The Economy Crumbles (or Fox News economists laugh at the idea that housing prices would fall)
November 25th 2008 00:26
As news of the subprime mortgage crisis has receded into the newspaper archives, your average citizen of the planet feels that the emergency has been averted, that the bailout from the US Fed was a bridge over troubled waters.
With that, then, people have gone back to the things that they're used to seeing on the news: weird things about Michael Jackson, Boy George assaulting escorts and whatever Andrew Symonds is doing.
Should we forget about the bailout and the economic crisis? An op-ed by Thomas Friedman in the New York Times today:
"You don’t know me, but I have to tell you that you shouldn’t be here. You should be saving your money. You should be home eating tuna fish. This financial crisis is so far from over. We are just at the end of the beginning. Please, wrap up that steak in a doggy bag and go home."
I'm just as pessimistic as Friedman, mainly because the US govt, the biggest player in the game, has been preoccupied with the messianic arrival of President-elect Obama, leaving Bush to play 'look at me!' with the Treasury's money until January.
Certainly, the bailout has gone through, but there's still some confusion over what it means, who gets it and what it'll do. The swift approval of the bailout has convinced other companies to come begging for money, most notably, the big three Auto makers, who arrived at a loan interview with Congress, flying in on private jets.
Friedman has a right to be wary - the federal government has pledged a big sack of money, around $7 trillion, to keep the markets liquid.
"The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14."
It's all very well for the govt to promise the money, but that money comes, in some way, from the American taxpayer, who's already up to their cranial ridge in debt. More debt to buy our way out of the recession? This is going to be a big credit card bill, one that'll depress the position of the US, as they'll be forced to adopt a humbler approach in global politics.
The sharks can smell the blood, too - an analyst in Russia has come out to proclaim that the US empire is, effectively, over.
"When asked when the U.S. economy would collapse, Panarin said: "It is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: America will no longer be the world's financial regulator.""
Additionally, he's forecasting that the Union will split, leaving the States to separate and form their own countries. A heavy, dire prediction, with the sense and affliction of "Mad Max", a post-apocalyptic world without the world's bouncer watching our every move.
"He predicted that the U.S. will break up into six parts - the Pacific coast, with its growing Chinese population; the South, with its Hispanics; Texas, where independence movements are on the rise; the Atlantic coast, with its distinct and separate mentality; five of the poorer central states with their large Native American populations; and the northern states, where the influence from Canada is strong."
Well, that's some crazy talk... not impossible, but highly unlikely, I would think, for independence movements to pick up enough steam to pull themselves apart.
Predictions are easy to dismiss now, though... the internet is awash with the outrage over this video from Fox News, where Peter Schiff, an economist, came on in 2006 and calmly explained that house prices were going to crash, Americans had too much debt and the economy was going to suffer.
This was back in the housing boom, so the Fox guest economists laugh the whole thing off, predicting that house prices would go up forever and that everything was awesome.
Listen as they actually laugh at his prediction:
The real detriment of this video is not that Schiff was right... the problem is that the other economists laughed him off, ignoring his ideas, mainly, I believe, because he's a friend of Ron Paul and the Libertarian Party, which believes the government should step back.
There was no debate in this clip - Schiff was brought on as a freak, someone for the Bulls and Bears cast to sneer at, pointing to the rising housing prices as evidence that there was nothing wrong.
Well, things went horribly wrong, and I listened to Schiff on the Planet Money podcast, where he was remarkably humble about his predictions being correct. An admirable position for someone who has won the right to point the finger and slap the label of 'idiot' freely.
*this image is from Jutiagroup
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Comment by alt_ed
Alted Opinion
ArtCombat
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They're being so rude Schiff and for no other reason that his opposing opinion on the situation... I particularly liked when the red-headed women said "we like different opinions on the show" or something to that effect with her smug little grin!
Gosh, I honestly believe if there were some standards that media outlets had to uphold half of the problems faced by the US would be solved (I mean after all, it seems to be the media de-educating the populous!).
Great read Cib!!
Comment by Cibbuano
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Actually, that's not true - I've been glum about the fate of the English speaking world ever since I came back from China. It feels like the hedonism and arrogance of Rome all over again - I've been playing Rome:Total War recently, so it's very fresh in my mind...!
Comment by Janet Collins
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Comment by Cibbuano
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Comment by Postmodern Critic
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I say forget the multi-billion dollar 'rescue' plans, the emergency relief, the aid packages. Ride the crisis out, eventually things will improve again. It's going to happen anyway, just go with the flow, whatever that means.
The Russian analyst did actually make me laugh, especially with this: "We could claim Alaska - it was only granted on lease, after all." ... Can you say WISHFUL THINKING? To be fair, half of Russia and Eastern Europe has been daydreaming about America's downfall for some time now. I don't understand how you can hate a place you've never been to so much.
Comment by Cibbuano
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...would they take Alaska? Shee...
Comment by Postmodern Critic
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Poor Alaska, you'd think having Sarah Palin as its most famous export was enough stigma.
Comment by Cibbuano
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China - is it bad? I'm hopeful that the country is being reformed, especially as the middle class grows and becomes more influential.
Comment by Postmodern Critic
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I'm not very familiar with Indian society, who would you like to have more of a voice? Should one person's vote ever count more than anyone else's?
I'm confused about your correlation between working class US people and where in America they live (why swing states in particular?)
As for China, its stance on human rights is very low compared to capitalist democracies. Look up 'Falun Gong', for example, or how China continues to support Sudan's genocidal regime by placing no restrictions upon doing business with them. They are one of the only powerful nations to do so, which weakens the ability of the rest of the world to intervene in Sudan's internal affairs. Then there's Burma/Myanmar - it continues to support this incredibly corrupt government as well, and has let down the world in their attempts to hurt it financially as well.
Then there's the fact that blogging on the internet can get you in trouble, representations of incompetence of Chinese authorities is censored (Mission Impossible 3), homosexuality is a taboo topic (the banning of Brokeback Mountain), and, well... I could go on.
It is the hope a lot of people, led by the Chinese themselves, that China will revert to a democracy when it is financially prosperous enough. The ideal seems to be a bloodless, calm, but long overdue revolution.
Come to think of it, my latest post on Postmodern Critic is on a Chinese avant-garde academic who has raised questions about what is socially acceptable sexual behaviour in Nanjing, you might find it interesting.
Comment by Cibbuano
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