The Economic Weather

A report called Battered by the Storm, put together and released by several organizations documents the vast number of people being crushed by our economic problems. Our corporate media doesn’t give much time to reporting the devastation occurring at the bottom rungs of our economy’s ladder. Blacks, Hispanics, women, children, and less-educated white males have felt the full force of the crash. This report documents that rising stock prices in no way correlate with any sort of broader economic health. It also should be noted by our cultural warriors of the last decades, cultural liberalism is always tied to economic vitality, without the latter, the former struggles mightily.

Meanwhile, in our global economy, our Ministry of Financial Propaganda, that is the corporate media, blared headlines all over that China’s exports improve. The AP states, “The trade figures for November were the best in a year with exports falling just 1.2 percent from the same month of 2008.” Remember, global trade numbers were off a cliff last fall, so a further 1.2% decline is an interesting improvement. There are growing problems with over-capacity in China. The WSJ had a good piece on the steel industry stating, “Crude steel output touched records this year, with the latest monthly posting in October reaching the second highest in history at 51.75 million tons, up 42% compared with a year earlier.” Now China currently produces half of all global steel, so if its exports are down 1.2%, while its production is up 42%, things are not right.

Paul Volcker continued his campaign in the financial wilderness against financial innovation. The former Fed chair once again stating the obvious that, “credit default swaps and collateralised debt obligations had taken the economy ‘right to the brink of disaster’ and then added that most uncomfortable fact, the economy had grown at ‘greater rates of speed’ during the 1960s without such products.” Volcker concluded, “The industry’s ’single most important’ contribution in the last 25 years has been automatic telling machines, which he said had at least proved ‘useful’. Who knew Volcker had a sense of humor? All financial reform thinking needs to begin with innovation in the financial industry over the last three decades has been of little value to the economy, but great profit for Wall Street.

Finally, a very unpalatable Paul Krugman gives up Keynes’ ghost in the NYT stating in so many words, “We’re all monetarists now.” Mr Krugman meet Mr. Eccles, Fed Chairman 1935 who stated, “We are in the depths of a depression and… beyond creating an easy money situation through reduction of discount rates, there is very little, if anything, that the reserve organization can do to bring about recovery.” However, Mr. Eccles never won a Nobel Prize.