Monday, September 29, 2008

let’s party like it’s 1929

I’ve seen the comment a few places, but since I am writing about it now and it isn’t mine, I’ll h/t Jawa Report. The line: Let’s party like it’s 1929.

The Great Depression, which moniker I dislike because it was nothing but a double-dip recession, was caused by a lack of capital in the markets. What do we face now? A lack of capital. Ut oh. Good thing I was an Economics undergrad, which means I’ll be able to decipher the macroeconomic meltdown that may be coming. It’s kinda like understanding compression and controlled explosions as the guy yells, “Ready, Aim, Fire!” which you can hear but cannot see, of course, because you are wearing a blindfold.

I could study up on the mechanics of a recession – a quarter-to-quarter reduction in Gross Domestic Product (is it two consecutive Qs? I think so) – but why do that? Hell, this is a blog, not a newspaper. I don’t feign an expertise. At least I’m honest about my credentials and bias, unlike my journalistic brethren. (Oh, MSM hacks don’t like me calling you “brethren”? Blow me …)

Where were we? Oh yes, the Greater Depression of 2008/9/10. GDP is the total value of goods and services produced in the United States for a given period. Since the unions priced themselves out of the marketplace, we’ve been shifting manufacturing overseas for decades. Why pay $27.50 an hour to some thug when we can pay Xangow $0.47 an hour and he’s glad to do it? Says a lot that unions drove the price of labor so high that we could afford to ship the finished product half way around the entire planet and still come out ahead on cost, eh?

Some manufacturing is still here, of course, but we are predominantly a services economy now. That is what is called a “mature” economy. Mature, however, becomes old, which in turn becomes dead. Stock up on ammo – it may get ugly.

So what do services do? Financial services are a big part of it. Financial services move money. Oh, wait, the economy took a US$1.1 Trillion hit today. That’s less money to move. Guess we have less need for money movers. Bummer. Pink is such an unfortunate color paper – can’t they lay people off with something happy like yellow?

Where does the money get moved? Into businesses and mortgages mostly. Oh wait, the subprime mortgage industry (“subprime” being the less than desirable creditworthiness of the borrower – anyone raise their hand? Whoops! Sorry for the delay – tough to type one handed) started to falter last year, and is currently that rumbling sound you hear in the background as the ground shakes and crevices appear that suck in rather large banks thanks to the regulatory lending requirements of the Clinton administration. Hunh. But the banks still have money to give to companies, right? Well, they ain’t in much of a lending mood right now.

So what does that mean? It means that large purchases and construction projects will be shelved for a while – just until the dust settles, you know? Problem is that a construction project shelved costs more when it is paid with tomorrow’s money. This means that some projects will be shelved forever. That means that the smaller fraction of our economy that manufactures goods is going to, well, manufacture fewer goods. That means people lose their jobs.

So with credit unavailable to the economy, GDP naturally spirals downward. We all get scared and spend less. Hell, lots of us will have less to spend. That is a major problem because so many companies are undercapitalized – which means that a bad couple of months will shut them down. The most employment in this country comes from small businesses. If small businesses start to fold, we are, in a word, fucked.

Could this have been averted? Well, there’s little use in going back to the Clinton years. That was a major cause, but not the only one. No sense in history – let’s just solve it.

The House Dems had a plan! No, not the plan from three and four years ago when the Republicans were screaming about Fannie and Freddie looking like train wrecks – their plan then was to do nothing, which they did and, much to their chagrin, the train wreck, um, happened.

I mean the plan they had last week, the one when they just bought up all the bad mortgages and got into the lending business. That one sucked. The House Republicans, thanks to Senator McCain, got their say – don’t BUY them, just INSURE them. So the Plan v2.0 was formed, and came to a vote today.

What happened at the vote? Well, immediately before House Speaker Nancy “Old Iron Tits” Pelosi goes off on W and everything and anything that isn’t a Democrat blaming them for the mess. This was odd to the assembled lawmakers because they all know the history – Clinton regs, Dem inaction over the years in the face of Republican statements (see “train wreck” above). Seems she was cranky about her plan be modified in such a fundamental way.

Then what happened? Well, 67% or so of the Republicans and 40% of the Democrats said, “Ah, Nancy Babe, fuck you!” Vote went down.

Now, the Legacy Media is saying the defeat was the cause of the Republicans. OK. Let’s do a logic check, shall we? The measure needed a simple majority to pass. It follows that the party with the most seats, that is, in parliamentary terms, the “Majority” party, had to simply all vote together. One for all and all for one! It is the job of the House Whip (no, not the thing the naughty ones use on the young male pages) to identify votes. It is the job of the Speaker of the House to lead. Now, the Majority Party, the Whip, and the Speaker are all Democrats.

So if every democrat voted for the measure, it would pass. Every single Republican could have voted against it to no avail. But Republicans are nice. They wanted to help. So they said among themselves, “Let’s give the Speaker a third of our votes. Surely she can then get the measure passed by simple majority.”

Even spotting the chick a third of Pubs, she couldn’t pull it off. Two out of five in her own party told her to cram the measure down her screechy throat. Must suck being her.

So where does that leave us? Well, since they worked the weekend, they took the next couple of days off. Only fair. Must be a union rule. The markets are going to be so much fun to watch tomorrow and Wednesday. No capital. Nothing to move. Investing in companies that don’t have access to credit to make their products? I don’t think so. Freefall. Unless W saves the day. Time to pile drive the Democrats.

What should we look for as the impact sinks into the economy? Orders for Durable Goods. Unemployment claims. New housing starts. Sales of existing homes. Business Inventories. Retail sales. Suicides. Drunk driving deaths. Homicides. Pillaging. Gun sales. Theft of farm animals.

Use this link to track economic data. Use this link to track crime stats in your area.

Let’s party like it’s 1929!

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