We need a MAJOR stimulation package

First, we must come to grips with the realization that THIS is the big economic catastrophe the doomsayers have predicted.  We destroyed much of the real economy or just left it to rot and the results are finally showing up on Wall Street.  We can keep bailing out that casino and pretend we have fixed things but the economy won't recover until we fix the underlying problem.

Even the guys in the trading capitals are seeing the evidence.

We're Underperforming The Great Depression

Doug Short, DShort.com | Aug. 23, 2010 

In real (inflation/deflation-adjusted) terms, when did the US market permanently regain the high reached in 1929? The first chart illustrates two answers to the question. One uses the real price and the other uses the real total return.

The remaining charts compare market performance since 2000 with the equivalent elapsed time following the peak in 1929. As the final chart shows, the current real total return over the past decade is worse than the performance over the equivalent timeframe during the Great Depression.

I've used the S&P Composite for this exercise — a splicing of the S&P 500, which was created in March 1957, and the earlier S&P 90 Stock Composite Index, a daily index that dates from January 1928. The chart is based on daily data for the price and the estimated total return calculated with daily interpolations based on quarterly dividends).

For the S&P Composite, the price didn't permanently remain above the 1929 peak until December 1985 — over 56 years later. The total return, with dividends reinvested, took nearly 20 years to achieve the same distinction. more

This next article is interesting mainly for where I found it--an english-language Chinese online newspaper.  The idea isn't especially new--I have been calling the free marketeers low-brow theologians since the days of Reagan.  And Chomsky has been banned from the commercial press for so long most folks have never heard of him in USA.  So here the Chinese give him space to call for the death of Anglo-American finance economics.

Bury the free market religion 

English.news.cn 2010-08-26 09:44:25

by You Nuo and Zhang Zhouxiang

BEIJING, Aug. 26 (Xinhuanet) -- Almost two years into its worst financial crisis since the Great Depression, where is global capitalism heading? "A lot of people have asked me what I think about it," says Noam Chomsky. "Frankly, I don't have an answer." But one crisis will follow another if the existing economic system, in which predatory financial institutions gobble up more than 40 percent of the total profits, is not dismantled.

Chomsky is all of 82 years; a linguist, philosopher, cognitive scientist, political activist and prolific writer rolled into one. He was in Beijing to deliver a lecture on "Contour of world order: Changes and continuities" at Peking University, after which he shared his views on global issues with China Daily.

The economic crisis needs time to subside, and the search for its remedies could be overshadowed by two other crises threatening the world: nuclear proliferation and climate change. It is not possible for just a few intellectuals to tide over the crises, says the author of the famous essay, "The Responsibility of Intellectuals". It needs the involvement of the greater body of the world population.

Known for his research in and radical criticism of capitalism, Chomsky says the collapse of the Bretton Woods system was the beginning of a change that led to the financialization of the economy. Large financial institutions were allowed to make profit greedily and create bubbles all over the world. more

Of course, articles like this make the world's greedheads explode.  When the official press starts quoting Chomsky, it's a good bet the Chinese government wants incomes to rise.

U.S. Execs "Extremely Worried" about China Pay Hikes 

by Sarge in Seattle

Sun Aug 22, 2010 at 11:13:58 PM PDT

Seriously! South China News reports that the dirty rotten greedy heartless scoundrels that are U.S. and Europe's corporate executives are lamenting slave minimum wage pay increases in China.

The prospect of workers in China making a whopping 900 Yuan per month ($132 U.S. Dollars), for God knows how many hours of work and under what conditions, has actually frightened the overpaid, undertaxed greedy bastards otherwise known as CEO's.

First they outsource most of the middle class wage manufacturing jobs to China in order to exploit the most desperate people in the world by rendering them slaves while pretending to employ them for their own benefit. Then, when pay starts to creep up above bare subsistence levels, they become "extremely worried".

These executives, at least a large portion of them, must be sociopaths. They simply do not care about human beings. They do not care about the environment. They do not care about the future for our children. They do not care how many people die by way of starvation, industrial accidents, cancer, lung disease, etc, so long as it serves their intersts. They care about two things: Their own personal exorbitant compensation, and profits for their shareholders.

Upton Sinclair's "Jungle" is alive and well, although it has mostly been outsourced to Asia.  According to a survey of major US and European corporations published this week by Credit Suisse, 40 per cent of executives are either "very worried" or "extremely worried" by rising wages in China. more

Which leads to an interesting question.  Suppose the economics of greed and austerity were replaced by the economics of growth and prosperity and it became cool to talk about economic stimulus packages again, what would you do?  This guy talks about spending a $trillion.  Keep in mind you can hire 20,000,000 people a year at $50,000 for a trillion.  Keep in mind that we just gave the banksters as much as $20 trillion (depending who is counting--$13 trillion below) to bail out the mad video games played with electronic money.  That's 20 million middle-class jobs for 20 years.  There is hardly anything wrong with the USA economy that wouldn't be cured with that many new jobs.

Putting People Back to Work

How Would You Spend a Trillion Dollars?

By STANLEY HELLER

It’s up to the Left to construct a program to put people back to work. The captains of industry can’t do it. Obama won’t do it and the labor movement leadership hasn‘t got a clue other than to buck up the Democrats.

The 500,000 new applicants for unemployment insurance last week surprised all of the “experts” who endlessly repeat the mantra of “slow improvement”. What a croc! 20 million without full time work is the New Normal and that will jump higher in the looming “double dip” recession. Signs of desperation are impossible to ignore. At the start of the month the New York Times wrote about the 1.4 million people who had exhausted 99 weeks of unemployment insurance payments and now were eyeing their new residence … their car. NPR did a story on homeless college students.

For the people on unemployment it’s a bitter path of job fairs, job counseling, Craig’s list scanning, occasional interviews and aimlessly passing the time. And think of the immense waste: millions of work hours that could be used for production or preserving the planet all gone down the drain. There’s also the eight million underemployed going from one dead end temp job to another or working a slew of part time jobs.

Wall Street and the entire U.S. corporate economy have been brought back from the precipice by $13 trillion in subsidies and guarantees. Profits have recovered nicely. And with all this money the corporate world has done zilch when it comes to jobs. The Washington Post reports that non-bank companies are sitting on $1.8 trillion in cash. What they don’t keep in the money market they’re using to buy back their own stock or to gobble up other companies like the digesting of Connecticut’s New Alliance Bank by First Niagara Bank. Bloomberg business news notes that “more productive” companies are buying up less productive ones and that means it might be efficient to fire “employees” at the companies that have been consumed.

We do have a President who talks about jobs all the time and he does have a program. It’s made up of several parts, enormous welfare to the banks and Wall Street in the hopes they’ll start lending, gargantuan weapon sales to fortresses of democracy (like Saudi Arabia) and various stimulus programs from unemployment benefit extensions to cash for clunkers. And the best this has gotten us is the New Normal. more

And so what happens when country's take care of their real economy?  Read how the Krauts sugar-coat their success while there are so many economies around the world in REAL trouble.

Boosting the Euro Zone

How Germany's Export Strength Helps its Neighbors

By Christian Reiermann

Germany has often been accused of threatening its neighbors' economies by relying too heavily on exports and not doing enough to stimulate domestic demand. But it is not the German upswing that is deepening divisions in the euro zone, rather the bloc's common monetary policy.

It has been a long time since Germany could be described as the "sick man of Europe." In terms of economic growth, Germany is now playing in a league of its own, compared to the other members of the euro zone. The country saw growth of 2.2 percent during the second quarter of 2010, compared to the first three months of the year -- more than any other major country in the monetary union.

For German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble, there is only one thing that worries them about the new development. Germany's new dynamism could revive an old debate which was only recently put to rest: Is Germany growing at the expense of its neighbors?

Statistically speaking, the answer is a clear no. On the contrary, Germany is boosting growth in the euro zone as a whole. Second-quarter growth in the 11 euro countries which have so far presented their figures totaled 1 percent. Without Germany, the other countries' growth would only have been half as high. more

But the official press seems determined to defend a German austerity package (can you say Zeitgeist?)

Germany 'Has Done Everything Right' on the Economy

The German economy is strong but the deficit is soaring.

A soaring budget deficit on the one hand, the strongest growth in years on the other: The news on the German economy is both good and bad. On the whole, commentators say, the politicians seem to have got things right. There are still tough times ahead, however.

The news on the Germany economy in the last few days has been both good and bad. While public borrowing has almost doubled since last year, economic growth is at its strongest in decades and business confidence is on the rise. It seems the costly measures that the German government took to stave off a deeper recession may have worked, but they have punched a massive hole in the state finances.

The Federal Statistical Office on Tuesday announced that the deficit rose sharply to 3.5 percent of GDP in the first half of 2010, putting it on track to break the European Union's budget rules. Net borrowing came in at €42.8 billion ($54.4 billion) -- more than double the €18.7 billion ($23.6 billion) for the first half of 2009. The EU requires its member states not to surpass budget deficits of 3 percent of GDP, but German government officials had already admitted in July that the overall figure for the year is likely to be 4.5 percent, as the bills for financing the country's massive stimulus packages finally come in.

However, recovery from the deep recession of 2009 seems to have come faster than even the most optimistic analysts had forecast. And Germany is hoping its massive austerity package will help it slash the deficit and soon bring it back into line with the EU rules.

On Tuesday the Federal Statistical Office also confirmed earlier numbers that showed the German economy had grown by an impressive 2.2 percent in the second quarter -- the fastest pace of growth since reunification 20 years ago. Consumer spending is also growing, up 0.6 percent in the second quarter -- the first rise in a year -- and there is also an increase in investment by businesses. more