Damn!

Krugman thinks it is going to get really ugly.

It will be an ugly scene, and it will be dangerous, too. The 1990s were a time of peace and prosperity; this is a time of neither. In particular, we’re still suffering the after-effects of the worst economic crisis since the 1930s, and we can’t afford to have a federal government paralyzed by an opposition with no interest in helping the president govern. But that’s what we’re likely to get.

If I were President Obama, I’d be doing all I could to head off this prospect, offering some major new initiatives on the economic front in particular, if only to shake up the political dynamic. But my guess is that the president will continue to play it safe, all the way into catastrophe.

It aint gonna be pretty, folks.

Still Not In the Paper

But it is good that it is being said. Krugman.

I’m finding it hard to read about politics these days. I still don’t think people in the administration understand the magnitude of the catastrophe their excessive caution has created. I keep waiting for Obama to do something, something, to shake things up; but it never seems to happen.

Here’s what I wrote in February 2009. It’s pretty rich that now the usual suspects are accusing me of having shared the administration’s optimism. But that’s a trivial point; the important thing is that all signs are that the next few years will be a combination of economic stagnation and political witch-hunt.

This is going to be almost inconceivably ugly.

It is not hard for me to conceive of how ugly it will be. One political party is saying we will tank the economy for political gain. The other party wants to believe that they fixed the economy. Yet we have 10% unemployment. I do not see how we avoid 20%-30% unemployment in the next couple of years.

Not Even Trying

Shame shame shame! The democrats are not even trying to make the economy better. The republicans are actively trying to make it worse. Things are going to get bad.

Krugman:

The administration has less freedom of action, since it can’t get legislation past the Republican blockade. But it still has options. It can revamp its deeply unsuccessful attempt to aid troubled homeowners. It can use Fannie Mae and Freddie Mac, the government-sponsored lenders, to engineer mortgage refinancing that puts money in the hands of American families — yes, Republicans will howl, but they’re doing that anyway. It can finally get serious about confronting China over its currency manipulation: how many times do the Chinese have to promise to change their policies, then renege, before the administration decides that it’s time to act?

Which of these options should policy makers pursue? If I had my way, all of them.

He is a Nobel Prize winner.

Those Poor Rich Folk

Krugman

We need to pinch pennies these days. Don’t you know we have a budget deficit? For months that has been the word from Republicans and conservative Democrats, who have rejected every suggestion that we do more to avoid deep cuts in public services and help the ailing economy.

But these same politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country.

What — you haven’t heard about this proposal? Actually, you have: I’m talking about demands that we make all of the Bush tax cuts, not just those for the middle class, permanent.

Conservatism/Republicanism/Very Serious Personism Has Become A Religion

Krugman calls out the cultists.

As I look at what passes for responsible economic policy these days, there’s an analogy that keeps passing through my mind. I know it’s over the top, but here it is anyway: the policy elite — central bankers, finance ministers, politicians who pose as defenders of fiscal virtue — are acting like the priests of some ancient cult, demanding that we engage in human sacrifices to appease the anger of invisible gods.

It is something I have been thinking about for a while. You have to believe so many things that have no basis in fact to be a republican.

How Hard

Nobel winner Paul Krugman

Spend now, while the economy remains depressed; save later, once it has recovered. How hard is that to understand?

Rotted Fruit

Robert Borosage.

Recovery requires fundamental reform of America's economic strategy. The old shibboleths of the conservative era—shrink government, cut top-end taxes, free multinationals to move jobs abroad, deregulate finance, wage war on labor unions, declare that trade deficits don't matter —have failed ignominiously. They must be discarded, like yesterday's rotted fruit.

Where will the jobs come from?

I Will Act Selflessly This Afternoon

All for the good workers at the Sierra Nevada Brewery.

"Sometimes when I reflect back on all the beer I drink I feel ashamed - Then I look into the glass and think about the workers in the brewery and all of their hopes and dreams. If I didn't drink this beer, they might be out of work and their dreams would be shattered. Then I say to myself, 'It is better that I drink this beer and let their dreams come true than be selfish and worry about my liver.'"
-Deep Thought, Jack Handy

Fire Them Already!

I understand we need a banking system but we do not need the banks we have or the bankers running them.Read this from John Cole.

The Illness- reckless and irresponsible betting led to huge losses
The Diagnosis- Insufficient gambling.
The Cure- a Trillion dollar stack of chips provided by the house.
The Prognosis- We are so screwed.

Fire Them!

Banking is necessary, the bankers that failed are not. Nobel winner Paul Krugman:

I’ll leave to others the question of who knew or should have known that the bonus firestorm was coming; but it’s part of a pattern. At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.

Green New Deal

The UN environmental agency is proposing a green new deal.

OSLO (Reuters) - Investments of $750 billion could create a "Green New Deal" to revive the world economy and protect the environment, perhaps aided by a tax on oil, the head of the U.N. environment agency said on Thursday.

Achim Steiner said spending should focus on five environmental sectors including improved energy efficiency for buildings and solar or wind power to create jobs, curb poverty and fight climate change.

"The opportunity must not be lost," Steiner, head of the U.N. Environment Program (UNEP), told Reuters of a UNEP study that will be put to world leaders meeting in London on April 2 to work out how to spur the ailing economy.

The UNEP report said investments of one percent of global gross domestic product, or about $750 billion, could bankroll a "Global Green New Deal" inspired by the "New Deal" of U.S. President Franklin D. Roosevelt that helped end the depression of the 1930s.[...]

"If, for argument's sake, you were to put a five-year levy in OECD countries of $5 a barrel, you would generate $100 billion per annum. It translates into roughly 3 cents per liter," he said.

Or less than 12 cents a gallon. But I'm sure tax payers will pay billions in bonuses to failed bankers before that will happen.

Economy Down, Fishing Up

More people are going fishing.

MEREDITH, New Hampshire (Reuters) – From his wooden fishing shack on Lake

Winnipesaukee's thinning skin of ice, Mike MacDonald doesn't need to think twice about why more Americans are going "fishin'" in the deepening U.S. recession.

"This costs $6 to get a bucket of bait and it will last the whole day," he said, skinning a fish next to a hole drilled into the frozen New Hampshire lake. "Compare that to skiing -- one day of skiing would cost $80 just for the lift ticket."

As Americans forgo expensive vacations, costly dinners and shopping mall splurges, many are opting instead for the quiet simplicity of fishing, according to the sport fishing industry and reports from bait shops and fishermen.

From the icy north to fly-fishing streams in Texas, angling is on the rise. For families, it's an inexpensive outing. Those with a knack for it can trim their grocery bills. And for newly unemployed, it's something to do.

"I'm seeing a lot more fishermen down here," said John Miller, owner of Bob's Sport & Tackle in Katonah, New York. "With the economy the way it is, people are getting laid off from work and don't want to sit at home and do nothing.

"The cheaper alternative," he said, "is to go fishing."

Hard times have had this effect on Americans before. In the last U.S. recession, from 2001 to 2002, spending on fishing rods and reels rose 12 percent to $343 million, according to the National Sporting Goods Association, a trade body that measures how much people spend on sporting goods.

Sign Of The Times

700 people apply for a janitors job in Ohio.

Economy Going Off A Cliff

What 4.4 Million Jobs Lost Over 14 Months Looks Like, originally uploaded by Speaker Pelosi.

No end is sight.

Zombies

Nobel Prize winner Paul Krugman.

What’s more, officials seem to believe that getting toxic waste properly priced would cure the ills of all our major financial institutions. Earlier this week, Ben Bernanke, the Federal Reserve chairman, was asked about the problem of “zombies” — financial institutions that are effectively bankrupt but are being kept alive by government aid. “I don’t know of any large zombie institutions in the U.S. financial system,” he declared, and went on to specifically deny that A.I.G. — A.I.G.! — is a zombie.[...]

So why has this zombie idea — it keeps being killed, but it keeps coming back — taken such a powerful grip? The answer, I fear, is that officials still aren’t willing to face the facts. They don’t want to face up to the dire state of major financial institutions because it’s very hard to rescue an essentially insolvent bank without, at least temporarily, taking it over. And temporary nationalization is still, apparently, considered unthinkable.

But this refusal to face the facts means, in practice, an absence of action. And I share the president’s fears: inaction could result in an economy that sputters along, not for months or years, but for a decade or more.

Bold is mine. The Reagan/Bush philosophy of the market is always right has failed. It is time to nationalize the banks.

Economic News

From the good doctor. Who points to this Krugman post.

And the insistence on offering the same plan over and over again, with only cosmetic changes, is itself deeply disturbing. Does Treasury not realize that all these proposals amount to the same thing? Or does it realize that, but hope that the rest of us won’t notice? That is, are they stupid, or do they think we’re stupid?

I don’t know which possibility is worse.

The good doctor says,"I think they are stupid"

Also, ABC wants to misinform.

This is stunningly wrong.

The ABC article is based on the premise that an individual's entire income is taxed at the same rate. If that were the case, it would be possible for a family earning $249,999 to have a higher after-tax income than a family earning $255,000, because the family earning $249,999 would pay a lower tax rate.

But that isn't actually how income tax works.

In reality, a family earning $255,000 will pay the higher tax rate only on its last $5,001 in income; the first $249,999 will continue to be taxed at the old rate. So intentionally lowering your income from $255,000 to $249,999 is counter-productive; it will result in a lower after-tax income.

The people ABC quoted don't seem to understand that. Worse, ABC doesn't seem to understand it, either.

Again from the good doctor. "Some times I can't tell if media outlets are playing stupid or if they are stupid."

Fire More People

The good doctor points to this article about AIG and how poorly it was run. I want more people fired.

At its peak, the A.I.G. credit-default business had a “notional value” of $450 billion, and as recently as September, it was still over $300 billion. (Notional value is the amount A.I.G. would owe if every one of its bets went to zero.) And unlike most Wall Street firms, it didn’t hedge its credit-default swaps; it bore the risk, which is what insurance companies do.

It’s not as if this was some Enron-esque secret, either. Everybody knew the capital requirements were being gamed, including the regulators. Indeed, A.I.G. openly labeled that part of the business as “regulatory capital.” That is how they, and their customers, thought of it.

There’s more, believe it or not. A.I.G. sold something called 2a-7 puts, which allowed money market funds to invest in risky bonds even though they are supposed to be holding only the safest commercial paper. How could they do this? A.I.G. agreed to buy back the bonds if they went bad. (Incredibly, the Securities and Exchange Commission went along with this.) A.I.G. had a securities lending program, in which it would lend securities to investors, like short-sellers, in return for cash collateral. What did it do with the money it received? Incredibly, it bought mortgage-backed securities. When the firms wanted their collateral back, it had sunk in value, thanks to A.I.G.’s foolish investment strategy. The practice has cost A.I.G. — oops, I mean American taxpayers — billions.

I realize some of the management has been fired. Anyone that worked in credit default swaps should be fired and they should be stopped. Anyone who signed off on credit default swaps should be fired. The same with 2a-7 puts. If these things are still going on they need to fire management again and the board of directors again. Also, now that we have spent 150 billion and are heading into the quarter trillion range all stock holders, bond holders, anyone with a financial interset need to be wiped out. They gambled on a poorly managed company and lost.

The End of Reagan/Bush Economics

Nobel Prize winning economist is happy with Obama's budget. He has not been too happy with Obama's plans so far.

Elections have consequences. President Obama’s new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.
The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.

Read it all.

Holy Crap

As the good doctor says.

Initial claims for state unemployment insurance benefits increased to a seasonally adjusted 667,000 in the week ended Feb. 21 from a revised 631,000 the prior week, the Labor Department said. It was the highest reading since October 1982, when claims reached 695,000.

The year-long U.S. recession has savaged the labor market and sent the unemployment rate soaring, with some economists fearing it will pierce 9 percent in 2009 from 7.6 percent in January and mount further next year.

Budget

If this is right, the people that want you to die(republicans), will not be able to fillibuster cap and trade.

WASHINGTON (Reuters) - President Barack Obama's budget includes hundreds of billions of dollars in revenues from a greenhouse gas emissions trading system, an administration official said on Wednesday.

The revenues from the system would be spread out over many years starting in 2012, the official said.

Obama wants to help fight climate change by capping emissions of greenhouse gases such as carbon dioxide, or CO2, from big industries and allowing them to trade rights to pollute. Such systems are commonly called "cap and trade."