9/6 Perils of a fast buck - Asia and Russia enthusiastically welcomed Western investors but the quick deposit and withdrawal of that 'hot money' shattered their fragile markets, by Kimberly Blanton, Boston Globe E1.
It moved through the world's financial markets with the power of a tsunami.... The troubles cascading from Bangkok to Moscow to Caracas are not the first to hit the world's "emerging" economies. In the early 1980s, a debt bomb exploded in Latin America, where governments were unable to repay loans to US banks. But the financial meltdown in Asia - and now Russia - is worse than any ever experienced, economists say.
[Except in 1929. Let's fix it and get it right this time, so we don't have to repeat the nightmare. In 1933, FDR considered doing the one thing the unions wanted and making a first step toward sharing the money by sharing the work and the skills. However, then he flipflopped and decided not to share the work by cutting the workweek but to try to avoid sharing by creating enough extra work to keep everyone busy at existing workweek levels - forever. It was called the New Deal. It didn't work until the War. And its legacy in the form of a frozen World War II workweek is still with us.]
You thought Hyde was a "monotonal eccentric" (Phoenix) for comparing our present "boom" with the 1920s? Better expand the nut house. There's a lot of us. Here's one from this weekend -
9/6 Economic boom is a bust, says study, by Stephanie Ebbert - B3 Boston Globe
Apparent good news, but...
9/5 Greenspan remarks hint at possible cut in rates, by Peter Gosselin, Boston Globe frontpage.
9/5 Experts gather to tackle fiscal turmoil - 17 Boston Herald
9/4 And just for the relief of voicing our worst fears, let's mention a tabloid that recently appeared on Cambridge, MA newstands with the following five screaming headlines touting two articles inside (p. 18-19 and p. 46-47) -
9/6 Free market fallacies, by Robert Kuttner - C7 Boston Sunday Globe
The US stock market is a casualty of...naive market-worship. Just weeks ago, prestigious commentators were still proclaiming a fundamentally "new economy" of permanent prosperity, eerily echoing the 1920s.
[Kuttner is referring to the statement that economist Irving Fisher made on Oct. 16, 1929, thirteen days before the Great Crash - "Stock prices have reached what looks like a permanently high plateau." (Quotation from Ed Angly's great little book, "Oh Yeah?" published Nov. 13, 1931 by Viking.) Kuttner also gets off a number of other great sound bites.]
The plummeting unemployment rate, climbing consumer confidence - was it all just a dream? A new study... would have Massachusetts residents believe that they were not, in fact, enjoying the best economic times in recent history. They were duped again.
The State of Working Massachusetts report, to be released today, shows a number of things.
9/5 US jobless rate holds firm in August, by Aaron Zitner, F1 Boston Globe
American workers continued to benefit from the lowest unemployment rates in nearly three decades, the US Labor Department said yesterday.... ["benefit from" UE rates that are more outdated than definitions anywhere else in the world?? - ed.] The tight labor market helped push wages up solidly in August, ["solidly"?? - and the labor market won't be "tight" until it reverses the continuing concentration and deactivation of wealth - ed.]...
'The loss of factory jobs is accelerating, and that's an indication that we are being hurt by the Asian slump,' said Cynthia Latta [of DRI].... Labor Secretary Alexis Herman said: 'Overall, I still believe that the fundamental underpinnings of this economy are very strong and very steady.' [Alexis, maybe you better curb your True Believer mouth - you sound just like Hoover on Oct. 25, 1929 (the Great Crash was four days later) - "The fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis." (Quotation from Ed Angly's great little book, "Oh Yeah?" published Nov. 13, 1931 by Viking) - ed.]...
As the currencies of Japan, Thailand, South Korea and other countries have weakened, the price of goods from those countries has dropped. This has made it harder for US companies to sell their products at home, where consumers can buy low-cost imports, or to sell them abroad, where the currency crisis has cut consumers' purchasing power. The Asian crisis most recently spread to Russia, where the value of the ruble has collapsed, and has hurt currency values from Columbia to Canada.... While [US manufacturing] added 95,000 jobs in August, the sector actually lost 48,000 or more jobs if the returning auto workers are excluded.
"As stock and currency markets worldwide gyrated yesterday, top financial officials huddled in Washington and San Francisco in efforts to contain spreading economic turmoil around the globe. Last night [following meetings with Japanese finance minister Miyazawa], Federal Reserve Chairman Alan Greenspan was expected to utter his first words about the state of the economy since the stock market selloffs that began late last week. Also meeting with Miyazawa was Treasury Secretary Robert Rubin, who suggested heading into the meeting that it would produce little in the way of policy initiatives to shore up Japan's ailing banks and revive its flagging economy.... There were more signs yesterday that the year-old economic crisis in Asia is hurting demand for U.S. products abroad.... The unemployment rate held steady at 4.5% in August as lost manufacturing jobs offset the return of 150,000 workers idled by strikes at GM.... The IMF this week called a meeting of Latin American officials in an unprecedented effort to calm fears of problems creeping into those economies.... In Brazil, the key Bovespa share index fell 6.1%.... In Argentina, stocks plunged to their lowest levels in more than three years.... As international credit dried up this week, banks doubled lending rates to their best customers, to about 15%.... The IMF urged Russia not to try to mint its way out of the currency crisis.... Russian political leaders debated whether to nationalize the biggest banks.... A new government report said as much as 40% of the nation's businesses were controlled by criminal elements.
9/3 Chase, DLJ say Russia turmoil to hurt results, Reuters via Boston Globe D6.
Chase Manhattan Corp. and Donaldson, Lufkin & Jenrette Inc. yesterday joined a growing list of banks and investment houses warning that the turmoil in Russia and other markets has hurt their results.
9/3 Bearish on hiring - Market slide could mean recruitment downturn at fund firms, by Steves Bailey and Syre, D1, Boston Globe.
9/3 Despite calls for action, Fed unmoved, by Peter Gosselin, Bos Globe D1.
NEW YORK - With investors shaken by the recent stock plunge and much of the world slipping into an ever-deeper financial morass, Americans are turning to the institution that has bailed them out of economic trouble so often in the past - the Federal Reserve. In growing numbers in recent days, political leaders, economists and even ordinary shareholders have called on the Fed to cut short-term interest rates to ward off what some see as a lurking danger of recession and steady the world economy. But, according to a wide variety of analysts, neither Fed officials nor policy makers elsewhere are likely to act anytime soon. Indeed, say these analysts, for the first time in the post-Cold War era, the nation and the world appear headed for a period of substantial upheaval with no one ready or able to guide the course of economic events.
[Every now and then in the media, an admission of economic helplessness is sounded. In 1974, when both inflation and unemployment were skyrocketing - against all previous economic theorists (except forgotten Arthur Dahlberg), a Newsweek cover depicted all the great economists of history gathered around an empty chair - the chair that would seat the unknown economist who could explain this supposedly unprecedented phenomenon. Now events are pushing the media to the same admission in ever sharper and clearer forms.]
The Fed and its counterpart central banks in the other industrial nations..."believe we [are] in a financial bubble and that this correction is exactly the tonic that's needed," ...said [Gary Hufbauer, director of studies for the Council on Foreign Relations in New York].
[Note this is an exact rerun of the early 1930s. Conventional solutions had not yet been exhausted and yet those with power to act would not act.
[Under the program outlined in Part II of Hyde's book Timesizing, Not Downsizing, the conventional solution of lowering interest rates would be exhausted before the first timesizing phase was initiated. This would accord with the ecological principle of "minimum necessary departure from status quo at each point." Rate-setting powers would be taken over from the arbitrary Fed and given to binding public referendum on the principle that, as long as we're making arbitrary settings, we had better allow input from everyone potentially affected because "no pain without input" or as our founding fathers put it, "no taxation without representation." Unemployment would be redefined to include everyone dependent on the taxpayer. Once interest rate lowering had done all it could against such unemployment, we would move to the three timesizing phases, one at a time, exhausting each in turn before moving on - (1) converting corporate overtime into hiring, and on-the-job training if necessary, (2) converting individual overwork (overtime from all sources) into hiring and on-the-job training if necessary, and (3) linking overtime to vary automatically with unemployment - as long as unemployment remained too high (or rose), overtime would also rise - by the simple expedient of gradually shortening the workweek - and vice versa - all automatic, all homeostatic. Note that this conversion of overtime into hiring etc. would be function as an effective automatic reinvestment of overtime profits, for firms, and earnings, for individuals, among a wider population of potential consumers. Thus it would amount to an automatic program for reinvesting in our own customers' customers - the opposite of present-day downsizing dba disinvesting - or reinvestment in our own markets - a balance of wealth centrifuging against the incessant centripetal forces that concentrate wealth into a turgid, unbalanced and unsupported "Black Hole."]
"We're in the midst of a global crisis that's more severe than anyone expected [wrong - Hyde and many others have been expecting it for years] and there's no big brother out there to fix it," said David M. Jones, a veteran Fed watcher and chief economist with Aubrey Lanston & Co. in New York.
[The "big brother" language sounds socialist, selfish socialist - the wealthy wanting some deus ex machina like government to come in and prop up the value of their grossly excessive share instead of guiding them to reinvest in their own markets (i.e., their own employees) at the necessary colossal (relative to today) levels. Note that though government tried to do this in the 1930s, it failed until total war in the early 1940s got the wealthy reinvesting - centrifuging wealth - at the appropriate megalevels for stability and sustainable growth.]
"You look at the G7 countries and there's not a lot of strength," said Hufbauer, referring to the so-called Group of Seven nations, including the United States, Japan, Germany, and the United Kingdom, that have the world's largest economies and at least until recently provided the world's economic leadership.
[Wal, dog our cats, if this don't sound like a crack in the "conspiracy of optimism" about the American economy! How refreshing!]
If Fed officials and other policy makers now take a hands-off policy toward Asia, Russia, Latin America and other current economic trouble spots," said Jones [and what else can they do with this scale of trouble?]..., "this will be the first time we've tested the system without any intervention."
[No, it won't. We "tested it without any intervention" in 1929. Unglue your eyes from the Fed and read your economic history, Jones! That gave us the Great Depression. That led Kellogg's, the unions, and Arthur Dahlberg to call for worksharing via shorter workweeks to centrifuge wealth back to a balanced state, and instead we tried to avoid work sharing by big government job creation (the "New Deal"). That failed until the War (yes, it FAILED because 42% "success" is a failing grade in any classroom in the land and the New Deal at its best only solved 42% of the unemployment of the Depression). And we are still locked into a World War II workweek of 40 hours despite all succeeding waves of work-saving technology.]
9/3 Senate OK's [$18B in] IMF funds, Bos Globe, D2
But the plan now faces strong opposition in the House.... The IMF was already under fire for its policies in Asia, where it engineered three bailouts last year.... At the Clinton administration's urging, the IMF in July arranged a $22.6B package of new loans for Russia, aimed at ending the country's crippling economic crisis..../ House Speaker Newt Gingrich has demanded the White House explain why Russia's financial crisis got worse and spread under the IMF's loan program.
9/2 Think it's over because the Dow (partially) recovered?
Look on the inside pages where these valium-dispensers (dba newspapers) hide the bad news:
Too many doctors, not enough jobs, medical study says, by Richard Knox, p. A3 Boston Globe.
Hey, when the American doctors lose control of their own market (next their pay will start sinking), you can bet that everyone else has long since lost control. The AMA (American Medical Association) used to be well-nigh omnipotent. And for those of you who still believe we have "low unemployment" instead of a massive hidden peacetime labor surplus, guess what, "Physician unemployment has been a hidden problem until now" according to an expert who has studied physician supply issues for 20 years. Timesizing is the only sustainable peacetime solution to hidden labor surplus and covered-over under-employment. Also...
9/2 Survey: Asia crisis taking its toll on US - Manufacturing dips in Aug. for third month in a row (Bloomberg), also D2, and
9/2 Russia abandons policy for beleaguered ruble - Lets currency slip out of trading band that gave it stability (Reuters), also D2, and let's not forget...
9/2 Questioning our boom-time illusions, by James Galbraith, on p. A23, Boston Globe. One mistake James makes is calling the optimists' balanced budgets, high technology and good feeling a "new paradigm." It's not. It's the same old paradigm of the 1920's, when all three conditions prevailed, plus plenty of mergers and acquisitions and downsizings, especially in banking, just the same as today. There was then the same denied surplus of job seekers, the same flat wages, the same astronomical concentration of wealth and growing income gap. So what's wrong with that? This is what's wrong with that and this phrase is a phrase you should memorize -
After all, Kellogg Cereals of Battle Creek. Mich. had already started a very successful 30-hour workweek in 1930, and like today, people were working shorter weeks anyway but getting paid too little to maintain our American consumer markets and buy what they produced. Today, Lincoln Electric of Cleveland and Nucor Steel of Charlotte scrunch their workweeks instead of their workforces. They are capitalist and they are successful, but they prize their employees and they maintain their markets via maintaining their employees.
For earlier collapse stories, click on -