Signs Staggering Economy Could Stumble

[marmar]

from OurFuture.org:



Progressive Breakfast: Signs Staggering Economy Could Stumble
Isaiah J. Poole's picture

By Isaiah J. Poole

December 22, 2009 - 8:52am ET


More proof this morning that the economy needs a new jolt of government intervention to keep it growing out of the Great Recession: The Commerce Department announced this morning a 2.2 percent increase in gross domestic product during the third quarter of 2009. CNBC reports:

The U.S. economy grew at a much slower pace than initially thought in the third quarter, restrained by weak business investment and a slightly more aggressive liquidation of inventories. ... Growth was boosted by government stimulus programs, including the popular cash for clunkers and tax credit for first-time home buyers..."

That report follows a dire prediction from economist Joseph Stiglitz that there is "a significant chance" that the U.S. economy will slip back into decline in 2010, bringing into reality the dreaded "W-shaped" recession.

Stiglitz, a professor at Columbia University, called on Washington to make more funds available to state governments who face a drop in tax revenue. The U.S. economy, the world's largest, must grow at least 3 percent to create enough jobs for new entrants into the labor force, he said. ... "If you don't prepare now, and the economy turns out to be as weak as I think it's likely to be, then you'll be in a very difficult position," he said.

President Obama meets this morning with about a dozen smaller banks, following up on a meeting he did earlier this month with some of the nation's largest financial institutions. This meeting, like the one he did with the too-big-to-fail behemoths, is intended to encourage more lending to small businesses and to homeowners so that the faltering economic recovery can gain some momentum. The Associated Press story notes that "cccording to the Federal Reserve, loans by the nation's 8,000 banks fell 8 percent to $6.7 trillion in the past year, and some analysts expect them to keep falling at least through next year." .............(more)

The complete piece is at: http://www.ourfuture.org/blog-entry/2009125222/progressive-breakfast-signs-staggering-economy-could-stumble

[Clear Blue Sky]

1. Wasn't this the third revision of GDP? Will the fourth revision be even lower?

[hayu_lol]

2. This economy cannot even start to recover...

until offshoring ends and the firms now located in other countries return home. That is where the jobs are and will stay.

The business community has been cutting jobs as quickly as possible for years. They finally reached tipover. It was deliberate and calculated to eliminate the middle class(factory jobs)and regional specialties: shoes/leather goods, textiles/cloth, watches/clocks, tires and related auto items, and so on.

We need to quit selling technology to other countries and start using breakthroughs here. Almost everyone has ideas on how selling our ideas to others has hurt our own workers.

Not everyone can be a paper-shuffler, i.e., bankers, investment bankers, stock brokers and the like. Many would be happy just to make a good living(not extravagant)and spend more time with their families. We are just about down to two classes--nobles and serfs. That will not produce the number of jobs we need.

[rhett o rick]

4. In other words, we havent got a chance. If that's what you are saying, I agree.

There has been no move by this admin to fix the broken things that brought about this disaster. What are they waiting for?

[medeak]

3. just told by banker 33,000 foreclosures coming in Las Vegas

for their bank alone..the 2nd wave have been hearing about is on it's way. Was told why they are hanging on to tarp money as to absorb the losses

[branders seine]

5. 'W-shaped depression'

Ain't that the truth.

[Meldread]

6. I don't think there is anything the government can do at this point but make it worse.

The first stimulus program was weak because it wasn't targeted and focused on creating jobs. It should have done two things:

1. Begin rebuilding American Infrastructure for the new century, putting us AHEAD of China.
2. Created a new "race to the moon" type of situation, but this time huge investments in new green technology with the goal of America becoming a carbon neutral nation by 2020.

Those are investments. Investments pay off and bring in MORE money than you spend (if they are successful). Thus to a large degree the huge spending can be justified. What Obama did, though, was let Congress waddle up to the trough like the pigs they are and feast like never before. The stimulus should have been an investment package, not a give away to Congress or the States.

The TARP in my view is the source of much of the problem. In bailing out banks that were "too big to fail" we've only made them bigger. Had they been forced into a structured bankruptcy and liquidated, the government could have moved to absorb the shock it would have dealt to the economy and prevented a domino effect. Instead, these mega-banks which by all rights should be dead, worked hard to repay the TARP funds. However, they required private capital to enter and take the place of government cash.

With billions and billions of dollars flowing into the "too big to fail" banks, it ensures that there is less private capital to flow elsewhere in the market. Additionally, tons of capital was lost in the beginning when the stock market collapsed.

Since these "too big to fail" banks still have the toxic assets on their books the private capital they've received they aren't lending out. Why? Because they need that cash to keep themselves from going under.

Meanwhile, the government is drowning in debt beyond its eyeballs. The interest on that debt is going to send the United States into bankruptcy. We're literally going to become a bankrupt nation because there is no way for us to repay that debt. Spending more isn't going to help. Even if we don't go into bankruptcy, we're going to have to pay that money back eventually. That's going to require HUGE tax hikes. The average American is likely looking at paying half their income or more in taxes, and getting nothing for it in return because it'll all be going to pay off the debt.

Meanwhile all that private capital from tax payers flowing into the government (and then being paid to China) further ensures that we cannot dig ourselves out of the hole by creating new jobs.

[OnceUponTimeOnTheNet]

7. I've prepared the best I can at this point.

Over the past 14 months we have paid down debt enough to have only 2 debts left. A Mortgage with 5 years to go and one car loan with 2 to go. No credit card debt left. Cash only purchases. We have cut to the bone on purchases. Stocked up on essentials, to say nothing of armnor.

God be with us.