Saturday, July 9, 2011

And Now for Something Completely Different

The chart below shows clearly that we are losing the battle. Even with all the money we have had to pump into this thing, the future looks bleak, that is if you believe the future should have an employed working class. This chart shows the growth in the number of days that the average jobless person remains unemployed. It is an exponentially rising figure. The average time a person stays out of work is now 280 days (double the worst that it has previously been) and the trend is almost a vertical line upward. *

To be amiable, I have decided to rename what I have been terming "The Bush Depression." This is serious stuff and politicians have definitely shown us that party affiliation and the politics of getting re-elected are not getting things done. The deregulation that caused our problem goes back a number of years and includes idiots from both parties. Frankly, I'm beginning to wonder if our pride is getting in the way of just fixing the problem with national bankruptcy (default on our debt) and the restructuring of our debt, paying less than we owe with a promise that we don't do it again. People would suffer incredibly in the short term but at least the future for our children might be brighter if we all came to terms with the depth of the problem that not paying our taxes has entailed. The "tax cuts" would be seen for what they are, the seriousness of the job problem would become popular wisdom, and the pressure would be on the people who caused our mess (unlike the fantasy world that the banks still enjoy.) It looks to me that nothing short of a revolutionary event will actually move us in the right direction.

We are in a whole new world that historical terms are incapable of expressing. Just like the invention of the term "stagflation" was created to describe the cicumstances of the day, we need new words. Until then, I think the term "depression" is more appropriate as a descriptive term for our current situation because of the way we have perceived "recessions" previously, as blips in an otherwise healthy economy. But again, this is not a business cycle but a structural problem that has roots that rival the precursors of the "Great Depression."

This extrordinary chart shows the various recessions we have been in since WWII, or the time when the "Great Depression" (also not a cyclical event) ended. Percentage of job loss is used as the measuring stick. Job loss is important to the lower and middle class, but not as important to, say, the executives at the banks who caused the mess. They took home their hundreds of millions regardless of job performance. In the wake of their hubris,  the staggering number of people who are jobless coincidentally lost their jobs regardless of job performance as well.

But I shouldn't digress, this is important. Job loss is the problem that appears to be the most salient visceral factor. On the chart we can see that previous recessions pretty much stemmed the job loss problem at about 11 months from the worst moment of the recession. This is how we viewed recessions, as cyclical blips. Take a look at the recessions on the chart that went beyond 11 months. It isn't a coincidence that the two most recent recessions before now (those of 1990 and 2001) are the ones that caused the greatest job disruption. Why? It was becoming a structural problem. We know about the exporting of jobs to other countries. We know about outsourcing. We know about the trade deficit. We know about the decline of our manufacturing base. There are lots of things we know. How bad is this? Look at the "recession" we are now in. Look at the results we can now see on this chart. The time between when the job loss began and when it ended is only rivaled by our most recent recession (2001). But the difference in the current recession in terms of depth is just stupefying. Until someone comes up with a new term for these "recessions" and base that term on the criteria of job loss and not on the traditional benchmark of growth of GDP, I will use the word "depression" and you should, too. The current definitions are purely oriented on statistics that now matter to the rich, not the average jobless person.

The cause of the problem was quite obviously the profit incentive of banks that knew no bounds under a government over which they had such vast influence. In the end, they had unimaginable power to expand the money they had outstanding and at risk, unencumbered by reserve limits in the specialized unregulated esoterica they were dealing in. And they chose to sell off the risk to others. The amount of risk they still held themselves would eventually be covered by the TARP plan. All the players we know to be at fault, like the ratings companies, just skated through, untouched.  Who wasn't untouched? People with pensions, expected pensions, and people who just found themselves suddenly out of a job.

Terminology-wise, what is needed is a phrase that is not too harsh, but describes the event in terms of the people, not GDP. The Bank Deregulation Depression is my best shot. After all there have actually been votes in the House of Representatives to reduce the little re-regulation we managed to sneak by the largest lobbying group in history, those of the investment industry. They don't seem to be the least concerned about job loss in their proposed legislation. Indeed, a convincing case could be made that their focus on cutting government way too early in the recession is a major part of the reason the job market is so anemic. The blame needs to be securely fixed with the evildoers, the idealistic simple minded deregulating politicians and authorities, plus, of course, the banks, doing only what came naturally - using every method at their disposal to increase profits for executives otherwise known as shareholders. Meanwhile the depth of the problem should relate to the suffering of the people wearing out their shoes beating the pavement for jobs and not on the restored portfolios of the well heeled.
*Remember the argument that tax cuts would pay for themselves? Why isn't the same logic used when we have all these people collecting unemployment? Shouldn't jobs programs pay for themselves in the same odd way?