NEOLIBERALISM

Intelligence study projects more Mexican violence, less-dominant U.S.

Phoenix Business Journal - by Mike Sunnucks

A new intelligence study looking at the next 16 years warns of continued violence in Mexico, global stresses over nuclear capabilities, oil and water supplies, a greater likelihood for nuclear or biochemical terrorist attacks, and projects a less-dominant U.S. economically and politically with China, India and Russia rising,The U.S. National Intelligence Council’s Global Trends 2025 report worries that economic growth will moderate and organized crime and corruption will dog Latin American economies, including Mexico.Northern Mexico border cities, including Nogales and Tijuana, are struggling now with drug cartel-related violence. Those cartels transport drugs into the U.S. via Arizona and other border states and buy guns in U.S. cities like Phoenix. There are worries that continued violence and corruption in Mexico could spill over to the U.S. border states, discourage economic development and induce more migrant workers to enter the U.S.The NIC reports also projects a less-dominant U.S. economically and politically by 2025 with “state capitalism” economic models such as those employed in China and Russia emerging as possible rivals to Western models of market economies and liberal democracies. Chinese, Russian, Persian Gulf and Middle Eastern economic models involve state partnerships with corporations, state ownership of wealth and businesses and less democracy than Western countries.China is Arizona’s third-largest export market and Phoenix corporate and political leaders have sought to increase investment ties with the Gulf state of Dubai.The intelligence projections also cite worries about how to deal with energy needs, water supplies, confrontations over key resources and expanded availability of nuclear weapons.Water supplies, solar and nuclear energy are long-term challenges and opportunities for Arizona. Arizona’s economy is also increasingly tied to international trade, especially with neighboring Mexico and the global semiconductor supply chain.

2009: Now for the Hard Part

Posted by Peggy Drexler, Huffington Post

AlterNet

Is the glass half empty, half full -- or did somebody take the glass and smash it against the wall? In times like these, optimism is a decision.

The end of 2008 was a time of "shock and awe." We are stumbling into 2009 dazed, confused and more than a little afraid.
The shock will wear off. Then, we are going to find out who we are, or perhaps what we have become.
We've taken hard hits in the past, picked up the pieces, and started to rebuild. This time the hit is going to be a long and painful unwinding of decades of bad habits, bad leadership and bad mistakes by those we assumed had a base level of competence and responsibility.
We can bewail and blame. But we can't change the next 12 months. By all accounts, we're strapped in for a very rough outing.
How we get through it is going to be a matter of fortitude and attitude. Pick your position. Is the glass half empty, half full -- or did somebody take the glass and smash it against the wall? In times like these, optimism is a decision.

Our historic resiliency may have atrophied in the soothing soak of good times. We are twice removed from the "greatest generation". After Vietnam and aside from a few short-term financial scrapes, the baby boom has had a sweet ride. While the advantages were certainly not evenly distributed, boomers have generally lived well, stayed healthy and had a pretty good time.
Our children's' generation had all that, plus they were raised in the warmth of our obsessive concern for their happiness and self-image -- a generation where, win or lose, everybody gets a trophy.
And now this.
It's said that the key to happiness is the ability to look reality in the eye, and deny it. Happiness, maybe. But not the ability to step up to one of the toughest times in our history. We can't deny the reality of a country that has been shaken to its very identity.
Will families become stronger, or will they begin to crack under the strain? Will new values emerge, or will the ones that got us in trouble simply be put on hold? Will square footage, portfolio growth and other past measure of success be replaced by things more lasting and spiritual? Will we reach out to those who are hurt the most, or will we spend our time making sure we are among those who are hurt the least? Will a country of special interests sacrifice for the greater good, or will we see a domestic protectionism that hobbles real solutions?
These questions and more will be answered in a year of both trial and illumination - a year unlike any in memory.

Krugman: We're in for a Year of 'Economic Hell'

By Paul Krugman, The New York Times.

AlterNet

Whatever the new administration does, we're in for months, perhaps even a year, of economic hell. After that, things should get better.

Whatever the new administration does, we're in for months, perhaps even a year, of economic hell. After that, things should get better, as President Obama's stimulus plan -- O.K., I'm told that the politically correct term is now "economic recovery plan" -- begins to gain traction. Late next year the economy should begin to stabilize, and I'm fairly optimistic about 2010.
But what comes after that? Right now everyone is talking about, say, two years of economic stimulus -- which makes sense as a planning horizon. Too much of the economic commentary I've been reading seems to assume, however, that that's really all we'll need -- that once a burst of deficit spending turns the economy around we can quickly go back to business as usual.
In fact, however, things can't just go back to the way they were before the current crisis. And I hope the Obama people understand that.
The prosperity of a few years ago, such as it was -- profits were terrific, wages not so much -- depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks. And since the housing bubble isn't coming back, the spending that sustained the economy in the pre-crisis years isn't coming back either.
To be more specific: the severe housing slump we're experiencing now will end eventually, but the immense Bush-era housing boom won't be repeated. Consumers will eventually regain some of their confidence, but they won't spend the way they did in 2005-2007, when many people were using their houses as ATMs, and the savings rate dropped nearly to zero.
So what will support the economy if cautious consumers and humbled homebuilders aren't up to the job?
A few months ago a headline in the satirical newspaper The Onion, on point as always, offered one possible answer: "Recession-Plagued Nation Demands New Bubble to Invest In." Something new could come along to fuel private demand, perhaps by generating a boom in business investment.
But this boom would have to be enormous, raising business investment to a historically unprecedented percentage of G.D.P., to fill the hole left by the consumer and housing pullback. While that could happen, it doesn't seem like something to count on.
A more plausible route to sustained recovery would be a drastic reduction in the U.S. trade deficit, which soared at the same time the housing bubble was inflating. By selling more to other countries and spending more of our own income on U.S.-produced goods, we could get to full employment without a boom in either consumption or investment spending.
But it will probably be a long time before the trade deficit comes down enough to make up for the bursting of the housing bubble. For one thing, export growth, after several good years, has stalled, partly because nervous international investors, rushing into assets they still consider safe, have driven the dollar up against other currencies -- making U.S. production much less cost-competitive.
Furthermore, even if the dollar falls again, where will the capacity for a surge in exports and import-competing production come from? Despite rising trade in services, most world trade is still in goods, especially manufactured goods -- and the U.S. manufacturing sector, after years of neglect in favor of real estate and the financial industry, has a lot of catching up to do.
Anyway, the rest of the world may not be ready to handle a drastically smaller U.S. trade deficit. As my colleague Tom Friedman recently pointed out, much of China's economy in particular is built around exporting to America, and will have a hard time switching to other occupations.
In short, getting to the point where our economy can thrive without fiscal support may be a difficult, drawn-out process. And as I said, I hope the Obama team understands that.
Right now, with the economy in free fall and everyone terrified of Great Depression 2.0, opponents of a strong federal response are having a hard time finding support. John Boehner, the House Republican leader, has been reduced to using his Web site to seek "credentialed American economists" willing to add their names to a list of "stimulus spending skeptics."
But once the economy has perked up a bit, there will be a lot of pressure on the new administration to pull back, to throw away the economy's crutches. And if the administration gives in to that pressure too soon, the result could be a repeat of the mistake F.D.R. made in 1937 -- the year he slashed spending, raised taxes and helped plunge the United States into a serious recession.
The point is that it may take a lot longer than many people think before the U.S. economy is ready to live without bubbles. And until then, the economy is going to need a lot of government help.

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Did America Get Punk'd on the Bailout?

Did America Get Punk'd on the Bailout?
By David Sirota, Campaign for America's Future.

AlterNet

The answer is yes ... now here's what to do about it.

Editor's note: David Sirota appeared on Rachel Maddow's MSNBC show on Dec. 16 to discuss the bailout. You can watch the clip at the end of the article.

When I went on Rachel Maddow's show on Tuesday, she asked a question about the bailout that is really the question of our time: Did we get punk'd? As progressive bailout critics have been saying since the current Wall Street bailout was first proposed, the answer is yes.
As the Minneapolis Federal Reserve reports, the major claims about a credit crisis that justified Congress cutting a trillion-dollar blank check to Wall Street were demonstrably false. And new data and reports show they remain demonstrably false.
For instance, take a look at line 1 and line 5 of this December Federal Reserve report on bank lending. That's right -- you see no significant decrease in lending, and in some cases, an increase. Interbank lending has dropped some, but certainly not at the crisis levels the Bush administration and banks claimed.
Then take a look at this story from Reuters, recounting a big report from a widely respected financial analysis firm:

"The credit crunch is not nearly as severe as the U.S. authorities appear to believe, and public data actually suggest world credit markets are functioning remarkably well, a report [from Celent consulting] released on Thursday says. ... The report, much of which is based on U.S. Federal Reserve data, challenges a long list of assumptions one by one, arguing that there is indeed a financial crisis but that, on aggregate, the problems of a few are by no means those of the many when it comes to obtaining credit.
"It is startling that many of (Federal Reserve) Chairman (Ben) Bernanke and (Treasury) Secretary (Henry) Paulson's remarks are not supported or are flatly contradicted by the data provided by the very organizations they lead," said the report.
Regarding U.S. business access to credit, the report says: Overall U.S. bank lending is at its highest level ever; U.S. commercial bank lending is at record highs and growing particularly fast since May 2007; corporate bond issuance has declined, but increased commercial lending has compensated for this; [interbank] lending hit its highest level ever in September 2008 and remained high in October and that overall interbank lending is up 22 percent; the cost of interbank lending ... dropped to its lowest level ever in early November and remains at very low levels; [consumer credit] was at a record high in September; and local government bond issuance had continued at similar levels to those before the credit crisis, while bank lending for real estate reached a record level in October 2008, it says. (emphasis added)

Then there's this from the Wall Street Journal looking at a new study by the National Federation of Independent Business:

The report found that among small businesses "no 'credit crunch' has appeared to date beyond the normal cyclical tightening of credit." The NFIB found that worries about interest rates and financing were a concern to only 3 percent of respondents. ... By and large, the story of the NFIB report was that if credit is going untapped, it's largely because company operators are not choosing to pursue the credit. It's not that companies can't get the extra money, it's that they don't want or need it because of the broader slowdown in economic activity. (emphasis added)

That last point is the big one: The real crisis is in the real economy -- ya know, the real world of jobs, wages, health care premiums and pensions that Washington has totally ignored as it keeps writing checks to its well-heeled campaign contributors on Wall Street under the guise of a lending crisis. Adding insult to injury is the last thing I discussed with Rachel -- the fact that because the bailout money came with almost no strings attached, the financial-industry recipients of the taxpayer largesse are either hoarding the money, using it to pay shareholder dividends and executive bonuses, or devoting it to efforts to buy up smaller competitors.

To read more HERE.