Saturday, August 29, 2009

The Coming Right Wing Deluge

Checking the 8/30/09 NYT Book Review Section, I noticed that 3 out of the top 5 bestselling hardcovers were from right wing fanatics (or "wingnuts", in the left of the left parlance). #1 was Michelle Malkin's Culture of Corruption, from Regnery, the publisher of all illiberal screeds. As the gentle NYT plot writer for the Non-fiction Best Seller list described its contents: "President Obama and his team as tax cheats, petty crooks, influence peddlers and Wall Street cronies." #3 was Mark B. Levin's Liberty and Tyranny, "[a] conservative manifesto from a talk-show host and the president of Landmark Legal Foundation. Rounding up the top 5 was Dick Morris and Eileen McGann's Catastrophe, which exhorts all to "[s]top President Obama before he transforms America into a socialist state.

This is a fearsome development. Aside from the astonishing fact that there are enough wingnuts to shell out around $27 and possibly even read a hardcover book, the trajectory of political discourse looks distinctly right of the horizon. I'm afraid of the rise of a populist demagogue who truly wishes to take over the reins of power. Right now I'm reading Senator Joe McCarthy by Richard H. Rovere, written in 1959, merely 5 years after McCarthy was brought down and two years after his sodden death. Sodden, not sudden. He was a drunk. But never mistake his ability to influence policy through his fabricated accusations. Everyone in the political arena, including Presidents Truman and Eisenhower, was afraid of him. Luckily (according to Rovere) he didn't seek political power; he merely wanted glory. Once he'd achieve his objective (say, getting a minor clerk in the State Department dismissed because he was noted in the bibliography of a red-tinged person), he'd drop the entire matter.

But what if a populist demagogue actually wanted to seize the reins of power on a national and international scale? A leader doesn't have to be an elected official. Father Coughlin? Rush Limbaugh? As the common man trudges through the Great Recession with nary an unfilled job in sight, people are disgruntled, frustrated, and filled with loathing and hatred. And packing heat. It doesn't matter how imbecilic the accusations against Obama and his administration are: that he's an illegitimate president, a socialist (if he's a socialist, then Lloyd Blankfein, head of Goldman Sachs and flash trading, is a dyed-in-the-wool Communist) and is planning to convene "death panels" to force the disabled, unwanted and elderly into euthanasia. The hysteria of Sarah Palin's original rallies have degenerated into Town Hall hate-a-thons. And Congress says nothing.

Tuesday, August 18, 2009

Recession Is Over. Or It Isn't.

Fed Chairman Ben Bernarke et al are hailing the end of the longest recession since the Great Depression. The Great Recession began in December 2007. Now, according to them, it's over. Many companies have reported better than expected earnings 2 Q '09. To be exact, 73% of the 427 companies in the S&P 500 that have reported earnings have beaten expectations.

Economists love history and statistics. In past recessions, when productivity reached a certain level, prosperity was just around the corner. But what if a recession is ahistorical, like this one? What if it has no precedent?

Don't accept statistics on faith. In the face of rising unemployment and foreclosure rates, what accounts for these profits?

If you weren't sure of the utter falsehood that what's good for Wall Street is good for Main Street, all you need to do is look at the worker productivity numbers for 2 Q '09. Productivity is the measure of what the economy produces per worker hour. And productivity at the end of June was the highest it's been since 3 Q '03, an annualized pace of 5.5%.

The profits didn't come from producing more stuff that more people wanted to buy. It came from merciless cost-cutting. Instead of 3 people doing the work of 3, 1 person does the work of 3. Easy math. Productivity zooms upward by 300%.

As reported in the WSJ:

The net result: rising unemployment, stagnant wages, sagging consumer confidence--and better than expected corporate profits.

Higher earnings and stock prices are supposed to induce companies to invest their capital and hire more. At least that's how it worked in the past.

But this Recession is the Mother of Them All. Achieving profits on the backs of their workers in a country where consumer spending accounts for 70% of GDP won't help Main Street and the economy beyond Wall Street at all. Certainly it won't increase consumer demand. The question is, will business invest? Will the private sector make up for lower consumer demand and a smaller-than-necessary government stimulus?

The jury is out on those questions:

In a classic economic recovery...rising profits and stock prices help make the recovery self-sustaining by encouraging companies to hire more workers.

What is still in doubt, though, is whether this is a classic recovery.

Tuesday, August 4, 2009

Timmy Gets Mad

In today's WSJ, someone inside the room leaked. Before a group that included Fed Chairman Ben Bernarke, SEC commission chairman Mary Schapiro and FDIC Chairman Sheila Bair, Treasury Secretary Timothy Geithner cursed like a sailor as he yelled at the assembled financial regulators for not getting on board with the plan to have the Federal Reserve grab total oversight power over all financial entities.