Re: [Marxism] Meanwhile..."Sharp Drop in Jobs Adds to Grim Picture of U.S. Economy" (NYT)

[Louis Proyect <lnp3@xxxxxxxxx>]

>There is no reason I know of to think that capitalist crisis march along
>immune to the vagaries of social conflicts as though they were like the
>sun spot cycles. Neither is there reason to believe crisis are all the
>same in cause and depth. There are quite a few reasons to think this
>crisis will be different and more severe both domestically and
>internationally.
>     --rod

Cyclical downturn or post-bubble recession?

An article in the New York Times by Morgan Stanley's Asia chairman, 
Stephen Roach, states that the country is not in a cyclical downturn, 
but post-bubble recession. There is a big difference. The Fed's 
interest rate cuts and Bush's "Stimulus Plan" are unlikely to stop 
housing prices from continuing to fall nor will they miraculously fix 
the problems in the credit markets. The massive expansion of credit 
in the last 6 years has created a $45 trillion derivatives balloon 
that could implode or just partially unwind. No one really knows. And 
no one really knows how much damage it will cause to the global 
financial system. Stay tuned.

Roach notes that the recession of 2000 to 2001 was a collapse of 
business spending which only represented a 13 per cent of GDP. 
Compare that to the current recession which "has been set off by the 
simultaneous bursting of property and credit bubbles.... Those two 
economic sectors collectively peaked at 78 percent of gross domestic 
product, or fully six times the share of the sector that pushed the 
country into recession seven years ago."

Not only will the impending recession be six times more severe; it 
will also be the fire-siren for America's consumer-based society. 
Attitudes towards spending have already changed dramatically since 
prices on food and fuel have increased. That trend will only grow as 
hard times set in.

Roach adds: "For asset-dependent, bubble-prone economies, a cyclical 
recovery ? even when assisted by aggressive monetary and fiscal 
accommodation ? isn't a given....Washington policymakers may not be 
able to arrest this post-bubble downturn. Interest rate cuts are 
unlikely to halt the decline in nationwide home prices...Aggressive 
interest rate cuts have not done much to contain the lethal contagion 
spreading in credit and capital markets.

A more effective strategy would be to try to tilt the economy away 
from consumption and toward exports and long-needed investments in 
infrastructure.

The Federal Reserve and Washington policymakers are still stuck in 
the past trying to revive consumer spending by creating another 
equity bubble with low interest rates and their $600 per person 
"stimulus" giveaways. Wrong way. Invest in infrastructure and 
environmentally-friendly technologies, rebuild the economy from the 
ground up, reestablish fiscal sanity and minimize deficit spending, 
put America back to work making things that people use and that 
improve society, and (as Roach says) "help the innocent victims of 
the bubble's aftermath ? especially lower- and middle-income 
families". And, most importantly, abolish the Federal Reserve and 
give the control of our money back to our elected representatives in 
Congress. That is the only way to put America's economic future back 
in the hands of the people.

That's a plan we can all get behind. It's time to split the new wood 
and start fresh.

full: http://www.counterpunch.com/whitney03082008.html 


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