Doug Henwood wrote:
On Jun 18, 2008, at 3:51 PM, Patrick Bond wrote:
Doug Henwood wrote:
I notice that a while back, you and other fans of "unfolding crisis"
were citing bourgeois sources for support. Now that most bourgeois
sources think that the worst of the financial crisis is probably
over, you're not citing bourgeois sources any more, eh?
This must be a difficult time for you, eh Doug:
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml
RBS issues global stock and credit crash alert
By Ambrose Evans-Pritchard, International Business Editor
Aside from the fact that this is one forecast among many, not a report
of what happened, consider the source.
Hey comrade, you don't like Evans-Pritchard channeling RBS. So how about
Louis Proyect channeling the Washington Post?
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/26/AR2008062604030.html
This Recession, It's Just Beginning
By Steven Pearlstein
Friday, June 27, 2008; D01
So much for that second-half rebound.
Truth be told, that was always more of a wish than a serious forecast,
happy talk from the Fed and Wall Street desperate to get things back to
normal.
It ain't gonna happen. Not this summer. Not this fall. Not even next
winter.
This thing's going down, fast and hard. Corporate bankruptcies, bond
defaults, bank failures, hedge fund meltdowns and 6 percent
unemployment. We're caught in one of those vicious, downward spirals
that, once it gets going, is very hard to pull out of.
Only this will be a different kind of recession -- a recession with an
overlay of inflation. That combo puts the Federal Reserve in a Catch-22
-- whatever it does to solve one problem only makes the other worse.
Emerging from a two-day meeting this week, Fed officials signaled that
further recession-fighting rate cuts are unlikely and that their next
move will be to raise rates to contain inflationary expectations.
Since last June, we've seen a fairly consistent pattern to the economic
mood swings. Every three months or so, there's a round of bad news about
housing, followed by warnings of more bank write-offs and then a string
of disappointing corporate earnings reports. Eventually, things
stabilize and there are hints that the worst may be behind us. Stocks
regain some of their lost ground, bonds fall and then -- bam -- the
whole cycle starts again.
It was only in November that the Dow had recovered from the panicked
summer sell-off and hit a record, just above 14,000. By March, it had
fallen below 12,000. By May, it climbed above 13,000. Now it's heading
for a new floor at 11,000. Officially, that's bear market territory.
We'll be lucky if that's the floor.
In explaining why that second-half rebound never occurred, the Fed and
the Treasury and the Wall Street machers will say that nobody could have
foreseen $140 a barrel oil. As excuses go, blaming it on an oil shock is
a hardy perennial. That's what Jimmy Carter and Fed Chairman Arthur
Burns did in the late '70s, and what George H.W. Bush and Alan Greenspan
did in the early '90s. Don't believe it.
Truth is, there are always price or supply shocks of one sort or
another. The real problem is that the underlying fundamentals had gotten
badly out of whack, making the economy susceptible to a shock. The only
way to make things better is to get those fundamentals back in balance.
In this case, that means bringing what we consume in line with what we
produce, letting the dollar fall to its natural level, wringing the
excess capacity out of industries that overexpanded during the credit
bubble and allowing real estate prices to fall in line with incomes.
The last hope for a second-half rebound began to fade earlier this month
when Lehman Brothers reported that it wasn't as immune to the
credit-market downturn as it had led everyone to believe. Lehman
scrambled to restore confidence by firing two top executives and raising
billions in additional capital, but even that wasn't enough to quiet
speculation that it could be the next Bear Stearns.
Since then, there has been a steady drumbeat of worrisome news from
nearly every sector of the economy.
American Express and Discover warn that customers are falling further
behind on their debts. UPS and Federal Express report a noticeable
slowdown in shipments, while fuel costs are soaring. According to the
Case-Shiller index, home prices in the top 20 markets fell 15 percent in
April from the year before, and Fannie Mae and Freddie Mac report that
mortgage delinquency rates doubled over the same period -- and that's
for conventional home loans, not subprime. United Airlines accelerates
the race to cut costs and capacity by laying off 950 pilots -- 15
percent of its total -- as a number of airlines retire planes and hint
that they may delay delivery or cancel orders of new jets from Boeing
and Airbus. Goldman Sachs, which has already had to withdraw its rosy
forecast for stocks, now admits it was also too optimistic about junk
bond defaults, and analysts warn that Citigroup and Merrill Lynch will
also be forced to take additional big write-downs on their mortgage
portfolios.
Meanwhile, General Motors, already reeling from a 28 percent plunge in
the pace of auto and truck sales, now confronts the fact that it won't
get any help this time from GMAC, its once highly profitable finance
arm, which is reeling from an increase in delinquencies on home and auto
loans. With the carmaker hemorrhaging cash, whispers of a possible
default sent the price of insuring GM bonds soaring on the credit
default market.
You know things are bad when middle-class Americans have to give up
their boats and Brunswick, the nation's biggest maker of powerboats, is
forced to close 10 plants and lay off 2,700 workers.
For much of the year, optimists took comfort in the continuing strength
of the technology sector and exports to fast-growing countries around
the world. But even those bright spots have dimmed.
Tech stocks got hammered yesterday after software maker Oracle and
BlackBerry maker Research in Motion warned that the pace of corporate
orders had slowed.
And both India and China raised interest rates and bank reserves sharply
in an effort to tame inflation and slow their overheated economies, even
as the air continued to rush out of their real estate and stock market
bubbles.
Like the rain-swollen waters of the Mississippi River, this sudden surge
of downbeat news has now overflowed the banks of economic policy and
broken through the levees of consumer and investor confidence. At this
point, there's not much to do but flee to safety, rescue those in
trouble and let nature take its course. And don't let anyone fool you:
It will be a while before things return to normal.
Steven Pearlstein can be reached at [EMAIL PROTECTED]
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