of compensation given certain events. What is real money is that taken from the middle and lower working classes and kicked upstairs to those that hold the power, the laws, and strings. Housing prices, cars, college, medical care, many services etc have already been hyperinflated while pocket electronics has been deflated because they keep the subscriber base going. Now that a large correction and bear market are in the works, jobs will be lost, demand will be crimped, and prices will stop short their steep ascent. The devaluation of the dollar is as much due to lack of global confidence in our competence as a "balanced economy" as developing countries own new found wealth as "outsourced manufacturers" and incipent domestic economic growth. Its fair to say the total economic losses due to greed, lack of regulation, and fraudulent imcompetence may approach 1-2 trillion before its all over, almost the loss of the tech/net boom of the 90's. Note the most recent decision of the Supreme Court to eliminate shareholder suits of the class action(and affordable) kind to protect the corporate banking, brokerage, and big institutional interests from having to pay the piper. Its also interesting to note for all the power and immunity they wield, many of their managers made huge blunders in faulty risk management costing their institutions and shareholders billions while they walked away with multimillion dollar packages. Also note the FCC has just approved allowing even further concentration of the various media platforms in the hands of just a few huge media conglomerates. It just goes on and on, and while everyone has had their eyes focused through constant fear campaigns on Iraq and Afghanistan, so much that formerly belonged to the people has been wantonly given away to the corporations. Those in power have no shame, and now their lobbiests will simply try their very best to push through more favorable legislation to even further go after more and more. This is unbridled large scale unregulated capitalism in which the strong simply squash the weak and go for it all. Capitalism, even by Adam Smith, was meant for small scale enterprises each working to the advantage of society their particular specialties. He never sanctioned today's kind of concentrated wealth among a few hundred corporations in which less than a hundred control almost everything including our government. I suggest you read his original essays and you will see how distorted today's argument by the right is about the virtues of our kind of capitalism. Its greed without concience and narcissism with an animal aggressiveness. Ultimately it goes to the vanity and greed of the people who rule us and their imaginary self serving arguments about why they are right and we don't matter.

[Deborah]

Apocalypse aside, the mantra of growth has deceived us for far too long. What it translates into is: Don’t worry about the relative size of your slice, just concentrate on growing the pie! Now, with a recession threatening even more suffering for those who are already struggling, may be the perfect time to get out the pie-cutter again.

How about we do it by mommy rules: Management gets to cut the pie, but the employees get to choose which slice they get.

I agree with wafranklin. It is long past time for outright rebellion. I wonder what it will take besides war, economic downturn, and a president who thinks he's above the law.

Have Americans become so opressed we can no longer fight back or are we just complacent?

[k8e]

How can anything grow forever? Growth that never stops is called cancer.

[Robin LESLIE]

This crisis of corporate capital is having some interesting effects! Firstly it is not simply exploding, collapsing from without, but, imploding from within. When a system collapses externally, a bit of social engineering can usually be devised to hide the structural fractures! When a system collapses from within, then the control function is itself impaired, and, I argue, that is what is happening with corporate capitalism right now! The British experiencve is an interesting one! Here we have had a revisionist Labour Party, operating a junk State, an uneasy coalition of incompatible interests, in the context of an increasingly hostile
and resentful British public! Vaclav Havel, the Czech author was right about Western States, donning the mantle of private tyrannies, the State serving the political interests of corporations, and professionals as clones in the process!
In the process of tying everything to the corporate machine however, the professionals ethics have been abandoned, and decisions in, for example, clinical medicine, are being taken by managers in the corporate business interest! Every thing, person, becomes a functionary of the Corporate machine, which tolerates no resistance! Ironically of course real resistance is now growing, so that a clear and distinct ideological alternative is now emerging based on an organic ecology and a humanised society free of the machine view of the world, that has prevailed since the 17th century. This alternative emerges at the most decisive point in human history viz. the decline of the planet by human hands! That is why corporate capitalism was the last chapter of human arrogance and conceit!

[Jacqueline Homan]

The problem is that the unemployment figures are NOT accurate. Anyone who is unemployed after unemployment benefits expire is not counted among "the unemployed." Anyone who is ineligible to collect unemployment benefits is not counted among the unemployed. And let us not forget those middle-aged job-seekers who have become discouraged after not getting chances for jobs after going three years or more without getting a chance for a job, and have given up (not because they're "lazy"), because they feel like what's the point when trying upon trying upon trying has gotten them nowhere.

When you're unemployed for a year or more, employers, including many temp agencies, will not hire you...Your "unemployment gap" is held against you and so you can't get a job because you're seen as "defective."

Have bad credit due to the death spiral of downward mobility and poverty? Kiss any hope of getting a job good-bye since the use of your credit score in poverty-profiling hiring practices will ensure you probably will remain jobless - and hence remain poor.

Disabled but able to work at as a cashier for the current federal minimum wage? Fat chance when employers make it a condition of employment to stand, refusing to accommodate you by allowing you to do that job while sitting. The ADA was supposed to change that; and end the marginalization of people with medical/health problems who need jobs...but the clause in "Employment At-Will" basically gives employers free reign to skirt age and disability discrimination laws.

Oh, and let's not forget that getting a job anywhere anymore is all about who you know, and who you know is directly related to the social networks you have which are based on your socio-economic strata. Friendships, networks, social ties, etc., that may be available to those in the middle and upper classes are NOT open and available to those who have been marginalized and left out.

[alban]

There is nothing natural about corporate capitalism, anymore than the 'countryside' we preserve is natural. Both are artifacts of our own creation.

The present system (apart from being grossly unfair and extremely inefficient) is also slow to adapt and slow to predict or solve the real supply problems that effect millions of people.
Defenders of the system: Please justify what is happening right now to the price of rice.
Also explain why we still travel in heavier than air vehicles, and why our cars burn oil.
There is no hidden benign intelligence at work in the so called free market.

[Gloria Diaz]

I went to college and got a bachelor’s degree and a string of crappy, low-paying jobs. I went back to school to learn to drive a truck, and after eight tries, passed the CDL test. I got fired as a trucker, and may not drive again for three years, due to some minor backing accidents. I feel like no matter what I do, nothing will allow me to become middle class on my own. When my parents were still alive, I was secure, but since my mother has been gone, I’ve struggled. What am I doing wrong? The last time I was able to pay my bills and set a little aside, was when I working three jobs. Then, I lost two of those jobs through no fault of my own, and I was back to my part-time day job. I’m seeking public assistance to help with utilities and my boyfriend’s mother, who is on disability, gave me a months’ worth of groceries out of her kitchen to tide me over. I’m living my worst nightmare, which is not being able to take care of myself. I feel ashamed and a failure.

[Vineet]

Hi,

The recent melt down of global markets will result in lot of retrenchments.
I feel that following industries are least prone to recession :
1. Education
2. Health care, Weight loss,
3. Any thing related to Religion – may be you can become a “Swami” or “Guru”
4. Ladies fashion industry and
5. High end product market

On-line income can also be made recession proof by right kind of mix of multiple income streams.

Vineet Aggarwal
www.ILoveExtraCash.com
http://www.ezinfocenter.com/7865808/MM

[ben]

The problem started because americans start putting things like GAS on their credit cards.. and now have nothing to show for it. We all are suppose to use the credit cards when we need a little extra help. Now They Maxed! There is no extra money. Its gone. Bail out after bail out, the banks, credit companies, and so forth will be saved, the people will get screwed, and somehow a ceo will still have his new benz every year and a huge bonus. God bless them. Frankly if people exercised some self control and showed some personal responsibility (like not buying a house they knew they couldn't afford), they would be better prepared for situations like we are now experiencing. I have changed absolutely nothing in my daily life because of the recession. But those "spenders" should stop buying gucci handbags and crocs and start focusing on if they will be fed 5 years from now. I found a new forum http://fightagainstrecession.com/index.php that will surely help you address your worry over the global recession, vent about financial stuff and share money-saving tips.