Sunday, December 7, 2008

It's Bad Now And It Will Get Worse

Certainly Obama believes things are going to continue to get worse, but just how bad? One estimate from the UK has November's massive job losses as the good times...and 2009 could see job losses of twice that.
As many as a million American jobs could be lost every month by next spring as businesses struggle to raise capital in financial markets consumed by fear, according to a new analysis.

November was the worst month in the US labour market since the oil crisis of 1974, as more than 500,000 US workers were laid off, according to official figures released on Friday.

But Graham Turner, of consultancy GFC Economics, says the rising cost of corporate debt is now flashing a red warning signal that far worse is to come over the next few months and job losses are heading for levels last seen in the 1930s Great Depression.

Corporate bond yields have rocketed since the credit crisis began as investors flee risky assets in search of safe havens such as US Treasuries. That effectively means many firms are being forced to pay eye-watering interest rates to borrow funds.

Turner says when the gap between the yield on high-risk company bonds and US Treasuries widens sharply, unemployment tends to shoot up - and current credit conditions are pointing to a doubling in the pace of layoffs, to more than a million workers a month, by spring.

'The correlation is holding up all too well,' he said. 'It's very disconcerting.' He added that the pace of layoffs already happening in the US 'is indicative of panic'. During the 1970s oil crisis the panic was relatively short-lived, he says. 'But the worry now is that this will just roll on and on.'

Sustained job losses of that magnitude would indeed be catastrophic for America and the world. Consumer spending would drop like a stone, and retail level goods and services would evaporate, taking the economy with it. We're talking a deflationary dealth spiral scenario, one where millions of jobs would vanish and the US would face shortages, riots, and chaos. The effective unemployment rate is 12.5% could end up twice that, with one in four working age Americans either out of work, under-employed, or no longer seeking a job because there will be none to have. The Happy Face economic press has so badly underestimated this crisis that the reality is more and more likely to be an "effective depression" where the entire global economy is restructured...and when it is, America will no longer be on top.

There is no visible bottom to this abyss. 2009 is going to be one of the worst years in American history, bar none.

Out Of Gas

The Kroog weighed in on the Big Three today, and the results were not pretty.
Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.

"It will do so because of the geographical forces that me and my colleagues have discussed," the Princeton University professor and New York Times columnist told reporters in Stockholm. "It is no longer sustained by the current economy."

Krugman won the 10 million kronor (US$1.4 million) Nobel Memorial Prize in economics for his work on international trade patterns. Some of his research on economic geography seeks to explain why production resources are concentrated in certain locations.

Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a "lack of willingness to accept the failure of a large industry in the midst of an economic crisis."

And I happen to agree with him. As I've said, there's nothing that can really be done to solve the US auto industry's problem that doesn't involve the nationalization of the entire industry, which is just unacceptable given there's plenty of car companies out there. Even in the short term if the automakers survive, they simply will die long term as people won't buy cars from a bankrupt company. Obama will be forced to do it, as losing millions of auto jobs is even more unacceptable, and the price autoworkers will have to pay is to deunionize completely and take brunt of the concessions. The GOP will demand it and will get it. The only other option is to lock out foreign autos completely in a bout of nationalist protectionism.

It's not the auto industry that's going to vanish first, it's the unions...and with it the last of the blue-collar middle class in this country.

Big Bucket Of Scary

Now this...this is a bad thing.
India's foreign minister accused Pakistan on Sunday of trying to dodge blame over the Mumbai attacks' Pakistani origins by leaking a story about a hoax call to Pakistan's president that set off diplomatic panic.

Pakistan's Dawn newspaper reported on Saturday that Pakistan had put its forces on high alert after a caller pretending to be Indian Foreign Minister Pranab Mukherjee threatened President Asif Ali Zardari while the attacks were still going on.

"I can only ascribe this series of events to those in Pakistan who wish to divert attention from the fact that a terrorist group, operating from the Pakistani territory, planned and launched a ghastly attack on Mumbai," Mukherjee said in a statement released on Sunday.

Pakistan insisted the call came from an official and verified phone number in India's foreign ministry.

New Delhi has demanded Islamabad take swift action over what it says is the latest anti-India militant attack emanating from Pakistani soil.

At least 171 people were killed during the three-day assault last week across India's financial capital, which has imperiled the improving ties between the south Asian nuclear rivals.

Officials from "third countries" called to inform Mukherjee of the hoax call, he said. He did not name them, but Dawn said the caller was a worried U.S. Secretary of State Condoleezza Rice, who was in both capitals last week to ease tensions.

"It is, however, worrying that a neighboring state might even consider acting on the basis of such a hoax call," he said.

Yeah, that's right. A hoax call after Mumbai nearly led to an open conflict between two nuclear powers. And the really scary part is it still might do so.

Think about it. If you're Al-Qaeda, what better way to destabilize Pakistan's government and take control of their nukes than to force the Pak military hunting you out to the Kashmir border to defend against India, then hit the capital Islamabad while everyone's worried about external threats and announce you're in charge?

Double G Goes Double Barrel

Nobody on the left does righteous indignation like Glenn Greenwald. When he latches on to The Stupid, he doesn't let go. Ever. Today's poor schmuck in his jaws is former Clinton OMB official Matt Miller, who rightfully gets both barrels.

Matt Miller, a Senior Fellow with the Center for American Progress (CAP) and former official in the Clinton OMB, has an Op-Ed in The Washington Post decrying the "kiss-and-tell" books written by top presidential aides once they leave the White House, and he singles out as examples the "tell-all" books written by George Stephanopoulos and Scott McClellan (whose name is repeatedly misspelled throughout the Op-Ed). Miller doesn't merely want former officials who write such books to be stigmatized and scorned, though he does want that. Far beyond mere disapproval, he actually wants to vest presidents -- or at least the new President -- with the formal legal power to block publication of these books in the first place:

Just as mergers and marriages that flourished on handshakes and vows had to turn to coarser arrangements once the stakes of break-up became high, the politician-aide relationship now needs its contract. In other words, it is time for the political prenuptial. Barack Obama should simply require key advisers and officials to sign a binding contract of confidentiality as a condition of employment. Aides should pledge not to disclose anything they see until, say, five years after their boss leaves office.

That is an atrocious idea. For one thing, it's hard to see how enforcement of these silencing contracts could be permitted in light of the First Amendment. And I doubt that Obama, for appearance reasons if nothing else, would take this proposal seriously. But those matters aside, the thinking behind this proposal is common among Beltway insiders and reveals much about the ways of Washington.

The attribute that defines Beltway culture as much as anything else is obsessive, gratuitous secrecy. The vast bulk of what takes place of any consequence occurs away from the public eye. Even laws which Congress enacts are proposed, negotiated and written behind closed doors with lobbyists and operatives. By the time these bills are even known to the public, let alone openly "debated," their outcome is a foregone conclusion. Floor "debates" and Congressional votes are pure theater, empty rituals with no purpose other than to ratify pre-ordained outcomes that were determined in secret.

Presidents in particular already possess a vast arsenal of weapons to prevent transparency, from the virtually unfettered power to classify to borderline-omnipotent investigation-quashing tools such as the state secrets and executive privileges. As Radley Balko detailed in his recent article urging the Obama administration to renounce claims of executive privilege except where genuine national security secrets are jeopardized by disclosures, these powers have grown so rapidly over the last decade that Presidents can now maintain an almost impenetrable wall of secrecy around virtually everything they do. CAP's own blog, ThinkProgress, just recently cited a report documenting "that by almost every measure, government secrecy is rising."

As always, Double G is a good read, and of course he has a good point here. Obama is breaking down that wall of secrecy, as is VP-elect Joe Biden. There's no way the opposite would be acceptable after eight years of Preznitman From Preznitland.

A Bit Less Democratic Stupidity Today

Indicted Congressman "Dollar Bill" Jefferson of Louisiana is gone.
Nine-term Democratic Rep. William Jefferson, who has been battling scandals and a federal indictment for the past three years, lost his bid for re-election on Saturday.

Republican challenger Anh "Joseph" Cao, an attorney and community organizer, defeated Jefferson in the 2nd Congressional district race. He will become the first Vietnamese-American elected to Congress.

With 100 percent of precincts reporting, Cao had almost 50 percent of the vote to Jefferson's 47 percent.

The 2nd Congressional district, in and around New Orleans, is mostly African-American and heavily Democratic, and Jefferson appeared to be favored to win re-election going into the election.

"The people of the second district were able to transcend party, transcend race," Cao said after claiming victory Saturday night.

Jefferson was as crooked as they come, frankly. Also, I was kind of getting sick of him being the guy thrown in the face of every Democrat that somehow proved that with this one scuzzy guy, the entire Democratic party was just as corrupt as the entire GOP.

Which is fine. The Wingnuts will move on to Jack Murtha next and scream he's the most corrupt guy in Washington.

Obama's Jobs Plan

With Friday's hideous job numbers out signaling truly bad times ahead, Saturday was certainly the right time for Obama to announce his job creation plan.
President-elect Barack Obama on Saturday revealed five parts of his plan to save or create 2.5 million jobs by 2011, and said he will push for immediate action by Congress when he takes office in January.

Obama wants to make public buildings more energy-efficient; repair roads and bridges; modernize schools; increase broadband access; and ensure health care uses the latest technology.

"Our government now pays the highest energy bill in the world," he said in the weekly Democratic Radio Address.

"We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs. That won't just save you, the American taxpayer, billions of dollars each year. It will put people back to work."

In addition, he said, "It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online."

"In addition to connecting our libraries and schools to the Internet, we must also ensure that our hospitals are connected to each other through the Internet."

"These are a few parts of the economic recovery plan that I will be rolling out in the coming weeks. When Congress reconvenes in January, I look forward to working with them to pass a plan immediately.

"We won't do it the old Washington way. We won't just throw money at the problem.

"We'll measure progress by the reforms we make and the results we achieve -- by the jobs we create, by the energy we save, by whether America is more competitive in the world," Obama added.

Indeed, the size and scope of Obama's national stimulus pacakage is growing by the day. And with state after state calling for long-needed Federal infrastructure investment and consumer consumption drying up quickly, it can't come soon enough.

I'm hoping this means that Republicans will be overwhelmed by the popularity of this and will have no choice but to concede, after all, politicians who vote against job creation for actual voters tend to get removed from office by those voters.

We'll see.

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