Nine years of jobs wiped out by the great recession- and counting
By Daniel at 10 July, 2009, 2:31 am
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Top of the News: Don’t be fooled by the somewhat lower weekly jobless claims, this labor market remains very sick as America slogs through the 20th month of recession.
The American economy has lost more than 3.4 million jobs since the beginning of the year, and 6.5 million since the start of the downturn. Compare that to approximately 3 million lost in the nasty 1982 recession.
Put another way, with June’s unemployment numbers the U.S. now has fewer jobs than it did nine years ago (and more people). According to Economic Policy Institute economist Heidi Shierholz, “this is the only recession since the Great Depression to wipe out all jobs growth from the previous business cycle, a testament to both the enormity of the current crisis and to the extreme weakness of jobs growth over the business cycle from 2000 to 2007.”
The Back Story: In the Here We Go Again Department, Morgan Stanley plans to repackage millions in near-junk collateralized debt obligations as top-rated securities and market them to investors. This according to a report from Bloomberg. It was this kind of creative finance, of course that caused the crash. Is this what alt-energy backers have in mind when they talk about turning trash into fuel?
Meanwhile, political extremism doesn’t make for a healthy business climate, something our friends at Boeing might want to consider. South Carolina Sen. Jim DeMint said that America under President Obama is “where Germany was before World War II.” In other words, under Hitler.
Fixing the problem requires legislative spending constraint, not increase. Neither the legislature, the executive, nor the voters have the fortitude to do what is needed. The inevitable crash is near.
John.
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There is a good reason why the employment situation is worsening and why the so-called “stimulus package” is not pulling the U.S. economy out of its decline. Our political leaders have been getting flawed analyses of the causes of the business cycle for over a century.
The beginning of disinformation occurred when influential economics professors saw to it that economic theory deliberately removed land (i.e., nature) from the equation a factor with distinct responses to “price” as a market clearing mechanism. From the early 1900s on, almost econmics text told students that locations in our cities and towns, natural resource laden-lands, the broadcast spectrum, our rivers and seas, rights of way in the air, were all just different types of “capital.” This has the advantage of allowing for solvable equations, but reality is discarded. We must also remember that chairs in economics were being funded by some of the most powerful monopolists of the time (e.g., John D. Rockefeller, Andrew Carnegie, Leland Stanford, J.P. Morgan, et al.) who wanted to make sure economics did not become a tool for systemic reforms.
We paid an enormous price for this collusion in the form of the Great Depression, ended only by the full employment of world war. Demand management aside, we have endured decade after decade of boom-to-bust cycles the drivers of which are dysfunctional “land” markets, fueled by imprudent credit providers, ineffective central bank interventions and upside-down tax policies.
Back around 2000, when I was still at Fannie Mae as a market analyst and business manager, I began to pull together my own analysis of the causes of business cycles and tried to warn our senior people of the coming financial meltdown. The GSEs were dutifully adding fuel to the speculative property (i.e., land) markets by each year increasing our maximum loan amounts and by devising ways to qualify borrowers for higher amounts of debt. What no one wanted to hear was that we were financing less and less house value and more and more land value each year, exposing ourselves to deep losses when the land market eventually reached its speculative breaking point.
It is my view that none of the measures being taken today by our governments around the globe are directed to the heart of the problem. They are all attempts to jump-start the speculative cycle again because the real solutions require systemic changes opposed by those who still pull the political strings by means of campaign contributions and aggressive lobbying.
Mine is a voice in the wilderness, but I am doing what I can to reach other thoughtful people searching for solutions to embrace. I have been giving talks on the business cycle and on the finandial meltdown to any interested group. If what I have written intrigues you, send me an email (ejdodson@comcast.net) and I will respond with Powerpoint presentations that make my case.
We are in very scary and desperate times. More of the same old policy ideas will do little to stimulate a real recovery.