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Economics

Paralysis at the Fed

The fact is that the Fed — which is required by statute to promote “maximum employment” — isn’t doing its job. Instead, like the rest of Washington, it’s inventing reasons to dither in the face of mass unemployment. And while the Fed sits there in its self-inflicted paralysis, millions of Americans are losing their jobs, their homes and their hopes for the future.

Paul Krugman, New York Times | NY

Submitted by Evergreene Digest Contributing Editor Thomas Sklarski

Ten years ago, one of America’s leading economists delivered a stinging critique of the Bank of Japan, Japan’s equivalent of the Federal Reserve, titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” With only a few changes in wording, the critique applies to the Fed today.

At the time, the Bank of Japan faced a situation broadly similar to that facing the Fed now. The economy was deeply depressed and showed few signs of improvement, and one might have expected the bank to take forceful action. But short-term interest rates — the usual tool of monetary policy — were near zero and could go no lower. And the Bank of Japan used that fact as an excuse to do no more.

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Summary: America's Financial Crisis: Week of August 15

6 New Items including:

  • The Forgotten Foreclosure Crisis
  • Will the Pension Time Bomb Set Off a Crime Explosion?

David Culver, ed., Evergreene Digest


Mike Thompson

The AIG Bailout Scandal, William Greider, The Nation

  • As Elizabeth Warren’s devastating Congressional report reveals, the Federal Reserve used taxpayer money to bail out the insurance giant, instead of forcing the major banks to clean up the mess they helped create. In so doing, the Fed may have set the system up for an even bigger fall in the future.
  • The battle over Elizabeth Warren

America Goes Dark, Paul Krugman, New York Times | NY

  • So the end result of the long campaign against government is that we’ve taken a disastrously wrong turn. America is now on the unlit, unpaved road to nowhere.
  • America: The Grim Truth

The Horror Show, Bob Herbert, New York Times | NY

  • Policy makers seem intent on allowing the employment crisis to fester. As bad as the July employment numbers were, a deeper look into them shows a seriously scary situation.
  • Long-Term Economic Pain
  • Jobless? Your leaders are at ease with that

The Forgotten Foreclosure Crisis, Think Progress

  • Without more intervention, the housing market will continue its 'slow motion' adjustment that will continue to inhibit economic growth and drag down consumer spending.
  • Foreclosures Rise with Unemployment

CNN Situation Room Social Security Scaremongering, Fairness & Accuracy in Reporting (FAIR)

  • CNN's Social Security 'crisis'
  • Ask CNN's Situation Room to bring on Social Security experts who would challenge the alarmist views featured recently on the show.
  • Top 5 Social Security Myths

Will the Pension Time Bomb Set Off a Crime Explosion? Justice Litle, Taipan Publishing Group

  • When state and local budgets fall short, services are cut. That means critical services like police and fire and transport... and with the pension crisis looming, the unkindest cuts of all still lay ahead.
  • America Goes Dark

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Will the Pension Time Bomb Set Off a Crime Explosion?

When state and local budgets fall short, services are cut. That means critical services like police and fire and transport... and with the pension crisis looming, the unkindest cuts of all still lay ahead.
America Goes Dark

Justice Litle, Taipan Publishing Group

Submitted by Evergreene Digest Contributing Editor Ken Mitchell

Diane Cunningham of Colorado Springs, Colo., no longer has a flat-screen television. She decided to sell it... so she could buy a shotgun.

Colorado Springs shut off a third of its streetlights this past winter, the New York Times reports, in order to save $12 million on electricity. Shortly thereafter, a chain of events convinced Ms. Cunningham she needed to be armed.

"Her tires were slashed, she said. Her car was broken into. Strange men showed up on her porch. Her neighborhood had grown deserted at night..."

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America Goes Dark, Paul Krugman, New York Times

  • So the end result of the long campaign against government is that we’ve taken a disastrously wrong turn. America is now on the unlit, unpaved road to nowhere.
  • America: The Grim Truth


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The Forgotten Foreclosure Crisis

  • Without more intervention, the housing market will continue its 'slow motion' adjustment that will continue to inhibit economic growth and drag down consumer spending.
  • Foreclosures Rise with Unemployment

Think Progress

The economic meltdown of 2008 grew out of a foreclosure crisis, as Wall Street banks drove lenders to make loans that were then securitized and sold around the world, in an unregulated slew of credit products. This inflated a housing bubble that, when it burst, severely damaged an already weak economy, sent millions of homeowners into foreclosure, and put millions more out of work, leading to even more foreclosures as unemployed workers began to miss mortgage payments. Many homeowners who were able to stay in their homes now find themselves underwater -- owing more on their mortgage than their home is currently worth.

But so far, the foreclosure prevention efforts undertaken by Congress and the Obama administration, while well-intentioned, have failed to produce widespread results. This not only hurts homeowners but undermines economic recovery. Proposals for a variety of more aggressive, and potentially more effective, measures have so far not been taken up, as the programs unveiled have often lagged behind the heart of the problem. According to analysts at Morgan Stanley, "Without more intervention, the housing market will continue its 'slow motion' adjustment that will continue to inhibit economic growth and drag down consumer spending." "It's certainly a weight on the economy," said Mark Zandi, chief economist at Moody's Economy.com. "Nothing works all that well in the economy when house prices are falling."

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Summary: America's Financial Crisis: Week of August 8

5 New Items including:

  • Five myths about the Bush tax cuts
  • The battle over Elizabeth Warren

David Culver, ed., Evergreene Digest

John Darkow

Jobless? Your leaders are at ease with that, Paul Krugman, New York Times

  • None of them want to fix it -- so high unemployment might become a habit.
  • Punishing the Jobless

Undocumented immigration: paying the price of NAFTA, Emile Schepers, People's World

  • A study published by the Carnegie Endowment for International Peace in December 2009 explains how this worked out in practice. ("Rethinking Trade Policy for Development: Lessons from Mexico under NAFTA")
  • The Economics Of Immigration Reform

Five myths about the Bush tax cuts, William G. Gale, Star Tribune | MN

  • A gloomy economic outlook...has given rise to a number of stubborn myths about what extending the Bush tax cuts would -- or wouldn't -- do.
  • Tax the rich more. (They can take it.)
  • Trickle Down Economics doesn't work
  • Top 5 Social Security Myths

What the NY Times is not telling you about the deficit, Rick Nagin, People's World

  • The deficit is largely a red herring - an issue being ginned up by the Republicans for the purpose of preventing Obama from making headway on economic recovery. They hope that anger and frustration over the ongoing crisis can be channeled into Republican votes in November.
  • Reagan’s budget David Stockman director calls GOP tax cuts delusional

The battle over Elizabeth Warren, John Case, People's World

  • Real consumer protection against fraud and misinformation in financial services is something the "financial sector" has fought for years. The catastrophe that required a $4 trillion public fiscal and credit injection into the economy makes no impression on the people whose reckless, unregulated behavior caused it, and whose bread is now buttered with its spoils.
  • The Case For Elizabeth Warren


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What the NY Times is not telling you about the deficit.

  • The deficit is largely a red herring - an issue being ginned up by the Republicans for the purpose of preventing Obama from making headway on economic recovery. They hope that anger and frustration over the ongoing crisis can be channeled into Republican votes in November.
  • Reagan’s budget David Stockman director calls GOP tax cuts delusional

Rick Nagin, People's World

In a major editorial last Sunday (August 1) entitled "What They're Not Telling You About the Deficit," the New York Times offers at best a partial solution to the problem of the deficit. The Times justifiably criticizes the Republicans, who blame stimulus spending and extension of unemployment benefits for the deficit. The Republicans fail to mention the tax cuts they enacted primarily under the Bush administration to benefit the super-rich.

Allowing the tax cuts for wealthy families to expire at the end of the year would generate $680 billion, a major chunk of the deficit that is expected to rise to $1.4 trillion this year.

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Reagan’s budget director David Stockman calls GOP tax cuts delusional, Teresa Albano, New York Times | NY
In an eye-opening, and at times hard-hitting article in Sunday's New York Times, President Reagan's budget director has slammed today's Republican Party for pushing to extend Bush-era tax cuts for the super-rich.

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Undocumented immigration: paying the price of NAFTA

  • A study published by the Carnegie Endowment for International Peace in December 2009 explains how this worked out in practice. ("Rethinking Trade Policy for Development: Lessons from Mexico under NAFTA")
  • The Economics of Immigration Reform

Emile Schepers, People's World

The rationale for NAFTA (North American Free Trade Agreement), which came into force Jan. 1, 1994, was Ricardian (after the Anglo-Italian classical economist David Ricardo, who thought that each country should specialize in the production that most suited its climate and other characteristics).

Much of Mexico's rural population was engaged in maize and wheat farming, which is much more productive in the vast plains of the central United States and Canada than in Mexico's more rugged terrain. So the idea was to push the grain farmers off the land and move them into specialized fruit and vegetable farming, and into manufacturing which was supposed to be attracted to Mexico by the cheap labor of displaced farmers.

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The Economics Of Immigration Reform, Matt Corley and others, Think Progress
While anti-immigrant groups use anecdotal evidence to erroneously claim<http://cis.org/UnemploymentAmongNativeWorkers>  that legalization would be disastrous for the American worker, passing comprehensive immigration reform would not only strengthen the labor market, it would promote needed economic growth.

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Summary: America's Financial Crisis: Week of August 1

3 New Items including:

  • Trickle Down Economics doesn't work
  • Not Too Big Enough

David Culver, ed., Evergreene Digest

Jim Day

Trickle Down Economics doesn't work says Alan Blinder. Here’s what does. Posted by rmontero, AlterNet

  • Redirecting money from the expiring Bush tax cuts to unemployment benefits would be a net job creator and give the economy a much-needed boost.
  • Long-Term Economic Pain

Long-Term Economic Pain, Bob Herbert, New York Times | NY

  • Simply stated, more and more families are facing utter economic devastation: completely out of money, with their jobs, savings and retirement funds gone, and nowhere to turn for the next dollar.
  • Reich and Krugman Agree: The Government Needs to Forget About the Deficit and Fix Unemployment
  • Krugman: US "Depressed Economy" Could Last 5 Years

Not Too Big Enough, Rob Larson, Dollars & Sense

  • How the “too-big-to-fail” banks got that way, and why the current banking reform won’t solve the problem.
  • US Financial Reform Bill Misses the Mark
  • Standing Up to the Unholy Alliance Between Washington and Wall Street


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Trickle Down Economics doesn't work says Alan Blinder. Here’s what does.

  • Redirecting money from the expiring Bush tax cuts to unemployment benefits would be a net job creator and give the economy a much-needed boost.
  • Long-term Economic Pain

Posted by rmontero, AlterNet

Top Economist Alan Blinder wrote this article last week supporting letting the Bush tax cuts on the rich expire.

The Basic idea behind it is that an unemployed person or a lower income person will spend any extra money he gets right away (he doesn’t have a choice) and thus stimulate the economy, whereas a rich person will save it and thus not stimulate the economy.

One thing that’s left out in almost all discussions is class. Most of the rich people that received the Bush tax cuts will make most of their money through investments and controlling businesses for a profit, most of the poor make their money on their labor. Any sound businessman knows the way you make a profit is to spend the least amount of money while profiting the most, any of the money you give to businessmen will be used to make them more money. That money won’t trickle down, hiring won’t increase simply because those doing the hiring have more money, hiring will only increase if those doing the hiring must hire more in order to make more profit, which will only happen when demand increases.

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Long-Term Economic Pain, Bob Herbert, New York Times | NY

  • Simply stated, more and more families are facing utter economic devastation: completely out of money, with their jobs, savings and retirement funds gone, and nowhere to turn for the next dollar.
  • Reich and Krugman Agree: The Government Needs to Forget About the Deficit and Fix Unemployment
  • Krugman: US "Depressed Economy" Could Last 5 Years

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