Roubini says double-dip too!

On the other hand, Paul Krugman isn't talking about double-dips, but a decade long depression.

I've got an expanded blog article titled "Recession Watch: one dip, two dips, ... we all fall down", which includes current macroeconomic data on America's descent into recession and opinions on what this all means by Krugman, Roubini, Joe Stiglitz, and Ken Rogoff.

None of this should be a surprise to those paying attention, but I suspect most people -as usual- aren't.

Stiglitz on stimulating the US economy

Joseph Stiglitz, professor of economics at Columbia University, former Senior Vice President and Chief Economist of the World Bank, and recipient of the 2001 Nobel Memorial Award in Economic Sciences, offers some sound advice to the American political system in how to stimulate the US economy.

He points out the obvious:

First, we must dispose two myths. One is that reducing the deficit will restore the economy. You don’t create jobs and growth by firing workers and cutting spending. The reason that firms with access to capital are not investing and hiring is that there is insufficient demand for their products. Weakening demand — what austerity means — only discourages investment and hiring.

He asks, "How do we  get America back to work now?"

The best way is to use this opportunity — with remarkably low long-term interest rates — to make long-term investments that America so badly needs in infrastructure, technology and education.

We should focus on investments that both yield high returns and are labor intensive. These complement private investments — they increase private returns and so simultaneously encourage the private sector.

Helping states pay for education would also quickly save thousands of jobs. It makes no sense for a rich country, which recognizes education’s importance, to be laying off teachers — especially when global competition is so fierce. Countries with a better educated labor force will do better. Moreover, education and job training are essential if we are to restructure our economy for the 21st century.

The advantage of having underinvested in the public sector for so long is that we have many high-return opportunities. The increased output in the short run and increased growth in the long run can generate more than enough tax revenues to pay the low interest on the debt. The result is that our debt will decrease, our GDP will increase and the debt to GDP ratio will improve.

He also considers the possibility of raising taxes and using that income to invest in the country to stimulate the economy.

Increasing taxes at the top, for example, and lowering taxes at the bottom will lead to more consumption spending. Increasing taxes on corporations that don’t invest in America and lowering them on those that do would encourage more investment. The multiplier — the amount GDP increases per dollar spent — for spending on foreign wars, for example, is far lower than education, so shifting money here stimulates the economy.

There are things we can do beyond the budget. The government should have some influence over the banks, particularly given the enormous debt they owe us for their rescue. Carrots and sticks can encourage more lending to small- and medium-sized businesses and to restructure more mortgages. It is inexcusable that we have done so little to help homeowners, and as long as the foreclosures continue apace, the real estate market will continue to be weak.

The banks’ anti-competitive credit card practices also essentially impose a tax on every transaction — but it is a tax with revenues that go to fill the banks’ coffers, not for any public purpose — including lowering the national debt. Stronger enforcement of antitrust laws against the banks would also be a boon to many small businesses.

Recession Watch: one dip, two dips,... we all fall down

The trend lines are undeniable; the US economy is heading into another recession.  Debate between economic analysts entail whether what is occurring is an entirely new recession, a double-dip recession, or the continuation of even larger economic contraction that began initially with the 2008 financial crisis (which some would argue is an extension of the 2001 recession) and has properties that are unlike previous recessions.  Each of these arguments have some validity in explaining the current situation, but all conclude that this new decline, while not likely to be as severe as the 2008 crisis, will last longer in duration and given the current political weaknesses of the major industrial nations, be more difficult to mitigate.

Leaving aside the debt crisis and economic malaise that is occurring in Europe for the moment or the possible hard landing that has been predicted about China and the entailing risks these situations pose to the global economy, America's economic position is clearly weak.

First, the jobs position is dismal.  Last month, zero jobs were added and only a fraction of the jobs necessary to compensate for population growth alone have been achieved in the previous four months.  The NY Times summarizes:

Over the last 50 years, every time that job growth has been as meager as it has been over the last four months, the economy has been headed toward recession, in a recession or in the immediate aftermath of one.

The collapse of job creation is not about businesses fearing regulatory uncertainty, creeping hyper-inflation, or the need for further tax-cuts to stimulate big businesses already bloated corporate coffers, but rather it is due to insufficient aggregate demand.  People without jobs, people forced to take inferior paying jobs, people concerned that they may lose their jobs, people forced to subsidize their spouse, adult children, parents, and/or relatives, and people loaded with debt, aren't engaged in making major purchases, because they can't afford to.  Consider the following:

But the latest indicators suggest that even if the economy does not continue to worsen, it appears to be too weak to add enough jobs each month — roughly 125,000 — even to keep pace with population growth. Anything less, and the share of the population that is employed will continue to fall.

The stimulus program offered by Mr. Obama was insufficient to meet the full demands of the  financial crash of 2008.  This blog has been saying for the past three years (here, here, and here) that the weak recovery was an illusion.  Joseph Stiglitz said back in 2009 that, "We need a larger and better designed stimulus."  Paul Krugman has been waging a public policy crusade to convince the public that a second more robust stimulus is needed.  President Obama, instead of listening to these and similar minded economists, decided to split the difference and offer everyone a little of what they wanted: a little bit of tax cuts and some stimulus over a couple years.  The problem was that while averting a more severe recession, it failed to create enough power to re-inflate the economy to pre-recessionary levels.  Now that the stimulus dollars have been used, the economy is drifting back into negative territory and with a recalcitrant Republican dominated House of Representatives, there is virtually no chance that anything of substance being passed.

Other indicators such as GDP, consumer confidence, consumer consumption, factory employment diffusion index, and housing are all trending downwards.  Volatility in the market place, with abundant talk of debt crises across the western hemisphere, has investors and business worried.  Last month Asian banks cut credit lines to French banks.  Central banks across Europe, Japan, and America have made the unexpected move to offer dollars to European banks to ensure liquidity.

What had been in 2008 a financial crisis has migrated into a sovereign debt crisis.  Nouriel Roubini expands:

We are running out of policy bullets. The policymakers don't have monetary bullets; they don't have fiscal bullets; they cannot even backstop their own financial system. That's why it's more scary than a year ago, two years ago, or three years ago -- when we had all these policy bullets. Now we are running out of them.

***

Ken Rogoff, Harvard professor and former chief economist at the IMF, has said, "the real problem is that the global economy is badly overleveraged, and there is no quick escape without a scheme to transfer wealth from creditors to debtors, either through defaults, financial repression, or inflation."  As a result, Rogoff points out that many policy makers have badly misunderstood the overall problems associated with this second great contraction, as he puts it.  He offers the suggestion that, "If governments that retain strong credit ratings are to spend scarce resources effectively, the most effective approach is to catalyze debt workouts and reductions."

Solutions to both individual and national debt problems should be addressed as follows:

For example, governments could facilitate the write-down of mortgages in exchange for a share of any future home-price appreciation. An analogous approach can be done for countries.  For example, rich countries’ voters in Europe could perhaps be persuaded to engage in a much larger bailout for Greece (one that is actually big enough to work), in exchange for higher payments in ten to fifteen years if Greek growth outperforms.

Another approach offered by Rogoff to reduce the painful deleveraging process and years of unnecessary slow growth, would be for central banks to pursue a policy of moderate inflation of 4-6% for several years.

At this stage, none of the policies suggested by Stiglitz, Krugman, Roubini, or Rogoff appear on the table in either Washington DC or the capitals of Europe.  Instead of sustained and ambitious solutions, we are left with blathering idiots telling us of austerity programs that will magically generate confidence, while keeping away the terrible bond vigilantes.  The incompetence and stupidity of our leaders is nearly blinding.

Unfunded Liabilities: A Cost Profile of the Iraq War

Joseph E. Stiglitz (Columbia University) and Linda J. Bilmes (Harvard University) wrote in 2008, "The Three Trillion Dollar War."  It was an attempt to examine and describe the full costs of the Iraq war to the general public and contextualize the implications of the American public's decision to allow the Bush junta unfettered war making authority.  Although the original figures were met with usual hostility from cultural managers and propagandists on the right,  additional studies completed by the Joint Economic Committee of Congress and the non-partisan Congressional Budget Office, concluded that the war would cost American taxpayers at least $3.5 trillion or between $1.4 and $2.2 trillion respectively.

Today they update the assumptions and cost profile of the cost of the Iraq war in a Washington Post opinion piece labelled, "The true cost of the Iraq war: $3 trillion and beyond." They briefly expand on four areas that have developed over the past two years: Afghanistan, the Oil market, the Federal debt, and the financial crisis. I've highlighted the most illuminating sections of the article below.

Afghanistan

The Iraq invasion diverted our attention from the Afghan war, now entering its 10th year... It is hard to believe that we would be embroiled in a bloody conflict in Afghanistan today if we had devoted the resources there that we instead deployed in Iraq. A troop surge in 2003 -- before the warlords and the Taliban reestablished control -- would have been much more effective than a surge in 2010.

Oil

We now believe that a more realistic (if still conservative) estimate of the war's impact on prices works out to at least $10 per barrel. That would add at least $250 billion in direct costs to our original assessment of the war's price tag. But the cost of this increase doesn't stop there: Higher oil prices had a devastating effect on the economy.

Federal Debt

There is no question that the Iraq war added substantially to the federal debt. This was the first time in American history that the government cut taxes as it went to war. The result: a war completely funded by borrowing. U.S. debt soared from $6.4 trillion in March 2003 to $10 trillion in 2008 (before the financial crisis); at least a quarter of that increase is directly attributable to the war. And that doesn't include future health care and disability payments for veterans, which will add another half-trillion dollars to the debt.

Financial Crisis

Saying what might have been is always difficult, especially with something as complex as the global financial crisis, which had many contributing factors. Perhaps the crisis would have happened in any case. But almost surely, with more spending at home, and without the need for such low interest rates and such soft regulation to keep the economy going in its absence, the bubble would have been smaller, and the consequences of its breaking therefore less severe. To put it more bluntly: The war contributed indirectly to disastrous monetary policy and regulations.

Federal Reserve to be Audited

The worm has turned several times in the effort to audit the US Federal Reserve and reclaim some democratic  accountability of the secretive machinations of this institution.  Joseph Stiglitz, Nobel recipient in economics, has called the Fed a corrupt institution.  Many on both sides of the political spectrum, like Congressmen Ron Paul (R-Tx) and Alan Grayson (D-Fl), have questioned the basis and decision making structure of the Fed and demanded that more transparency be provided.

On the other hand, many Democrats, Republicans, and status quo defenders of Fed have attempted to defeat any legislation that would review and address the gross failings of the Fed, which directly lead to the Great Recession.  The arguments offered by these groups have varied from the supine to the ridiculous.  For example, claims were made that American capitalism itself would be imperiled (unlike the current situation) if politicians were given the ability to review the monetary policies of the Fed.  The sacred independence of the Fed would be lost and monetary policy would be subject to the whims of politicians, who are subject to short-term re-election thinking; thus potentially pushing the country into a Zimbabwe-like economic collapse.  However, the problem isn't so much congress' meddling in monetary policy, but the Fed's persistent habit of defining fiscal policy, which is clearly the purview of the elected representatives in Congress and the executive.  During the past recession, the Fed shifted its position from being the lender of last resort to the investor of last resort.  In practice this meant that the Federal Reserve, under Ben Bernanke, has been picking the winners and losers in the US market by defining who would be protected by the state if their businesses faltered.   That is the definition of crony-capitalism.

Last week, 11 May 2010, the US Senate voted 96-0 for the Government Accountability Office to audit the "Fed's activities since the outbreak of financial turmoil in 2007."   Unlike in the past where the Federal Reserve and its Chairman were given "deference and near-reverence" by members of Congress, populist anger at all branches of government have forced politicians to respond.

The chief backers of the audit idea are a political odd couple, Rep. Ron Paul (R) of Texas in the House and Sen. Bernie Sanders (I) of Vermont. On the right, Representative Paul is a libertarian who sees the audit as a step to help the public conclude that the Fed should not exist at all. On the left, Senator Sanders is known as a "democratic socialist" crusading against an institution that critics say is closely allied with powerful Wall Street bankers.

The recipients of all those trillions of dollars, which to date the Fed has refused to provide, and the underlying rationals for providing these parties with such grandiose sums, will now be open to public inspection.  As Senator Sanders said, "We also need to know what possible conflicts of interest exist involving the heads of large financial institutions."

Stiglitz Calls the US FED Corrupt

Last week Joseph Stiglitz, professor of economics at Columbia University and recipient of the Nobel Memorial award in Economics (2001), made a set of explosive criticisms about the Federal Reserve at a public forum on financial reform that has largely been ignored by the mainstream media to date.    Tim Iacono at SeekingAlpha says, with respect to the comments, that they are, "patently obvious to anyone with a working knowledge of how the Federal Reserve system really works, yet, even to me they somehow seemed shocking."

What was it that Stiglitz said?

If we had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure.

The pseudo-public (and therefore pseudo-private) Federal Reserve has long pretended to the serve the public interest, while hansomely filling the vaults of the banks to whom they are supposed to supervise and regulate.  Since the the inception of the Great-Recession libertarians, progressive-liberals, and an assortment of economists have been asking tough questions about the conduct and competency of Alan Greenspan and Ben Bernanke and the entire Federal Reserve system, which to date has blocked, scuttled, or diluted any attempts to allow transparent examination of its activities.  I too have been questioning the basis for the US Federal Reserve system (here, here, and here) for some time, and Stiglitz's comments, which I do not consider hyperbole, are a refreshing anodyne to the usual mealy-mouthed platitudes offered by the MSM on why meaningful examination of the Fed and financial system reform cannot occur.

Leading Economists Question US Growth

Despite the seemingly robust growth of 5.7% seen in the last quarter of 2009, a number of noted economists, who originally anticipated the great recession, have stated their concerns and pessimism for the future of the American economy.

In Bloomberg's news-wire, New York University professor Nouriel Roubini calls the released Q4 numbers “very dismal and poor.”  He explains that more than half of the 5.7% expansion "was related to a replenishing of inventories and that consumption depended on monetary and fiscal stimulus."  In his opinion, future growth for the US economy remains tenuous and he believes that although the economy will not trend back into a recession, for many Americans -especially those who remain or become unemployed- it certainly will feel as if the recession persists.  His title as Dr. Doom remains intact.

Princeton university professor Paul Krugman has been warning Americans since the first signs of the recession that a strong stimulus program, paralleled with a comprehensive regulatory reformulation between government and America's financial institutions, was necessary in order to have the country successfully rebound from the recession.  His January 28th NY Times column outlines this theme:

We’re in the aftermath of a severe financial crisis, which has led to mass job destruction. The only thing that’s keeping us from sliding into a second Great Depression is deficit spending. And right now we need more of that deficit spending because millions of American lives are being blighted by high unemployment, and the government should be doing everything it can to bring unemployment down.

He rebukes Mr. Obama and his economic team for their unwillingness to do more and warns "against the perils of complacency and false optimism."

As you read the economic news, it will be important to remember, first of all, that blips -- occasional good numbers, signifying nothing -- are common even when the economy is, in fact, mired in a prolonged slump ... the odds are that any good economic news you hear in the near future will be a blip, not an indication that we're on our way to sustained recovery.

In addition, he sternly chastises the Obama administration for engaging in budgetary gimmickry and sleight of hand policies, such as reining in non-military discretionary fiscal expenditures, while calling for increases to defense, nuclear, and homeland security budgets.  A subject Glenn Greenwald described as the Sanctity of Military Spending.

Joseph Stiglitz, another Nobel Prize winner in economics and professor at Columbia university, is equally unimpressed by the current state of affairs and has been condemning both governments and business alike in their meekness to effectively manage and resolve the underlying problems.  He too calls for a second government backed stimulus in the USA, to reduce chronic unemployment, which when including the under-employed and discouraged workers represents a rate of approximately 19%.  He states that, "I don't think anyone would describe the current situation as a strong recovery."  Furthermore, Stiglitz questions the underlying premise of using GDP as an adequate economic metric:

The big question concerns whether GDP provides a good measure of living standards. In many cases, GDP statistics seem to suggest that the economy is doing far better than most citizens' own perceptions. Moreover, the focus on GDP creates conflicts: political leaders are told to maximise it, but citizens also demand that attention be paid to enhancing security, reducing air, water, and noise pollution, and so forth - all of which might lower GDP growth.

Robert Shiller, professor at Yale University, has written an article in the NY Times that discusses the underlying psychological elements affecting both consumers and investors.  He reminds people that,

business recessions are caused by a curious mix of rational and irrational behavior. Negative feedback cycles, in which pessimism inhibits economic activity, are hard to stop and can stretch the financial system past its breaking point.

The article notes that a majority of Americans do not believe that any recovery will occur for at least another two years.  Unless the population becomes convinced that serious attempts have been made to re-align risks, stabilize the economy, and pursue a long-term plan for future growth and prosperity, there will be  little realized improvements. 

The past ten years have been a disaster for the American middle class and average person.  The time for tepid half-measures and voodoo-economics has long expired.  Mr. Obama was elected to take on the institutional forces that have corrupted government and driven the entire economy to near collapse.  As all four of these economic professors indicate, serious and sustained actions are required to convince everyone that America has a plan for success that will work in everyone's interest.

Elizabeth Warren: TARP Watchdog

Elizabeth Warren is a Harvard Professor specializing in bankruptcy, who has been tasked to be the head of the Congressional Oversight Panel for the government's financial bailout program or TARP. She has received accolades from Nobel Prize-winning economist Joseph Stiglitz and liberal economists like Dean Baker, who said, "She's done a great job calling attention to the Treasury's failing in ensuring that the taxpayers get a fair deal."

To the banks, the crony-capitalists, and the Wall Street crooks who broke the economy, but got a generous get-out-of-jail card from the government, she is Public Enemy Number One. As Stiglitz has said of her, "What she is doing is making a lot of people very uncomfortable." Indeed. During congressional hearings, she pronounced, "Today's [banking] business model is about making money through tricks and traps." She doesn't use the Greenspan-esque habit of mumbling in officialese and feeding the masses pre-packaged platitudes that invoke green-pastures of future growth. She is blunt in her prognosis of institutional corruption and even plainer in the necessity to rectify the imbalance of power and irresponsibility that currently passes for regulation.

MotherJones magazine has a short expose on her, written by David Corn. It outlines her modest origins and escalation through academia to her present position.

Warren focused on how financial policy and law affected folks at the kitchen-table level, and by 2005 she was testifying on the Hill against legislation sought by credit card companies and the financial sector—and eventually passed by Congress—that made it tougher to file for bankruptcy.

With respect to bank regulators, she believes they need to be stripped of their consumer protection roles, because as she says,"The regulators have turf to protect. They want to run big agencies with big budgets and lots of employees. The new agency would reduce some of their bureaucracy."

In a Reuters article,

Warren said banks are opposed to the creation of the new agency for two reasons: one, it would force real change upon their business practices, and two, it would compromise the cozy relationship banks often have with their primary regulators.

"They fear that the public may pay more attention to the consumer agency," she said. Warren said it is up to lawmakers to decide how quickly to pass legislation but said the financial system needs real change, and needs it soon.

"The bad news has been piling up for a year, but none of the rules have changed. Many of the same things that got us into trouble are still going on."

The greedheads and jackals of casino-capitalism are running scared, as McClatchy Newspapers reports, "The [US] Chamber [of Commerce] said it's spending about $2 million on ads, educational efforts and a grassroots campaign to kill the agency. It said that the grassroots effort has led to more than 23,000 letters sent to Congress to date." We all know how it will end again if effective reform is not instituted. The question is whether the President Obama and the spineless democratic stooges in congress will shake off the corporate lobbyists or merely play dead like a Virginia opossum when faced with the task of actually governing.

Corporate Socialism: Agribusiness Subsidies

Despite the loud and perennial denunciations of creeping socialism by right-wing protesters, for decades American agribusinesses have been receiving prodigious and what some would call obscene levels of subsidisation through legislative machinations. This is a bi-partisan effort, pursued by both Democrats and Republicans and executed across all regions of the nation, and meant to insure excess revenue for already large and very profitable corporations. In fact, agribusiness, after the military-industrial complex and most recently the bailed out banking industry, is the nation's largest recipient of corporate welfare. The implications are not trivial for they entail not just the gross misuse of public money, but result in excessive taxes levied on individual citizens, unfair competition for small farmers, and the nation's food supply and production being placed under the control of multi-national companies seeking less regulation, cheap labor, and ever larger annual profits.

These bills are sold to the public under labels like the "Farm Security Act" and the "Agriculture Conservation and Rural Enhancement Act" and are subject to heavy lobbing efforts. Despite the claim that these bills are meant to improve the status of rural family farmers, the reality is much different. According to the conservative Heritage Foundation,

two-thirds of all farm subsidies go to the top 10 percent of subsidy recipients while the bottom 80 percent of recipients receive less than one-sixth of farm subsidies. A full 60 percent of America's farmers do not qualify for any assistance. In 2000 alone, more than 57,500 farms received subsidies totaling over $100,000, and subsidies of at least 154 farms topped $1 million. Among these beneficiaries are fifteen Fortune 500 companies, including Westvaco, Chevron, and John Hancock Mutual Life Insurance, which receive as much as 58 times as much as the median annual subsidy of $935.

In what is described as a "plantation effect," family farms across the country are being bought out by corporations, which are converted into tenant farms. According to available statistics, 75% of the nation's rice farms are tenant farms and the ownership of other monoculture based farms is trending in the same direction.

The US is not alone in its trade protectionist and 'free trade' charade. The video above by Nobel Prize winning economist Joesph Stiglitz, provides a sliver of the hypocrisy conducted by all the major economic powers relating to farm subsidies. The EU as an example, provides "13 billion euros, about a quarter of the £47.5 billion spent under the EU's Common Agriculture Policy (CAP)... to big business and industry, not farmers." The Economist magazine evaluates the overall situation in the industrial world as of 2008:

The OECD estimates that its member countries spent $265 billion on farm subsidies in 2008. This was slightly more than a fifth of their farmers’ total earnings. Last year’s increase in food prices ensured that such payments were at their lowest level since records began in the mid-1980s. But handouts still made up more than three-fifths of farmers’ gross incomes in Norway and South Korea between 2006 and 2008. In contrast, they were less than 1% of farm incomes in New Zealand and under 10% in both Australia and America. But the size of America’s farm sector meant that it spent $23.3 billion on subsidies last year. The European Union was by far the biggest subsidiser, forking out $150.4 billion.

Agricultural practices conducted by corporate plantations and food conglomerates as portrayed in the recent documentary Food Inc., "are endangering health, allowing appalling cruelty to livestock and putting the food supply in a dangerously vulnerable position." For example, the number one subsidised crop in America is corn. In particular,

Corn syrup... is an ingredient in high-calorie, low-nutrition junk foods that have created the obesity epidemic. Corn is stuffed into animals that were not evolved to eat it, promoting the evolution of E. coli bacteria and requiring antibiotics that are passed on to unwitting consumers. Given that one fast-food hamburger may involve meat from literally thousands of cattle, the effects are inescapable.

Under the guise of providing supplemental income to family farmers, the US government has allowed corporatized feudalism to become the 'norm' in the agricultural industry and permitted the domestic population to become subservient to the rapacity of these multi-nationals, without a single bullet or invasion occurring. As always, beneficial socialism for the wealthy and fuck-you-very-much capitalism and for the rest of us.

Economics and The Great Recession

Economists across the world have been grinning from ear-to-ear saying the recession is nearly over, “we’ve past the worst,” and there are clear indicators of improvement. Arguments have been bandied about that tell the greedy and the absent minded that “green-shoots” are rising, the rate of job losses has declined, there are fewer surplus’ to be seen in manufacturing circles, and consumer sentiment has improved. While these arguments all have an element of truth, taken in context with actual events that have unfolded not merely in the past eighteen months but in the past two decades of globalization, a substantially different set of conclusions can be reached.

I’ve never trusted economists and their dismal science as a whole. One of the fundamental aspects of ‘real’ science, and not the statistical bloviations of financiers, is the concrete capacity to first, adequately explain a physical phenomenon and second, to accurately predict physical events before they occur based on the prior’s explanation. Let’s first review how they did leading up to this current recession:

1. Alan Greenspan former chairman of the US Federal Reserve (1987-2006) and an adherent of Ayn Rand, in March 2007 said he saw only a one third chance that a recession could occur that same year. The US recession officially began December 2007.

2. Greenspan’s successor, Ben Bernanke, stated in July 2007, only months before the beginning of the largest economic downturn since the Great Depression of 1929, he believed that despite a host of potential economic perils the US economy would pull through 2007 and into 2008 in relatively good shape. It did not.

3. Mark Perry, professor of economics at University of Michigan-Flint, stated in his popular economics weblog Carpe Diem in October 2007, “Economic variables identified by the NBER as the most important recessionary indicators… provide no support for the notion that the U.S. economy is headed for recession.” In fact he believed, “Most current economic indicators suggest a healthy economy, expanding at the average rate of an expansionary economy.” A year later stock markets across the planet crashed.

4. Martin Feldstein, a professor of economics at Harvard and the president of the National Bureau of Economic Research (NBER), stated in November 2007 in the NY Times that, “My judgment is that when we look back at December with the data released in 2008 we will conclude that the economy is not in recession now.”

5. April 2008, Alan Greenspan was given the opportunity to re-evaluate his previous stances and provided the eager public with another kernel of his vast sagacity in the belief that a decline in “U.S. home prices will probably end well before early [2009] as the number of houses on the market diminishes, aiding an economic rebound.” As of today, “US home prices fell 6.8 percent in April from a year earlier as rising unemployment and record foreclosures kept buyers out of the market.”

6. Greg Mankiw, a Harvard University economist and another Bush-bot adviser, recently stated in the NY Times, “It is fair to say that this crisis caught most economists flat-footed. In the eyes of some people, this forecasting failure is an indictment of the profession. But that is the wrong interpretation.” I’m sorry but this isn’t the Gong Show; you’re wrong again.

The above aren’t drama queen’s like Jim Cramer or for that matter anyone affiliated with CNBC. Rather, they supposedly are the best America has to offer in understanding economics and as such, were given pedestals in government and chairs in academia to pursue policies in the public interest. As the above summation reveals, none of them came close to accurately analyzing the existing trends or predicting the evolution of the current recession. If any person in ‘real’ science were to give such glaringly inaccurate and poor predictive analysis they would be fired and dismissed as dunces and crackpots.

In the past few months, the schemers, speculators, and accumulated greedheads, have been positing the argument that we are at the end of this so-called recession. Again, I think we need to re-evaluate the terms we are using. Richard Posner, a conservative jurist and author of a recently published book “A failure of capitalism,” has called this current situation a ‘depression’ due to,

The intensity of the anxiety that it has aroused, the enormous costs that the government has incurred to try to stop the downward spiral of the economy, the possibility that those costs will bite us as the economy begins to recover and by doing so will knock the recovery off its path, and the further possibility that the recovery will be extremely protracted because of long-term changes in consumer preference.

Let’s look at the outcome of the past six months for America:
1. The June 2009 US employment report shows that conditions in the labor market continue to be extremely weak, with job losses in June of over 460,000
2. Unemployment has risen from 7.2% to 9.5%
3. Underemployment rate has risen from 14.8% to 16.8%
4. Aggregate number of hours worked per week has dropped precipitously
5. There has been more than 6 Million jobs lost since the start of the crisis
6. The DJIA remains 42% below its 2007 peak of 14,200
7. Personal savings of those with jobs has risen to 6.9%

The UK, the Eurozone, Japan, and all emerging markets are in worst shape than the USA. The UK output is expected to decline by 4.3% in 2009. The ECB announced in June that it expected Eurozone GDP to decline by as much as 5.1 percent this year. Eastern Europe is still a brewing concern with its capacity to further undermine major Western European economies and financial sectors. Japan faces historic levels of unemployment and continuous month-to-month declines in exports. The numbers offered by the Chinese simply don’t add up and their vaunted domestic middle-class population is not in any position to become uber-consumers. Unlike previous recessions and regionalized meltdowns, the rancid fruit borne by the collusion of national governments and international finance industries now encumbers the entire globe and all industries.

Despite these obvious facts, the OECD has declared “green sprouts” are rearing, the worst is behind us all, and in 2010 the 30-country organization will see 0.7% growth. The IMF, as of yesterday, boosted its 2010 global growth forecast to 2.5 per cent. Ben Bernanke back in February assured congress that, “there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.” Given the track record of these “experts,” does anyone really believe them?

Nouriel Roubini, one of the few economists who got it right, has stated that the U.S. recession will last at least two years and could drag on as long as the one that plagued Japan in the 1990s. Joseph Stigiltz who has done an excellent job of analyzing the roots of this current calamity states the little spoken but obvious fact:

So the real risk, I think, is that things will be even worse [than] before the crisis. The reason I say that is the way that we have gone about rescuing the banks and restructuring our financial sector has resulted in the too-big-to-fail banks becoming even bigger.

The best argument I have discerned is that there will not be a sustained recovery or minmally a return to the previous norm! One has to consider the fact that we have seen a fundamental and systemic failure of capitalism across the globe and neither the American nor any other nation’s economy will simply revert to “business-as-usual.” For the past decade, the American consumer, who represents 70% of the US economy, was sopping up an inordinate level of consumables from China, Japan, and the rest of the world. They built it and the Yanks bought it. Now that has stopped.

Americans are losing their jobs at record levels, they are seeing whole domestic industries disintegrate with no chance of those jobs returning, health care costs are increasing, and the value of their homes are collapsing. US Housing prices as of April 2009, have witnessed an 18% year-over-year drop and a reduction of 32.6% from their peak three years ago (S&P/Case-Shiller index). Currently, ten percent of homeowners have mortgages that are valued more than their homes are actually worth. Foreclosures increased 18% in May 2009 and thus remain unabated. The US banking industry, on the other hand, has an additional $1.8-trillion exposure to commercial real estate and faces potential losses of approximately $200-billion. The implication is that commercial real estate, "Is headed for a crash that could eclipse even the devastating slump of the early 1990s." The American consumer has wisely started to save again; however, this new propensity towards frugality during a severe recession reduces the likelihood that a recovery will occur anytime soon or can be maintained.

Robert Reich states, “This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.” Therefore, the growth and consumption that occurred during the roaring nineties and the dismal decade of the zeroes will not be repeated. A new equilibrium will have to be established with diminished expectations, reduced (if any) growth rates, and an end to the culture of excess that has permeated government, business, and individual want.

As John Connor says in Terminator Salvation, "If we stay the course, we are dead! We are all dead!"