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Posts Tagged ‘Great Depression’

U.S. Job Market Implodes As More Than Three Million File For Unemployment, Pointing To A 21st Century Great Depression

March 26th, 2020 Comments off

The U.S. Labor Department released its worst weekly jobs report, demonstrating that the Covid-19 pandemic has unleashed a full-fledged global economic crisis more severe than the financial crisis of 2007-09, and increasingly likely to exceed the Great Depression of the 1930s in its impact.

Since the Labor Department began issuing its weekly jobless claims report in 1967, the previous record for unemployment filings was 695,000 in 1982. The expectation was that the report released today would be very bad, most estimates being in the range of one million. The actual number: 3.3 million. This is worse than devastating; it is a clear sign that we are beyond a severe global recession, and are almost certainly heading into a global economic depression.

As this is only the initial phase of the impact of the coronavirus induced unemployment, the figures just released by the Labor Department suggests the unemployment rate will likely exceed 20 %, possibly even 30 percent. It is not just the U.S. shedding jobs at an unprecedented rate; the entire global economy is being struck by a tsunami of jobs destruction. This economic catastrophe will inevitably lead to a level of severe social and political strife not experienced globally since the 1930s.

 

Economist Nouriel Roubini Warns Emerging Global Economic Crisis Will Be Possibly Worse Than Great Depression

March 24th, 2020 Comments off

Perhaps the most insightful economist to watch as the Global Economic Crisis unleashed by the Covid-19 pandemic rages is Nouriel Roubini, economics professor at New York University. In the months leading up to the 2008 global financial crisis , his predictions were eerily accurate. Now he has published an essay on what is unfolding regarding the Coronavirus pandemic induced economic disaster on the Project Syndicate website, entitled ominously “A Greater Depression?”

I urge ever sensible person to read it; the link is: https://www.project-syndicate.org/commentary/coronavirus-greater-great-depression-by-nouriel-roubini-2020-03?

 

Among the points Professor Roubini makes is that the collapse in stock markets has greatly exceed in velocity not only what occurred during the global financial crisis of 2008, but also during the Great Depression during the 1930s. While other prognosticators are predicting a U or L or worst case V trajectory and recovery, Roubini views such happy talk as delusional. He sees every indicator as pointing to a global economy in unrestrained free fall. The hope for an eventual recovery lies in a host of unconventional monetary and fiscal measures. However, as he observes, there are a host of probable white swan events and negative political realities that will likely obstruct the unprecedented policymaking the now full-fledged Global Economic Crisis requires.

 

Global Economy In Free Fall At Worse Rate Than Beginning of Global Financial Crisis and Great Depression

March 20th, 2020 Comments off

The imposed shutdown of much of the world’s economy, all being done in a frantic effort to contain the rapidly spreading coronavirus, has set the stage for possibly the worst contraction in economic history. JP Morgan has now issued its first projection on the impact of Covid-19 on economic growth. They forecast in Q1 and Q2 of this year combined contraction of negative 14 percent in the United States, and negative 22 % in the Eurozone. This rate of decline exceeds the initial period of the 2008 Global Financial Crisis and 1929 stock market crash that unleashed the Great Depression.

What is unique about the 2020 Global Economic Crisis is that is being initiated by self-imposed demand destruction predicated on a public health emergency. We are entering uncharted territory.

Trump Global Trade War Could Bring Economic Catastrophe

July 10th, 2018 Comments off

The  core supporters of President Donald Trump maintain that despite the at times troublesome tweets and verbal coarseness, this is trivial compared to the tangible economic results achieved during the first year-and-a-half of his administration. The relatively high GDP growth rates and low official unemployment rates are heralded by his adherents as signposts on the road of making America “great again.”

I am not as sanguine. In  the first place, based on the pattern of economic cycles in the last hundred years, the American economy is overdue for a severe  recession. It has not happened yet due to the monetary alchemy of the U.S. Federal Reserve, in lockstep with other central banks across the globe.

Secondly, and more importantly, Trump has now unleashed a trade war. It is the economic equivalent of an economic world war, as President Trump is targeting friend and foe alike;   China, Canada   and the European Union have been hit with sizeable tariffs; these countries have responded with retaliatory tariffs, matching America’s in scope and severity.

Many scholars of the Great Depression have argued that this worldwide economic calamity was not driven by the Wall Street crash of 1929, buy by a massive wave of protectionism in the early 1930s, characterized by a wave of tariffs and quotas.

Has President Donald Trump opened a Pandora’s box that may unleash a massive global economic crisis?

U.S. Unemployment Rate Continues To Fall-As Discouraged Workers “Disappear”

May 5th, 2012 Comments off

he latest numbers from the Bureau of Labor Statistics indicate that the United States supposedly “created” 115,00 jobs in April. Not even President Obama’s supporters are cheering loudly over this figure, as it indicates a slowing down of job creation-and that is if the number is accurate. As many know, BLS jobs numbers are usually a mathematical abstraction based  on assumptions and inferences, not hard numbers. In any event, if there were 115,000 jobs created in April, that is below the approximately 200,000 new jobs that must be created in the U.S each month in order to keep up with population growth. In other words, 115,000 new jobs in April would mean that the American unemployment rate would increase.

But in April, again according to the BLS, the U.S. unemployment rate did not increase; in fact it “declined” to 8.1 percent. If job creation is lagging behind the expected entry of new workers into the U.S. labor market, how did the magicians at the Bureau of Labor Statistics construct a reduction in unemployment?  Very simple. There are so many discouraged unemployed workers in the United States, they are simply giving up and “leaving” the labor force. In many cases, actually, the BLS is exercising initiative and assuming that a certain proportion of the unemployed simply drop out of the workforce each month.

The real meaning of the April jobs number is that the participation of age-eligible Americans in the labor force -both working and unemployed-is at a 30 year low. How is that synonymous with an economic recovery?

In point of fact, a staggeringly high rate of unemployment, made artificially lower by not counting those long-term unemployed workers as being part of the active labor force, is by no means characteristic of a post-recessionary economic recovery. What has recovered since the onset of the global financial and economic crisis in 2008 are equity prices, which have regained almost all of their losses. However, that recovery is not due to increased consumer demand stemming from the reentry into the workforce of formerly unemployed workers. Rather, stock prices regained most of their losses and have enjoyed a recovery due almost entirely to the loose monetary policies of the Federal Reserve under the tutelage of its chairman, Ben Bernanke.

In contrast with the policies of President Franklin Roosevelt during America’s Great Depression of the 1930s, which focused on facilitating job creation, the policymakers in the U.S. have focused their efforts on reinflating equity prices through quantitative easing (money printing) and offering banks (including investment banks) historically low interest rates, in effect free money. Perhaps sooner than we can imagine, history will render its verdict on this policy of neglecting a recovery in the labor market in favor of reinflating the stock market.

                 

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Global Economic Crisis Is Now A Depression: Paul Krugman

December 12th, 2011 Comments off

Nobel Prize winning economist Paul Krugman, in his recent column, has declared that the crisis in the global economy is now a depression.  Since the onset of the global economic crisis, policymakers and media pundits have resisted using the “D” word, instead preferring terms such as the “Great Recession.” However, this is what Paul Krugman wrote in his  December 11, 2011 New York Times column:

It’s time to start calling the current situation what it is: a depression. True, it’s not a full replay of the Great Depression, but that’s cold comfort. Unemployment in both America and Europe remains disastrously high. Leaders and institutions are increasingly discredited. And democratic values are under siege. .. Specifically, demands for ever-harsher austerity, with no offsetting effort to foster growth, have done double damage. They have failed as economic policy, worsening unemployment without restoring confidence; a Europe-wide recession now looks likely even if the immediate threat of financial crisis is contained.”

Krugman points out in his piece that the economic disaster now unfolding in Europe threatens a resurgence of anti-democratic, populist authoritarianism of the type that infected European civilization during the Great Depression of the 1930s.Of course, the same dangers also lurk in the United States.

In my book, “Global Economic Forecast 2010-2015: Recession Into Depression,” I predicted in 2009 that the policy responses following the collapse of Lehman Brothers in 2008 would not only fail to resolve the global financial and economic crisis; they would create a sovereign debt contagion that would transform the recession into a depression.  Paul Krugman has confirmed the validity of my forecast made in 2009.

In his closing observation, Paul Krugman offers an ominous warning. After describing how Hungary, one of the new democracies in Eastern Europe, is receding into authoritarian rule as its politics become more extremist, all due to the economic crisis in Europe, Krugman writes about the Eurozone political leaders,  they also need to rethink their failing economic policies. If they don’t, there will be more backsliding on democracy — and the breakup of the euro may be the least of their worries.”

It appears that the global economic crisis, and Eurozone debt crisis, are increasingly becoming a political crisis.

 

                 

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Officer Larry of the NYPD is on his way to Zuccotti Park in lower Manhattan to arrest peaceful protesters involved with the Occupy Wall Street movement. Being a public spirited member of the New York Police Department, Officer Larry does remind us that there is a global economic crisis underway that rivals the Great Depression of the 1930s.

U.S. Banking Crisis Accelerates: FDIC Bank Closures Well Ahead of Last Year

August 2nd, 2010 Comments off

The FDIC once again did its Friday Night below-the-radar exercise; shutting down insolvent banks while Americans and their news media were in low gear or distracted. This time, five more banks were shuttered, while the U.S. media overdosed on coverage of the wedding of the daughter of former president Bill Clinton.

With the FDIC closing of 5 banks in Oregon, Washington,  Florida and Georgia, the total for the first 7 months of 2010 stands at 108 failed institutions. This compares with a mere 69 at the same point last year. And 2009 was supposedly one of the worst years ever for bank closings in the United States since the Great Depression of the 1930s.

Despite claims by U.S. economic policymakers that the American banking crisis was “cured” by the U.S. Treasury and Federal Reserve bailouts of the nation’s financial industry, there is no doubt that FDIC bank closings will set a record in 2010, eclipsing the already dismal figures for 2009.

In my book, “Global Economic Forecast 2010-2015: Recession Into Depression,”  I project a severe deterioration in the U.S. banking sector during the latter part of 2011. The accelerating pace of FDIC bank closings, combined with the  continuing global economic crisis and  indications of a double dip recession, would seem to provide growing validation of my prediction.

U.S. Housing Market Remains in Deep Slump

June 17th, 2010 Comments off

The U.S. Commerce Department released figures for housing starts for May 2010, and they were far worse than projected by economists. They plunged 10%, representing a seasonally adjusted annual rate of 593,000 housing starts, versus  659,000 for April. The decline in single family dwelling starts was 17%, the worst contraction since 1991.

The minor uplift in housing starts over the past several months was due entirely to government funded tax credits, paid for with borrowed money. With these short-term gimmicks now being phased out, the organic weakness in the American housing market can no longer be obscured. It must be recalled that the trigger for the current global economic crisis was the collapse of the sub-prime residential housing market in the United States. With worsening public deficits forcing governments to phase out artificial props for a fractured housing industry, we are now seeing adjustable rate, near prime and prime mortgages going into default, not only in the U.S. but throughout the world. This will all serve to undermine what has thus far passed for an anaemic recovery from the worst economic downturn since the Great Depression of the 1930s.

George Soros: Global Financial System Has Disintegrated!

February 23rd, 2009 Comments off
At a recent private dinner held at Columbia University, two of the most high profile players on the global financial scene expressed opinions that are certain to arouse the most spine-tingling of chills. Currency speculator and billionaire investor George Soros said to his no doubt discomforted dinner colleagues that the world financial system has, in effect, “disintegrated.” He went on to relay his view that the resulting financial and economic turbulence was more severe than the levels experienced during the Great Depression.

“We witnessed the collapse of the financial system…it was placed on life support, and it’s still on life support. There’s no sign that we are anywhere near a bottom,” stated Mr. Soros with emphasis. Not to be outdone, fellow participant at this nifty dinner pow-wow at Columbia University, former Fed Chairman and current senior advisor to President Barack Obama, the illustrious Paul Volcker, added the morose observation that, “I don’t remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world.”

When men as astute and intimately connected to global finance as Paul Volcker and George Soros are openly talking about the Global Economic Crisis as being “worse than the Great Depression” and having brought about the “disintegration” of the global financial architecture, it is clear that the most dire forecasts for the global economy can no longer be treated as uninformed hyperbole. The most knowledgeable and well-connected financiers on the planet are already preaching the gospel of economic and financial Armageddon.

Soros has also written in the Huffington Post a reflection based on simple math that outlines why the Global Economic Crisis, at least in the United States, will have an economically destructive impact that eclipses the Great Depression. He points out that at the time of the stock market crash on Wall Street in 1929, outstanding credit represented 160% of the U.S. GDP; this figure grew to 260% in 1932 as GDP contracted. Soros, however, writes that America “…entered into the Crash of 2008 at 365 percent, which is bound to rise to 500 percent or more by the time the full effect is felt.”

How should we interpret the musings of Soros and Volcker? In my view, we ignore their informed observations at our peril. Their stated views are not uninformed speculation, but rather a reflection from those in the eye of the storm of this global economic tsunami. Furthermore, despite continued happy talk from the inept political actors across the globe, those who inhabit the rarefied world of high finance, observing the Global Economic Crisis unfold from the pinnacle of power, do not harbor in the least a hint of optimism-or illusion.

 

 

Global Depression Train Has Left The Station: Next Stop Worldwide Economic Catastrophe

February 8th, 2009 Comments off
At first, many politicians and key economists and financial “experts” refused to use the “R” for recession word, as the housing price collapse in the United States unleashed the eruption of the sub-prime mortgage asset bubble. One could look back at the utterances of former U.S. Treasury Secretary Hank Paulson and his collaborator, Fed Chairman Bernanke, of less than a year ago. Amid mounting indicators of impending systemic financial failure, they were still boasting that their “aggressive” tactics were containing the economic fallout resulting from the sub-prime implosion, ensuring not only the avoidance of a recession but the continuation of economic growth, albeit on a more modest scale. The Global Economic Crisis was the furthest thing from their collective minds. That was then. But this is now.
No longer is the recession terminology hidden; it is conceded in the highest circles as a global disaster, requiring unimagined sums of money to save the financial system while also saving jobs being eliminated by the global recession. However, as with the earlier denial on use of the recession terminology, there is an unwillingness to employ the “D” word for depression, as in a replication of the Great Depression of the 1930s.

It is not only those who were myopic a year ago that want to avoid talk of a depression, at all costs. Even the most prescient analysts and experts have held back on their vocabulary in defining the Global Economic Crisis. However, more and more credible economists and experts have begun describing our current economic catastrophe as a depression. The Economist magazine was one such authority, as was the most recent recipient for the Nobel Prize for economics, Paul Krugman.

Perhaps the most astute observer of the unfolding disaster resulting from the implosion of the U.S. housing bubble has been NYU economics professor Nouriel Roubini. A year ago, amid the happy talk being proffered by Hank Paulson and Ben Bernanke, he accurately warned of the systemic financial collapse that would ensue in short order, unless urgent, coordinated steps of global intervention were swiftly undertaken. History vindicated the judgement of Roubini, while also applying to him the moniker of “Dr. Doom.”

As clear-cut as Nouriel Roubini has been in assessing the Global Economic Crisis, even he has been reluctant to use the “D” word. Now, however, he is warning that the worldwide economic crisis will get much worse, and in the absence of effective global intervention that is coherent and synchronized, a “near depression” was a serious possibility. His most recent warning comes in conjunction with his current assessment of the losses he projects for the global financial system due to “toxic assets,” in the range of $3.6 trillion. His conclusion is chilling in the extreme: the banking system in the U.S. is effectively insolvent.

Added to the mounting evidence of banking insolvency, not only in the United States but other major economies, in particular the U.K., are the horrendous unemployment numbers. The U.S. Labor Department has released its statistics on job losses for January of this year, indicating that another 600,000 Americans joined the ranks of the unemployed. This translates into an official unemployment rate of 7.6%. However, in reality, the situation is far worse than those numbers indicate. In the first place, the Labor Department’s monthly reports are never complete, owing to lagging tabulations from small firms and businesses. This is reflected in that the current report revised substantially higher the unemployment numbers for November and December of 2008. In all probability, more than 700,000 Americans were terminated in January, with every indication that this trend will continue far into 2009. In addition, the official unemployment rate, since the 1960s, subtracts “discouraged” workers, meaning the permanently unemployed, as well as part-time workers unable to find full-time employment. If these numbers are added into the unemployment figure, it exceeds 14%.

At its worst level, the unemployment rate in the U.S. during the Great Depression stood at 25%. After the advent of the New Deal of President Franklin Roosevelt, it temporally declined to near 10%, but then rose to a much higher level, reaching the range of 16-17% prior World War II. Accordingly, a true current unemployment rate of 14% is within the levels experienced by the United States during the 1930s. Factor in the structural insolvency of the American banking sector, the rampant demand destruction infecting the global economy and other catastrophic asset bubbles set to burst during the next several months, and it becomes clear that the United States and the rest of the world have now entered a dark economic territory that can no longer be defined as merely a recession.

The Global Economic Crisis has now achieved levels of economic contraction in all major indices that can only be described as a depression of worldwide dimensions. The global depression train has left the station, and will bring a level of economic and financial carnage to every corner of our world on a scale so staggering, it would have been unimaginable to even the most sober pessimists-until recently.

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com