double dipping

Unemployment hit 10.2% nationwide, a number not seen since 1983. In some states, like California and Michigan, it is much higher. And for those unfamiliar with the "US method" of calculating unemployment, or those eager to compare unemployment across different countries, it is good to point out that real unemployment in the US is much higher than 10.2%. The real number probably hovers well over 15% and in some states it may top 20%.

The discrepancies arise because the US jobless benefits are very short term compared to those of other countries. The US has the smallest safety net of any developed country. Many people do not qualify for unemployment benefits and have to make do with part-time jobs or employment that is much below their skill and competence (and pay) level. In other countries citizens are far less likely to be forced into such situations. The US also does not count people who have given up looking for jobs altogether.

Although the rate of unemployment is slowing, I predict that a pickup is to be expected. Foreclosure rates are still quite high and new foreclosures are likely now that people are losing employment. Many odious ARMs are also expected to reset leading to further foreclosures. It seems very likely that the Christmas shopping season will be another dismal failure and when that happens more retailers are expected to go out of business. At the very least new rounds of layoffs are coming.

So why is the stock market rallying? The reason is rather simple. There is tons of money sitting on the sidelines. Many have made fortunes in the bubbles and a lot of money is constantly added to retirement plans (even though it is decreasing now that jobs are lost). The money has to go somewhere and there are few palatable options. Investors have been waiting for (what they consider) a long time and so a rally was unavoidable. Unfortunately this is just more churning and it will lead to further losses which may end up damaging the "recovery" even more.

It is obvious that the stimulus package was way too small. Unfortunately the appetite for more stimulus money is gone. What that means is that the recession will last much longer. But given how destructive our economy is and how it is threatening our long term survival on the planet, that may well be a good thing in the long run. If people were rational, one could hope for a two-pronged solution, where people agree to change their destructive lifestyles in return for help from the government. That seems about as unlikely as convincing an alcoholic to stop drinking. All the money that is put in will quickly go to feed further addiction. And so it is that we, like the drug addicts that we are, will rather go down in flames, than wake up and change.

afraid to face the music

I heard another economist talk on KQED last night. This one was from Harvard -I forget his name, not that it really matters in the scheme of things. 

Once again the story was the same: the administration is not doing enough to mitigate the crisis. It is afraid to "grab the bull by the horns." The monster bailout is too little, too late. And then there was more talk about "toxic assets" and possible bank failures. It appears nobody wants to admit these toxic assets are not toxic as in, "of questionable value," they are simply worthless. Totally and completely worthless. There are no "toxic" assets because there are no assets to begin with.

Anyone who talks about selling toxic assets or setting up a clearinghouse to sell toxic assets is yet another scam artist trying to fool the public into buying worthless paper. No wonder savvy investors are not interested in the Geitner plan. They've learned their lessons.

Unless and until we face these facts, the crisis will not get resolved. Not only that, the longer we wait, the more serious the problem will become and the more damage will ensue. It is one pill the Obama administration does not want to swallow. It is one danger they are not prepared to tackle. 

The reality is that all of the nation's major banks are de facto bankrupt and will have to go through bankruptcy procedures of some sort to be salvaged. Since everyone seems to agree that we need those banks, we cannot simply let them go out of business. That would be an even greater disaster and might cause a profound lack of trust in our currency. If that happens all bets are off. That is why I think you should own real gold. Real, as in tangible metal.

Even though Obama does not want to admit to it, the solution is simple: the US has to nationalize its major banks. At the very least it has to nationalize these banks for some short period of time. In essence much of it has already happened. We the tax payers are keeping these businesses alive. We are the de facto owners.

What is truly shameful however, is that the government did not want to get legal ownership in return for its cash. It did not want to become a shareholder with shareholder rights in return for the money it donated. Therefore its bailout money is nothing more than a donation to the rich. No wonder people are getting upset!

And why did that happen, you may ask? Because the folks in Washington are simply too chicken or too stubborn to admit that the great capitalist Reaganomics system has failed. That there is no other way out than to nationalize the financial system in order to avoid total disaster.

If stubbornness is the cause then we are seeing something that is eerily reminiscent of the previous administration's stubbornness to admitting failure in Iraq. If that is true, then change was just another empty campaign promise. If stubbornness is not to blame then there is only one alternative: weakness. I am not sure which is preferable.

what change?

It is easy to talk about change. Much easier than making it happen. There is an old Roman proverb that reads, nil nove sub sole. Although 2,000 years old, it is as relevant today as it was when first written. The truth is that over those 2,000 years very little has changed. So little in fact that if we were to magically resurrect the Romans -like the dinosaurs in Jurassic Park- they would not find it very hard to comprehend or adapt to our society.

Sure, they might be in awe when they first see airplanes, cars, cell phones and TV's. But that would not last too long. The Roman elite would quickly grasp how to use these modern tools to further their ancient goals of domination and control. Despite the new toys the basic concepts are unchanged. 

The Romans knew a highway infrastructure was important in ruling the empire. So they built one, and a rather high quality one too. Many of the Roman roads are functional today. How is that for infrastructure? Roman roads can rival American bridges. It is not a big step to go from wagons to semi's. I am sure the Roman architects fantasized about these in any case. It would be no shock to them to see their fantasies become reality.

When it comes to change, take a closer look to see history in action. The people overseeing and administering the financial bail-out and rescue plans are the same people that got us in the mess in the first place. The CEOs of failed companies are now heading the government panels overseeing the rescue operations. The politicians, lobbyists and pundits of yesterday are staffing the new administration. The same very rich are financing it all. Every cycle these guys put in more money and every cycle the elected officials become more beholden to the powers that be. It would not be surprising if we, like Rome, suddenly changed our system to a dictatorship with emperors.

Sure, there are slight shifts every few years. One cycle the more conservative and hawkish members hold sway and then the more moderate and liberal ones take over. But they are all part of the same club. The same families and dynasties that ruled our country in the past century are still at the helm today. Only a few of the old guard have fallen by the wayside due to unfortunate events, and a few new ones have joined. In essence the rulers are the same. So are the rules.

We will inaugurate a black president, but the color of money stays as green as ever. Only the face on the stamps changes. We have a new actor for an entrenched role. A fresh face to sell the same old message.

obama's change

I wonder if the democrats realize what kind of change Americans are looking for. After having swept the country with his "change" campaign, Barack Obama is now suddenly finding it hard to believe that McCain and especially Palin have successfully hijacked his campaign slogan. What is even more hard to believe is that he does not seem to understand why that is, and his arguments "I don't understand" and "this is just more of the same" just show how he misses the point. (More cynical persons might say, how his elitist stance is disconnected from the real America)

Americans it appears want not so much change to something new, but a change back to the past. They want to turn the clock back. They want to change things back to where they were. Back to the good old times, when gas was less than a $1 a gallon, when they could fly and drive all over the place and when they did not have to worry about greenhouse gases, endangered species, and all those other "nasty" items that interfere with their daily consumerist happy-go-lucky attitude.

Sarah Palin is the perfect embodiment of the kind of change Americans are looking for. The more we hear about her so-called shortcomings -or what the opponents perceive as shortcomings- the more she becomes the ideal candidate of change. Her small town, no-nonsense, hard core religious, hockey-mom, all-american image is exactly the kind of change Americans are so desperately yearning for. Everything about Sarah Palin, from her hairdo to her glasses cries out change.

Furthermore, the Obama camp now seems puzzled and the very fact that they are illustrates why they are so vulnerable. In essence they are disconnected from the middle America that they need to win the election. 

And yet it is so obvious what their problem is because they faced it before. When Hillary sat down with the blue-collar folk to shoot the breeze, she won and she won with great margins. And even though Hillary is very good at this, she is no match for Sarah here. 

But Hillary's move came too late. By then, the game was already lost. Maybe that is why the Obama folks were able to brush it aside or did not pay attention.

Well, my friends, it is back. But this time bigger and better than ever before. And if Obama could afford to ignore the lessons of Hillary drinking beer and pressing the flesh, he cannot afford to ignore the Palin magic. Better scramble and do something quick.

Let's face it America, what sounds better to you. Going moose hunting with John and Sarah or having lengthy discussions about the finer points of the law with Barack and Joe?

And therein, my friends lies the outcome of this election.