In 1964, President Johnson declared a War on Poverty. 46 years later, the poverty rate looks to return to levels not seen since his administration.
Statistics can tell the story of a boom and bust much better than more worthless day-to-day metrics like the individual movements in the stock market, especially when the companies represented in the stock market see their boom times return on the backs of not investing any profit or hiring anyone. Your books can look stellar if you don’t invest for two years down the line, much less the actual future.
Statistics can also paint an accurate picture of life in the real world – a world that is separated from the machinations of tycoons and the narratives that television pundits try to write for the rest of us. Only in the raw data can the actual situation on the economic ground be put together, and that situation has been, is, and looks to continue to be dire. This week’s example – the poverty rate:
The number of people in the U.S. who are in poverty is on track for a record increase on President Barack Obama’s watch, with the ranks of working-age poor approaching 1960s levels that led to the national war on poverty.Census figures for 2009 – the recession-ravaged first year of the Democrat’s presidency – are to be released in the coming week, and demographers expect grim findings.
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The anticipated poverty rate increase – from 13.2 percent to about 15 percent – would be another blow to Democrats struggling to persuade voters to keep them in power.
Obama has received bills to sign, and those bills have helped, but not going for more from the start is coming back to bite far too soon.
There’s a danger in not pushing through a dramatic agenda when the situation calls for it – the danger being you succumb to falling back into the same rut, perhaps learning from your mistakes in a philosophical way but doing nothing to prevent a repeat them in the future.
There is an increasing risk that America is sliding into a double-dip recession or, at best, a period of stag-flation (little to no growth over an extended period of time) that will serve to continue to harm those who have already been harmed by the recession and keep those who are hanging on to their jobs looking over their shoulder, waiting for that next economic shoe to fall and hit them.
The panacea that was the stimulus bill – the American Recovery and Reinvestment Act of 2009 – turns out to not be the cure-all that was originally hoped for, and that a mere $787 billion couldn’t stop the continuing of the slowdown, as ludicrous as that sounds on its face. With the money running out in a midterm election year, Congress is set to dither, with disastrous repercussions for the American people who are already suffering greatly from the downturn – now entering its 3rd year (or, if you live in manufacturing states, 9th year).
We find ourselves at this very moment in the month of February. For those of us in the northern hemisphere, this means we also find ourselves in the season of winter. Winter tends to bring us colder temperatures, Christmas, the groundhog, and the chance of snow – increasing more the further north you head. While this is what we have known for the longest time as “winter”, in recent years – like another echo building in a chamber – it has come to mean something else: a complete disapproval of the concept of global warming! Here in the hyper-partisan world of American politics anything can, and will, be turned into some sort of political issue with exactly two sides.
I suppose we all missed the memo about winter ending forever, but the framing for this post comes out of a relatively new political attack ad aimed at two Virginia Democrats in conservative-leaning districts (hey did you know it’s an election year!?). The premise of the ad is that because the state has been hit by rather severe snowstorms this winter, this completely destroys the idea that global warming can exist in any sort of way. It’s even ended with a clever shot, asking for constituents in those districts to call their representative and let them know how many inches of global warming they have gotten. See for yourself:
Dow in September 2008 – down 12.07% from Sept 1 high to September 18 panic low
Whispers are beginning to come in as to what exactly happened to our financial system during the chaotic weeks of September 2008 – especially the week of September 15th, 2008. What is emerging is a picture of an economic state that almost ended up in what would have really been a second 1929 in terms of losses and in terms of the sort of immediate impact it would have on America. The day that almost lived in infamy was September 18th, 2008. On that day, if one source in particular is to be believed, the American financial system was quite literally hours away from collapse. Some events swirling around this day back this up, others are nearly indistinguishable from the wild volatility that dominated that month. This post will be an attempt to analyse what was going on during that period of time to at least give this some back story, as the comments drift around the internet to reactions of “…woah”.
We’ll start with the video in question…
That is Rep. Paul Kanjorski (D-PA) on C-SPAN talking about the upcoming second round of bailouts for the banking system and the economic stimulus package that is currently making its way through Congress. A caller had, in essence, asked about how bad things really had been the last time a bailout was proposed – which would become the Troubled Asset Relief Program – TARP. The basic premise of the plan, whether or not it would work, would be to “unclog the system” and get lending flowing again between banks, which various reports had hinted as all but coming to a dead halt. While it was generally understood that the situation was bad, the full extent was never really known until potentially now.
It’s one of those cases where the numbers only begin to tell the story. While the forces that have been at work to cause the current economic mess that the world is in have been in motion for a few years now, it has been still less than a year since the crisis went from backwater corners of the internet to the front page of every major paper and the top story on every nightly newscast.
It’s impressive how “ancient history” this all looks now, but it was only October of 2007 when the stock market was setting all time highs – the Dow over 14,000. Those who knew that things weren’t going quite right were having a very hard time convincing anyone of any such thing, as the market pushed endlessly higher, even as the value of our currency continued to erode and the price of fuel was making more and more Americans suffer.Continue reading »
Monday was the 350th trading session since the peak of the financial sector, as measured by the XLF exchange traded fund. Seemingly endless billions of dollars of pledges and actions have been pumped into the world financial system. The result?
It took the United States nearly half a decade to spend $564 billion dollars in Iraq – and that cost is still rising quickly. Dwarfed it is, unfortunately, by the amount of money just pledged by the United States alone – over $700 billion pledged by Congress which neglects to include the hundreds of billions of money pumped into the system by the Federal Reserve, nor does it include the billions in guaranteed loss coverage arranged by the Federal Reserve for numerous shotgun marriages of companies over the past year to keep the financial system from collapsing.
Yet, here we are.
Consider the companies that have disappeared, or are in the process of disappearing, in the past year alone:
* Bear Sterns (March 16)
* IndyMac (July 11)
* Fannie Mae (September 5)
* Freddie Mac (September 5)
* Lehman Brothers (September 15)
* Washington Mutual (September 26)
* Wachovia (September 29)
With failures racking up like that, this chart looks less surprising…
Let there be no mistake, even if everything feeding into this current crisis ended tomorrow, it would still take a lot of time and effort to get things back to where they were a couple of years ago – which in the event anyone forgot was still lagging years behind where things were before the boom and bust of the technology sector in 2001. While markets such as the Dow did peak higher post-2001 than before, those gains – much like any realized gains in America for most of this decade – were more the result of an inflating, weakening dollar than any sort of forward progress of our economy. The popping of bubbles today does an excellent job of showing just how fake the last couple of years were.
It must be noted that when people speak of bailouts and stimulus today they speak of fixing the parts of the system that have already broke, well past the point of breaking and prevention. Measures of “progress” are more measures of vultures picking over remains than they are anything good and new happening. Just take a look at the other side of a sunny California update about housing sales surging 50%:
Southern California home sales shot up by an unprecedented 65 percent last month from the dismal, record lows of a year ago, when a credit crunch slammed the brakes on home financing. September sales also posted a rare gain over August as price cuts lured more buyers. Foreclosure resales rose to half of all transactions.
If the only thing driving the housing market forward is the foreclosure market, that is a serious problem.
The death of the housing bubble, and the sudden end of value that is bringing to many people, is something that will not go away with the wave of any sort of magic wand – but instead with years of a concerted effort, and that is under the best case scenario.
Inflation data that isn't cherry-picked shows prices jumping by over 10% in a year.
Unemployment is taking off – soon to race past the heights of earlier this decade with an eye on the 8% seen in the early 1990's. This is of course a very conservative measurement of unemployment. "Real" numbers (on the rolls + fallen off) are currently hovering near double digits, so a return to 8% real unemployment could push the "real" numbers past 15%.
The root causes for all of this financial disaster have yet to be addressed or stopped. Adjustable rate mortgages are still claiming family after family day after day. When people go homeless, they are not contributing to the economy, which means there’s less things being consumed, which leads to sharply lower sales, which leads to companies having to layoff to survive, which leads to less people buying less or maybe even losing their own homes… and the cycle continues.
Cross that with companies being careless enough to risk everything for the world – subprime lendees did it with the American Dream, corporate America did it with the Capitalist Dream: seemingly unending profits at very little risk. Those financial institutions, known as derivatives, are now also crashing down around them, which drives companies big and small under – sending tens of thousands of more workers home jobless, which only exasperates the problem more.
If anything, the trillions of dollars pledged or pumped into the economy as of now have done nothing more than prevent a Great Depression II. The reward for that is a protracted, lengthy, deep recession – one that has not nearly exacted all the pain it has left to give. With any luck the political winds will give us people intelligent enough to lead us through and out of this crisis – but it is a crisis we will still be talking about in 2009, 2010, and maybe beyond. This sort of damage can never be undone overnight, or over a year.
I’ll leave you with one last video clip of how bad things are getting – this one from California’s Inland Empire. If you have 12 minutes, I highly encourage the watching. It speaks sad, sad volumes.
Back again for a third time, it would seem. The following is now the latest in what I suppose can be called a series, though I haven’t named it yet. Previous posts along this theme:
1) Your Economy is in Trouble When the Dollar in Your Hand Loses Value by the Day (March 13, 2008)
2) Anatomy of a Crash (July 13, 2008)
Shortly after that second post, the Feds tried to make it clear that if it came down to it, as much money would be thrown into two companies: Fannie Mae and Freddie Mac, as possible to keep them from going under. The idea was to instill confidence in the two companies which between them back more than half of the $12 trillion mortgages out there. Since then, the stock prices of both companies have fallen by 50% again on extraordinary volume. Obligatory CNBC clip time, with more after the flip:
Of all the things to go wrong this decade (of which there have been a landslide) perhaps the longest lasting effect to Americans as we move into the next decade and beyond is the significant damage done to our economic future. When the most powerful financial institutions on the planet are having a hard time remaining solvent, there’s a serious problem out there. The article peers into the blood being let in the financial markets:
