The Nieman Watchdog is the conscience of many in the media and for others a haven for the public’s right to know. Watchdog economists declare the recession may get much, much worse, and the press has a duty to warn.
This is Part I of a three-part series on the economy and how recession woes in the United States are predicted to increase in severity and what individuals and the government can do about it.. The impetus for this series came from a review of Nieman’s Watchdog Reports and the directive to the media to take responsibility in helping the public understand the seriousness of the nation’s present financial situation. and what they might expect.
The Watchdog reports are entitled “Reporting the Economic Collapse,” Dan Froomkin, one of the Watchdog contributors, writes that the economy isn’t really recovering. Instead he says the nation is in serious trouble, and the economic facts are so disturbing the public must be informed.. He declares there are seven things people should be more worried about than they already are.
The first worry is that the collapse of the financial markets and real estate has seriously undermined the financial status of the middle class so that it may never be the same again. Homeowners borrowed at significant rates on their home equity, complicating and increasing the financial dilemmas for many. Experts maintain this process of de-leveraging in the real estate sector actually began a generation ago as the nation’s GDP saw a wealth transfer from the middle class to the top 1% of the population. Those who did the right things have seen their security dwindling or gone and can’t catch up because of the dramatic shifts that occurred in the financial sectors. An insecure middle class makes for an insecure economic future, according to experts.
Froomkin notes as the second worry that the recovery could take a very long time, far longer than what has been thought and that it could last longer than a decade. That’s because of high unemployment. Furthermore, whatever recovery has occurred has come about because of government stimulus money, and he wonders, as he says the rest of us should, what will happen when the infusion of that money stops. He maintains as the nation keeps adding to the debt, whatever recovery comes about during the initial period will likely only be temporary, which he considers to be the third critical issue..
The economy could become worse again, after what appears to be a recovery, because of insufficient demand for goods and services. Many people are out of work, and those working won’t spend at the same rate. In other words, there hasn’t been, what Froomkin says sustained consumption to keep the economy going. This fourth significant problem could cause the economy could tank again.
An additional and fifth problem, according to Froomkin, has to do with banks who aren’t doing proper accounting and reporting their losses. They continue to play by bogus rules. This increases the fragility of the economy as many of these banks may really be insolvent. The commercial real estate market is also likely to collapse bringing a worse correction in the Dow and a more serious recession.
The country may have worn out the government rescue capability because there’s only so much that can be borrowed. The next time around, Froomkin states, the money just might not be there. Furthermore what he calls “deficit hawkery” could plunge the country further into trouble as people are led to believe (as he says is virtually the required mantra in Washington) that reducing the deficit comes first. The consequence of looting programs could cause, as it did in the Great Depression, a tight monetary policy that exacerbated economic woes.
Froomkin also maintains that the stock market increases could actually be just another bubble perhaps, coming as it did on the heels of bailouts and zero-interest loans not from solid investors. There is no solid foundation for the upswing in stocks.
The seventh issue involving the nation’s financial recovery is the fact that the financial markets remain “unchastened.” They haven’t had to pay for what Froomkin says have beent Ponzi schemes. He maintains President Obama was right in reminding financial giants that they can’t do business in the 21st century using 20th century rules. In fact he agrees with Obama’s analogy that the economy can’t be a house built on sand and that if it continues to be, as he suspects, we are in for a huge catastrophe.
The Watchdog report comes as a contrast to Science Daily’s article November 2009 where economists predict 2010 as a rosier year than its predecessor. The article quotes Bill Witte, associate professor emeritus of economics at IU and a member of the Kelley School of Business, the annual Business Outlook Panel. He said, “Better is not necessarily good. 2010 is going to be acceptable, except for the fact that we’re starting from extremely low levels. Things will be getting better, but they still won’t be really good.” The article goes on to say that some economists predicted a recovery already in process and the recession already over.
An economic report from Economy Watch in many ways agrees with the Nieman Watchdog, declaring” it isn’t time to break out the champagne and celebrate,.” The report points out seven good reasons for caution. It maintains the recent Supreme Court decision to unleash unbridled corporate campaign spending in the political arena will make an American political system struggling with political corruption even more corrupt. The result, the article underlines, will be a troubling effect on the world economy as the great political divisions, exacerbated by huge influxes of cash from campaign contributors, will continue to bog down the government in political wrangling so nothing ever gets done. The report also indicates the media’s ineffective and inefficient reporting about the impact of politics on economic decisions. It also, as does the Nieman Watchdog report, points out the continuing bank irregularities and Wall Street problems.
Digital Journal interviewed Tom Loudatt , Ph. D., a local economist in Hawaii and forensic expert in economics, about his take on the national economy. After reviewing with him a few of the salient details in the Watchdog report, Loudatt maintains he agrees with their summation and is deeply concerned about President Obama’s failure to take the kind of decisive action that was necessary to turn things around. He said, “The problem is that Obama is bright enough, but he has been in bed with Wall Street crowd and has appointed the whores of Wall Street to oversee the nation’s economy.”
As an example of the mistakes made by the Obama administration, Loudatt points to the Obama’s support of Ben Bernake, whom Loudatt refers to as “the architect of the mess.”
As for the bank failures and bailouts, Loudatt says, as does the Nieman Watchdog Report., “with the bank bailout they (the government) used every arrow in their quiver. ” Loudatt predicts economic stagnation as a result, pointing to the big “debt overhang” that continues to face the country.
While Loudatt criticizes Obama’s actions, and lack of actions, he reminds people of the President’s predecessor, former President George W. Bush. Loudatt underlines the fact the former President, “made a mess” There were a lot of things Obama could have done to help the nation get out of it, The big problem is he catered to the bankers and Wall Street clowns instead of helping folks on the lower rungs get the money they needed.” He went on to say that giving big money to failed institutions “created an insurmountable moral hazard which was passed on to taxpayers
Economists like Tom Loudatt and those with the Nieman Watchdog Report see future calamities ahead for the nation’s economy without proper financial oversight and infusing money into it in the right way to the right people. But Loudatt believes there are things people can do to protect themselves while the government sorts things out. Part II will cover his recommendations for both individuals and government.
By Carol Forsloff – digitaljournal.com
If you want to understand the economic crisis, there are several hundred 250-page books for you to read. If, on the other hand, you want a one-page explanation, this is it.
As the financial crisis of 2008-2009 slowly passes into history, the first round of autopsies is beginning, with congressional committees looking for culprits, and everyone from business leaders to economists to the proverbial man on the street grappling with answers as to what precisely caused the meltdown. It is now almost cliché to speak of how the so-called “Great Recession” nearly brought down the global financial system—how it was the worst crisis since the Great Depression and how the world has changed dramatically as a result. Clichés can be compact truisms, but in this case, what’s most striking about the world isn’t how much things have changed as a result of the crisis but how little.
Summary