econolypse

John Cassidy via The New Yorker

To me, what is really, really alarming is this: a typical American male who works full time and still has a job is earning almost exactly the same now as his counterpart was back in 1972, when Richard Nixon was in the White House, O. J. Simpson rushed a thousand yards for the Buffalo Bills, and Don McLean topped the charts with “American Pie.”

The figures, which appear in Table A-5 at the back of the Census Bureau’s report (pdf), are these. Median earnings for full-time, year-round male workers: 2010—$47,715; 1972—$47,550. That’s not a typo. In thirty-eight years, the annual earnings of the typical male worker, adjusted to 2010 dollars, have risen by $165, or $3.17 a week.

If you do the comparison with 1973 it is even worse. The figure for median earnings of full-time male workers in that year (when O. J. rushed two thousand yards and Tony Orlando had a chart-topper with “Tie a Yellow Ribbon Round the Old Oak Tree”) was $49,065. Between now and then, Archie Bunker and Willie Loman have suffered a pay cut of more than twenty-five dollars a week.

Is it any wonder Americans are not as optimistic as they used to be?

Should Barack Obama Bail Out Americans?

Barack Obama

My answer is yes. Artificially created debt is cholesterol clogging the arteries of consumer spending. The economy that created the debt is gone. Only by surgically removing debt can Americans freely spend, thus pumping fresh blood to the heart of the U.S. economy. But, hey, I’m no economist, although in 2005 I rightly predicted the housing bubble’s collapse and much of the aftermath. Surely such insight is worth something.

TARP (Troubled Asset Relief Program) succeeded in bailing out the rich and made them richer—six days ago Wall Street Journal reported that “about three dozen of the top publicly held securities and investment-services firms—which include banks, investment banks, hedge funds, money-management firms and securities exchanges—are set to pay $144 billion in compensation and benefits this year.” The paper describes the amount as a “record high”. The rich are richer, while most other Americans are poorer: At least one in five homes is worth less than the mortgage value; unemployment is stuck above 9 percent (not counting another 10 percent to 12 percent underemployed); and consumer spending spurts and sputters month-to-month.

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We couldn't be manipulating the price of oil to hurt Putin, could we?!

I have been watching the price of oil drop, with alarming speed, to prices not seen since the Econolypse. 

image

From a pure supply/demand perspective this puzzled me. I was at a loss to explain such a precipitous drop from a market perspective - especially with a cartel (OPEC) at the helm.

And then…the Russian ruble collapsed.

Here is a money quote from the NY Times:

Along with Western sanctions, the ruble’s depreciation has been driven by a slump in the price of oil to below $56 a barrel from a summer high of $107. The bulk of the government’s revenues come from oil.

The bulk of the government’s revenues come from oil.

Hmmm…

This couldn’t be a manipulation…could it?

The smoking gun will be found if oil prices recover after an agreement with Putin that lifts, or lessens, the sanctions.

Just sayin’

If Americans had been consulted about the 2008-2009 Wall Street bailout, I doubt it would have happened the way it did. At the very least, strict conditions would have been placed on the banks in return for the money. The banks would have had to eat the losses of the predatory mortgages they sold, and help homeowners reduce those mortgages. They’d be required to improve the capitalization of small banks in communities across the country. They’d be forced to accept stringent new regulations, including resurrection of Glass-Steagall.

But Americans weren’t really consulted. It was an inside job.

As a result, Wall Street has prospered but the rest of the nation hasn’t. One out of four homeowners is underwater, owing more on their homes than the homes are worth.

And with the worst economy since the Great Depression, we’re now embarking on fiscal austerity. Either Congress’s super-committee comes up with $1.2 trillion of federal budget cuts that Congress agrees to—going into effect a little over thirteen months from now—or $1.5 trillion of cuts are made across the board. Meanwhile, states and cities have been slashing public services for the past three years.

So which is it? Rule by democracy or by financial markets? Based on what’s happened in America, I’d choose the former.

— 

- Robert Reich, Greece’s Choice—and Ours: Democracy or Finance?

Reich thinks the Greeks should default, and we should let the banks go hang, which is what we might have done back in 2008-2009 if anyone had asked us.

When millions of willing and able workers are unemployed, and economic potential is going to waste to the tune of almost $1 trillion a year, you want policy makers who work on a fast recovery, not people who lecture you on the need for long-run fiscal sustainability.

Unfortunately, giving lectures on long-run fiscal sustainability is a fashionable Washington pastime; it’s what people who want to sound serious do to demonstrate their seriousness. So when the crisis struck and led to big budget deficits — because that’s what happens when the economy shrinks and revenue plunges — many members of our policy elite were all too eager to seize on those deficits as an excuse to change the subject from jobs to their favorite hobbyhorse. And the economy continued to bleed.

What would a real response to our problems involve? First of all, it would involve more, not less, government spending for the time being — with mass unemployment and incredibly low borrowing costs, we should be rebuilding our schools, our roads, our water systems and more. It would involve aggressive moves to reduce household debt via mortgage forgiveness and refinancing. And it would involve an all-out effort by the Federal Reserve to get the economy moving, with the deliberate goal of generating higher inflation to help alleviate debt problems.

The usual suspects will, of course, denounce such ideas as irresponsible. But you know what’s really irresponsible? Hijacking the debate over a crisis to push for the same things you were advocating before the crisis, and letting the economy continue to bleed.

— 

- Paul Krugman, The Hijacked Crisis

Enough. We need jobs, now!

Reuters

The pace of growth in the U.S. manufacturing sector unexpectedly slowed in October, according to an industry report released on Tuesday.

The Institute for Supply Management (ISM) said its index of national factory activity dipped to 50.8 from 51.6 the month before and missed expectations of 52.0, according to a Reuters poll of economists.

A reading below 50 indicates contraction in the manufacturing sector, while a number above 50 means expansion.

New orders rose to 52.4 from 49.6, while the prices paid index fell to its lowest level since April 2009 at 41.0 from 56.0. The employment index eased to 53.5 from 53.8.

Here comes the second dip: welcome to the New Depression.

(Note I am not calling it the Lesser Depression, because that is too optimistic.)

The times are very hard in Greece, unemployment is rising, so how to make a living? Go back to the land.

Rachel Donadio via NYTimes.com

Unemployment in Greece is now 18 percent, rising to 35 percent for young people between the ages of 15 and 29 — up from 12 percent and 24 percent, respectively, in late 2010. But the agricultural sector has been one of the few to show gains since the crisis hit, adding 32,000 jobs between 2008 and 2010 — most of them taken by Greeks, not migrant workers from abroad, according to a study released this fall by the Pan-Hellenic Confederation of Agricultural Associations.

“The biggest increase is in middle-aged people between 45 and 65 years old,” said Yannis Tsiforos, the director of the confederation. “This shows us that they had a different sort of employment in the past.”

In Greece, as elsewhere in the Mediterranean, most families have traditionally invested heavily in real estate and land, which are seen as far more stable than financial investments, and it is common for even low-income Greeks to have inherited family property. Increasingly, as the hard times bite deeper, many Greeks are deciding or being forced to fall back on that last line of defense.

Enrollment in agricultural schools is also on the rise. Panos Kanellis, the president of the American Farm School in Salonika, which was founded in 1904 and offers kindergarten through high school as well as continuing education in sustainable agriculture, said applications tripled in the past two years and enrollment in classes like cheesemaking and winemaking has been rising.

Mr. Kanellis says that young people frequently come to him and say: “I have two acres from my grandfather in such-and-such a place. Can I do something with it?”

A growing number of Greeks are asking themselves that question, and some are deciding they can. “I think a lot of people will do this,” Ms. Tricha said. “In big cities, there’s no future for them. For young people, the only choice is for them to go to the countryside or to go abroad.”

This is happening in the US too. Expect much more of a move back to the land in 2012.

What is written as a recommendation by the NY Times Editorial Board to the leaders of the European Union is actually better considered as a prediction.

Greece is careening toward a disorderly default because the northern European economies won’t accept the idea of forgiving the ‘southerner’s debts’ — even though in reality the debts were caused by the real estate/bank crash of 2008. But the facts shouldn’t get in the way of a morality play, which is what the current austerity regimes are: they are actively damaging the economies they are supposed to be benefiting. And the people won’t stand for it.

via NY Times

Without a new infusion of financial assistance, Greece could default on a $19 billion bond payment as soon as March 20. But Angela Merkel, the German chancellor, and Nicolas Sarkozy, the president of France, have warned that Greece will receive additional funds only after it complies with the terms of its agreement. This includes convincing Greece’s private creditors to accept a 50 percent writedown on some $260 billion of debt, and proceeding with draconian budget cuts that have already forced the government to raise tax rates, cut jobs and pensions and slash spending in the middle of a recession.

But debt relief talks have stalled, with hedge funds and other investors that bought the debt from French and German banks holding out for better terms. And Greece can hardly take more austerity. Its economy contracted by 5.5 percent last year, after shrinking more than 3 percent year-over-year in 2009 and 2010.

The economic implosion is preventing the country from meeting its fiscal commitments by reducing tax revenue and increasing expenditures on automatic programs like unemployment insurance. Despite spending cuts, Greece is likely to have a 9.6 percent budget deficit in 2011, half a percentage point above target.

More importantly, austerity is rending Greek society. Unemployment has mushroomed to 18 percent, with enormous social costs like rising homelessness and crime. Imposing further cuts is becoming politically untenable.

It is time to shift course. Although Greece is a small economy, Europe is in no shape to withstand the financial fallout of a disorderly Greek default, or its abandoning the euro. Greece is likely to need even more money than it has been promised so far. Economists think the 50 percent writedown may not be enough to return Greek debt to manageable levels. What’s more, Greece and its weak neighbors need Europe’s stronger economies, like Germany, to start spending more to help boost their exports.

Germany should realize by now that without growth its beleaguered neighbors will never be able to pay back their debts. Europe’s problems have spiraled so far out of control that no one knows what policy mix will work. What is certain is that a single-minded obsession with austerity will only deepen the crisis.

Can you remember the last time you felt a national leader looked us in the eye and told us there is no easy solution to our major problems, that we’ve gotten into this mess by being self-indulgent or ideologically fixated over two decades and that now we need to spend the next five years rolling up our sleeves, possibly accepting a lower living standard and making up for our excesses?
— 

- Thomas Friedman, The Whole Truth and Nothing But

Friedman does it again. Once again he looks at the financial ruin of America and blames the victims. Why do we have to accept a lowered standard of living, and rolling up our sleeves for five years of austerity? The rich 1% own 90% of everything! We’ve been robbed systematically for 30 years, and now the GOP wants to institutionalize it with more tax cuts.

But Friedman never talks about the burglar, living up at the top of the hill. He keeps shaking his head, telling us that we have to pay for the broken window the burglar broke, and pay higher taxes for the cops that didn’t protect us, and then buy another set of silver to replace what the burglar stole. It’s time for the President, he says, to tell us to roll up our sleeves.

We have a culture where individualism has become so pathological that we cannot heap up our collective experience as victims and craft it into solidarity

What I want to know is this: when will the President — or any other credible leader, for that matter — stand up and say that those who have become billionaires by rigging a system to impoverish everyone else are our enemies, and we need to restructure the system — a completely new social contract — so that their wealth is redistributed.

And the working and middle class of America — and the growing ranks of the poor and unemployed — will not accept new privations, new austerities.

We have a culture where individualism has become so pathological that we cannot heap up our collective experience as victims and craft it into solidarity. As Steinbeck said, ‘Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires’, which is why so many poor people in America vote for the GOP: they identify with the rich, even though the rich are screwing them over.

But a sufficient dose of austerity — once the street lights are turned off, school class size grows to 50+ because of layoffs, and cities and town cannot afford to rebuild streets after floods and fires — that might start to mobilize people.

But we have to reject the implicit individualistic self-loathing, that we brought this on ourselves, by accumulating too much personal credit card debt and buying houses we couldn’t afford in a down market. That we stole our own future from ourselves.

No, Tom, we are not the ones that did this. We borrowed on the credit cards when real wages dropped in the ’90s, when two worker families were already the norm. We bought big houses in the ’00s to grab onto the American dream, and to own an asset that everyone — including the banks and our leaders — promised us would appreciate. But they all lied to us.

The banks have been bailed out, but now we are told we have to pay our own debts, plus the new debts that our government has taken on to write down the costs of the housing bust. Oh, and a few wars in Asia where we are busy spreading ‘democracy’, which loosely translated means global free trade, making billionaires happy again.

Enough. We won’t accept it. We want our money back. We want our future back. We want our country back.

And Tom, stop saying we have to accept what the leaders, the billionaires, and the banks decide for us. This is our world too.

Zoe Schneeweiss, Soros Says a Euro Exit Mechanism Is ‘Probably Inevitable’ Amid Debt Crisis

Billionaire investor George Soros said it’s “probably inevitable” that a mechanism will be put in place to allow weaker economies to exit the euro.

“There’s no arrangement for any countries leaving the euro, which in current circumstances is probably inevitable,” Soros, 80, said at a panel discussion in Vienna yesterday on whether liberal democracy is at risk in Europe. “We are on the verge of an economic collapse which starts, let’s say, in Greece, but it could easily spread. The financial system remains extremely vulnerable.”

Concern Greek lawmakers will fail to pass austerity measures to ensure the next installment of the nation’s bailout is roiling global markets and pushed the euro to a record-low against the Swiss franc last week. Greece is one of three euro- region members to have sought international bailouts amid the sovereign debt crisis.

“I think most of us actually agree that” Europe’s crisis “is actually centered around the euro,” said Soros. “It’s a kind of financial crisis that is really developing. It’s foreseen. Most people realize it. It’s still developing. The authorities are actually engaged in buying time. And yet time is working against them,” he said.

[…]

Europe’s leaders should look for alternative strategies to solve the debt crisis, Soros told the Vienna panel, which also included Former Belgian Premier Guy Verhofstadt.

Because the “survival of the EU is of vital interest to us all,” there’s a need for a “Plan B,” he said, explaining that this could include EU-wide taxes, a “banking system guaranteed by European institutions, not a bunch of national banking systems,” or a financial transaction tax.

“You need a Plan B and there’s no Plan B at the moment,” Soros said. Instead, “authorities are sticking to the status quo” and not “recognizing that there are fundamental flaws that need to be corrected,” he said.

I missed this back in June, but Soros is one of many that is talking about the inevitability of peripheral EU countries leaving the eurozone.

Can we please have a future?

Benyamin Appelbaum via NY Times

There are good reasons for gloom — incomes have declined, many people cannot find jobs, few trust the government to make things better — but as Federal Reserve chairman, Ben S. Bernanke, noted earlier this year, those problems are not sufficient to explain the depth of the funk.

That has led a growing number of economists to argue that the collapse of housing prices, a defining feature of this downturn, is also a critical and underappreciated impediment to recovery. Americans have lost a vast amount of wealth, and they have lost faith in housing as an investment. They lack money, and they lack the confidence that they will have more money tomorrow.

Many say they believe that the bust has permanently changed their financial trajectory.

“People don’t expect their home to regain value, and that’s really led to a change in consumer attitudes about the economy that we’ve just never seen before,” said Richard Curtin, a professor of economics at the University of Michigan who directs its Survey of Consumers. The latest data from the survey, released Friday by Thomson Reuters, shows that expectations for economic growth have fallen to the lowest level since May 1980.

[…]

A recent paper by Karl E. Case, an economics professor at Wellesley College, and two co-authors estimated the decline in home prices from 2005 to 2009 caused consumer spending to be $240 billion lower in 2010 than it otherwise would have been. That figure is equal to about 1.7 percent of annual economic activity, enough to be the difference between the mediocre recent growth and healthy growth. And it does not include all the other effects of the housing crash, including the low level of new home construction, that are also weighing on the economy.

People believe that we will never rebound. Should make the elections even more interesting. Plus the civil unrest during the summer of 2012, leading up to the elections.

The Way Forward

Will our elected officials listen? I bet we’ll have to suffer more pain — the debt collapse in Europe, and open civil unrest in the US — before we’ll be able to get our government to take this way forward:

Daniel Alpert, Robert Hockett, and Nouriel Roubini, The Way Forward

[…] this is not an ordinary business cycle downturn.  Two features render the present slump much more formidable than that – and much more recalcitrant in the face of traditional policy measures.

First, the present slump is a balance-sheet Lesser Depression or Great Recession of nearly unprecedented magnitude, occasioned by our worst credit-fueled asset-price bubble and burst since the late 1920s.4  Hence, like the crisis that unfolded throughout the 1930s, the one we are now living through wreaks all the destruction typically wrought by a Fisher-style debt-deflation.  In this case, that means that millions of Americans who took out mortgages over the past 10 to 15 years, or who borrowed against the inflated values of their homes, are now left with a massive debt overhang that will weigh down on consumption for many years to come.  And this in turn means that the banks and financial institutions that hold this debt are exposed to indefinitely protracted concerns about capitalization in the face of rising default rates and falling asset values.

But there is more.  Our present crisis is more formidable even than would be a debt-deflation alone, hard as the latter would be.  For the second key characteristic of our present plight is that it is the culmination of troubling trends that have been in the making for more than two decades.  In effect, it is the upshot of two profoundly important but seemingly unnoticed structural developments in the world economy.  

The first of those developments has been the steady entry into the world economy of successive waves of new export-oriented economies, beginning with Japan and the Asian tigers in the 1980s and peaking with China in the early 2000s, with more than two billion newly employable workers.  The integration of these high-savings, lower wage economies into the global economy, occurring as it did against the backdrop of dramatic productivity gains rooted in new information technologies and the globalization of corporate supply chains, decisively shifted the balance of global supply and demand.  In consequence, the world economy now is beset by excess supplies of labor, capital, and productive capacity relative to global demand.  This not only profoundly dims the prospects for business investment and greater net exports in the developed world — the only other two drivers of recovery when debt-deflation slackens domestic consumer demand.  It also puts the entire global economy at risk, owing to the central role that the U.S. economy still is relied on to play as the world’s consumer and borrower of last resort.  

The second long term development that renders the current debt-deflation, already worse than a mere cyclical downturn, worse even than other debt-deflations is this: The same integration of new rising economies with ever more competitive workforces into the world economy also further shifted the balance of power between labor and capital in the developed world.  That has resulted not only in stagnant wages in the United States, but also in levels of income and wealth inequality not seen since the immediate pre-Great-Depression 1920s. 

[…]

The principal features of the recovery plan are as follows:

First, as Pillar 1, a substantial five-to-seven year public investment program that repairs the nation’s crumbling public infrastructure and, in so doing, (a) puts people back to work and (b) lays the foundation for a more efficient and cost-effective national economy.  We also emphasize the substantial element of “self-financing” that such a program would enjoy, by virtue of (a) massive currently idle and hence low-priced capacity, (b) significant multiplier effects and (c) historically low government-borrowing costs.

Second, as Pillar 2, a debt restructuring program that is truly national in scope, addressing the (intimately related) banking and real estate sectors in particular – by far the most hard-hit by the recent bubble and bust and hence by far the heaviest drags on recovery now.  We note that the worst debt-overhangs and attendant debt-deflations in history always have followed on combined real estate and financial asset price bubbles like that we have just experienced.   Accordingly, we put forward comprehensive debt-restructuring proposals that we believe will unclog the real estate and financial arteries and restore healthy circulation – with neither overly high nor overly low blood pressure – to our financial and real estate markets as well as to the economy at large.

Third, as Pillar 3, global reforms that can begin the process of restoring balance to the world economy and can facilitate the process of debt de-levering in Europe and the United States.  Key over the next five to seven years will be growth of domestic demand in China and other emerging market economies to (a) offset diminished demand in the developed world as it retrenches and trims back its debt overhang, and (b) correct the current imbalance in global supply relative to global demand.  Also key will be the establishment of an emergency global demand-stabilization fund to recycle foreign exchange reserves, now held by surplus nations, in a manner that boosts employment in deficit nations.  Over the longer term, we note, reforms to the IMF, World Bank Group, and other institutions are apt to prove necessary in order to lend a degree of automaticity to currency adjustments, surplus-recycling, and global liquidity-provision.

A worldwide structured write down of debts? Where the banks, rentiers, and pension funds accept the fact that they aren’t getting the monies that are on their balance sheets, and it’s in everyone’s interests to accept that and move on? I wish.

But, like these authors, I am a philosopher: looking for general answers to big questions. So I have hope that — once the defaults in Europe are accepted — that we might get moving on this larger scheme.

UK PM Advocates Censorship And The Cessation Of Free Speech… Of Course

So it has been widely reported that UK Prime Minister, David Cameron, has considered a crack down on social network tools, like Twitter and Facebook, when being used by those involved in unrest:

[W]e are working with the police, the intelligence services and industry to look at whether it would be right to stop people communicating via these websites and services when we know they are plotting violence, disorder and criminality.

A great number of people have expressed outrage or surprise. Jeff Jarvis gave well reasoned arguments that Cameron was about to cross a line onto a slippery slope:

Jeff Jarvis, A social media crackdown is the wrong response to riots

Beware, sir. If you take these steps, what separates you from the Saudi government demanding the ability to listen to and restrict its BBM networks? What separates you from Arab tyrannies cutting off social communication via Twitter or from China banning it?

This regulatory reflex further exposes the danger of British government thinking it can and should regulate media. Beware, my friends. When anyone’s speech is not free, no one’s speech is free. I refer the honourable gentleman to this . Censorship is not the path to civility. Only speech is.

It’s not that I disagree with Jarvis: far from it.

However, I don’t think that a justifiable and well-reasoned argument will work here. In the end, the forces that have conspired to create the terrible situation we find ourselves in economically, and the undue levels of austerity they have proposed, will inevitably lead to social unrest, and that social unrest will lead to escalating repression by the state.

As Jacopo Ponticelli and Hans-Joachim Voth recently reported, austerity too long or too harsh always leads to social unrest. And social unrest, as we have seen across the Arab world this year, and in France, Greece, and other European countries in recent years, leads to an escalating response by the authorities.

I lived through the Law and Order Nixon and Reagan years, where white urbanites turned against the Democrats for being soft on US rioters and demonstrators against the war. [This ultimately led to a giant rift in the Democratic party, which led to Reagan winning the White House, and the slow but inexorable shift of many formerly Democratic southern states to GOP bastions.]

Cameron will be riding the same two-headed beast, and slowly those espousing hardening the response to the rioters will gain control of the party, and those taking other viewpoints will be ruled illegitimate and soft on crime.

And if the social tools of the day are instrumental to the ability of the rioters to elude capture and plan their activities, the authorities will seek to turn them off, or to otherwise control them.

Another centrist editorial that seeks a balancing of the pain as the US figures out how to write off its debt, but fails to ask the right question:

Menzie Chinn and Jeffry Frieden via The NY Times

The recent skirmishes all dance around the central issue: the United States is in the midst of the world’s largest debt crisis. The Treasury now owes the public almost $10 trillion, including $4.5 trillion to foreigners — and that doesn’t include what households and companies owe. For decades to come, Americans will face the core problem of every heavily indebted nation: who will bear the burden of adjustment?

Countries borrow for many purposes: canals and railroads in the 19th century, factories and highways in the 20th, and in the last decade, a housing and financial boom in Europe and America. When the projects don’t pan out and the debtor country falls into crisis, what happens to the accumulated debts? Who pays? Creditors or debtors? Workers or investors? Rich or poor? The European Union is tearing itself apart over this question, which divides creditor nations from debtor nations and which divides groups within nations. The American variant of this conflict is just beginning.

Perhaps, some Americans believe, we can shunt the adjustment costs onto foreigners. Indeed, our creditors worry that the United States will reduce its debt burden the old-fashioned way, by inflating it away. A few years of moderate inflation, and a weaker dollar, would significantly lessen the real cost of servicing the country’s debts — at our creditors’ expense.

But adjusting to the reality of America’s accumulated debts will inevitably require sacrifices at home. The battle over who will be sacrificing has already begun, albeit under veils of rhetoric. The Republicans seem unconcerned about stimulating recovery, and primarily concerned that none of the long-term costs of balancing our budget be paid by upper-income taxpayers. No surprise: unemployment among the one-third of Americans with the highest incomes is barely 4 percent, while for the lowest third it is more than four times that level.

The Democrats, for their part, seem content to insist that the adjustment burden not fall on beneficiaries of government spending, whether public employees or recipients of social spending. This reflects their base in the labor movement, the public sector and the poor.

Yes, the GOP wants to spare the wealthy from any pain, either increased taxes or a write down of the value of their treasuries.

And, perhaps the authors are right about the Democrats — that they are working only for those with entitlements. At any rate, they are trying to make sure that the poor, the old and the young aren’t the first thrown from the lifeboat.

But the missing question is ‘Who is responsible? Who is to blame?’

Why are we incapable of pointing at the folks who created this mess and saying they are responsible and should pay? The banks, the wall street traders, the CEOs of organizations that gambled and lost, and then paid off the politicos so that the debts would become ours, added to the government’s deficit?

If the government only exists as a means for the wealthy and the corporations to abrogate their obligations, and the Democrat-led government prosecutes no one, then its clear that GOP and Democrats alike are incapable of leading us.

The New Depression is casting its growing shadow, and there seems no will to do what is needed: a massive jobs bill, to restart the stalled American economy, and grow our way back.

Obama has been emasculated by the GOP terrorists, and there is no voice of reason, aside from shunned economists and progressives, all deemed too far left for today’s realpolitik that considers Obama’s policies — far to the right of Reagan and Nixon — socialism.

Who speaks for us? Where is the Martin Luther King or Franklin Delano Roosevelt for our time?

We thought it was Obama, but he’s faded: the light’s gone out of him, like a firefly too long in a corked bottle.

Who will lead? We seem to have no plan, no direction. We have no leaders worthy of us.

Portugal is now embarking on what will be its third international bailout since returning to democracy in the 1970s, with previous interventions by the I.M.F. in 1978 and 1983. This time, however, “the sense of punishment will be much stronger because the expectations of citizens are much higher than three decades ago, when Portugal was not even in the E.U.,” said António Vitorino, who was in the Portuguese government that negotiated the 1983 rescue and a former European commissioner.

In 1983, Mr. Vitorino noted, Portugal was able to revive an export-led recovery by significantly devaluing its currency — no longer an option under euro membership. “The money injection that we received had a much stronger short-term effect on our economy than it could have this time,” he said.

Look: It’s undeniable that many of the people facing foreclosure bear some responsibility for the crisis. Some borrowed beyond their means. Some even borrowed knowing they would never be able to pay off their debt, either hoping to flip their houses right away or taking on mortgages with low initial teaser rates without bothering to think of the future. The culture of take-for-yourself-now, let-someone-else-pay-later wasn’t completely restricted to Wall Street. It penetrated all the way down to the individual consumer, who in some cases was a knowing accomplice in the bubble mess.

But many of these homeowners are just ordinary Joes who had no idea what they were getting into. Some were pushed into dangerous loans when they qualified for safe ones. Others were told not to worry about future jumps in interest rates because they could just refinance down the road, or discovered that the value of their homes had been overinflated by brokers looking to pad their commissions. And that’s not even accounting for the fact that most of this credit wouldn’t have been available in the first place without the Ponzi-like bubble scheme cooked up by Wall Street, about which the average home­owner knew nothing — hell, even the average U.S. senator didn’t know about it.

At worst, these ordinary homeowners were stupid or uninformed — while the banks that lent them the money are guilty of committing a baldfaced crime on a grand scale. These banks robbed investors and conned homeowners, blew themselves up chasing the fraud, then begged the taxpayers to bail them out. And bail them out we did: We ponied up billions to help Wells Fargo buy Wachovia, paid Bank of America to buy Merrill Lynch, and watched as the Fed opened up special facilities to buy up the assets in defective mortgage trusts at inflated prices. And after all that effort by the state to buy back these phony assets so the thieves could all stay in business and keep their bonuses, what did the banks do? They put their foot on the foreclosure gas pedal and stepped up the effort to kick people out of their homes as fast as possible, before the world caught on to how these loans were made in the first place.

Why don’t the banks want us to see the paperwork on all these mortgages? Because the documents represent a death sentence for them. According to the rules of the mortgage trusts, a lender like Bank of America, which controls all the Countrywide loans, is required by law to buy back from investors every faulty loan the crooks at Countrywide ever issued. Think about what that would do to Bank of America’s bottom line the next time you wonder why they’re trying so hard to rush these loans into someone else’s hands.

When you meet people who are losing their homes in this foreclosure crisis, they almost all have the same look of deep shame and anguish. Nowhere else on the planet is it such a crime to be down on your luck, even if you were put there by some of the world’s richest banks, which continue to rake in record profits purely because they got a big fat handout from the government. That’s why one banker CEO after another keeps going on TV to explain that despite their own deceptive loans and fraudulent paperwork, the real problem is these deadbeat homeowners who won’t pay their fucking bills. And that’s why most people in this country are so ready to buy that explanation. Because in America, it’s far more shameful to owe money than it is to steal it.

—  Matt Taibbi,  Invasion of the Home Snatchers via Rolling Stone