Going to Heck in a Handbasket, With Music Video

Here’s some eye ear candy — a video of melodies derived from StockCharts, using the Microsoft Songsmith tool.  These charts are familiar names …

If you’re on the road to ruin, at least you can have a melody to take you there.

Robert Reich has a good column today:  Playing Politics While the Economy Burns.

Are things getting worse?  Yes.  Brad Setser,a  former staff economist at the U.S. Treasury, explains:

The recession formally started in late 2007 or early 2008. For a while it was possible to hope that the recession might prove to be fairly shallow. Exports were doing well, and the contribution of growth from net exports helped offset the fall in residential investment. And the American consumer seemed quite willing to keep spending.

But, well, things have changed. Rather than getting better, things are still getting worse. Exports are poised to fall sharply, as the world not just the US has slowed. And the fall in US industrial production has accelerated …  in an average post-World War 2 recession, the economy would be recovering by now — not getting worse.

Economist and professor at Stanford University Paul Romer says we should forget trying to repair the existing bad banks and use the remaining $350 billion in TARP money to start new banks.  However, since the Obama administration seems to be as much in the pocket of Wall Street bankers  (see HERE also) as the Bush administration, don’t expect Washington to listen to him.

Willem Buiter of the London School of Economics, who knows something about debtor nations who can’t pay their bills, says the U.S. and Great Britain are fast approaching banana republic status.  Buiter believes a currency collapse, a scenario that most would dismiss as impossible for the U.S. dollar, is becoming more likely as Washington opens up the rip cord on spending.  I’m not saying he’s necessarily right (in fact I believe that stimulus, spent correctly, is worth the risk), but his views have a certain traction with the “in” crowd.  And if such views spread, that could give gold even more positive momentum.

Here’s an opposite point of view:  Bill Gross, co-chief investment officer of Pacific Investment Management Co., said the U.S. should spend trillions of dollars to spur growth.  Some caveats:  Gross is known for talking his book (investments), and if his biggest fear is a “mini-Depression”, I think he needs a hard slap in the face from reality.  I believe that, unless timely action is taken, we are running the risk of a Depression worse than the Great Depression, more along the lines of  The Panic of 1873 and the ensuing Long Depression.

Alternately, we could be looking at a scenario like the Panic of 1837, which was a horrific economic implosion after a speculative real estate fever. In New York City, every bank stopped payment in gold and silver coinage. The Panic was followed by a five-year depression, with the failure of banks and record high unemployment levels.  Also, several U.S. states (most notably Pennsylvania) went bankrupt.  Sort of like California is going bankrupt now.

And yes, today’s nonfarm payrolls number was horrible — a loss of 598,000 jobs.  This is the massaged official number; the real number is likely much worse.  Jesse gives us a nifty chart …

Meanwhile, Mark Zandi (an informal advisor to John McCain’s Presidential campaign) and his colleagues at economy.com calculate the fiscal bang for the buck of various proposed stimulus measures…

You see that each dollar of spending has much more impact than each dollar of tax cut.   I favor spending on infrastructure, because at least you have something to show for it (like bridges that DON’T fall down) when the money is spent.  But, we can’t even get much spending on America’s railroads into the current stimulus package.

Overseas …

China is outraged after India bans all toy imports.   Raj Kumar, the president of the Toy Association of India, said politicians were acting in the interests of the economy and consumer safety.  This case will end up in the World Trade Organization Court of Appeals.

As Stephen Colbert said, “everything produced in China contains lead, except for lead, which is made from cardboard.”

That’s all for now.  Have a good weekend.

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