Quoting the Crisis

07/11/2009

“ 

Productivity increased 9.5 percent in the nonfarm business sector during the third quarter of 2009 as unit labor costs fell 5.2 percent (seasonally adjusted annual rates). In manufacturing, productivity increased 13.6 percent while unit labor costs fell 7.1 percent…

Back in the 1930s there was a Polish Marxist economist, Michel Kalecki, who argued that recessions were functional for the ruling class and for capitalism because they created excess supply of labor, forced workers to work harder to keep their jobs, and so produced a rise in the rate of relative surplus-value.

For thirty years, ever since I got into this business, I have been mocking Michel Kalecki. I have been pointing out that recessions see a much sharper fall in profits than in wages. I have been saying that the pace of work slows in recessions—that employers are more concerned with keeping valuable employees in their value chains than using a temporary high level of unemployment to squeeze greater work effort out of their workers. I don’t think that I can mock Michel Kalecki any more, ever again.

 „

ZOMFG WTF!!!!! 9.5% THIRD QUARTER PRODUCTIVITY GROWTH NUMBER!!!! - J. Bradford DeLong’s Grasping Reality with All Eight Tentacles

pitchforks?

(via champagnecandy)

(via robot-heart-politics)

(via continuum)

Quote posted at 11:01

06/11/2009

“ The priority now is not to revitalise asset markets, but to transform a bloated and dysfunctional financial sector towards one that supports the real economy in a sustainable and cost-efficient way. „

Dirk Bezemer in FT.com / Comment / Opinion - Lending must support the real economy

Quote posted at 09:02

05/11/2009

“ Profit and capital gains may look much the same to the individual bank – a stream of revenues – but they have different macroeconomic consequences. Lending to the real sector is self-amortising: it creates a debt, but also the value-added to repay principal and interest. Such loans enlarge the economy in proportion to the debts created and are financially sustainable. By contrast, loans to create or buy financial assets and instruments are not, by themselves, self-amortizing. In a credit boom, successive owners may sell the asset at a profit, but their buyers will have to shoulder proportionally more debt in order to acquire the asset, balanced (for the time being) by the asset’s value. Asset trading may be individually profitable; but it is a zero sum game, sustainable only if the real economy furnishes enough money to support the rising debt burden. Beyond a point, the lure of capital gains diverts funds from real-sector investment, and households’ rising debt-service cuts demand for real-sector output. In both ways, excessive growth of financial asset markets is self-defeating. „

Dirk Bezemer in FT.com / Comment / Opinion - Lending must support the real economy

Quote posted at 21:05

“ In the 1980-2007 era of cheap credit and deregulation, banks had every incentive to move from real-economy projects, yielding a profit, towards lending against rising asset prices, yielding a capital gain. In the 1990s and 2000s, loan volumes rose to unprecedented levels, supporting global assets booms in property, derivatives and the carry trade. The share of lending by US banks to the US financial sector – instead of to the real economy – went from 60 per cent of the outstanding loan stock in 1980 (up from 50 per cent in the 1950s) to more than 80 per cent in 2007. „

Dirk Bezemer in FT.com / Comment / Opinion - Lending must support the real economy

Quote posted at 17:03

azspot: The story so far, in one picture

azspot:

The story so far, in one picture

Photo posted at 09:00

04/11/2009

“ This brand of economics is the conservative obsession with personal responsibility taken to the nth degree. We are weak, selfish, and we spend frivolously. If only we’d buckle down, pull ourselves up by the bootstraps, and limit ourselves to “necessary” expenditures we would be fine. Yes, we can cherry pick an example here or there of a person who blows all his money on plasma screen TVs and can’t pay his mortgage just like we can find earmarks that are pure waste. Neither example is evidence that our problems as people and as a nation have to do with priorities. Our problems are systemic and deeply rooted. We are at a crisis point not because we are choosing between the mortgage and a mall shopping spree. Instead, we are choosing between the mortgage and college tuition, Medicare or the military. „

ginandtacos.com » Blog Archive » LATTE ECONOMICS (via robot-heart-politics)

Quote posted at 19:14

“ 

Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners — holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.

Technically, it’s not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers’ annual tax bills won’t change.

Think of it as a forced, interest-free loan: You’ll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.

 „

Shane Goldmacher and W.J. Hennigan in California to withhold a bigger chunk of paychecks — latimes.com

Quote posted at 13:13

02/11/2009

» CIT Files Bankruptcy; U.S. Unlikely to Recoup Money

crazynutjob:

The latest chapter in the CIT saga is Chapter 11.

The article has some good stuff in it. I consider this passage to be the most important:

CIT accounts for about 70 percent of all short-term U.S. financing known as factoring, worth about $40 billion a year, according to Ray Ecke, president of Credit Management Resource in Oakland, New Jersey.

In factoring, suppliers and manufacturers sell payments owed for goods and services to companies such as CIT because they need immediate cash. The process gives vendors money to produce goods retailers have ordered. Retailers typically make payments within 90 days. After they do, a factor keeps a fee based on a percentage of the total order.

This is what I referred to in my previous post. What isn’t clear from this article (or any article on CIT), is how large this business unit will be going forward. CIT was in the process of shrinking it during this whole slide into bankruptcy. Now that they’re in bankruptcy and will exit with much better cash flow, I want to see someone mention this on a forward-looking basis. I suspect that the wind down will continue. This may be orderly, but it still pushes many retailers closer to death.

Link posted at 09:49

31/10/2009

“ …42% of American men with fathers in the bottom income quintile remain there as compared to: Denmark, 25%; Sweden, 26%; Finland, 28%; Norway, 28%; and the United Kingdom, 30%. „

Inequality Begets Inequality (via azspot)

The American Dream may be just that

(via financegeek)

Quote posted at 09:01

30/10/2009

continuum: Who is filing bankruptcy? In 2008, more than 1 million filed for bankruptcy protection. This sharp graphic takes a close look at the demographics behind those numbers to give us a clear view of who is being affected by the economic downturn.

continuum:

Who is filing bankruptcy? In 2008, more than 1 million filed for bankruptcy protection. This sharp graphic takes a close look at the demographics behind those numbers to give us a clear view of who is being affected by the economic downturn.

Photo posted at 23:18

continuum: abbyjean: the legacy of the bush years (and their failure to promote job creation) in chart form. (yglesias)

continuum:

abbyjean:

the legacy of the bush years (and their failure to promote job creation) in chart form. (yglesias)

Photo posted at 09:02

26/10/2009

Japan total Debt in 1990 was roughly 150 of GDP: today total debt is close to 290% and the market is still in a funk.  Could this be what lies in store for the U.S? — Sol Palha in Debt Crisis

Japan total Debt in 1990 was roughly 150 of GDP: today total debt is close to 290% and the market is still in a funk.  Could this be what lies in store for the U.S?

— Sol Palha in Debt Crisis

Photo posted at 17:08

24/10/2009

“ Every President we’ve had since Ronald Reagan, Republicans and Democrats alike, have repeated the mantra of free trade over and over again. I wonder how Republicans who claim to be so concerned about national defense can justify promoting the wholesale export of manufacturing which has happened over the past 30 years. Similarly, I wonder how Democrats who claim to be so deeply concerned about the environment and workers’ rights can do precisely the same when many of the countries which have succesfully imported manufacturing capacity and jobs have no such concerns. Any claim of concern about human rights by either party, by liberals or conservatives, rings hollow when we export our jobs and manufacturing capacity to countries that have abominable human rights records. It seems corporate profits and corporate lobbyists trump any and all other concerns. Greed remains the real G-d of early 21st century America. It’s way past time we examine the real costs of “free trade” instead of just parroting well worn lines about the benefits. I think if we do an honest cost-benefit analysis of free trade we will find that it is anything but free and, indeed, may do more harm than good as it is structured today. „

Ever Increasing Entropy (via azspot)

Quote posted at 21:04

20/10/2009

“ Since 2000, more families go through bankruptcy than go through divorce. That’s right…chances are very probable that you know more people who’ve gone bankrupt than you know who’ve gone through divorce; bankruptcy is just easier to hide from friends and relatives… „

Hard-boiled Dreams of the World  » Blog Archive  » The Coming Collapse of the Middle Class

Quote posted at 19:05

“ But if no one wants the dollar to depreciate — which is the standard solution to a trade imbalance — what does it mean to be against global imbalances? No one will come out in favor of tariffs. Using fiscal policy to encourage domestic sourcing of goods and services did not go over well with the Europeans. I guess that leaves exhorting Americans to buy less and save more, which is a little like asking Goldman to pay smaller bonuses. „

James Kwak in Cognitive Dissonance and Global Macroeconomics «  The Baseline Scenario

Quote posted at 15:03

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