de(e)pre(ce)ssion

Navigators on The Nation liberal flag-site, thenation.com:

a) voted during the last 2 weeks: i.e., after

March 14 milestone = Bear Stearns bailout; death of  neo-conservatism officially declared by Wolf on the Financial Times; neo-con marketing itself as neo-liberalism, under false Adam Smith’s flags (follow our page regular updates, here on the 2nd column: access page 2 all-the-subprime-science).

b) They believe: 5/8 it’ll be depression, 3/8 just recession. A balanced and fair synthesis of state-of-the-art financial meltdown, real economy  stagflation, sincere evaluations, and feelings by experts and field operators.

c) There are still (but not for ever) wide degrees of freedom – in de(e)pre(ce)ssion evolution – as far as “il Politico” and its autonomy (Mario Tronti) are concerned, appropriate-systemic social, institutional and economic policies, both nationally and internationally. We discuss them in 2 blog sections and their next updates:

– access page to (almost) all-the-subprime-science

– SPECIAL REPORT obamanewdeal_080215.pdf 

In the recent page “Arcapedia: which are the Prozac …” we propose an original definition of DEPRESSION.

http://www.thenation.com/poll/whatsahead032608    

POLL | posted March 25, 2008 (web only)

 

What’s ahead

for the US economy?

A recession: Inflation will rise and many will lose

their jobs and homes, but it will be of relatively

short duration. 

  (829) 36%

 

The Big One: We’re on the verge of economic

disaster on par with the Great Depression 

  (1417) 63%

Published in: on April 9, 2008 at 9:39 am  Leave a Comment  
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goto subcrime social science

On Palms’ Sunday, the Fed said: back to the 1930s

More in our special report pdf (May 3 updated v.)subcrimesocialscience080503

Palms’ Sunday, we finally realised that a domino effect, potentially self-destroying for most banks and capitalisms was there, at hand and sight (had perhaps Keynes understood something even Marx had missed?). Well, but, if the ‘30s are back, the two greatest John (Steinbeck and Ford) are back as well: we’ll collect and tell the story of every single proletarian, of all the Joad and Ortiz families. Nikola Chesnais will help us to turn the films, since John Ford is his paradigm, and Ford filmed Grapes of Wrath immediately after the book (1939-40).This film was the most popular left-leaning, socialistic-themed film of pre-World War II Hollywood“. At Washington Post, BRIGIDA SCHULTE already started telling us about Gloria Ortiz and her husband: we love them now: they don’t American Dream any more; we dream to encourage and help them. The Joads, the Ortiz, and new gold rush prospectors. FT March 29, p.1: Soaring prices spark fresh rush to find Ca.’s forgotten gold.

subcrime social science is an art

subcrimesocialscience was a 20 pp. (now 30) w-in-p survey, adopting the de(e)pre(ce)ssion Political Economy paradigm (Ricardo- Marx, Keynes- Kalecki, Schumpeter- Minsky- Perez, Aglietta and Chesnais). It briefly reviews, in its early pages, what economic sciences know on ongoing:

KONDRATIEV LONG WAVE (197os +)

Minsky Magic Moments, since Summer 2007

Minsky Financial Meltdown, we are on the border of

2008+ deep&long recession, endowed with a depression potential

FAQ. Might Capitalisms succeed where Socialisms failed: to help us coping with them, undermining and overthrowing them? Then it deals with policies and recession chronicle highlights. Here is a summary on economic policies.

” De(e)pre(ce)ssion 7 capital virtues: remedies for the Minsky Meltdown.

1. Minsky won the bet versus Chicago. The latter did not survive to the great Milton Friedman for longer, and finally died at dawn, Friday March 14, 2008 (on Bear Stearns’ day: p.15 here).
2. States will massively intervene, after decades of anti-State mind washing: how effectively?
3. After March 14, oil into firing debates on credit&fiscal policies: moral hazard of rewarding – again – those fucking rentiers, vampires that already gained 6-0 the early sets of the subprime match.
4. Leaders’ war. March 29 FT (Not yet time for a bail-out of banks) versus March 22 The Economist (Wall street’s crisis): both are over-Bullish, but policies clash. FT delays a bail-out fiscal policy, conditional upon sacking the rentiers (“it should do so only over the dead bodies of shareholders and management” – falling in love with FT). The Eco. advocates hyper-fiscal policies, erecting floors “either in housing, or in asset-backed securities”. FT objects housing prices must stop to a floor before, otherwise you can’t price securities. At 19th C The Eco., they found a Hegelian synthesis: neo-Leviathans will buy the open and the foreclosed apt.s: almost everything. Socialist times.
5. All this policy makers (hyper-)activism is and will be part of the process (Roudini’s blog, Feb. 8), in a self-referential crisis system (Niklas Luhman), where no one is sitting outside the system. As in an ancient Myth, financial accelerators ate Bernanke himself: their father.
6. Minsky’s call for an institutions-specific and even a capitalisms-specific analysis (note 10) might be the compass exploiting the fixed point of an endogenous institutions axiom.
7. The latter fits with self-referential systems theory, and this couple is full of well known (in their proper cognitive, policy theoretical domains), important consequences.”

On Minsky’s suggestions,

see monetary policies in:

Wray 2007; Galbraith,

Giovannoni and Russo 2007.

Please note – from the 7 points above – that we converge much with Roubini, although we get there by different arguments and ways. Knowing already, by him, the most likely end of the story (script of Grapes of Wrath 2: by H. P. Minsky).

Grapes of Wrath



GRAPES OF WRATH no.1: rent the video (you better buy it, and read again Steinbeck’s book) and take a look at http://www.filmsite.org/grap.html
No.2 has many locations across and beyond America, e.g.:
a) subprime ones in …
b) tomatos picking by migrant people nearby Naples and in South Florida
c) rural migrants building up Shangai, Shenzen
 
From the new, static “ACCESS PAGE TO ALL THE SUBPRIME SCIENCE” (this is marketing), you enter a 20 pages pdf, a guide to essential knowledge, and carefully selected readings on the financial meltdown that threw US people (mainly black, but also latinos) out of home, and is about to produce  millions of unemployed and new slaves across labour markets.
 
Grapes of wrath no.2.

Ground 0 by Shadow Finance Rentiers: terrorists @work to dismantle civil society, solidarity networks & democracy

SLATE.COM

TODAY’S PAPERS

Regulation Size Racket

By Jesse Stanchak Posted Sunday, March 23, 2008, at 6:47 AM ET The New York Times leads with Congress and the White House debating whether or not to tighten regulation of the financial services market. The Washington Post leads with Bhutan preparing to conduct its first elections on Monday, despite resistance from some citizens who are wary of the tumult of electoral politics. The Los Angeles Times leads locally, with its top national story saying that Sen. John McCain is staking his White House bid on the war in Iraq. The NYT compares the debate surrounding the current financial crisis to the reaction following the Sept. 11 attacks. Just as the attacks highlighted problems with coordinating intelligence and law enforcement agencies, the paper says the current crisis points out the lack of coordination between financial regulators. The paper finds the White House and Congress sparring over how best to correct a flawed system of financial regulations that Wall Street has learned to exploit. The Bush administration favors streamlining regulations and possibly creating an umbrella agency to handle duties currently split between different regulatory bodies. Congressional Democrats, however, want to tighten the rules by applying banking regulations to investment firms. Both sides claim their solution will benefit the free market the most. The White House says that investment capital would wither if the industry were overly regulated. Democrats, however, say that unless the industry becomes better regulated, investor confidence will shrivel and take the market with it. (bold added)  More on the US political debate over shadow financial system regulation, in the quoted NYT paper: 

In Washington, a Split Over Regulation of Wall Street 

In Congress, Democrats are drafting bills that would create a powerful new regulator — or simply confer new powers on the Federal Reserve — to oversee practices across the entire array of commercial banks, Wall Street firms, hedge funds and nonbank financial companies. (…) At least four federal agencies — the Federal Reserve, the F.D.I.C., the Office of the Comptroller of the Currency and the Office of Thrift Supervision — have some jurisdiction over mortgage lending. (…)

Ms. Bair of the F.D.I.C. cautioned that industry and government turf battles would make it difficult to agree on a single regulator, especially a strong one. But she said the need for one was clear.

 

“We need to go in the direction of more regulatory consolidation,” Ms. Bair said. “It would make more sense to have some type of umbrella agency, if for no other reason than facilitating information.” 

Let us pursue the rentiers throwing families into the street

 

The bio-politics of sub-prime

Read carefully, through the link,  this piece

of Pulitzer-style classic journalism:

Washington Post

‘My House. My Dream. It Was All an Illusion.’

Latina’s Loss in Va. Epitomizes Mortgage Crisis

 

Read, sympathize with her, and  look at the pictures of subprime victim Glenda Hortiz, immigrant from Honduras into Virginia, the day she lost her house, last September: she was induced to sign papers in English she didn’t understand, and had to pay $3000/month (€1930), while gaining $4200 (€ 2700) together with her husband. The uncompassionate machinery of capital over-accumulation, and the credit oceans Tsunami fuelled the financial meltdown with her life and dreams as well, among many. But due to serious and compassionate journalism, she sorts out form anonimity.

    A useful comment; MorganaLeFay wrote:

    The person who brokered this ridiculous mortgage has no funds at stake here. They pocketed the $10,000 in “fees”, sold the loan off to a securities firm and moved onto the next sucker. Later, this loan will help to pull down our financial system. And we will pay for it either with a direct bail out or through crushing inflation.The loan broker has perpetrated a fraud on the securities traders and on us by alleging that this hopeless loan was somehow on par with an average mortgage.What is needed is a law that sets lending standards and allows the state to put people in jail for the sort of fraudulent lending described in the article – that is if the loan is not held to maturity by the entity that brokered the loan.

At Comments closure, another Attorney intervened with  a word of compassion toward Gloria,  who had to stay at home from work a full year, because of cronic depression, after this fact.

jking1 wrote:
I can’t believe how idiotic some of these comments are. The woman DID NOT speak English. I’m an attorney. I can’t tell you how many times people who are fluent only in English, did not take the time to read the fine print of the 20 page credit card agreement when they obtained a new credit card, or didn’t read every single sentence of the 40 page document they signed when they purchased their home. Oh, what a wonderful world we would have if everyone were honest, and everyone made conservative financial decisions. But that’s not the case. When someone is desperate, it’s very easy for them to be taken advantage of. That’s why there are laws which prohibit excessive charges for loans (usury), and that’s why in some states, you have 3 days to get out of a purchase agreement for a home or a car. The law recognizes the reality that people will sometimes do things that they later realize is not in their best interest. The idea that this woman was even approved for a $400K loan is outrageous, and part of the problem is the tax bill which she probably was never told about. I have great empathy for her. I had a conversation with a mortgage broker who told me that he was doing 20 loans a month, at $1500 a pop. That’s a lotta money, and it provides great incentives to talk desperate, uneducated people into doing something that they unquestionably will regret.

 

 

 

TODAY’S PAPERS
Houses Without Homes

By Morgan Smith Posted Saturday, March 22, 2008, at 5:14 AM ET

The Los Angeles Times, Wall Street Journal, and Washington Post all front stories about the worsening housing slump. The LAT leads with an article on record foreclosure rates, reporting that at the end of 2007, they were at “the highest level since the [Mortgage Bankers Assn.] began keeping records in the 1970s.” The states hit the hardest by foreclosures and delinquent mortgages were Calif., Fla., Nev., and Ariz., and in those regions the housing crisis may last longer than it will nationally. The weekend edition of the WSJ leads with a prediction that the stagnant condo market will deteriorate further. Even though there’s already an excess of unfilled units, developers will still complete more building projects because they “usually put up their own money for a project first, then spend borrowed funds,” so once a project’s moved through its initial phase, they have a “strong incentive to keep building to finish,” and hope the market will turn in the meantime. And with its contribution to coverage of the troubled economy, the WP off-leads locally with a profile of a Va. woman who lost her home when she defaulted on a subprime loan, pushed through for her by predatory lenders.
Slate is everyday’s best (below and at post start, we show the two main Slate’s links). Easter weekend WSJ:

PAGE ONE

Woes in Condo Market Build

As New Supply Floods Cities

By JENNIFER S. FORSYTH and JONATHAN KARP

March 22, 2008; Page A1

 

The condominium market is about to get worse as many cities brace for a flood of new supply this year — the result of construction started at the height of the housing boom.

 

More than 4,000 new units will be completed in both Atlanta and Phoenix by the end of the year. Developers in Miami and Fort Lauderdale, Fla., are readying nearly 10,000 total new units in a market already struggling with canyons of unsold condos. (…)

Prices of condos have been steady in some areas and fallen elsewhere. The median condo sales price in the Cape Coral-Fort Myers area of Florida fell 26% to $202,300 in the fourth quarter of 2007 from $273,400 a year earlier.

 

Prices dropped nearly 20% in Tucson, Ariz., and 12% in the Atlanta area during that time, according to National Association of Realtors data. Inside the newly minted Quantum on the Bay in Miami, prices for two-bedroom units have fallen from the high $700,000s to around $500,000.

One option for a developer is to convert the condos to apartments. However, these projects are usually financed with the presumption that sales of individual condos pay off more than rents from a comparably sized apartment building. Also, lenders typically expect developers to pay off condo construction loans with the millions of dollars they receive when closing on the sales. Such a quick payout isn’t possible if the developer is only receiving monthly rental payments.

SUBPRIME SURPRISES. Today, even Paul Krugman has changed his prediction

Northern Rock branch Digg!  The world cycle has  entered a recession phase  generated in the US last summer, deeply entrenched with the highly unstable nature of current growth and institutions, money and markets (for historical reasons, plus theoretical ones Political Economy illustrated since long: the roots are in Malthus and Marx, Keynes and Kalecki).   Credit and financial markets were obviously the first ones shocked by the subprime crisis, a necessary consequence and dead end of Greenspan’s Fed easy money policy in the 1990s, again since 2003, and a “free market” social engineering experiment in enlarging financial K circulation to a new expropriation domain: stealing wealth from fresh new victims, the poor (first) and the rich all over the world, from Latin ghetto home buyers to Northern Rock clients (see 2007, Oct. 26 Krugman’s blog post A Catastrophe Foretold and my comment upon his revelations, the same day on my blog). But this was only the beginning of the Financial K “conspiracy” (K for Capital).  In October-November 2007, hyper-sensible Baltic Dry index of maritime freights (indexes do have senses, sentiments and even a soul: did you know?) got the blues, reached a cyclical peak and started to decline – you can see the weekly updated graph also by clicking here – meaning that world commodity markets and manufacturing were already affected, not just global finance.When a US report told the services sectors were also declining, Wall Street (- 3% on Tuesday Feb. 4) got also the blues, started panicking and detecting the recession, a quarter after experienced Baltic freight traders. I am not sure this might be tagged text book “globalization” and “rational expectations” alike behaviour, I suggest irrational stupidity. Mr Bernanke never thought to rebuke such irrationalities: on the contrary, he hurried up ensuring he will carry on doing the dirty-hiding dirty job for WS boyz-and-banks, everything is under control, interest rates will go further down (so what ?), after the exhibition of a mix of power-willing and sheer impotence in the base rebate 4.25 to 3. We know things are very different, no one is in control of the recession: see 2 base papers, in January 5 and 8 Prof. Nouriel Roubini’s fundamental blog, (1) and – in French – the contribution by François Chesnais in Carré Rouge – La brèche no.1, 2008, pp. 17-31. Their 3 titles carry the message:

  1. The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster.
  2. Can the Fed and Policy Makers Avoid a Systemic Financial Meltdown? Most Likely Not.
  3. Fin d’un cycle. Sur la portée et le cheminement de la crise financière (End of a cycle. On the dimension and path of the financial crisis).

 Today, even Paul Krugman is changing his prediction. Still resisting the idea, because he knows very well how devastating for the US the crisis might and perhaps will be, he admits a denti stretti that  “the double-bubble nature of the underlying problem — a housing bubble and a credit bubble combined” will be tougher than the 1980 and 1991 recessions. He even talks of a new President getting to the White House (Jan. 2009) in the middle of the storm: if you follow his NYT op-eds and blog (a must), you know that his adamantine intellectual honesty is at work. Being optimistic, I counter-argue that Ms. Clinton\Obama (or Mac Cain) will have to tackle either a long recession in her\his first term, or a full depression in both. My friend and colleague Carlota Perez started the epilogue of a very useful, almost prophetic post- Schumpeterian book by saying: “In June 2002, as this book is going to press, the world is at the turning point. The decisions being taken at this crossroads will determine how long, how deep and how widespread the current recession will be and whether what lies ahead is a depression, a gilded age or a true golden age”. We are back to that point, but the total lack of political-institutional decisions and longterm management (called for by Carlota), in such a crazy world, that it is hard to believe it is still Capitalism, stole us the golden age. Now we have choices and destiny in between a shaky cyclical recession, a decade of depression in the 2010s, and re-inventing Socialism. For empirical facts and analyses, search  my blog, or excerpts from my “blog before the blog” from summer 2007: where I report and discuss how the recession has been read in real time: e.g. by Attac in July 2007, The Economist in October, etc. You’ll perhaps come to the conclusion that Bernanke bosses, the Wall Street boyz: either they are analphabet, or they have no time to read anything, nor even economic news and bulletins. If the Fed wasn’t the Fed (a purely Keynesian matter, discussed also in some comments to Prof. Roubini’s blog) Bernanke, instead of burning billion $ in “rites of winter, then spring and summer”, should have just sent them a Xmas card with a free (0 cost) yearly subscription to: http://investmenttools.com/futures/bdi_baltic_dry_index.htm  NOTES _ (1) Prof. Roubini reached a climax when, in a creative Dostò-Shakespearian mood, he described Alan Greenspan’s decision making this way.To Raise or Not To Raise? Reading into Greenspan Hamletian Mind. Aug 29, 2004As Greenspan sips through long reams of obscure economic data (are cardboard production data a good leading indicator of economic activity?) while relaxing daily in his bathtub, he is pondering whether he should increase the Fed Funds rate at the September 21st FOMC meeting. Here is what he is mumbling in his mind, in between a bubble bath and endless wonky economic statistics:”Well, the September 21st decision will be a real tough one, the last one before the elections! I thought that the economy was perking up; and then we hit this Q2 “soft patch”! But is it really a soft patch as we have been claiming in public or the beginning of a deeper deceleration of the U.S. and global economy? Japan is also slowing down (…) and figures from Europe are the usual mixed bag with overall softness and a sub-part Q2 growth of 2%. So, I am usually as Kriptic in public as Delphi’s oracle but on this one I am a bit schizophrenic myself even in private. I haven’t really figured out what to do! I feel like Hamlet: to raise or not to raise?”

Published in: on February 10, 2008 at 4:36 am  Comments (1)  
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Will Super Tuesday somehow affect the recession path?

february 8, 2008. Click this date for a 10 pages file of this week’s (February 8 to the 1st) first entries into this baby blog: depression or recession? At the moment, we might be still before the fork, and the blog title follows. Main arguments, dictated by the quickly unfolding events after the disputed Fed’s move:
FAQ 1: What if the Fed continues to cut the rate, at a rate of 125 points a month?
FAQ 2, Super Tuesday: Prof. Roubini argues the policy maker can’t stop the financial catastrophe. He is right,  but what if  a leadership and a new political process emerge from an America fed up with the establishment  and an overwhelming, unrestricted markets power?
Feb. 8, Frankfurt: ECB on hold (already changing adjectives on € zone inflation)
Feb. 7, Yesterday’s mood in Avenida Paulista (SP) was mixed feelings
Feb.5, Just an IMS Report for another Black Tuesday? The oddness of Wall Street boyz mood
Feb. 1, US non farm employment just negative (first time since August 2003).
MORE: a) in blog page SUBPRIME SURPRISES, there is a_primer_on_subprime.pdf, a 20 pp. still provisional, very draft work-in-progress, with a Political Economy analysis of the unfolding recession\depression, with perhaps original (at least, not textbook) policy implications:1. monetary policies have now counter-intuitive and counter-willing effects:

more money&credit, lower interest rates = deeper depression

2. fiscal policies (in the countries that can afford such a luxury) might do better, wasn’t the recession rooted in long term structural processes (à la Carlota Perez);

b) in the 30 pp. long file: 080131-0707deeprecessionblog.pdf – in blog style and reverse time order, there is the legacy of my posts before this blog started: many useful analyses and comments to what happened to the world economy in the past 9 months (when I had this blog in mind, like Jupiter Minerva, and Gods were planning to strike a recession to humans on some planet).