15 percent of the U.S. population is receiving food-stamp benefits.

from David Ruccio

source

In 2007, at the start of the Second Great Depression, 26.3 million Americans—8.7 percent of the population—were on the Supplemental Nutrition Assistance Program (SNAP). Today, that number has risen to 47.6 million, which means that 15 percent of the U.S. population is receiving food-stamp benefits.

What’s that you say about a recovery?

Robert Lucas on the slump

from Lars Syll

In a recent lecture on the US recession – Robert Lucas gave an outline of what the New Classical school of macroeconomics today thinks on the latest downturn in the US economy and its future prospects.

Lucas starts by showing that real US GDP has grown at an average yearly rate of 3 per cent since 1870, with one big dip during the Depression of the 1930s and a big – but smaller – dip in the recent recession.

After stating his view that the US recession that started in 2008 was basically caused by a run for liquidity, Lucas then goes on to discuss the prospect of recovery, maintaining that past experience would suggest an “automatic” recovery, if the free market system is left to repair itself to equilibrium unimpeded by social welfare activities of the government.

As could be expected there is no room for any Keynesian type considerations on eventual shortages of aggregate demand discouraging the recovery of the economy. No, as usual in the New Classical macroeconomic school’s explanations and prescriptions, the blame game points to the government and its lack of supply side policies.

Lucas is convinced that what might arrest the recovery are higher taxes on the rich,

In not Of?

from Peter Radford

Today’s New York Times has a reminder of the damage the crisis has done to the economy, and, more importantly, to enduring attitudes towards opportunity. The article summarizes the results of a survey conducted by Rutgers University.

The main thrust of the article is that this crisis was both deep and broad enough to involve almost eighty percent of the population in one way or another. Unemployment and its awful effects were that widely felt. People’s lives were often ruined permanently. The entire trajectory of some people’s lives will be changed forever. The damage is incredible. The downdraft from Wall Street’s extraordinary greed driven stupidity caught almost all Americans and has left enormous psychological as well as material scars.

Yet we still have not dealt with the causes and have not undertaken strong remedial action.

Why not?

British Test Case

from Peter Radford

For those austerity advocates amongst you: may I draw your attention to the plight of the British economy?

Its’ headed down again. There’s a distinct possibility that it will enter recession. Make that a third recession. A rare triple dipper. The prolonged slump pervading Britain has now lasted longer than the Great Depression. It is taking an enormous toll. It is steadily eroding the future potential of the economy.

And it is entirely a manmade problem.

Manmade as in Conservative party made..

The British government, for ideological reasons, decided to trash the British economy, It is doing a fine job. So good is its effort that it surely would be eligible for some prize, were prizes given for most asinine, antisocial, deliberately destructive, and all round stupid economic policy.

Many Happy Returns? 5 years of crisis

from Steve Keen

On this day 5 years ago, the global economic crisis began. The trigger was the decision by BNP to suspend redemptions from funds that were linked to the US housing market. Those of us who had been expecting a debt-deflationary crisis
and warning about it
for some time (see also here and here) could never have picked the trigger itself—that would have been prophecy, not prediction—but very rapidly it was clear that this was it.  

A tale of two economies

from David Ruccio

Back in May, at the Volcano Symposium at Oxford University, I made the argument that economists and pundits are not seeing the same economy.

We are, by almost any measure, in the midst of a Second Great Depression.

I am often amazed at how controversial that claim is. Many economists and pundits, on both the Left and the Right, refuse to admit we’re in the midst of a depression—qualitatively different from the succession of postwar recessions and comparable in scope to what we last experienced in the 1930s.

The only explanation, it seems to me, is we’re looking at two different economies. 

Politics, economics, and business cycles

from David Ruccio

source*

In the midst of the Second Great Depression, mainstream economists continue to heap scorn on one another concerning the relative merits of their “screw-the-unemployed” monetary-policy-has-no-effect and “hydraulic Keynesian” IS-LM-in-the-liquidity-trap models. 

Can you spot the recovery? (graph)

from Edward Fullbrook

United States Employment-Population Ratio
http://data.bls.gov/timeseries/LNS12300000
Data extracted on: August 2, 2012 (4:39:26 AM)
 
 

 

United States of declining minimum wage

from David Ruccio

In the midst of the First Great Depression, Secretary of Labor Frances Perkins made the case for a federal minimum wage. In making her argument, she quoted the Massachusetts Commissioner of Labor and Industries:

In the midst of the Second Great Depression

from David Ruccio

source

I would have written “chart of the day, year, and probably decade” if it included data for stagnant real wages. Then, it would be the single most important chart of the Second Great Depression.

As it stands, it indicates that

Break up the banks. Please.

from Peter Radford

How do I say this delicately?

The banking system, and in particular the biggest banks, were central players in the development of the crisis; they then played a major role in spreading contagion around the world; they then collapsed due to mismanagement, poor regulation, and endemic greed; this required that they be propped up beyond their normal subsidy by the taxpayer; the cost of propping them up transformed a private debt catastrophe into a sovereign debt catastrophe; this undermined national budget across the globe; which, in turn, induced a wave of austerity-driven debt reduction by governments; which has now ensured that the crisis has become a depression.

Well done banks. 

USA employment and unemployment levels – 5 graphs

 

Is this the Second Great Depression?

from David Ruccio

Readers know that I have come to refer to the current crises of capitalism as the Second Great Depression.

Apparently, at least one person agrees with me. And, after reading Dean Baker’s latest, she sent me the following question (which she also posted as a comment on Baker’s post):

Professor – I am NOT an economist but WHY would Dean Baker deny that we ARE in a GREAT DEPRESSION – how rich is he?  Yes, I am so livid at this dribble, his fairytale, I did post a comment. Regards,

Let me attempt a brief answer (brief only because, as a professor, I have lots of grading to catch up on). . .

Michael Hudson on the making of the crisis

from Merijn Knibbe

I stumbled upon what for me is the best analysis of the crisis I’ve read up to know: an article from Michael Hudson. An excerpt:

In this new financialized warfare, governments are being directed to act as enforcement agents on behalf of the financial conquerors against their own domestic populations. This is not new, to be sure. We have seen the IMF and World Bank impose austerity on Latin American dictatorships, African military chiefdoms and other client oligarchies from the 1960s through the 1980s. Ireland and Greece, Spain and Portugal are now to be subjected to similar asset stripping as public policy making is shifted into the hands of supra-governmental financial agencies acting on behalf of bankers – and thereby for the top 1% of the population.

Krugman considers Koo

Paul Krugman devotes his New York Times column to Richard Koo‘s RWER paper The world in balance sheet recession: causes, cure, and politics.  It includes the following.

Richard Koo’s RWER paper “has gone viral on the Web” says the New York Times”.

Richard Koo’s RWER paper The world in balance sheet recession: causes, cure, and politics already looks set to become a classic.  In its first two weeks it was full-text downloaded over 30,000 times from www.paecon.net.  Koo’s paper, reports the New York Times, “has gone viral on the Web”

Here are some key passages from Koo’s paper. 

Chart: US long-term unemployment 1967-2011

from David Ruccio

Between the third quarter of 2009 (when the recovery is said to have begun) and the third quarter of this year, the percentage of workers who had been jobless for a year or longer nearly doubled from 16 percent to 31.8 percent. The number of workers who have been unemployed for a year or longer has jumped, during the same period, from 2.5 million to 4.4 million.

Meanwhile in Europe…(20). Current accounts. French history repeats itself (in Germany).

from Merijn Knibbe

Some countries in the European Union have large and persistent current account deficits. According to Hans-Werner Sinn this situation is “a balance-of-payments crisis whose solution requires real adjustment of prices and wages in the periphery countries”. He means: internal deflation, engineered by mass unemployment. However, some other countries in the European Union have large and persistent current account surpluses

The Second Great Depression

from David Ruccio

For some time, I’ve been calling the current crisis in capitalism the Second Great Depression.*

Now, it seems, fears of a repeat of the First Great Depression are becoming more widespread.

Will Hutton [ht: db] is one example: