A Bulletin From the Captain of the Titanic

[Crewleader]

April 16 2009

"The Foundations of Our Economy are Strong"

A Bulletin From the Captain of the Titanic

By MIKE WHITNEY

"We are starting to see glimmers of hope across the economy."

President Barack Obama, April press conference.



Retail sales fell in March as fearsome job losses and tighter credit conditions forced consumers to cut back sharply on discretionary spending. Nearly every sector is seeing declines including electronics, restaurants, furniture, sporting goods and building materials. Auto sales continue their nosedive despite aggressive promotions on new vehicles and $13 billion of aid from the federal government. The crash in housing, which began in July 2006, accelerated on the downside in March, falling 19 per cent year-over-year, signaling more pain ahead. Mortgage defaults are rising and foreclosures in 2009 are estimated to be in the 2.1 million range, an uptick of 400,000 from 2008. Consumer spending is down, housing is in a shambles, and industrial output dropped at an annual rate of 20 per cent, the largest quarterly decrease since VE Day. The system-wide contraction continues, with no sign of letting up.

Conditions in the broader economy are now vastly different than those on Wall Street, where the S&P 500 and the Dow Jones Industrials have rallied for 5 weeks straight, regaining more than 25 per cent of earlier losses. Fed chief Ben Bernanke's $13 trillion in monetary stimulus has triggered a rebound in the stock market while Main Street continues to languish on life-support, waiting for Obama's $787 billion fiscal stimulus to kick in and compensate for falling demand and rising unemployment. The rally on Wall Street indicates that Bernanke's flood of liquidity is creating a bubble in stocks since present values do not reflect underlying conditions in the economy.

The financial media are abuzz with talk of a recovery as equities inch their way higher every week. CNBC's Jim Cramer, the hyperventilating ringleader of "Fast Money", announced last week, "I am pronouncing the depression is over." Cramer and his clatter of media cheerleaders ignore the fact that every sector of the financial system is now propped up with Fed loans and T-Bills, without which the fictive free market would collapse in a heap. For 19 months, Bernanke has kept a steady stream of liquidity flowing from the vault at the US Treasury to the NYSE in downtown Manhattan. The Fed has recapitalized financial institutions via its low interest rates, its multi-trillion dollar lending facilities, and its direct purchase of US sovereign debt and Fannie Mae mortgage-backed securities. The Fed's balance sheet has become a dumping ground for all manner of toxic waste and putrid debt-instruments for which there is no active market. When foreign central banks and investors realize that US currency is backed by dodgy subprime collateral, there will be a run on the dollar followed by a stampede out of US equities. Even so, Bernanke assures his critics that "the foundations of our economy are strong".

http://www.counterpunch.org/whitney04162009.html

[westerebus]

1. Icebergs or pirates? Hmm. n/t

[Autumn]

2. Well shit

"the foundations of our economy are strong". Doesn't look like it

[RaleighNCDUer]

3. Foundation. They keep using that word.

I don't think it means what they think it means.

The foundation of any economy is the agricultural/industrial base. Not the stock market. The stock market is merely a mirror - often a fun-house mirror - of the economic foundations of the economy.

It's not the market - it's the JOBS, stupid!

[dickthegrouch]

5. Not even jobs, it's production

All the service workers are employed, but they have nothing to serve or service if there is no production. Everything depends on manufacturing from raw materials (including farming), that's the ONLY place wealth is created. Everything else follows on from that creation.

Until or unless we find a way to start manufacturing again, the economy cannot go anywhere but down.

[Hydra]

4. You know, they keep saying the trouble is over

While all the numbers say "Still screwn, and getting worse."

I thought this sort of inverted thinking was supposed to go with the Bush Admin...

[skoalyman]

6. First comes denial, then Frustration, Anger follows and finally Acceptance.

:party: First comes denial :argh: then Frustration :rant: :rant: :rant: :scared: :scared: :scared: :nuke: :nuke:Anger follows :crazy: :toast: :beer: :beer: :beer: :hangover: finally Acceptance.

[Innkeeper]

7. To paraphrase the famous quote about the Great Depression:

"When we thought it was over, it had only just begun."

[roamer65]

8. In 1930, there was an uptick in GDP...then things came crashing down.

They thought then it was just a normal recession, as we do now. It's not. Its a depression, probably not on the level of the GD, but more like the Depression of 1893.

I'm sure your quote originated in 1930.

[mkultra]

11. there was no uptick in 30

the US gdp took a straight dive into the basement. World GDP had an uptick. slight difference.

[Mark Twain Girl]

9. I hear that the recovery is here and I feel like I'm in an alternate universe

Maybe it's because the news and political celebs are okay, have great health care, and have a cushy roof (or several) overhead. Maybe that's it. For the political and economic elite, things really are okay. It's the rest of us going down.

[sendero]

10. Reminds me of "the fundamentals of the economy are sound"..

... BULLSHIT spouted by Bush the last few months of his term. Only morons believed him then and only morons believe the updated version.

[eridani]

12. The only cause for optimism is that we still have a good bit of physical and human capital

Real skills haven't vanished, and our physical plant is still there. If your house kept you warm and dry when it was "worth" $500K, it still does even if it is "worth" $250K.

[SlowDownFast]

13. Disinfo.

They're kicking the can as far down the road as they can - to buy time and because the alternative scares the shit out of them, as well it should. Problem is, kicking the can further just prolongs and will ultimately intensify the pain. Obama, as well as Congress, are now complicit in The Greatest Looting Operation Ever - whether or not that was their intention.

They need to tell the American People the Truth.

Transparency indeed.