A chronology of the Economic Crisis

From a commenter at Daily Kos:

1961-64 Robert Kennedy wages war against the Mob. Labor effectively defanged. Economic Elites will eventually learn that they can bitch slap labor without worrying about being slapped back. Mob and Labor part ways.

Liberalism is nothing without labor, labor, it turns out, is nothing without teeth.

1964 High Tide of Liberalism reached. Movement Conservatism formed, funded by the Economic Elites.

1970 Walter Reuther dies from mysterious plane crash.

1973 Per hour Wages peak and stagnate there after. From 1940-1973 wages grow with increases in productivity. Increasingly after this, demand increases only with increased man hours.

1980 Reagan wins election

1981 PATCO - Reagan lets labor step on the banana peel and bitch slaps labor into third tier status. From this point, Economic Elites are on the gravy train.

2001 The Blunder-man "Wrong Way" Bush commeth. For the last 27 years the growth in GNP has all gone to the economic elites (the supply side) by 2001 the economy has more than doubled over 1973 - that's trillions and trillions of dollars to the top 1% of the economy, year-in and year-out. As a result of this excess in flow of money to 'supply-side' demand is soft and beginning to shrink - creating a deflationary recession and stock bubbles (bubble result from too much money finding too little returns across the aggregate of the economy - until one little spot, like new technologies shows decent returns and then all money floods to that spot).

In the face of too much supply, in an economy based 2/3rds on demand, does Bush implement demand side economics? In a word no.

Instead, Bush pores the coals on 'supply-side' economics and by the end of his term may have pushed another 10 or 11 trillion dollars over to the supply side of the economy.

At this point the economy should contract, indeed crater, but it doesn't. Why? Bush is able to borrow cheap money from east Asia to cover his tracks as a substitute for real wage based demand. When the bills come do ... then the economy craters.

That's how we got to where we are.

Wages have to keep up with productivity to be stable. If they don't society becomes top heavy and unstable, like standing up in a dugout canoe: prone to sudden epic collapse.

The Fate of (some of) the Sun Belt

Richard Florida, author of The Rise of the Creative Class, has an article in the new Atlantic Monthly where (among other things) he assesses where the economic collapse is likely to be most keenly felt:

But in the heady days of the housing bubble, some Sun Belt cities—Phoenix and Las Vegas are the best examples—developed economies centered largely on real estate and construction. With sunny weather and plenty of flat, empty land, they got caught in a classic boom cycle. Although these places drew tourists, retirees, and some industry—firms seeking bigger footprints at lower costs—much of the cities’ development came from, well, development itself. At a minimum, these places will take a long, long time to regain the ground they’ve recently lost in local wealth and housing values. It’s not unthinkable that some of them could be in for an extended period of further decline.

To an uncommon degree, the economic boom in these cities was propelled by housing appreciation: as prices rose, more people moved in, seeking inexpensive lifestyles and the opportunity to get in on the real-estate market where it was rising, but still affordable. Local homeowners pumped more and more capital out of their houses as well, taking out home-equity loans and injecting money into the local economy in the form of home improvements and demand for retail goods and low-level services. Cities grew, tax coffers filled, spending continued, more people arrived. Yet the boom itself neither followed nor resulted in the development of sustainable, scalable, highly productive industries or services. It was fueled and funded by housing, and housing was its primary product. Whole cities and metro regions became giant Ponzi schemes.

Obama's Weekly Youtube Address

He definitely gives me the sense of someone who knows where he wants to take the country, is prepared to ask for sacrifice and personal responsibility from every citizen, and has the people around him to bring Congress along.

He's not yet served a day of his first term, but all the signs are promising. We've seen what happens when a president has greatness thrust upon him (9/11) and declines the offer. Obama is a second chance. Godspeed, Barack.

"Eventually" Has Arrived

We've heard this stuff for years. Cheap Oil will "eventually" run out. Our deficits will "eventually" need to be dealt with. Foreigners will "eventually" get tired of buying our debt. Global warming will "eventually" cause real problems...

The US has been stumbling blindly into an absolutely epic train wreck the last few years. Hear that *thwack* sound just lately? That's the brown matter finally hitting the in-room air-mover. Gasoline is now over 4 dollars a gallon (in some places, well over). "Eventually" is now here. There are a number of urgent, and very expensive, things that are needed right away if the United States is to survive as a first-tier country in the world. A few of the more urgent items on the agenda:

1. We urgently need passenger rail service to be massively expanded. In an ideal world with non-cowardly Democrats in congress, a big Rail bill would pass right now, over Bush's veto - It would be better not to wait until Obama takes office. The ever-upward trend in fuel prices means air travel is about to become both much rarer and far more expensive; air travel as a mass consumer activity is in deep, deep trouble. This means that we will need electric high-speed rail between major Metro centers, and pronto, or pretty soon no one except for the very rich going to be able to get around the country in anything resembling an efficient way.

2. Suburbs, especially more-distant suburbs, are probably going to be effectively abandoned on a large scale shortly (30-mile commutes with $10+ per gallon gas? $12 per gallon? If you make six figures, maybe: If you're the vast, vast majority of us that don't make six figures - Um, no. And all those "creatively" financed McMansions currently being repo'ed and sold at a loss will add to and accelerate this process) All those ex-suburban folks are going to need an affordable place to live that's closer to where they work; and they will need massively expanded public transit (street cars and light rail) to take them to work. Many smaller cities will be too broke (in part due to the cratering housing market) to finance even a substantial fraction of this: they are going to need Federal help. Taxes need to go up. Substantially. Especially the top marginal rates.

3. Interstate trucking is currently reeling, and its precarious situation going to get much, much worse. Interstate trucking relies on now-unobtainable cheap diesel fuel to work as it has up until now. It is hard to overstate the extent to which contemporary commerce depends on trucks to deliver supplies - everything from food delivery to your local supermarket, to the loads of cheap lead-laced crap imported from China and delivered to Walmart from the ports of entry comes on trucks: we need to find alternatives. Moving food and other goods shorter distances (i.e., using local sources rather than China and South America) is going to become mandatory when trucking collapses.

This diary just scratches the surface, but I'm not despairing. Americans have, in the past, come together to face problems at least as daunting as the ones we're facing now. That said, our survival will depend on the bullshit ceasing, and people facing the situation squarely and realistically.

Finally, a good general link, for further reading on peak oil:

The Oil Drum