Gloom or Doom

As a review of my recent posts will indicate, the set of news items most interesting to me of late is the discussion among economists and investors about US economic prospects in the next five to ten years. Although I have not attempted a comprehensive survey of the economics and investment literature, and I frequently have to turn to reference sources to better understand some of the economics items that I do read, my sense of the consensus is that something not-so-good is going to happen to the US economy in the next few years. Aside from some Bush appointees at the Treasury (who inspire almost universal embarassment among the economists I read), I don't know of anyone who thinks the future looks bright and sunny. The argument is rather between those who think a tremendous crash is in the offing (the 'Doom' group), and those who feel that some lesser downturn, a 'soft landing,' is more likely (the 'Gloom' group). I won't attempt here to summarize the entire debate. If you're interested in considering the views on both sides, I suggest this link-filled post from Brad DeLong as a good entry into the conversation.

I would put myself in more worried section of the 'Gloom' category--I think there are simply too many sensible people in the world with too much at stake in the US economy to let it slide into total chaos. But more important than my relatively uninformed opinion is the consensus that current US economic policy is simply unsustainable. No one is arguing for more of the same as the route to fiscal happiness. Those more bullish on the future rely on assumptions that current US policy will at some point return to something more rational--like the Reagan II policies of the 1980s. There is also, as I've noted, a general belief that the people currently in charge of US fiscal policy are either ridiculously naïve, or simply not interested in or capable of actually managing US finances. Hopefully, if there is a crisis point, it can be delayed until after January, 2009; or, if it comes before then, it will finally wake up the Bush administration to the looming danger.

Finally, if you're feeling more Gloomish than Doomish, it's still worth considering what a 'soft landing' might look like. (It sounds kind of nice, doesn't it?) How about looking back to a somewhat analogous soft landing, when the US began to come down from the high deficits and real estate boom of the Reagan years? That soft landing featured a brief recession with a slow recovery, and such 'bumps' as the savings and loan crisis.

Update: Two posts w/ excellent comments describe various scenarios for the hard/soft landings--the first is at Angry Bear; the other is at Macroblog.

Economics Debate

The link above will take you to a debate on the Wall Street Journal's Econoblog between two economists about whether or not foreign investment in US debt is a dangerous thing.

Also worth noting is this post from Roubini associate Brad Setser about the trans-Pacific real estate boom, in part fueled by low interest rates in the US. NPR also recently featured a much less meaty report by Rob Gifford on China's booming real estate market.

Why Does America Hate America?

Now that President Bush's social security reinforcement plan is making its final circles around the drain, it's time for Bush supporters everywhere to start wondering why so many 'mercins oppose W's plan for giving them their own personal stake in the Ownership Society^®--why, in short, do Americans hate America?

First of all, W. didn't get to talk to everyone. Over-zealous staffers kept keeping people out of the town hall meetings of the Phase Out '05 Tour. Yes, certain people should have been kept out. The terrorists. The evil-doers. The gay old people in the AARP who don't support our troops. But those staffers ended up keeping out a lot of other people--ironically, a very high percentage of the people they kept out were exactly the people W. needed to convince to support his plan.

But what W.'s plan was, was to give everyone... Well, all the young people. The Freedom to invest their money in their own private accounts. As long as they invested in certain, rigidly restricted ways. And they could then pass those personal accounts on to their children, if they died at a certain age--giving their children the Freedom to enjoy their fruits of their parents' Freedom. And Freedom would start to spread, and soon everyone would have more Freedom. But liberals like a certain Senator from Taxachusetts, think that the government should keep your money--they hate Freedom, you see, and won't let you pass it on to your kids.

Now the polls and everything--the Filter--are telling people to be afraid. That's fear--not Freedom. Americans shouldn't be afraid of Freedom--they embrace it--they hold it close to the heart. And luckily, policies put in place by our pal, Paul Bremer, and by the noble sacrifices of our heroic men and women of the armed forces, will soon make it possible for Iraqis to begin investing in their own personal accounts. A Free and personally-investing Iraq will be a beacon of light in the troubled Americo-Middle-Eastern-region, and show the people of the world--and America--that Freedom is not something to fear. And then, once again, Freedom will be on the march toward a glorious, personally owed future.

We must act now to ensure a personally investing future for both Iraq and America. If we don't act, millions of young people will be facing the future without Freedom. And I don't care what you say, America—but that's not the way we do things here in America.

More economics (please, no cheering)

For those of you who want more more! MORE! economics--check out Brad Setser's web log called, uh, Brad Setser's Web Log. I thought he was the leader of the Stray Cats, but he apparently knows something about global economics, too. I was particulary interested in this post about who's buying US debt securities. As the post starts out with the rhetorical flourish "The fastest growing US export: Debt, without a doubt."

Should Sweeney Go?

This post from Donkey Rising, picking up on an article in The New Republic by John Judis, agrees with Judis that labor unions in the US have done a poor job organizing under AFC-CIO president John Sweeney. Judis and Ruy Teixeira argue that labor has done no better under Sweeney (1996-present) than it had under previous AFL-CIO president Lane Kirkland (1979-1995). Neither Kirkland nor Sweeney succeeded in arresting the steady decline of the percentage of American workers represented by a union. But the decline in US union density has been happening since the 1950s. Clearly there are large structural issues that involve a lot more than who the president of the AFL-CIO. Although I agree that reform is needed in the labor movement, it could be argued that both Kirkland and Sweeney were at the helm during a political and economic period much more hostile to unions that any period since the 1920s. Indeed, the decline of unions since 1970 is an international phenomenon--union membership in Britain, for example, has also been steadily declining, but was almost 27% in 2002. I'm not necessarily defending Sweeney's policies--in fact, I'm sympathetic to the reform proposals of Andy Stern--but I don't think Sweeney or Kirkland can be held soley responsible for not reversing labor's decline.

More economic warning signs?

Maybe the author of The Big Picture is more bearish than I thought. The title links to his compilation of some warning signs in the economy at the moment. To be fair to those less bearish, though, several of the collected warning signs are from the same person--Kurt Richebacher--and are basically variations on the theme "public and private deficits make the current recovery unstainable." Who is Kurt Richebacher? I had no idea, but a Google search revealed that he's been preaching gloom and doom (and not spelling in English particularly well) for several years. Indeed, the most substantial Google entry I found for him is from the website investmentrarities.com, which seems to be cashing in on economic paranoia by selling various precious metals. You can be forwarded to Investment Rarities by typing in the URL 'gloomdoom.com'. In fact, the entire list compilation of 'gloom and doom' quotes may be compiled from the gloomdoom.com site.

A Hero Labeled a Coward

"To those who have called me a coward I say that they are wrong, and that without knowing it, they are also right. They are wrong when they think that I left the war for fear of being killed. I admit that fear was there, but there was also the fear of killing innocent people, the fear of putting myself in a position where to survive means to kill, there was the fear of losing my soul in the process of saving my body, the fear of losing myself to my daughter, to the people who love me, to the man I used to be, the man I wanted to be. I was afraid of waking up one morning to realize my humanity had abandoned me."

- Sgt. Camilo Mejia, who served one year in prison for refusing to return to fight in Iraq. He was released from prison Feb. 15, 2005.
Source: AlterNet

Bankruptcy Blog

Josh Marshall of Talkingpointsmemo.com has been giving extensive coverage to the Bush administration's plans to overhaul social security. So much so, in fact, that other issues have taken a back seat. To redress this, he has expanded his site to include a 'guest blog' entirely devoted to the terrible, terrible bankruptcy bill--a bill that many Democrats are supporting (!). The authors of the guest blog are well-informed on the subject: Professor Elizabeth Warren of Harvard Law School and law students Michael Negron, Ryan Spear and Jason Spitalnick. If you're interested in learning the awful details of this latest bit of Democratic caving to corporate interests, you should definitely check out this new site.

Real estate valued at 140% of GDP

The link in the title above will take you a post from the Big Picture economics web log which contains this nice little graphic:



The charts compare the value of the stock market leading up to the collapse of the 'internet bubble', and the value of real estate holdings as a percentage of the GDP.

The author of the Big Picture is generally bullish on the economy over the next few years. For those more bearish, or at least a little worried, or just interested in economics, the Big Picture web log makes for useful reading.

Thinking About God's Politics . . . without the Left??

Given my self-selected blog posting name, it should come as no surprise that I put Jim Wallis's new book, God's Politics: Why the Right Gets It Wrong and the Left Doesn't Get It (New York: HarperCollins, 2005) at the top of my bedtime reading list. Ever since the post-mortem on last November's election that proclaimed the importance of morality and faith to voting patterns, Wallis has been making the rounds as a spokesperson for an alternative, "Progressive" faith perspective. I have long admired Wallis and his various public endeavors, such as Sojourners, advocating that Christians get more involved in issues of poverty and social justice. And I am glad that Wallis is out there preaching a new vision of faith in action.

Yet as a self-proclaimed Christian leftist, something bugs me about Wallis's approach. In his public speeches and, now, this book, Wallis tries to portray himself as beyond left or right by taking shots at both "sides" (often conflating the terms liberal/conservative with left/right as many do nowadays) and declaring himself to be above the fray. Yet, truth be told, the prophetic positions that Wallis often takes are at the root traditional left-wing positions: strong opposition to U.S. overseas imperialism and in particular against the war in Iraq, advocacy for government action to alleviate poverty, rallying behind the banner of economic and social justice, etc. There is even a refreshingly bold chapter in the book advocating a more radical position on the Israel-Palestine question, which is even further to the Left of what most Democrats would publicly say.

Probably the most powerful statement in the whole book is one crafted by 200 Christian theologians and ethicists, which Wallis quotes at length. This "new confession of Christ" (pp. 153-154) is a powerful and, to me, prophetic vision against narrow nationalism and patriotism. "Whenever Christianity compromises with empire," it reads, "the gospel of Christ is discredited." (The full statement is available on the Sojourners web-site.) I find myself standing with Wallis, Sojourners, and all those other Christians who want to advocate for peace, equality, and justice.

Yet I wonder all along why Wallis doesn't just call this growing movement what it is: The Christian Left. That's right. Why should we be afraid to say it? I know that the Gospel of Jesus Christ is beyond any earthly political party. (And I agree that "God is Not a Republican or a Democrat"...) But is there some reason why we are afraid to say that the Christian Gospel calls us to stand with the poor, the powerless, the marginalized, the oppressed, and those on whom war is made? And against the wealthy, the powerful, the oppressors, and the imperial military machine? That sounds like "the left" to me! In my mind it is pretty clear that the Gospel is a radical document and that Jesus was a radical political AND religious prophet. As we stand against current-day Empire, and the morally obscene inequalities of wealth and power, we need not hamstring ourselves trying to prove how "centrist" or "anti-extremist" we are. The Christian Gospel IS radical, and we should not be afraid to proclaim it!

I know that since 1990 people think it is unfashionable to claim to be on "The Left" anymore, but what hope do we have for real deep, meaningful political change in our society if we shy away from a bold, Christian embrace of the egalitarian, justice-seeking ideals of the Left? (Note to Jim Wallis: Since when are you afraid to be counter-cultural and go against current fashion?) Powerful forces of wealth and privilege in our society have largely succeeded in driving out the economic justice language of the Left and have replaced it with a culture war discourse. I know that in the short term it seems expedient to play the "neither left nor right" game, but in the long run, I would argue, we cannot bring our Christian values and ideals into the political realm WITHOUT embracing the Left again. We are the Christian Left, and we should not be afraid to say so!

End of the Empire

Gee, that was a quick century. Remember the beginning of the Bush presidency, when the talk of American political circles was how best to manage America's overweening global superiority--our 'hyperpower,' in the words of the French foreign minister? That sense of near-omnipitance, fueling and fueled by neo-con dreams of weilding unilateral power wherever necessary to secure a new American century, is being drowned these days in the tides of red ink and blood resulting from the Bush administration's fiscal and foreign policies. TomDispatch features a good essay on the topic by Jonathan Schell, with links to others as well. See in particular the essay by the Lefty historian Kirkpatrick Sale, author of The Conquest of Paradise, and Rebels Against the Future (about the Luddites).

Decades from now historians of American power will look back at the turn into the 21st century and see an almost farcical waste of resources and global influence. It will be the jumping-off point for ruminations on the world that might have resulted from a more responsible use of American power.

Economic rumblings?

Ahead of Alan Greenspan's testimony on Capitol Hill today, here's a Cassandrian update on possibly portentous economic news. On February 16 Greenspan pronounced himself puzzled that even as the Fed inches up short-term interest rates, the market insists on pushing long-term bond rates *down*. What the hell does this mean? Well, it could be a sign that investors are worried about the future of American finances. Bonds are usually considered a safe investment--they don't pay off spectacularly well, but they pay consistently. That long-term rates are *low* indicates that there is a high demand for these bonds--they sell well even at low interest rates. Hence investors may be looking to sock away money in safe place as a US--perhaps world-wide--economic decline seems more likely.

One of the reasons for pessimism is the slide of the US dollar against most other currencies. Foreign central banks, particulary those of Asia, help prop up the value of the dollar by buying up large numbers of them for their reserves. But as the dollar continues to slide, these banks effectively lose money they could have kept if they had held their reserves in other currencies. Recently the South Korean central bank announced that it was going to start to diversify its currency holdings by not purchasing more dollars. This led to fears in currency markets of a more general sell-off of dollars by Asian central banks, which would send the dollar's value through the floor. Nothing of this sort happened, but it is enough of a concern for the world economy that Asian central banks are setting up a 'discussion group' to talk about ways to stabilize the value of the dollar. The Australian Finance Minister said recently that he was worried about the increasing risk of a US financial meltdown, though the Australian PM discounted such fears as 'alarmist.'

So why would a collapse of the US dollar be a big deal? It could, for one thing, make US goods cheaper abroad and help reduce the trade deficit. Not such a bad thing, eh? But if the dollar tanks, suddenly investments in US, whether in new factories or in securities, are far less attractive. Running huge budget and trade deficts, the US depends on foreign investment to buy it's IOUs. If US investments were not very attractive because of sinking dollar, they could only attract capital by raising interest rates. That would hurt consumer credit spending and the real estate market, two sectors underpinning the US's current economic growth. So a falling dollar could send the US, and probably much of the rest of the world, into recession. Even if the Bush administration seems not to think that chain of events is likely, other governments seem to think it's a possibility worth planning for.