Monday, February 16, 2009

So the Big Guys are finally figuring out

that there's a Big Problem at the American Household level. (h/t to bystander at Greenwald's Place).

Reference material:
  • Krugman's NYT clolumn "Decade at Bernie's"

  • "Tracking the Household Balance Sheet" at the Baseline Scenario

  • Bill Moyers' disscussion with Simon Johnson

    [It's really impossible to overstate the blind indifference and the gross incompetence of what passes for most of our Economic haute monde.]

    Throughout this economic meltdown, it has been astonishing to me how utterly and completely -- and apparently deliberately -- ignorant economists and economic policy makers and general commentary about the economy in the blogosphere has been about the growing plight of American households.

    That plight is easy enough to quantify, and it's been in plain view to anyone who would deign to look for years: household income has been flat or declining, household savings has been zero or negative, household debt has exploded -- based largely on phantom assets in real estate and pensions.

    Real estate foreclosures have been a leading indicator of the household debt problem for years. And years.

    And nothing is done about it. Nothing (much) is in the works.

    Yet trillions and trillions and trillions of dollars are being paid or pledged to bail out the banks, and now hundreds of billions are pledged to be paid directly to corporate contractors as part of the "stimulus."

    It is alleged that $50 billion is being set aside to deal with the foreclosure problem, but we've heard similar allegations over and over and over again throughout the tumult, and ultimately nothing is done on behalf of homeowners facing foreclosure, except that many of them get fleeced yet again. So people have a right not to believe any promise they hear now that "help is on the way." More than likely it isn't and it won't be.

    And yet, as some are coming to realize -- too late, oh well, ha ha -- had there been help at the household level when the crisis first emerged, many of the titanic global issues (not all of them by any means) that we're facing now would have been mitigated or eliminated.

    Of course Americans have to reduce spending, and they have done that smartly and substantially. Lack of household spending will continue for so long as households are crushed under a massive debt burden with no increase in income and no debt relief in sight.

    That's where we have been stuck for (seemingly) years.

    What to do about it? Easy:

  • increase household income substantially ($7.50 a week won't do it), and/or

  • relieve household debt.

    Neither of which is in the cards in our lifetimes.

    Or so the graybeards insist. And why is that?

    Is there a serious economist in the building who can explain why household incomes cannot rise substantially (say so that they can make up, even partially, for the productivity gains of the last 30 years?) and why household debt cannot be substantially relieved (say on a scale equivalent to the gambling debt relief being applied to the banks and Wall Street?)

    Most economists won't even deal with the question at all let alone provide an answer. The notion of doing something to ease economic distress at the household level doesn't even occur to them, so they have no answers, cannot rationally contemplate the issue.

    It is too foreign to them.

    And that, ladies and gentlemen, is largely due to the Triumph of Milton Friedmanism and Neoliberalism -- which, in circular fashion, has brought us to this crisis.

    And that is why conditions will continue to deteriorate for the middle and working classes, and why the economic predators will continue to be fed and funded and treated like Royalty.

    Well, they are. Aren't they?
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