“It’s The Economy, Stupid” (175 views before July 5)

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For those who may not remember, "It's The Economy, Stupid" was a constant reminder pasted by Bill Clinton to his shaving mirror for his entire 8 years in office.

Suggested reading = “Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism” by Kevin Phillips, author of 12 best-selling books on American politics, a regular contributor to the Los Angeles Times and National Public Radio, and a political analyst for PBS’ NOW with Bill Moyers.

Published 4/15/2008 and available from your local library or Amazon.com for $17.13 new ($11.50 used) + shipping.
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Pat
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“It’s The Economy, Stupid” (175 views before July 5)

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Editorial Note = Suggested by Pat 3/28/2008 (175 views before being brought forward from the July-Topics/Historical section which appears below on this bulletin board)

Book = Kevin Phillips – “Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism” – 4/15/2008

Kevin Phillips, author of 12 best-selling books on American politics, is a regular contributor to the Los Angeles Times and National Public Radio, and a political analyst for PBS’ NOW with Bill Moyers.

Pat’s original recommendation follows ver batim.

Pat’s original recommendation did not contain a book recommendation. However, as if on cue, Kevin Phillips new book was published two weeks later!!! The NY Times Book Review of Phillips’ book appears below immediately following Pat’s original recommendation.
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Pat’s original recommendation =

"It's The Economy, Stupid"
by Pat on Fri Mar 28, 2008 12:59 pm

This was President Bill Clinton's favorite saying, which he pasted to his shaving mirror for the entire 8 years he was in the White House. Because he firmly believed that the public deeply cares about the economy and virtually nothing else!!!

So why is it NOT surprising that the economy as a political issue, has pushed its way to center stage in the Presidential election???

Accordingly, although it is a very difficult technical subject and has almost too many facets to consider, it strikes me that we should try to grapple with as much of it as we can chew.

I will post momentarily the transcript from last Sunday's "Meet the Press" when Tim Russert interviewed two of the most knowledgeable women on the subject in a wonderful discussion that covers quite a bit and does so in an easily understandable fashion.

Editorial Note:

Tim Russert greets the two women as "ladies"!!! Which might be considered to be insulting by feminists who haven't read Russert's autobiography entitled "Big Russ and Me: Father and Son: Lessons of Life." "Big Russ" was Tim's father and spent his working years as a garbageman. Since the autobiography describes how Tim spent his college summers as a garbageman, one could choose to view his form of salutation as charming and excusable!!!

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Maria Bartiromo/Closing Bell & Erin Burnett/Street Signs
by Pat on Fri Mar 28, 2008 1:04 pm
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Two CNBC Financial-Program Anchors discuss the economy.
"Meet the Press" Transcript
March 23, 2008

MR. TIM RUSSERT: Our issues this Sunday: The Federal Reserve cuts interest rates again. But Wall Street and Main Street are still nervous about talk of recession, bankruptcy, bailouts and more. What now? With us, the anchor of CNBC's "Closing Bell," Maria Bartiromo and the anchor of CNBC's "Street Signs," Erin Burnett.

Then, the candidates talk about race, gender, Iraq and delegates. Insights and analysis from the editor of Newsweek magazine, Jon Meacham; columnist for The Wall Street Journal Peggy Noonan; columnist for The Washington Post Eugene Robinson; and political director of NBC News Chuck Todd.

But first, investors and consumers hold their breath as our economy continues on a very rocky ride. What is the biggest worry, the biggest challenge we face? Here to put it all in perspective in a meaningful and understandable way, Maria Bartiromo and Erin Burnett, both from CNBC.

Ladies, welcome both.

MS. MARIA BARTIROMO: Hi there, Tim.

MR. RUSSERT: Maria, let me start with you. What is our biggest challenge economically?

MS. BARTIROMO: Well, our biggest challenge economically right now is the tight credit environment. From an individual standpoint, it is very tough to get a mortgage, it is very tough to borrow money anymore. From a business standpoint, the same thing. I would say one of the key representations of what's happening right now is what happened at Carlyle Capital. Very simple stuff, Tim. They had $600 million in assets, they borrowed $22 billion. Doesn't work out. The math just doesn't work. And that's exactly what's happening. People have overextended themselves, businesses as well as consumers, and now we're paying the price. So the most important issue right now is not a recession, it is the fact that we have an extremely tight credit environment.

MR. RUSSERT: Is it going to loosen up in the foreseeable future?

MS. ERIN BURNETT: Well, that is, of course, the--well, let's call it the $14 trillion question, since that's the size of the U.S. economy. I think, to Maria's point, not immediately. It's going to be a long, tough road. And that's why the Fed has pulled out all the stops. And one of the analogies that I came up with was think about the credit problem like a tumor. It--and they--right now they are throwing everything at it. They're doing chemotherapy, they're doing medicines that have never been tried, they're trying the holistic approach. They're just figuring just throw the kitchen sink at it and hope that that will make things get better, interest rates go down, people start borrowing and lending again. But it's going to take time, because what you're dealing with here is a huge erosion of trust. Banks don't trust the people who are borrowing, borrowers don't trust the banks. And without that key ingredient, you're not going to start having people lend again.

MR. RUSSERT: Many people watching, Maria, saw Bear Stearns, a venerable institution, practically go under. Should consumers be worried about other banks, other houses being in financial trouble?

MS. BARTIROMO: I think the strain on financial services right now is very significant. I would be hard-pressed to sit here and say we won't see another failure. Look, Bear Stearns went for such a low valuation because it literally was going out of business. The, the, the, the alternative was bankruptcy or having this acquisition at such a low valuation. Yes, banks right now are teetering. Some of them are certainly teetering. That's why the Federal Reserve is doing all of these extraordinary actions. Last week, you cannot underline enough, important enough what the Fed did by opening up the so-called discount window to investment banks. Typically, that window is only available to commercial banks who have an enormous asset base. You know, when you're an investment bank and you don't have that asset base, that permanence of funding is very difficult. You are relying on the markets in terms of funding. That's why opening the discount window was really critical. I do think that this is cyclical, this too will pass. We have several more months of probably upset ahead of us in terms of writedowns and losses from the banks. But, at some point, you are going to see a loosening up of this, given all of the stimulus that's coming out of, out of the Fed and, and the government.

MR. RUSSERT: Here's the latest NBC News/Wall Street Journal poll. "Compared to four years ago, are you better off or are you worse off?" Forty-three percent of Americans say they're worse off, that's the highest since 1992. Here's the cover of BusinessWeek magazine, "Reluctant Revolutionary: Where is Bernanke Taking Us?"

On the street, Erin, what are people saying about the Federal Reserve chairman? Is he doing enough? Is he up to the task?

MS. BURNETT: We asked that question to a lot of people and, and the answers that you get on and off the record actually pretty consistent right now. Most people say, "I wouldn't want that job for any amount of money." I mean, Ben Bernanke is in an incredibly difficult situation. However, I think most CEOs would say he's, he's now doing the right thing. He has come out, basically, like I said, "I'm going throw the kitchen sink at this problem. We, we want to try to get through this crisis." Now, I think one thing that we need to watch for very carefully, and this is why he's stuck between a rock and a hard place, is he's throwing the kitchen sink at the credit problem, but what that's doing is flooding the economy with money. And maybe you don't see that money now, because we keep talking about the vise that's on the lending problem, but over the next six months or twelve months, that money is going to flood into the system. And that's where you might start to see a big inflation problem, and some people are critical of Ben Bernanke, because they think that's what he's creating, a big inflation cycle. That's a big question mark out there, and that might be the demon that we're dealing with in a year.

MS. BARTIROMO: I really don't think you can blame Ben Bernanke for this, Tim. You know, I think that he is, as Erin said, throwing the kitchen sink, doing a lot at this point. And remember, he--he's a new chairman. You know, so what was put in place before he was actually in the--in, in this role has, has set us up for this. I actually think he's doing a good job. And sure, you know, maybe they needed to watch to see how steep things really got before they actually got very aggressive. But they're certainly aggressive now.


MR. RUSSERT: What are people on Wall Street telling you? How nervous are they about what they're seeing?

MS. BURNETT: The nervousness has increased. You know, last week, the Treasury secretary, when he was on the "Today" show, said to Matt Lauer, the economy was in sharp decline. That was a shift. We had seen the administration more publicly saying the fundamentals of the economy are strong. They're now, they're now saying, fundamentally over the long term, the economies are strong, that the fundamentals are strong. But things have changed a little bit, and CEOs are also more concerned. You know, one of the interviews that, that surprised me recently was several restaurant CEOs--you know, Little Caesars Pizza, Papa John's and Landry's. They own, say, the cafe--Rainforest Cafe, if you've ever seen that in a mall. And all of them said over the next 18 months they think things are going to be worse. And that surprised me, because just a few months ago, they were saying things were all right, or maybe we'll be through this in six months. The CEOs that deal on the ground with consumers every day are becoming much more negative about the longer term outlook. That has been significant over the past week.

MR. RUSSERT: Maria, you talked about the credit crunch, but you mentioned the word recession. Is there a consensus that we're in a recession?


MS. BARTIROMO: Probably. Look, Tim, it doesn't matter what you label it, right? A recession, sharp slowdown, the bottom line is we're all feeling it. Jobs have been cut, things have slowed down, we are certainly in a sharp slowdown. Whether it's a recession or not--we could be talking ourselves into a recession, by the way, because all of the headlines and all of the negativity out there...

MS. BURNETT: Yeah. That's right.

MS. BARTIROMO: ...you know, will push us to, to pull in our horns and, and spend less. So I think that it's--that was sort of last quarter's conversation, and now we're talking about, you know, when this will end and whether or not the markets turn off before the recession. I'm actually a lot more positive than, than many people out there. Having said that, you asked the question, how are people on Wall Street feeling? Nervous. It's tough, OK? It's tough out there. I had the CFO of Lehman on the other day, Erin Callan, and she said, "Maria, this is the toughest I've seen it or anybody who is in the business has seen it for 40 years, like my CEO Dick Fuld." So it's very tough, and yes, it could be a recession. By the way, we may know more next week when we get the GDP report out on Thursday. If we see negative growth--because we know that the definition of a recession is two quarters of negative growth. We haven't seen that yet. So we don't know that it's a recession. But as far as I'm concerned, it doesn't matter. It doesn't matter what you call it. This is--this is real...

MS. BURNETT: Right, it's semantic.

MS. BARTIROMO: ...and it's a slowdown.

MR. RUSSERT: Does anyone talk privately of calamity? A real meltdown?

MS. BURNETT: Some people do. There are some, some--one you know, Marc Faber, he edits The Gloom, Doom and Boom report.

MS. BARTIROMO: Oh god.

MS. BURNETT: Yeah, right? All right, there are those out there who will always entertain the Armageddon, cataclysmic scenario. But it appears, from what the Fed did this week, and I think, you know, Maria was right when she said you can't underestimate the significance of what they did with Bear Stearns and with that discount window that the central banks of the world right now do not want that, and they will do anything to prevent it, and they have the full faith of their governments behind them, and they have the one thing that people may not realize. They can print money. They can print money out of it. And again, that creates problems down the road, but they will do whatever it takes, I believe, at this point to avoid that Armageddon-like situation.

MR. RUSSERT: An investor, with his portfolio, her portfolio, watching today, what should they be thinking, Maria?

MS. BARTIROMO: Well, it's always a good time to reassess where your money is. If you have money in a bank, in a CD, you are insured. The FDIC is insuring that money. You are fine. I don't think you want to look at what's happening right now and have any knee-jerk reactions. I think you want to save, invest wisely for the long term. Long term means five, 10, 15, 20 years and beyond. But it's always a good time to say to yourself, "Well, is my money in an institution that I think is shaky?" Is my money in, in an area where, you know, we could see a reversal of fortune? And you want to be diversified. I think so long as you're diversified and you have--you know, I call it the three buckets, putting your money. Number one bucket, simple savings account. You're not going to get a great yield, but you know it's safe if life throws you a curve ball. Number two, 401(k), you must have money for retirement. And number three, you need to have some money in the bucket of stocks because virtually every asset class will be exceeded by the performance of stocks over the long term.

So I would not be, you know, getting, getting so, you know, knee-jerk reaction and, and nervous over this. Yes, we're in a downturn, for sure, but everything is cyclical. This too will pass. By the way, you asked if people are calling this, you know, a calamity. Alan Greenspan in an op-ed just last week said that this is the worst since World War II. So yes, people are certainly nervous about it.

MR. RUSSERT: I'm not asking you to be political predictors, but there is an election in November.

MS. BARTIROMO: Mm-hmm.

MR. RUSSERT: Based on your reporting, do you think the economic downturn lasts through November and goes into '09?

MS. BURNETT: That is a great question. Right now the consensus forecast, which would include the administration, is that in the second half of this year things turn around. The economy is once again growing, the administration now projects we could have half a million jobs created over that timeframe. Many people are more skeptical, and, and it would appear from talking to CEOs in many industries--not just the restaurants, as I mentioned, or even Lehman Brothers, that it will last through the rest of the year. But I think one crucial thing to remember is the market often looks ahead. And when the market recognizes there's a recession, historically one year after that the market's up 15, 16 percent. So you might make money in the market, but as for the overall economy, what voters are going to be dealing with in November, it will likely be an economy that is still in a recession or very close to it.

MR. RUSSERT: The psychology, so important. I remember in 1992, the economy grew in the fourth quarter some 4.7 percent, but the perception on Election Day was, "We're in bad economic times."

MS. BURNETT: Yeah, mm-hmm.

MS. BARTIROMO: Well, I think that, you know, we are in a slow period, and it will go into the second half, but you have to believe that all of this stimulus will take effect at some point. In May we'll get those checks from the government, the fiscal stimulus package. Rates keep coming down. You know, the, the banks are seeing an ease up by this liquidity from the Fed. I, I suspect that by the second half of the year we see a little ease up. But most people are predicting that the--this does go into '09, actually. I think, though, the market will obviously trade up a lot sooner than that.

MR. RUSSERT: Final thoughts?

MS. BURNETT: One positive thing out there. Everyone talks about the weak dollar as a sign of weakness in the U.S. economy. Big picture, you can't really disagree with that, Tim, but when you look at it day to day, the weak dollar has been stimulating the one part of this economy that's still growing--exports. It's cheap for everyone that lives everywhere else in the world to buy American-made products. So about 12 percent of our economy is exports, and it is booming. And it's cheaper here right now for other companies, so BMW's opening plants in the United States, Honda's opening plants in the United States and creating jobs. So the weak dollar, the weak economy is creating an opportunity in and of itself.

MR. RUSSERT: Final thoughts?

MS. BARTIROMO: Well, the situation at Bear Stearns is really a tragedy. Shareholders, employees, they're wiped out because of this $2-a-share bid. But oftentimes situations, events like this takeover of Bear Stearns often represent a bottom. I would not be surprised if we have seen the worst at this point in terms of hard, hard economic times.

MR. RUSSERT: To be continued. Thank you for your expertise, ladies.

MS. BURNETT: Good to see you, Tim.

MS. BARTIROMO: Thanks, Tim.

MR. RUSSERT: Good to have you here.

Coming next, Hillary Clinton, John McCain, Barack Obama. They speak out on race and gender, Iraq and more. Our roundtable is next. Jon Meacham, Peggy Noonan, Gene Robinson, Chuck Todd all coming up right here only on MEET THE PRESS.

(Announcements)

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NY Times Book Review – April 22, 2008

BOOKS OF THE TIMES; What Ails the American Economy? Everything, and There's Worse to Come

By BARRY GEWEN

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Barry Gewen is an editor at The New York Times Book Review.
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Correction: April 22, 2008, Tuesday The Books of The Times review on Monday, about ''Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism,'' by Kevin Phillips, misidentified the era of Britain's decline in which Mr. Phillips has seen parallels with the current situation in the United States. It was the early 20th century, not the early 19th century.
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At a time when the Cassandras of finance are looking like realists, there is no gloomier prophet than Kevin Phillips. The author of 13 previous books including at least one classic, ''The Emerging Republican Majority,'' Mr. Phillips sees a perfect economic storm coming. The final pages of his bleak new book, ''Bad Money,'' tell of an ''unprecedented'' number of Americans planning to leave the country or thinking about it. Readers of ''Bad Money'' may come away with a similar impulse to flee.

Mr. Phillips begins with an overview of the current debt debacle. The 1980s were the start of ''three profligate decades,'' when the expansion of mortgage credit and the invention of financial instruments like collateralized debt obligations (C.D.O.'s) led to an orgy of leveraging and irresponsible speculation. The Federal Reserve kept the bubble afloat with easy money, while regulators and ratings agencies looked the other way.

By 2007 total indebtedness was three times the size of the gross domestic product, a ratio that surpassed the record set in the years of the Great Depression. From 2001 to 2007 alone, domestic financial debt grew to $14.5 trillion from $8.5 trillion, and home mortgage debt ballooned to almost $10 trillion from $4.9 trillion, an increase of 102 percent. A crisis in the mortgage market in August 2007 brought the party to an end. Since then we have been living in a twilight zone of what a security analyst quoted in the book calls ''one of the slowest-moving train wrecks we've seen.''

The second component of the perfect storm is the upheaval in the oil industry. Domestic production peaked in 1971, and there are signs that production worldwide is also peaking. (Mr. Phillips cites experts who believe it already has.) And with the emergence of new economic powers like China and India, demand has risen dramatically and prices have been climbing steadily; by 2004 a rapidly growing China had become the second largest oil consumer, after the United States. Despite the bad news at the gas pump, however, America has actually been getting a cost break, because the major suppliers price their oil in dollars. But with the dollar falling, OPEC has been talking about moving into other currencies. Were that to happen, ''the effects,'' Mr. Phillips says tersely, ''could be painful.''

Finally, Mr. Phillips turns to what he terms America's ''calcified'' political system. We may need new regulations to deal with the debt mess, along with an energy policy to address the changing world of oil, but Washington, he says, has become dedicated to ''the politics of evasion,'' reluctant to pass dramatic reforms or to call for sacrifice from the public. Democrats and Republicans alike are so entrenched, so dependent on campaign money and special interests, that ''the notion of a breath of fresh air has become almost a contradiction in terms.'' Instead of a ''vital center'' in Washington, we now have a ''venal center.'' Mr. Phillips holds out little hope of improvement from a new president; he doubts that any administration could do much, even though ''the crisis is no longer in the future, but upon us.''

Is such pessimism justified? Mr. Phillips says he is making no predictions, but that's not quite true. Throughout his book he tends to lean on the darkest analyses, though others might be less grim. And as readers of his earlier books know, he has a penchant for seeing parallels between the current situation in the United States and the declines of 17th-century Spain, the 18th-century Dutch Republic and early-20th-century Britain.


But historical comparisons are always dangerous playthings (remember all those foreign-policy analogies to Munich?): you necessarily have to cherry-pick eras and evidence from history's panorama. Perhaps there are similarities in the financial arrangements of monarchical Spain and democratic America, as Mr. Phillips says, but the differences between the two societies are far greater. It's hard not to feel that Mr. Phillips's argument has been shaped not only by his facts but also by his temperament.

Still, even if his pessimism doesn't seem wholly warranted, a sense of foreboding surely is, which is why his warnings have to be taken seriously. Mr. Phillips writes that the inventors and marketers of the new financial instruments didn't entirely understand them. An executive of Fidelity International says a panicky feeling has set in on Wall Street because no one knows where the risks really are. The finance minister of France observes that investments may have reached such a level of complexity that no one can assess them. And Charles R. Morris, in his own gloomy book, ''The Trillion Dollar Meltdown,'' reports that even Citigroup's chief financial officer ''did not know how to value his holdings.''

The screenwriter William Goldman once declared that in Hollywood ''nobody knows anything.'' When Wall Street begins to resemble the American Dream Factory, it's a safe bet that something has gone terribly wrong.

UtahOwl
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Re: “It’s The Economy, Stupid” (175 views before July 5)

Post by UtahOwl »

An excellent companion to the Phillips book is Paul Krugman's The Return of Depression Economics and the Crisis of 2008 - the "depression economics" analysis was first published 10 yrs ago, & he updated the book for our current disastrous financial mess. I also like to check in on his blog http://krugman.blogs.nytimes.com/.

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