Sunday, October 2, 2011

Robert Samuelson Still Doesn't Get It!

The threshold for being a syndicated columnist for the WaPo media universe is obviously pretty damned low if Robert Samuelson is the standard for economic insight. What becomes ever more clear is the guy is either: a) dumb as a sack of hammers in respect to our low aggregate fiscal environment, or b) one of the cagiest of economic propagandizers and PR hacks.

I can't believe the guy is that dumb, so I lean to the latter. Nonetheless, since more and more citizens are getting increased Wall St. smarts (as they pull their monies out of that den of thieves) it amazes me that ol' Samuelson still believes he can sway anyone with his pro-market blather. Haven't they seen enough? Don't the people, including his readers, know enough now not to be taken in by his bollocks?

He begins by interjecting the usual Horatio-Alger-esque codswallop, that most thinking Americans ought to have seen through by now:

"Americans see themselves as risk takers and go-getters. Our optimism will ultimately rescue us.

So it's said.

But the folklore increasingly collides with reality. The 2008-09 financial crisis traumatized millions. It swelled the ranks of risk-avoiders, worrywarts and victims"

He did get one thing right, that the idiotic Horatio Alger folklore the Overclass has been using for generations has outlived its usefulness and "collided with reality". The stark reality which all can now see, or ought to, that we inhabit a gamed, zero-sum financial system that consistently works to the detriment of the middle and working class while it continually enriched the upper 10%.

Where he goes off the cliff is when he intimates the financial crisis (which continues, btw), merely generated millions of risk-avoiders, victims and worrywarts. This is confirmed when his next sentence is:

"We are prisoners of our own rotten mood"

Errr, no, "we" are not. We, the newly financially enlightened, are prisoners of a rotten financial system which many have exposed (as I have in a number of past blogs) and the "Occupy Wall Street" protests are now circulating to a wider audience.

The fact is we do have millions of victims, and they aren't merely penny pinching because of being "worrywarts" in a rotten mood. They are saving now in as aggressive a way as they can because:

1) They've already lost 30-40% of their pension (401k) thanks to Wall St. hijinks and believing its rat-faced drumbeaters and PR cheerleaders.

2) Their wages are still stagnant in relation to 1973 wages, when corrected for inflation

3) Their health care benefits have eroded as they've either been taken away or they've been made to pay more of them.

4) Their meager pensions have now been gutted by assorted companies, or converted to 401ks, making their future even more insecure.

5) To top that off, assorted asshole politicians have been asserting the one remaining security platform (Social Security) is a "Ponzi scheme" and their Medicare benefits will either be cut or eliminated (via Paul Ryan's death plan).

Given all this, why would people go out on a crazy limb and spend themselves senseless merely to prop up the GDP? (About 68% of GDP support is via consumers). To do that, they'd have to eviscerate and compromise what little financial security they have left, merely to satiate the economic expectations of those like Samuelson!

Further, we already have seen the evidence of how inequality has expanded, and the Middle class is being cratered. Even a WSJ article (Sept. 13, p. A1) noted that so many middle class consumers have down -shifted in their purchases of many products (for example replacing the detergent Tide with Gain, and replacing Crest toothpaste with Pepsodent or Baking Soda) that marketers of the products have had to develop separate lower cost niche products, see e.g.

The same piece noted that the Gini coefficient for the U.S. now stood at 0.468, or a 20% increase in income-earning disparity from 40 years ago, according to the U.S. Census Bureau (see chart in the linked blog).

According to one marketer from P&G quoted in the article:

"We now have a Gini index similar to the Phillippines and Mexico - you'd never have imagined that!. I don't think we've typically thought about America as a country with big income gaps to this extent".

But it is exactly this income earnings debasement that has caused Americans to pull back on spending. Yes, they did spend 0.2% more last quarter, but not out of choice. It was because the prices of key products rose by 0.2%!

Earlier, before the mortgage-financial meltdown, most Americans who couldn't stretch wage dollars far enough went into debt - or leveraged their income - to get what they needed. They bought their new HDTVs or repaired their roofs this way. They were also able to use their homes as ATM machines by the simple expedient of re-financing for a larger amount than they actually needed (say $120,000 for for $95,000 mortgage balance) and took the balance ($25,000) to pay off outstanding debts.

All that halted with the mortgage meltdown, as the banks - loaded with toxic assets in the form of credit default swaps- became far more wary lenders, if they lent at all. They also demanded much higher loan standards, including higher credit scores and much larger upfront down payments, that most would-be borrowers couldn't meet.

This is why people are pulling back, because they've finally been forced to engage economic reality as opposed to responding to the ever present pressure of slick advertisers to buy, buy, buy...even if they don't need. Yet, Samuelson chastises them for being "worrywarts" and "in a rotten mood".

Well, let's hope they stay that way because even as the DOW dumped another 24o pts. last week on top of the 640 the previous week, things aren't going to change anytime soon. The basis simply doesn't exist for any real or valid optimism predicated on hard facts, as opposed to horse manure.

There will continue to be an anti-spending mindset which defeats all efforts to improve the jobs level, and this austerity will carry over into Americans' own financial decisions, since they'll now be thinking how much more they'll need to save if congress decides to cut Social Security benefits (say by changing the COLA) or raising Medicare premiums beyond the 122% nicrease since 2000. Can you blame them?

Lastly, I must disagree with Samuelson's other codswallop that any talk of stimulus will have the reverse effect and increase consumer retrenchment. No, it will not. This is just framing and negative PR because the Neo-liberal Samuelson doesn't want to see any more stimulus.

But the true fact is that another $1.7 trillion for capital works, mainly infrastructure, could immediately put enough Americans back to work to lower the unemployment rate to about 8.2%. Those extra citizens, with money in their pockets, will then be finally able to buy the items they couldn't before..and because of the buying of assorted products, companies making the products will be able to hire more people to make more of them. As opposed to seeing inventories pile up and having to let them go.

But see, the Repukes in charge of the House don't want any such benefits accruing to Obama especially for 2012. So they will continue to lock down the government purse strings and scream "Deficits matter!" as their tea party hangers-on clap in the background.

In the meantime, the rest of us "victims" will be likely flushed down the toilet in a new Great Depression, because one party placed its own agenda above the nation's economic survival.

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