Robert Reich: 2 American economies going in opposite directions

[marmar]

from SFGate:




Next time you hear an economist or denizen of Wall Street talk about how the "American economy" is doing these days, watch your wallet.

There are two American economies. One is on the mend. The other is still coming apart.

The one that's mending is America's Big Money economy. It's composed of Wall Street traders, big investors and top professionals and corporate executives.

The Big Money economy is doing well these days. That's partly thanks to Ben Bernanke, whose Fed is keeping interest rates near zero by printing money as fast as it dares. It's essentially free money to America's Big Money economy.

Free money can almost always be put to uses that create more of it. Big corporations are buying back their shares of stock, thereby boosting corporate earnings. They're merging with and acquiring other companies. .............(more)

The complete piece is at: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/13/INEK1G9GG6.DTL#ixzz15GUOgZhq

[RandomThoughts]

1. LOL, they still don't own me.

And they still, in part, owe me beer and travel money and many experiences. So it isn't going to get better for them.

[chill_wind]

2. Recommend.

"Thanks to fast-growing China, India and Brazil, giant American corporations are racking up sales. They're selling Asian and Latin American consumers everything from cars and cell phones to fancy Internet software and iPads. Forty percent of the S&P 500, the largest corporations in America, are now doing more than 60 percent of their business abroad. And America's biggest investors are also going abroad to get a nice return on their money.

So don't worry about America's Big Money economy. According to a Wall Street Journal survey released recently, overall compensation in financial services will rise 5 percent this year, and employees in some businesses like asset management will get increases of 15 percent.

The Dow Jones industrial average is back to where it was before the Lehman bankruptcy filing in 2008 triggered the financial collapse. And profits at America's largest corporations are heading upward.

But there's another American economy, and it's not on the mend. Call it the Average Worker economy."

See the rest, as to where we are. Reich lays it out in plain English.

[leftstreet]

3. K&R

Well worth the read

[dkofos]

4. They don't act like they want or need the American consumer.

Give them what they want.

Don't support globalization!!

[riderinthestorm]

5. Big Kick! Big Rec!

Articulates the problem clearly and easily. The article isn't long and I encourage everyone to open it and read it.

Here's another snippet:

"One out of eight breadwinners is still out of work. Most families in the Average Worker economy rely on two breadwinners. So if one out of eight isn't working, chances are high that family incomes are down compared with what they were three years ago. And that means the bills aren't getting paid.

According to a recent Washington Post poll, 53 percent of all Americans are worried about making their mortgage payments. This is many more than were worried two years ago, when the Great Recession hit bottom. Then, 37 percent expressed worry. Delinquency rates on home loans are rising. Distressed sales are up as a percent of total sales.

Most people in the Average Worker economy own few shares of stock, if any. Their equity is in their homes. But with all the delinquencies and distressed sales, the housing market has a glut of homes for sale. As a result, home prices are still dropping. So the net worth of most Americans is still dropping.

Even though interest rates are falling, most people in the Average Worker economy can't refinance their homes. They can't get home equity loans. Banks don't want to lend to the Average Worker economy because people in it are considered bad credit risks. They still owe lots of money, their family incomes are down, and their net worth has fallen."


Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/13/INEK1G9GG6.DTL#ixzz15HQrbHTH

[Starry Messenger]

6. I'm reading William Z. Foster today

It's kind of beautifully weird, but people on DU are posting things that he was talking about exactly in the 1930's:

http://www.marxists.org/archive/foster/1932/toward/02.htm#pec

If the capitalists have callously forced the toiling masses into starvation conditions they have, however, very carefully looked after their own interests. “During the first nine months of 1930, our national industrial and business system was able to and did pay $432,000,000 more in dividends and $191,000,000 more in interest than it did in 1929; in the first nine months of 1931, the second year of the depression, it paid $347,000,000 more in dividends and $338,000,000 more in interest than it did in the first nine months of 1929.”6 The Publishers Financial Bureau, (New York American, Mar. 19, 1932), states that the industrial dividends paid in 1931 are “the largest for any year previous to 1929.” Anna Rochester says: “In September, 1931, the New York Times reported that of 5,000 companies, 50% had continued dividend payments without reduction; 20% were paying smaller dividends; and only 30% had omitted payments entirely. . . . For October, 1931, the total dividends plus bond interest by a large group of corporations were only 4% below the high record of October, 1930.”7 Besides, every appeal of the bankers and other capitalists to the government for assistance has met with immediate response. The two billion dollar Reconstruction Finance Corporation has been organized and the Glass-Steagall inflation bill is being prepared to absorb the worthless paper of the banks and to underwrite the dividends of industrial corporations. And in the new Federal taxes the capitalists are further shielded from the economic effects of their own bankruptcy.

I just read that passage 30 minutes ago and thought, I'm sure the same thing must be going on today. And there it is.

[leftstreet]

7. Just wow. You could change the dates/figures in that and....

Amazing

[Starry Messenger]

8. I know right?

The hair stood up on my arms. This book is incredible. It's like a Guide To Everything That is Wrong Now.

This pollyanna propaganda is best illustrated in the policy of the federal government. President Hoover started out, at the time of the Wall Street crash) by assuring everyone that this was only a financial bubble, that the great “prosperity” was safe. Then, when the industrial crisis was upon us on all sides, he assured us, March 8, 1930, that “the depression will be over in 60 days.” And from that time on every department in the government has harped upon a similar string. Undoubtedly, the effect of sowing such illusions has been to facilitate the wholesale cutting down of the workers’ living standards that has taken place. The theory that the crisis will cure itself and that all will be well again, is further classically illustrated by Prof. Taussig, who advises us: “Don’t spend too much; don’t hoard; don’t worry; just live normally and everything will right itself in due time as it has always done.”10

[Odin2005]

9. It's a depression.

[riderinthestorm]

10. Morning kick. Robert Reich is always worth at least another read. nt