Amy Goodman: Recession....but is it possible the US economy is in even deeper financial straits?

[marmar]

from Democracy Now!:



“Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism”
Renowned political analyst Kevin Phillips argues successive administrations have imperiled the US economy by a combination of shortsighted policies and a trend against regulation. These include unparalleled credit card debts, the expansion of financial industries such as hedge funds, ballooning national debts, and deliberately altering statistics like inflation and unemployment to mask the accurate picture.

Guest:

Kevin Phillips, author of Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism.


AMY GOODMAN: We turn now to this nation’s economy. With the collapse of the housing market and the rise in oil prices, much attention has been paid to the question of whether the US is in a recession. But is it possible the nation’s economic well-being is in even deeper financial straits?

A new book by the renowned political analyst Kevin Phillips argues it is. Phillips says successive administrations have imperiled the US by a combination of shortsighted policies and a trend against regulation. These include unparalleled credit card debts, the expansion of financial industries such as hedge funds, ballooning national debts, and deliberately altering statistics like inflation and unemployment to mask the accurate picture.

A generation ago, Kevin Phillips wrote The Emerging Republican Majority, which Newsweek described as the “political bible of the Nixon administration.” Throughout the ’70s and ’80s Kevin Phillips was viewed as one of the GOP’s top theoreticians and electoral analysts. But today he’s considered one of the leading critics of US political culture.

Kevin Phillips’s latest book is Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism. It’s the fourteenth volume in his series of reflections on US political culture, following his bestseller American Theocracy. Kevin Phillips joins us now from Houston, Texas.

We welcome you to Democracy Now!, Kevin.


KEVIN PHILLIPS: Nice to be with you, Amy.

AMY GOODMAN: It’s good to have you with us. I know that you’re on a grueling road tour, but tell us, what is “bad money”?

KEVIN PHILLIPS: Well, “bad money” is sort of like “bad dog,” bad Wall Street, misbehaving finance. On the other hand, if you’re somebody who’s tried to travel in Europe recently and you know what you get when you turn in greenbacks, you can think of “bad money” as also a shorthand for the purchasing power of the dollar. We have an economy that’s eroding in lots of ways Americans don’t really fully understand yet.

AMY GOODMAN: What do you think is one of the most serious signs of this overall global crisis of American capitalism?

KEVIN PHILLIPS: Well, not to single out just one, I have an approach I use to say that normally when a country is—United States is—heading into a recession, there are one or two, sometimes three, factors that you worry about. But at this point in time, the American economy, you can think of it as being kind of in a shark tank, and there are like six or seven sharks, and you don’t usually see anything like that number.

And just to skim the list quickly, we have a financialized economy in which we don’t make much anymore, and finance is up to 20 to 21 percent of the US GDP, and manufacturing down to 12. Finance dominates the US economy.

The second problem is that we have massive debt, both public and private. It’s gone up about 700 percent since the early 1980s, staggering numbers where there—we basically have $50 trillion worth of credit market debt, which is tradable debt. And people just have no idea of this. It’s not government debts that’s the problem, it’s private sector debt, both financial and corporate and then in the consumer sector with credit cards and then mortgage debt. We just have this extraordinary level of it. 340 percent of the gross domestic product, that’s how big debt is. And the last time something was close to this—and it was less—was in the late 1920s and early 1930s. So it’s enormously a vulnerable, dangerous thing.

Third shark in the tank is the collapse of home prices. They continue to follow the scary trajectory that has people predicting that there’s going to be a 15 to 20 percent decline in home prices, which would be the sharpest since the Great Depression.

Then you can go to shark number four, that’s global commodity inflation. Oil and food, people are as worried now about the price of milk as they are about the price of a gallon of gasoline. That’s a global problem, but it makes a mockery of the administration’s pretense that there’s no inflation.

The fifth shark is, frankly, lousy economic statistics. I don’t think the average American should believe either the inflation numbers, the GDP numbers or the unemployment numbers. And there’s a lot of complexity and technical terminology involved here, but the long and the short is that over thirty to forty years, we’ve seen a kind of Pollyanna Creep, and administrations of both parties have done this. They want the figures to be friendlier, not to get them in trouble. And we’re at a point now where the figures lie enough that foreign investors are starting not to believe them and, I think, with considerable justice.

Now, the next shark in the tank is obviously the price of oil. And it’s not just global commodity inflation, it’s the problem that we see of oil production peaking in the world sometime in the next ten to twenty years. And the advance signs of this are scarcity in peaking in certain countries. And the prediction just came out of Goldman Sachs a couple of days ago that within a fairly short period of time, probably this year, you’re going to see $150 or $200 oil.

And that’s because, partly at least, of the scarcity, but the US dollar has been tied historically since the 1970s to oil, because of a deal worked out when OPEC wanted a price increase. Henry Kissinger and others were involved in getting OPEC to commit that they would sell and buy oil only in dollars and that they would invest their petrodollars in the US, in Treasury debt. So we have a currency that’s profited from the connection to oil, which sustained it in many ways. But now oil has boomeranged on the United States.

We have to spend $400 billion a year to import the oil we need. We don’t have the basis for controlling oil anymore, after the idiocy in Iraq, which was partly put in motion to solve the oil problem, and instead you’ve got oil prices going up 500 percent in five years. So the dollar is on the ropes, and that’s the other shark in the tank.

There has never been a period in anybody’s memory, except very old people who remember the late ’20s and ’30s, where you had so many things converging. And that’s what makes it frightening. And every time the administration says it looks like it’s under control or it’s half-over, you start to get evidence that, no, it’s not under control, and maybe it’s not even a third over. ......(more)

The complete piece is at: http://www.democracynow.org/2008/5/6/bad_money_reckless_finance_failed_politics

[NMDemDist2]

1. ooo good! I have Amy on the DVR, I watch every night before I go to bed

this sounds like an excellent one!

[lonestarnot]

2. 8 years of piglicons has done us in under and out without a doubt.

[PDJane]

3. Yes.

[aint_no_life_nowhere]

4. For a GOP guru to write about the global crisis of American capitalism

and about how much the economic statistics are being fudged by our government for political purposes, you know things are really heading in a very troubling direction.

[sandyd921]

5. Sure hope that whoever ends up in the White House

is prepared to be the new Roosevelt of our times and that the new Dem majority in Congress also do what needs to be done to bring us out of this. If not, we, our children, and our grandchildren will not have much of a future to look to. When you combine this with global climate catastrophe, it doesn't look good for us and our progeny. I can only hope that there is wisdom and steady hands at the helm to guide us through the storms to come.