Wednesday, January 21, 2009
No bottom in sight yet: a conversation with Doug Henwood
By Steve Perry | Published Wed, Jan 21 2009 8:07 am
For the past 20 years plus, journalist/author Doug Henwood’s Left Business Observer newsletter has been an essential source for economics news and analysis from a left-progressive viewpoint. Likewise his books, which include After the New Economy, a critique of the tech bubble years and “new economy” hoohah, and Wall Street: How It Works and for Whom, which is available for free download at the LBO website. He's currently working on a book about the American ruling class.
I spoke to Henwood (who also hosts a weekly radio show at WBAI in New York that’s archived at LBO) yesterday afternoon, just a couple of hours after Barack Obama took the oath of office, to see what he makes of the tea leaves and of Obama’s likely course.
SP: A great many economists--including Nouriel Roubini, who famously predicted the credit crisis back in 2006--now say that the likeliest scenario is a very steep recession that lasts through this year and part of next year. What's the most compelling case about the length of this downturn that you’ve encountered?
Doug Henwood: It’s hard to say. There are really no signs of it approaching a bottom yet. None of the leading indexes seem to have approached a bottom. If we were going to see some kind of stabilization by mid-year, that would start showing up in some of the leading indexes now or soon. So we’ll be looking for that, but there’s no reason to believe we’re anywhere near that point.
If you look at the history of financial crises--and there’s a good paper by a couple of economists, Kenneth Rogoff and Carmen Reinhart, that looks at some of the major financial crises of the past several decades and looks at what happens to real economies after them--the average increase in unemployment rates was about 7 points. We started at 4.5, which means we’d end at 11.5, which would be a post-1930s record. The authors also saw very, very steep declines in GDP, on the order of 9 or 10 percent. We’ve only seen a fraction of a percent so far.
So judging on the basis of past financial crises, we are not even halfway through this.
See the entire article here.
OK. So most people don’t know what to do. Here is one idea.
Lots of serious economists and observers are now saying that this economy is in crisis and needs a significant jolt to return confidence. ( see below) Well, most of them are not talking about what would produce confidence among working people.
So, I will give it a try.
I think the government should arrest the top 100 or so corporate CEO’s and prosecute them for theft. They have taken billions from investors, caused the decimation of pensions, and caused 1.2 trillion to be drained from the economy.
By any standard they are thieves.
On the other hand, they should receive a fair and impartial trial. Much of what corporate finance did with their derivatives was illegal until 2001 when Democrats and Republicans united in the U.S. Congress to make this looting legal.
See, William Black, The Best Way to Rob a Bank is to Own One, and David Cay Johnston, Perfectly Legal. and Free Lunch: How the Wealthiest Americans Enrich themselves at Government Expense (and stick You with the Bill).
My knowledgeable friends tell me that you can’t arrest these people. They claim that our major banks and industries would collapse. I don’t think so. If you arrested the top twenty executives at Citicorp, for example, there are at least 40 more officers just below them who could take over. And, If you arrested the top twenty, the next forty would be much more careful with the public’s money in the future.
Of course another option is to nationalize the major banks, but that seems radical.