Depression 2.0: New Data and Musings

First off: Third quarter foreclosure are up. With jobless claims also up last week, the future could be bleak.

Also, economic activity has slowed down at the grassroots: state tax receipts are down.

With so many states seeing shortfalls, we could expect services to suffer or the federal government to step up spending. The latter is of concern because it will drive the deficit upwards. And America's banker, China, has demands: greater regulation of the global financial system.

This means we can't repeat the Greenspan Bubble Follies. Apparently, he has a big blind spot, human nature. He said the following:

"I made the mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms."

This is stunning statement from a behavioral scientist, a person whose purpose is to analyze human behavior! One is supposed to account for regularities in human behavior, such as the ample evidence that humans exhibit a great deal of cupidity and lethargy (greed and laziness are less polite descriptors). Greenspan speaks like a waif. How naive could be be?

Apparently, VERY:

Over the last two decades, fortunes have been made and lost parsing Greenspan's Delphic declarations, but there's a breathtaking example of ideological blindness embedded in that first sentence. Does Greenspan really believe that banks, brokerages, rating agencies and insurance companies act of their own accord? Even he has to understand that the people who run them decide how they respond, even to market forces.

There are no autonomic reflexes in finance. Did Greenspan really believe that the people in power, presented with a chance to make a killing, would put the interests of their institutions and stockholders ahead of their own?

Greenspan must have forgotten that people, not models, engage in actual economic activity. All kinds of evidence that greed crowded out all other considerations was plainly on display:

What Greenspan and the rest of the aiders-and-abettors of Wall Street's greed spree don't want to admit is that there's something wrong in the economy and financial system that new regulations on trading and disclosure won't correct. Long before the financial system melted down, American business' share of the social compact melted completely away. The corrosion didn't begin at the top but at the bottom -- with the renunciation of any corporate loyalty toward working men and women. For nearly as long as Greenspan has hovered in the financial stratosphere, U.S. companies have been encouraged to treat their workers like any other "expense." Wall Street has rewarded -- indeed, lionized -- companies "tough enough" to treat workers like the electric bill. Presto! Layoffs became "cost management."

No one begrudges a company about to go out of business the right to cut payroll, but now nobody blinks when a CEO throws people out of work for an uptick in the stock price or to ease the service of ill-considered debt. It's been a long time since anyone who analyzes the economy has been willing to say that it's immoral for a profitable firm to deprive families of their income and health insurance, to strip hardworking men and women of labor's dignity.

It is so ironic that the Party Preaching Patriotism, the GOP, is also the party of big business, which has abandoned any pretense of serving any cause larger than their own cold, hard calculations of profit. Patriotism for the people, and socialized risk for the captains of industry! I almost think I'm hallucinating sometimes....