Jackson Hole discussion points to deepening economic crisis - OBAMANOMICS: BANKSTER LOOTING, CRIMES and PROFITS SOAR - NOW COMES MORE BANKSTER WELFARE

DESPITE THE DEVASTATION THEY CAUSED, OBAMA'S CRIMINAL BANKSTER DONORS MADE MORE PROFIT DURING OBAMA'S FIRST TWO YEARS ALONE, THAN THEY DID UNDER ALL 8 YEARS OF BUSH!

OBAMA HAS KEPT HIS PROMISE. NO BANKSTER GOES TO PRISON... IN FACT, THERE WILL BE EVEN MORE NO-STRINGS BAILOUTS, HANDOUTS, PROFITS.... and foreclosures ahead!

Jackson Hole discussion points to deepening economic crisis

Jackson Hole discussion points to deepening economic crisis

By Nick Beams
3 September 2012

While the speech by US Federal Reserve Board chairman Ben Bernanke was the centrepiece of the annual Jackson Hole symposium of bankers and economists, held on Friday and Saturday, there were several other significant contributions.

Like the Bernanke speech, which gave an implicit commitment that the Fed would continue to pump hundreds of billions of dollars of ultra-cheap money into the financial system, they all pointed, in one way or another, to the ongoing breakdown of the global economy.

Four years after the collapse of Lehman Brothers, the latest Jackson Hole gathering has demonstrated that not only have the central bankers no solution to the crisis, they do not even understand the workings of the system over which they are supposed to preside.

Tailoring his remarks for public consumption, Bernanke couched his case for further handouts to the banks in terms of the need to bring about economic recovery and end the destructive effects of long-term unemployment. But while the Fed’s quantitative easing has boosted financial corporations and lifted Wall Street, it has had no real impact on the economy as a whole.

The obvious failure of the policy to provide any significant boost, and the lack of any explanation, was the subject of remarks by a former vice-chairman of the US Federal Reserve, Donald Kohn.

“What is holding the economy back? Why is it that we’ve had such incredibly accommodative monetary policy for so long (but) we’ve had so little growth? I think it remains a puzzle,” he said.

Kohn had no answer. “We keep trying to bring spending from the future into the present with lower and lower interest rates... There is a lot we don’t understand about what is going on,” he continued.

Adam Posen, who has just completed a term at the Bank of England, posed the same question: “Why have all these short-term interest rates failed to make the economy go go go?”

St Louis Federal Reserve President James Bullard asked whether the US economy “went through some sort of structural shift associated with this very large financial crisis.” It appeared that the economy was on one trend before the crisis and a different trend after it, he said.

That assessment was underscored by figures in a paper by Columbia University economist Michael Woodford which showed that US nominal GDP (without adjustment for inflation) in 2012 was 15.6 percent below its pre-2008 long-term trend.

Global statistics tell the same story. Major economies that account for around 60 percent of global gross domestic product (GDP)—the US, UK, Canada, the eurozone and Japan—have all had interest rates set by their central banks at 1 percent or less for almost four years. Yet these economies are either stagnant or experiencing low rates of growth, with unemployment totalling almost 30 million. Moreover, this stagnation is now impacting on China, India and Brazil, which, it was hoped, would provide a boost to global growth.

While it received little attention in the set contributions, the crisis of the eurozone overshadowed the conference. European Central Bank (ECB) President Mario Draghi had been scheduled to deliver a speech on the second day but withdrew, citing pressure of work. The ECB executive board is due to meet on Thursday to decide on the conditions under which the central bank will buy Spanish and Italian bonds in order to try to keep interest rates down and prevent a financial crisis. At the end of July, Draghi gave a commitment to do “whatever it takes” to safeguard the euro but since then European central bankers have disagreed over this should be implemented.

The eurozone crisis was the subject of remarks by International Monetary Fund deputy managing director, David Lipton, on the sidelines of the symposium.

“Europe has made decisions and now it is time for the Europeans to ... move forward and actually implement it (sic),” he told Reuters. Lipton said the markets had been comforted over the northern summer by statements from government leaders and from the more recent declarations by Draghi, and interest rate spreads had come down. But now it was time for action.

Reflecting the concerns in the US over the impact of a continued failure to deal with the eurozone crisis, he said: “I think a reversal of sentiment ... could turn this into a more acute situation and so it is important that Europe put one foot in front of the other and start carrying out the things that they have decided.”

In the wake of every great economic and financial crisis, the myth-makers and defenders of the capitalist economy get to work to promote the lie that “lessons have been learned” and action will be taken to prevent a recurrence. Today is no exception. But, while it was not his intention, the claim that greater regulation can prevent another financial meltdown was effectively blown apart in remarks delivered by Andrew Haldane, the executive director of financial stability at the Bank of England.

Calling for a simpler set of regulations, he said not even computers could track all the variables in the interlinked and complex financial markets. He noted that international rules on capital requirements for international banking went from 30 pages in 1996, to 304 pages in 2004, to 616 pages in 2010. Banks now had to calculate several million ratios, and make decisions based on guesstimates and models with questionable assumptions, rather than on hard numbers, as in the past.

Haldane warned that today “banks are the blackest of boxes,” with no transparency. He likened asking regulators to prevent another crisis to asking a dog to catch a frisbee by applying Newton’s Law of Gravity.

Haldane held out the hope that simpler regulations would start to bring the financial system under control. But the real position was summed up by Marx more than 160 years ago.

“Modern bourgeois society,” he wrote, “with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells.”

Neither more complex nor simpler regulations, but only the overthrow of the profit system, and the nationalisation of the banks and financial system, can end the crisis devastating the lives of billions of people the world over.

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Fed minutes point to a bankrupt economic order

28 August 2012

Much of the attention of the financial markets and media since the minutes of the July 31-August 1 meeting of the US Federal Reserve Board’s Federal Open Market Committee (FOMC) were released last week has focused on when and how the Fed will carry out the next stage of quantitative easing—the process through which the central banks pumps hundreds of billions of dollars into the money markets.

However, such is the myopia of the media as they direct their attention to the short-term fluctuations of the financial markets that the real significance and implications of the Fed’s deliberations are passed over in silence.

The focus of the media and financial markets on the Fed’s actions will become even more concentrated this week in the lead-up to the scheduled speech this Friday by Chairman Ben Bernanke to the annual gathering of central bankers at Jackson Hole, Wyoming. There will also be keen interest in the speech on Saturday by European Central Bank chief Mario Draghi, who has promised that the ECB will do “whatever it takes” to maintain the euro.

While the Fed chairman is not expected to announce a new round of quantitative easing in his speech, there is an expectation that action will soon be taken. The minutes of the FOMC noted: “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of economic recovery.”

Market expectations of action were further fuelled last Friday when Bernanke remarked that there was “scope for further action by the Fed to ease financial conditions and strengthen the recovery.”

The latest FOMC meeting amounted to an acknowledgement that while the financial system continues to operate on a day-to-day basis, in a longer-term, historical sense it has completely broken down. Such is the extent of the internal rot that the chief task of the central bank is no longer to try to provide the framework for real economic growth. Rather, it is to seek new ways of shovelling money to the banks and finance houses to finance their operations out of fear that if this is not done, the whole system could collapse.

Since the bankruptcy of Lehman Brothers in September 2008, the Fed has injected something on the order to $2.3 trillion into US financial markets in the form of purchases of Treasury and mortgage bonds. However, this policy, which amounts to supplying the banks and financial institutions with a massive supply of cheap money with which to undertake their speculative financial operations, has failed to bring about any real economic recovery.

In fact, as the FOMC minutes made clear, key sectors of the US economy are either stagnant or going backwards. Information presented to the meeting showed that, overall, the economy had slowed and there was little improvement in the labour market. Government employment had decreased slightly in the second quarter, while manufacturing production had “decelerated significantly.” The minutes noted that the “restraint from fiscal policy” would hold back growth rates while information received since the June meeting showed that “economic activity had decelerated in recent months” at a faster rate than anticipated. Unemployment was expected to still be at “elevated” levels at the end of 2014.

The minutes record that: “A number of members noted that if the recent modest rate of economic growth were to persist, the economy would be less able to weather a material adverse shock without slipping back into recession.”

There are any number of potential sources of instability throughout the world economy. The relative calm that has marked European financial markets in recent weeks could soon end when representatives of the “troika”—the European Commission, the International Monetary Fund and the ECB—deliver a report on the state of Greece’s finances. With the Greek economy continuing to contract—it is in the fifth year of recession—the question of state bankruptcy and the withdrawal of the country from the eurozone could again loom large, despite recent assurances by German Chancellor Angela Merkel that she wants Greece to remain.

In the longer term, the financial instability in Europe is being intensified by the deepening recession across the continent. Six members of the eurozone are already officially in recession and the region as a whole may experience two quarters of negative growth.

The downturn, which started in the so-called “periphery,” is now extending to the centre, with clear signs of a slowdown in the German economy. New export orders showed their fastest decline in three years, with manufacturing activity falling for the sixth consecutive month amid predictions that the economy as a whole could record negative growth in the third quarter. Analysts from Barclays Capital warned that “weaker global demand will soon be felt in Germany and weigh on exports, while domestic investment will continue to suffer from uncertainties created by the euro area crisis.”

The impact of the contraction in global demand is reflected in Japan, still the world’s third largest single economy. The latest predictions are for either stagnation or a contraction in gross domestic product (GDP) in the third quarter under the impact of a decline in exports to China and Europe.

The slowdown in China, India and Brazil, where governments are looking to measures to stimulate the economy, points to the underlying processes in the world economy. Far from these countries providing a new boost to global capitalism, they are now being heavily impacted by the recessionary forces unleashed by the financial breakdown.

It was therefore significant that there was no reference in the FOMC minutes to if and when there might be a return to what were once considered “normal” economic conditions.

This is because global recession, rising unemployment, the permanent threat of financial chaos, combined with sweeping attacks in every country on the social position of the working class, constitute the “new normal” of the historically bankrupt global capitalist economy.

Nick Beams

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AS WELFARE AND LOOTING FOR BANKSTER SOARS, SO DOES FORECLOSURES AND HUNGER FOR AMERICANS... and then the jobs go to illegals!

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Hunger mounts in the US

By Tom Eley
20 December 2008

As the economic crisis deepens, its human toll is becoming more evident. A new survey of food charities in the United States has revealed a dramatic increase in hunger. Feeding America, the largest hunger-relief organization in the US, says that a growing number of families face difficulties in securing adequate nutrition. Meanwhile food banks have proven ill-equipped to meet the increased demand caused by layoffs and increased food costs, and many have collapsed or have restricted the allotments of food they make.

In a nationwide survey of 160 local food assistance programs, with operations covering virtually every county in the US, Feeding America found that there has been a 30 percent increase in requests for emergency food assistance, and that every food bank has seen an increase in demand for food relief. An opinion poll commissioned by the organization and released simultaneously found that a growing number of low-income families lack sufficient nutrition.

In a chilling statement on social conditions in the US, 72 percent of surveyed food charities said that they are unable to meet the current demands of local communities for assistance. In most cases, the charities have responded by offering smaller distributions to the hungry, and some have been forced to close down.

This is taking place in every region of the country. To cite a few examples, the Food Bank of New York City reported that organizations under its direction "have regularly reported over the past year that their shelves are bare and that they have had to turn people away due to their lack of food." The Cleveland Foodbank reported that the crisis "is moving at a pace so fast that our staff cannot catch a breath." The Food Bank of Corpus Christi, Texas, said that "our agencies are seeing such a drastic increase in new clients that they are having a hard time getting the money to acquire the food we need," while "other agencies are burning out and we are seeing a number of agencies closing their doors." Second Harvest Food Bank of Northeast Tennessee reported that its agencies have asked that it not refer new clients "because they are running out of food."

In its survey of households, Feeding America found that nearly two thirds of low-income households—defined as having an income at less than 200 percent of the official poverty level—said that within the past year "their food didn't last and they could not afford to buy more." Forty percent "ate less than they felt they should," and 36 percent "cut the size of meals or skipped meals because there wasn't enough money for food." A large majority of low-income respondents, 70 percent, said that they are reducing food spending, while 62 percent said they make multiple shopping trips for food "because they didn't have enough money to buy everything at one time." In New York City, in 2008, nearly 40 percent of all households said that they had faced difficulties in procuring sufficient food for their families, a sharp increase over figures from 2007.

Hunger is affecting ever-wider sections of the working class, including two-parent households and the gainfully employed. The survey of food banks found user increases of 99.4 percent among "first-time" users, 74 percent among unemployed workers, 59 percent of those with jobs, and 48 percent among families with children seeking assistance.

"When you hear someone say, ‘I never thought that I would have to come to the pantry to get food,' or to have someone say, ‘I used to donate to the pantry and now I am using it,' that's when you realize how tough things are," a representative of the Community Food Banks of South Dakota said.

A food charity in Bloomington, Indiana, reported that a food bank in what it called "a higher income per capita" area saw an increase from 60 visits per month last year to 700 this year. A food bank in Long Island, New York, said that it has witnessed "increased need among middle class people making between $40,000-$70,000, who are recently unemployed, having health problems, having difficulties managing mortgage payments, and going to pantries and soup kitchens for emergency food assistance." A survey of New York City households found that even among the college-educated, 36 percent faced hardship in 2008 in buying needed food, an increase from 11 percent in 2003. A food assistance program in California reported that it is "seeing people coming to us who have never been a part of our system and who never thought that they would need food assistance."

"We are in a national crisis," said Vicki Escarra, the president and CEO of Feeding America. "We have some food banks reporting as high as a 65 percent increase in need. There are record numbers of new men, women and children, who never thought they would need food assistance."

Financial hardship forces many families to choose among necessities such as food, health care, and home heating. The survey of households revealed that 40 percent of low-income families had, in the past year, been forced to choose between eating and paying for utilities.

The economic crisis is at the root of the growth in hunger. Upwards of 90 percent of food banks attribute the increase in hunger to rising food prices and unemployment. Sixty percent also cite fuel costs, and 52 percent listed the inadequacy of state food stamp programs as a cause.

A press release by Feeding America calls on Congress "to pass economic recovery legislation that will offer desperately needed relief to both low-income Americans and the nation's food banks, as the recent surge in unemployment has pushed millions to the brink of hunger."

Estimates on the size of the "economic stimulus" package that President-elect Barack Obama will put in place have ranged from $400 billion to $900 billion. Democrats have hedged their bets, moreover, by asserting that its passage will depend upon minority Republican support. But whatever its final size and content, Obama's "stimulus" will prove woefully inadequate in the face of the deepest social crisis since the Great Depression. The sums being discussed represent a small fraction of the more than $8 trillion that has already been doled out to the largest financial institutions.

Meanwhile, in the 2009 Federal Budget, only $62 billion has been appropriated for all food assistance programs, including food stamps and school lunches, which for many children provide the only substantial meal of the day.

More than 9 percent of all US households now rely on food stamps, the Supplemental Food Assistance Program, to help meet dietary needs. This is a sharp increase from 2001, when 6 percent used food stamps. But indications are that this number will rise sharply. A number of states, including Oregon and Washington in the Pacific Northwest, have seen record requests for food assistance. Food stamps function as vouchers that can be redeemed at grocery stores. Generally, they may be exchanged only for the cheapest items in stock, and only for staples such as milk, meat, and bread.

The program will not meet the level of hunger provoked by the crisis. In the Feeding America survey of households, one third of food stamp recipients said "their benefits only lasted for two weeks or less." Bureaucratic hurdles prevent a large number of eligible families from receiving aid. Undocumented immigrants, as well as immigrants who have been in the country legally for less than five years, are not eligible. Assistance is pegged to 130 percent of the official poverty level, meaning that large numbers of the so-called "working poor" are ineligible, including many of those surveyed by Feeding America.

Though they paint a grim portrait, the Feeding America surveys on hunger offer only a glimpse of the level of social misery to come. Significantly, the surveys were conducted at the end of November. Since then, layoffs have mounted precipitously.