Soros: Financial Crisis Stems from Super Bubble

[flashl]

...

{I}n his latest book, The New Paradigm for Financial Markets, Soros writes that we are now in a financial crisis that's unparalleled.

"It's the worst, most serious crisis of our lifetime"

...

'Strange' Financial Instruments

Soros says there's a "super-bubble" in the economy that's bigger than just the recent housing crises, and he blames exotic financial instruments for helping cause it.

"The markets have introduced financial instruments with fancy names — CDOs and CLOs and all these strange instruments that are traded in very large volumes. And they were all constructed on the belief deviations are random. That's how some of those instruments were rated AAA and institutions bought them, and a few months later they turned out to be valueless and they were selling at 10 cents on the dollar."

...

A Serious Combination: Inflation and Recession

"So you have a recession and inflation at the same time," he adds. "That's why this crisis is different from the previous ones."

NPR

[bbinacan]

1. Didn't we have a recession and

inflation in the late 70s? Or 1980?

[flashl]

2. Recessions ...

Economists call it recession

Nov 2001

NEW YORK (CNN/Money) - The world's largest economy sank into a recession in March, ending 10 years of growth that was the longest expansion on record in the United States, a group of economists that dates U.S. business cycles said Monday.

The National Bureau of Economic Research (NBER), composed of academic economists from Harvard, Stanford and other universities, joined a chorus of economists and investors who were saying that a recession had already begun. The group posted its decision on its Web site.

It ruled that the long expansion ended in March and the nation's tenth recession since the end of World War II began at the same time. The declaration means the longest expansion lasted exactly 10 years. The previous record for uninterrupted economic growth was set in the 1960s, a period of eight years and 10 months lasting from February 1961 to December 1969.

...

The country's last recession begin in July 1990 and lasted until March 1991. But he NBER did not officially declare the downturn over until December 1992. Democrat Bill Clinton used the economy's troubles as a major weapon in his successful campaign to unseat the first President Bush in 1992.

---

Unemployment and Joblessness in New York City, 2004: Better, But Still a Long Way to Go

Although New York City's labor market is growing stronger, the effects of the 2000 to 2003 recession continue to linger. Unemployment remains higher and the jobholding rate lower than their pre-recession 2000 levels.

[loves_dulcinea]

3. stagflation

manifested in the early days of carter's administration. Mostly a result of Nixon's price 'fixes', but then, not my specialty.

[Joe Chi Minh]

4. This is how Andrew Oxslade, writing in the Mail on Sunday, sees the arrival

in the UK of the Perfect Storm:

"The most clicked-on stories of the past week perfectly capture the problem facing millions of Britons.

Soaring oil and global food prices, largely a result of China's growing appetite for commodities, has pushed up UK petrol costs, heating bills and prices in supermarkets. Add in repeated inflation-busting council tax hikes over the past six years and you have the perfect financial storm that now faces us all.

First-time buyers are feeling the pinch most: priced out of an expensive market and in need of larger deposits to secure a mortgage, following a post-credit crunch tightening of lending criteria.

To add to the misery it now emerges (story no.5) that with potential buyers spooked by the faltering property market, demand for rented property is on the rise. For the first time, the average home costs more than £1,000 per month to let. Typical repayments on the average £100,000 mortgage, on the other hand, are still barely more than £700.

And the final blow? Rising commodity prices means greater inflation pressure, and that's what prevented the Bank of England cutting rates this week (story no.3). The storm couldn't be more perfect.

http://anmblog.typepad.com/this_is_money_blog/author_andrew_oxlade/index.html

[no_hypocrisy]

5. Summing it up in two words: unregulated credit.

[AdHocSolver]

6. The problems stem mainly from the offshoring of jobs, and bringing jobs back is the solution.

The "good times" during the late 1990's were due to the technology bubble creating many new jobs in the U.S. It had nothing to do with Clinton's policies. (In fact, his promoting NAFTA, media deregulation, and repeal of the Glass-Steagall Act helped set the stage for the bubble bursting starting around 2001.)

The Federal deficit was reduced because all of the decent paying jobs were bringing in large amounts of income tax revenue. The accelerated offshoring of jobs in 2001 and later was exacerbated by Bush's tax cuts, but they were in a hurry to steal the treasury before the well ran dry.

Besides loss of income tax revenue due to offshoring of jobs, the U.S. goes into debt to pay for the importation of so many goods. If the goods were manufactured here, the money would stay here as wages. Since we manufacture so few goods here, there is no income to pay for imports. This is NOT China's fault, by the way. The multinational corporations set up cartel agreements like NAFTA, the WTO, the IMF, the World Bank, etc. to prevent small U.S. businesses from being able to compete. The Corporations do NOT pass along lower labor costs as savings to consumers. They either pocket the savings as profit or use their lower costs to destroy any competition.

The huge trade deficit together with the federal deficit is deflating the value of the dollar causing the inflation spiral we are experiencing. This is another reason oil prices are rising, that is, the devaluation of the dollar. The oil prices are up because the value of the dollar is plummeting, and the oil sheiks are getting as many dollars as they can before the U.S. economy tanks and we can no longer afford to buy gas.

The solution to this dilemma is twofold. Since our economy is so dependent on oil, to stabilze the price, we have to reduce our demand for oil. We must mandate, and enforce, fuel efficiency standards for all vehicles (no exclusions). We must increase development of plug-in electric and hybrid electric vehicles, stop making ethanol from food grains such as corn (the most stupid policy yet), promote mass transit, and spur development of solar and wind generation of electricity.

Second, we must rescind NAFTA, the WTO, the IMF, the World Bank and all other corporate-sponsored cartel agreements that eliminate competition in business. These are NOT "free trade" agreements. The are cartel agreements to suppress labor and turn the U.S. into slave labor camps. Make Americans scrabble for a small number of low-paying jobs and you have a very compliant population.

Remember many of the concentration camps in Nazi Germany were slave labor camps. The slogan above the entrance to Auschwitz was "Arbeit Macht Frei" - "Work makes you free".

[judasdisney]

7. Don't worry, this is all B.S. conspiracy nonsense

I know this because all throughout the 1980s and 1990s, this is all I heard when I voiced concerns. And whenever I ask about PNAC and Neocon writings and Neocon stated intentions (like Grover Norquist's "drown government in a bathtub") -- whenever I ask whether the suicidal 2003 tax cut and out-of-control 2000s Republican AND Democrat spending spree on Iraq/etc. is an intentional attempt to create a U.S. caste system and permanent labor underclass -- a backdoor budget-cut frenzy -- I'm told this is conspiracy theory.

So: Taking Grover Norquist at his word is conspiracy theory and you're all a bunch of dumbass conspiracy clowns.

I believe you. Because that's what you all told me.

[flashl]

8. But, inquiring minds want to know: Has Structural Change Contributed to a Jobless Recovery?

August 2003

The current recovery has seen steady growth in output but no corresponding rise in employment. A look at layoff trends and industry job gains and losses in 2001-03 suggests that structural change—the permanent relocation of workers from some industries to others—may help explain the stalled growth in jobs.

A Second Jobless Recovery

... The period following the 1990-91 recession was dubbed the “jobless recovery” because the economy added so few jobs during the first year and a half after the expansion began.

...

The current recovery parallels this earlier recovery in important respects. In 1991-92, output growth rose fairly steadily, but job growth remained near zero for more than a year. In 2002-03, real (inflation-adjusted) GDP has grown each quarter at annualized rates between 1.3 and 5.0 percent, while payroll growth averaged -0.4 percent at an annualized rate through July

Federal Reserve Bank NY