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Brian Fairrington | Consumer Confidence Jumps to New Low / CagleCartoons.com

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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

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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.

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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:

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  • The Forgotten Foreclosure Crisis
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  • Will the Pension Time Bomb Set Off a Crime Explosion?
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David Culver, ed., Evergreene Digest

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Mike Thompson

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The AIG Bailout Scandal, William Greider, The Nation

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  • 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.
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  • The battle over Elizabeth Warren
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America Goes Dark, Paul Krugman, New York Times | NY

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  • 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.
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  • America: The Grim Truth
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The Horror Show, Bob Herbert, New York Times | NY

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  • 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.
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  • Long-Term Economic Pain
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  • Jobless? Your leaders are at ease with that
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The Forgotten Foreclosure Crisis, Think Progress

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  • Without more intervention, the housing market will continue its 'slow motion' adjustment that will continue to inhibit economic growth and drag down consumer spending.
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  • Foreclosures Rise with Unemployment
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CNN Situation Room Social Security Scaremongering, Fairness & Accuracy in Reporting (FAIR)

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  • CNN's Social Security 'crisis'
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  • Ask CNN's Situation Room to bring on Social Security experts who would challenge the alarmist views featured recently on the show.
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  • Top 5 Social Security Myths
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Will the Pension Time Bomb Set Off a Crime Explosion? Justice Litle, Taipan Publishing Group

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  • 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.
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  • 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.

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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.

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"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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Related:

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America Goes Dark, Paul Krugman, New York Times

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  • 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.
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  • America: The Grim Truth
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The Forgotten Foreclosure Crisis

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