Will The Economy Recover In 2010? Don’t Bet On It, Time To Fight Back

December 30th, 2009 - by: danny

“It was the best of times, it was the worst of times, it was the age of wisdom,
it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity,
it was the season of Light, it was the season of Darkness, it was the spring of hope,
it was the winter of despair, we had everything before us, we had nothing before us,
we were all going direct to Heaven, we were all going direct the other way —
in short, the period was so far like the present period, that some of its noisiest authorities
insisted on its being received, for good or for evil,
in the superlative degree of comparison only.”
- Charles Dickens, 1859

The year is ending but the crises that defined the year are not. No matter where you look, the system, the politicians, the leaders are incapable of addressing deep problems. Civil liberties are routinely violated, not only here but in Egypt which gets $3 billion a year from the USA and whose riot cops are attacking international activists including Americans who traveled there to protest on the anniversary of the criminal assault on Gaza a year ago.

• Gaza March Photos; “No More Than 6 People can Assemble” in Egypt

Bear in mind, it was partially repression in Egypt that drove Zwaheri into forming Al Qaeda….Look around—where do you see progress? We bombed Yemen and they tried to bomb us. The President spoke out about what went wrong with that wannabe plane bomber–but please realize that the conspiracy theory of history is not as powerful as the fuck-up theory.

NYT: Two officials said the United States government had intelligence from Yemen before Christmas that leaders of a branch of Al Qaeda there were talking about “a Nigerian” being prepared for a terrorist attack. [More here Ã¢â€ â€™]

• Top Republican Myths about the Crotch Bomber Affair

Juan Cole: I hear these on tv or from Reps. Pete Hoekstra and Peter King and Sen. Joe Lieberman.

And then there is our economy — my subject today:

Are we out of the “woods?” Is the economy bouncing back?

As readers know, I have been focused on these issues in the blog, articles and commentaries and in my forthcoming film and book. I hate to be a bad news bear but I am hardly alone. Of course, the progressive economists have been pointing out how screwed up things STILL are, but so is the financial press.

Martin Wolff of the Financial Time writes:

“In an article published in the FT this week, Arvind Subramanian of the Peterson Institute for International Economics, argues that economics has redeemed itself by rescuing the world economy from the crisis. I agree, but only up to a point. Many economists argued that the measures were unnecessary, or even harmful. Moreover, these extraordinary interventions have not returned the patient to health. They have merely prevented him from dying. We now must heal five chronic conditions, instead of survive last year’s brutal heart attack.” [More here Ã¢â€ â€™]

“Finally, the financial system remains damaged. Not only does it still own vast quantities of the “toxic assets” its “talented” employees created, but the world is not addressing the structural causes of the crisis. In some ways, the oligopolistic banking system that has emerged from the crisis is riskier than the one that went into it.” [More here Ã¢â€ â€™]

Some more:

• Crony Capitalism Still with us

• NakedCapitalism.com: How Not To Solve A Financial Crisis By Edward Harrison

As we head into the New Year, I am trying to look back at the last one with some semblance of a coherent interpretation of events that leads to a strategic vision of the future. I have already touched on stimulus, kleptocracy and crony capitalism as dominant themes for the year 2009.

These posts have been critical of the economic vision presented by the Bush and Obama Administrations. I would stress that I see a lot of overlap in the two Administrations’ economic policies, which is why I use the phrase “the Bush and Obama Administrations” instead of focusing just on Obama.

But, now is the time to offer a review of alternative policy solutions. Bashing policy without pointing to an alternative doesn’t add value. I also believe quite strongly that this exercise will demonstrate that alternative policy solutions did exist — and that they were pointed out at the time. One can only assume that alternative policy solutions were rejected because the Bush and Obama Administrations preferred the solutions they crafted to these. And while, I am most concerned with outcomes, this juxtaposition between what could have been and what is points to the kleptocracy and crony capitalism I mentioned in my last two review posts.

Before I go into my spiel, I want to stress a point I made at the outset of a November post “The less optimistic view of Treasury’s handling of the crisis“:

one doesn’t have to take the view that its efforts to save the banking industry were a deliberate attempt to line bankers’ pockets by transferring money from taxpayers to the banking industry.

I will probably end up flexing my confabulatory muscles like every other pundit out there — making direct or unconscious assumptions about motives, agendas or intent. This is all just speculation — much of it false. It is outcomes that matter, not intentions. And it is the outcomes that leave me unsatisfied with the present policy course.

Change you can believe in [More here Ã¢â€ â€™]

• The Baseline Scenario: What The Senate Must Do Now

Charles S. Gardner, a former senior official at the International Monetary Fund argues we must not overlook the importance of extending effective regulation to the nonbank sector.

As Congressional action on financial industry reform shifts to the Senate from the bill passed recently by the House, the urgent need now is to fill the gaps in the piecemeal House approach. Regulators require an airtight scheme giving them clear responsibility plus tools to nip industry abuses early and drain the tendency to crisis out of world finance. This rare opportunity also must be seized to restore the Federal Reserve’s control of the money supply, eroded by decades of expanding credit creation by nonbanks.

So far, Congress has ignored this macro dimension of the reform challenge. Understandably, the House Financial Services Committee focused mainly on the high-profile villains of the financial crisis enraging constituents from coast to coast: obscene pay practices, secret but deadly derivatives trading, the murky role of hedge funds, boundless leveraging of assets, and heedless loan packaging that left the originators both rich and risk free. [More here Ã¢â€ â€™]

So there you go. There is no guarantee that what recovery we have will be permanent, no assurance that what seems to have come up won’t go down again.

I have been reporting that all of this is critical to our futures, but so far, there has been little agitation on these key issues. Far too many of us are bystanders, passive onlookers, not engaged citizens.

SOME ARE FIGHTING BACK

Robert Hayes called my attention to this story:

• David and Two Goliaths — A Sebastopol boot maker takes on Citibank and the U.S. government over the legalities of credit card debt By Suzanne Daly

[snip]

“Michael is pushing a big boulder up a steep hill,” says Alan Cone, a civil practice attorney who finds Carnacchi’s case fascinating. “He’s bright as hell, reads tons and prepares his documents well. He has passion, intelligence and a supportable, ingenious argument. And he’s defending himself in court, which is incredibly difficult to do.”

And what’s more, there’s every indication that he might actually have a case.

For five years, Carnacchi had a faultless record with his Citibank credit card account. He had a perfect payment history and was never late with his minimum monthly payment of $213 on a balance of $14,233.54. In December ’07, however, his payment was four days late. When Carnacchi’s January ’08 statement arrived, it showed a new balance almost $600 higher than December had, totaling $14,851.03. Most shockingly, his minimum monthly payment had been increased by 575 percent to $1,224.52 per month, and his interest rate went from 2.99 to 31.24 percent.

He called Citibank, and citing his previous unsullied record, asked them to reverse the charges. He was refused and told that the interest rate could not be adjusted. When Carnacchi pointed out that increasing it was an adjustment, the representative answered that they could increase it but couldn’t decrease it. After a multitude of phone calls trying to negotiate an affordable payment plan, Carnacchi told Citibank that he would make no further payments until they reversed the rates and charges. Three months later, his monthly payment had increased to $3,132.12, almost 15 times the amount of his original payments. He contacted a lawyer, and together they concluded that his options were to declare himself insolvent or fight.

Carnacchi started exploring the very core of U.S. law, the Constitution and the Bill of Rights. A section of the Eighth Amendment prohibits the federal government from imposing excessive fines, and this clause caught his interest. He noted the connection between the U.S. Treasury purchasing $45 billion of preferred stock in Citigroup and using it as collateral for the bank’s bailout money. Citibank accepted the bailout under the Trouble Assets Relief Program, and the sale of the stock effectively made the federal government part owner of the bank.[More here Ã¢â€ â€™]

Again, Happy New Year. If you like what we have been doing here. Please consider supporting us right now with a check made out to the Global Center for Mediachannel.org. We are here today, but could be gone tomorrow. Hoping to hear from you. Write: dissector@mediachannel.org

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