‘Round and ‘Round We Go (Reprinting Vol. XVIII, Art. 35 – 3 years ago today – Mar.21, 2009)
On Thursday, March 19th, the Washington-based International Monetary Fund (IMF) said that the world economy, reeling from financial crisis, was on track to shrink for the first time in 60 years. The institution also sharply lowered growth projections for emerging and developing countries and offered, to a world waiting with ‘bated breath, what was supposed to be sound financial advice.
According to the report:
“The IMF said that the G20 countries had not done enough to fight the recession and pointed out that its recommendation (that) they implement stimulus measures amounting to 2.0 percent of output so far had been largely unheeded.
“‘Country responses to the global crisis are in an early stage … measures are still needed to restore financial stability,’ the IMF said.
“Next year’s projected recovery depends on comprehensive steps to stabilize financial conditions, sizeable fiscal support, a gradual improvement in credit conditions, a bottoming of the US housing market, and the cushioning effect from sharply lower oil and other major commodity prices, the IMF said.”
The geniuses in the IMF, of course, are supposed to know a lot about money. But let’s look at the above gibberish for a minute.
– ” … projected recovery …”. Right. But they say nothing about the how, what, when and where of this projected recovery.
– ” … comprehensive steps …”. Right. But they say nothing specific about those “steps”.
– ” … sizeable fiscal support …”. Right. This means that more taxpayer billions must be handed over to their Wall Street cronies.
– ” … a gradual improvement in credit conditions …”. Right. This means that even more taxpayer billions must be handed over to their Wall Street cronies.
– ” … a bottoming of the US housing market …”. Right … as if they, or anyone else have the slightest clue about applying brakes to this plunging market.
– ” … the cushioning effect from sharply lower oil and other commodity prices …”. In spite of the fact that oil exploration giants are demanding higher prices in order to continue drilling operations, and in spite of the fact that carriers have pledged to raise shipping rates on most of the remaining shipping routes in order to continue operations, the IMF worthies are recommending a reduction in prices. Go figure.
Note that the words “jobs” and “unemployment” do not appear in this IMF pronouncement. Also absent are any references to production, manufacturing or consumers’ buying power. The IMF is only concerned with borrowing power … the “power” that created this catastrophe in the first place.
The IMF should have noticed the following Reuters report that, “U.S. workers on jobless benefits hit a record high”… because the data was released right under their noses, in Washington, on the 19th.
“WASHINGTON (Reuters) – The number of U.S. workers drawing state unemployment benefits scaled another record high early this month, according to government data on Thursday that highlighted the difficulties of getting new jobs in the recession-hit economy …
“The number of people staying on the benefit rolls after drawing an initial week of aid surged 185,000 to 5.47 million in the week ended March 7, the latest week for which the data is available, from 5.29 million the previous week …
“Analysts had estimated the so-called continued claims would be 5.33 million …
“Companies are responding to the severe downturn in demand that is squeezing their profit margins by cutting jobs, exacerbating the burden of households already staggering from a rapid decline of net worth.”
Speaking of “rapid declines”, The New York Times had this in its March 20th edition:
“Rapid Declines in Manufacturing Spread Global Anxiety” was the story’s headline, and for all we know, the IMF may have missed this report as well..
“Orders are down 50 percent from a year ago …” one manufacturer reported. “That manufacturing is in decline is hardly surprising, but the depth and speed of the plunge are striking and, most worrisome for economists, a self-reinforcing trend not unlike the cascading bust that led to the Great Depression …
“‘Manufacturing has fallen off the cliff, and it’s certainly the biggest decline since the Second World War,’ said a senior economist with Goldman Sachs …
“In Europe, new figures for January manufacturing are expected to show that the decline is worsening … but the speed of decline in orders, according to one manufacturer, ‘is the worst we’ve ever seen’ …
“The pattern of manufacturing and trade ominously recalls how the financial crisis of 1929 grew into the Great Depression: tightening credit and consumer fear reduced demand for manufactured goods in one country after another, creating a downward spiral that reduced global trade …
“That means more workers can expect to lose their jobs around the world in coming months as manufacturers continue to cut production, especially as global trade contracts.” End of story.
A decline in demand for manufactured goods, causes a decline in manufacturing, which causes an employer to cut more jobs, which increases unemployment rolls and causes a loss of spendable income, which causes a reduction in consumer buying power, which causes a decline in demand for manufactured goods, which causes … well, which causes us to go ’round and ’round in circles.
Because it’s “cyclical”, right? The next time someone tells you that this “recession” is bound to end soon … somehow … because everything is “cyclical”, recite the above paragraph to the know-it-all. We’re tied up in an unbreakable cycle this time … in the form of a noose that the international financiers and political leaders have wrapped around our throats.
The only way to put the brakes on declining consumer demand is to create jobs. Blowing hundreds of billions of dollars of hard-earned taxpayer money on Wall Street bailouts creates nothing but resentment and raises the ire of millions of Americans. And anyone who suggests that Wall Street bailouts will open up credit avenues for housing and for automobile sales is nothing less than a con man. Credit will simply be refused to the jobless, and throwing a few bones to the down-trodden in the way of stimulus handouts won’t even pay a month’s rent. U.S. workers need jobs and paychecks. The entire world depends upon the buying power of the U.S. consumer, and if U.S. consumers aren’t buying, then worldwide economies are dying.
We reported last week that almost 500 container ships have been idled by the world’s economic downturn and have been laid up as a result in various anchorages around the world. Has the Wall Street handouts done anything to reverse this costly happening? Forgettaboutit.
Instead of giving away hundreds of billions to financiers who know nothing about economics, why not get back to basics and do what we’ve already done in a similar situation. The Great Depression came to an end when we were forced to revitalize shipyards and put millions and millions of U.S. jobless back to work. If you weren’t alive back then, at least you must have read about the occasion.
Knowing that hundreds of giant, inflexible megaships are now laid up and being used as storage warehouses for unused and empty containers … and knowing that these vessels are idled and those containers are empty because nothing is being produced in foreign manufacturing facilities … and knowing that those overseas facilities are shuttered because of a declining demand on the part of U.S. consumers … and knowing that U.S. consumers no longer have the power to demand because they no longer have buying power … and knowing that U.S. consumers no longer have buying power because they’re no longer employed …
How does our country and its citizens … or the world, in fact …benefit when we hand over hundreds of billions of dollars to Wall Street entities? Why not make use of Title XI … the Maritime Administration’s 87.5% loan guarantee for shipyard revitalization and shipbuilding? Hundreds of shipyards could be revitalized or upgraded, and thousands of flexible, profitable, patented and U.S.-owned container ships could be built for just a tiny fraction of the amount of money that’s being thrown away under the so-called bailout programs. We’d need to create about 50 million new jobs to make the program work, of course, but that would be the least of our problems. That’s how many Americans are job hunting right now.