Paul Krugman's view of the next 60 days is scaring the hell out of me.

[robertpaulsen]

Paul Krugman: The lame-duck economy
By Paul Krugman Published: November 21, 2008

PRINCETON, New Jersey: Everyone's talking about a new New Deal, for obvious reasons. In 2008, as in 1932, a long era of Republican political dominance came to an end in the face of an economic and financial crisis that, in voters' minds, both discredited the Republican Party's free-market ideology and undermined its claims of competence. And for those on the progressive side of the political spectrum here in the U.S., these are hopeful times.

There is, however, another and more disturbing parallel between 2008 and 1932 - namely, the emergence of a power vacuum at the height of the crisis. The interregnum of 1932-1933, the long stretch between the election and the actual transfer of power, was disastrous for the U.S. economy, at least in part because the outgoing administration had no credibility, the incoming administration had no authority and the ideological chasm between the two sides was too great to allow concerted action. And the same thing is happening now.

It's true that the interregnum will be shorter this time: FDR wasn't inaugurated until March; Barack Obama will move into the White House on Jan. 20. But crises move faster these days.

How much can go wrong in the two months before Obama takes the oath of office? The answer, unfortunately, is: A lot. Consider how much darker the economic picture has grown since the failure of Lehman Brothers, which took place just over two months ago. And the pace of deterioration seems to be accelerating.

more...

http://www.iht.com/articles/2008/11/21/opinion/edkrugman.php

Sounds like there is a strong possibility that bankruptcy for the Big Three may be imminent. I think Chapter 11 is a best case scenario; Chapter 7 is the scarier possibility.

[Idealism]

1. Chaper 11 won't happen unless

The government sends them a loan, because credit markets are still frozen. If they could've gotten a loan from a bank they wouldn't be begging the government for one. Chapter 11 is the least likely of two possibilities, but if either 11 or 7 happens, it means the end of our auto industry. People won't see any differance, bankruptcy is bankruptcy to them. What little sales any of the big three will have will drop off to virtually nothing over fears of voided warranties and dealership closings. Consumer confidence is already the lowest it has been since the 80s, this will make it worse, and when people fear a purchase they will not go through with it.

[phantom power]

2. There's a sort of irony here...

The fact that the GOP scam-economy finally collapsed under its own weight before the election was one major factor in helping Obama actually win the election.

But, it also means that the rubes who brought us this crisis are in charge until Jan 20, which means we have this perilous period of "leadership" that has nothing in it's intellectual arsenal for understanding or reacting to the crisis.

I'm trying very hard to be optimistic: Imagine if the economy had waited until, say, January to crash. We might be facing the same situation we're facing now, except that McCain might have been in charge for the next four years.

[bullwinkle428]

10. Bush is just thinking, "GOL-LEE...this house o' cards wasn't supposed

to collapse 'til I was outta office! Unka Dick, Unka Dick...Whadda I do now?"

[SammyWinstonJack]

16. Like he gives a rat's ass. He doesn't. He never did.

[rvablue]

3. This is exactly why I think all of the "Clinton drama" or "Clinton circus" on TV

right now is the Natalie Holloway or shark attacks of 2008.

Every little freakin' move that BO makes is watched. That is fine. He is going to be the next POTUS.

But why is not one single talking head on TV talking about how Bush is just sitting back and cruising until the end of his term.

He is still the President and the media are giving him yet another free pass.

I just don't get it anymore. And I really trust the word of Krugman...so yeah, this freaks me out, too.

[grasswire]

5. Tweety and Fineman spanked Bush the other night.

Tweety said "we are at the crossroad of hilarity and horror" in our national situation. They talked about how Bush has totally checked out and no one is in charge.

[rvablue]

11. Hadn't heard that...glad someone is saying it and I never

thought that I'd being looking to Tweety for a voice of reason.

[speedoo]

6. Bush is irrelevant. Has been since the financial disaster hit.

Should have been irrelevant and impeached years ago.

And the media knows it, just unwilling to admit it because they have been his bitch since 9/11.

[SpiralHawk]

8. You got it -- the corporate media Jump-the-shark Attack 2008

[Warpy]

4. He might have a point if this summer's stock crash

had happened in 2005 instead of this year. However, we're just in the beginning of what people faced for four long years of Hoover in 1929. This is why, even with the frustration and pain of the next 60 days, we have reason to hope this is a deep recession that won't progress to a full blown depression.

Had McCain been cheated into office, there would be no escape. We would repeat 1929-1933, something I think few of us in our right minds would ever consider a good thing.

As it is, a lot of people are going to be facing a huge hangover after a debt fueled party. They're going to be on the steep part of the learning curve of how to live within their means and it is not going to be pleasant. That it's absolutely necessary won't make much difference to them. A lot of people are going to be hurting.

I do share his frustration over the prolonged transition period this year. I think Stupid has been bored by the job for years and wishes it was all over. I think the only people spitting nails about not clinging to power are Norquist and the gaggle of televangelist types clinging to him.

This too shall pass. Anybody who's been constipated can tell him that.

[GliderGuider]

9. Today's low oil prices give a clue as to why a recovery is not assured.

I said this before, but it bears repeating:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4509004&mesg_id=4509225

The combination of low oil prices and the economic crisis have brought exploration and new production projects to a standstill. Right now the world is draining its existing stockpiles and using production from existing wells. As the stockpiles drain and the producing wells run dry the supply will fall, and prices will begin to rise again.

Then the real fun starts:

The combination of low oil prices and the economic crisis will have constrained exploration and new production, both of which have long lead times and high capital requirements. That means that there will be little new oil to replace the stuff we've burned while prices were low. As the economy tries to recover it needs more energy, and oil prices are low, so demand goes up. But there isn't enough supply to meet the renewed demand (supply constraints have by now gotten quite severe because we're already past the point of Peak Oil). The supply shortfall then causes a true super-spike in oil prices, which deals a body-blow to the struggling economic recovery.

What we may see is a series of spikes and drops in oil prices. The spike happens when demand outstrips supply, and the drop happens when the high prices knock the economy back onto the mat, thereby lowering demand. Then the low price re-stimulates demand, causing another bump into the supply limits, another price rise, another body blow to the economy, and a drop in oil prices and around and around it goes. Each time the price spikes higher and the subsequent price drop doesn't go down as far. We're at the very beginning of this scenario, because we just passed Peak Oil last year..

Of course, the combination low oil prices and the economic crisis that are constraining petroleum exploration and production are also preventing investment in renewables, so when TSHTF there will be no new new oil AND no significant alternatives. That's a recipe for $50/gallon gasoline within 10 years.

Our inability to capitalize renewables, along with the repeated spiking in oil prices due to supply constraints will make recovery from this depression a dubious proposition.

[Warpy]

12. Well, the whole dump in the Dow and commodities

was caused by hedge funds trying to pay off customers who wanted to cash out.

Another thing Roubini said was that a third of hedge funds would be gone. I think he was optimistic and I think the remaining ones will find themselves in business but heavily regulated out of naked and predatory shorting.

The spike in demand the author attributes to consumer demand was actually caused by hedge funds pumping and dumping.

[robertpaulsen]

15. Shhh...Quiet! Robert Hirsch doesn't want you to scare people!

Peak-a-boo, I don't see you?
Robert Hirsch suggests 'keeping relatively quiet' in near-term about peak oil
Posted by Joseph Romm

The WSJ blog reprints an incredibly dumb "You can't handle the truth!" memo from uber-peaker Robert Hirsch.

Yes, the author of the seminal 2005 study funded by the Bush Energy Department on "Peaking of World Oil Production" has written a memo "To The Peak Oil Community," recommending that group "minimize its effort to awaken the world to the near-term dangers of world oil supply."

Well, I'm not on that distribution list, so instead of endorsing Hirsch's inanity, I'll endorse his original conclusion:


The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.

http://gristmill.grist.org/story/2008/11/17/114045/52


Seriously, you did a great job spelling out a point that the recent IEA report, as far as I can tell, only refers to vaguely: we can't get to the oil! The IEA obfuscates the full story, but the end result is the same. That's the bad news. The good news is I think Obama gets it. In his 30 minute campaign commercial in the final weeks of October, he mentioned as part of his energy policy a word I haven't heard in a long time from a politician: conservation. He spelled out pretty clearly in the townhall debate that any energy policy would have to prioritize renewable energy over non-renewable; that while the economic crisis required immediate solutions, the energy crisis required long term solutions. I admire our President-elect (sure feels good to write that) and wish him the best. You have to stay flexible in a crisis like this.

[formercia]

17. The oil service corporations will make out.

A lot of producing wells will have to be mothballed until such time as the market improves. They make money no matter which direction the market goes. They're like brokerage houses are to stocks. They get a comission win or lose.

[depakid]

19. "a series of spikes and drops in oil prices."

I expect to see that pattern with other commodities, as well as currency exchange rates.

All in all, not an easy business climate for recovery.

[Gman]

7. yeah, well, that's the disaster the GOP has created in this country

and around the world. There's even more damage that can likely happen and there may not be anything anyone can do about it. Bush is lame duck so he doesn't care for ideological or his usual lazy reasons, nor will he allow anyone else to do something for likely the same reasons.

[ljm2002]

13. I think the political standoff is a big "F*** You from the Republics...

...as they give up their power in the White House and in both houses of Congress.

Note that their opposition to the Big 3 bailout is ideological in nature: first, it's a union-busting move, and second, as Krugman points out, they want the money to come from progressive programs for fuel efficiency standards.

Bastards. They don't care about the misery they cause, they want to impose their ideology regardless.

When Obama comes into office, he will inherit a financial mess and a recalcitrant opposition party. And we'll begin to see how much trouble a real opposition party can cause. They'll block progress at every turn, then when he and the Democrats are not successful in any way, the loudmouths in the corporate media will say there is no excuse because of their large majorities in Congress.

I hope Obama is ready to use the bully pulpit to good effect. Americans are mad, across the board. That may be the only way to get effective action.

[dreamnightwind]

18. I coimpletely agree. EOM.

[seafan]

14. Bush sits back for the next 60 days, surveying his vast dragon's treasure of abuse and neglect.

Today, Paul Krugman writes:

Everyone's talking about a new New Deal, for obvious reasons. In 2008, as in 1932, a long era of Republican political dominance came to an end in the face of an economic and financial crisis that, in voters' minds, both discredited the Republican Party's free-market ideology and undermined its claims of competence. ..... There is, however, another and more disturbing parallel between 2008 and 1932 - namely, the emergence of a power vacuum at the height of the crisis. The interregnum of 1932-1933, the long stretch between the election and the actual transfer of power, was disastrous for the U.S. economy, at least in part because the outgoing administration had no credibility, the incoming administration had no authority and the ideological chasm between the two sides was too great to allow concerted action. And the same thing is happening now.

.....

Yet economic policy, rather than responding to the threat, seems to have gone on vacation. In particular, panic has returned to the credit markets, yet no new rescue plan is in sight. On the contrary, Henry Paulson, the Treasury secretary, has announced that he won't even go back to Congress for the second half of the $700 billion already approved for financial bailouts. And financial aid for the beleaguered auto industry is being stalled by a political standoff.

How much should we worry about what looks like two months of policy drift? At minimum, the next two months will inflict serious pain on hundreds of thousands of Americans, who will lose their jobs, their homes, or both. What's really troubling, however, is the possibility that some of the damage being done right now will be irreversible. I'm concerned, in particular, about the two D's: deflation and Detroit.

About deflation: Japan's "lost decade" in the 1990s taught economists that it's very hard to get the economy moving once expectations of inflation get too low (it doesn't matter whether people literally expect prices to fall). Yet there's clear deflationary pressure on the U.S. economy right now, and every month that passes without signs of recovery increases the odds that we'll find ourselves stuck in a Japan-type trap for years.
About Detroit: There's now a real risk that, in the absence of quick federal aid, the Big Three automakers and their network of suppliers will be forced into liquidation - that is, forced to shut down, lay off all their workers and sell off their assets. And if that happens, it will be very hard to bring them back.

Now, maybe letting the auto companies die is the right decision, even though an auto industry collapse would be a huge blow to an already slumping economy. But it's a decision that should be taken carefully, with full consideration of the costs and benefits - not a decision taken by default, because of a political standoff between Democrats who want Paulson to use some of that $700 billion and a lame-duck administration that's trying to force Congress to divert funds from a fuel-efficiency program instead.

.....

Leadership from this White House? Bush has checked out.


George W. Bush, the vacuous, giggling murderer enjoys the spoils of the hell he has willfully created.

[BrklynLiberal]

20. The core of the problem is the INTENTIONALITY of the repukes, including

prez shit-for-brains, to do everything they can to plant landmines and timebombs that will be set to go off after they have left office. It is bad enough that things are in bad shape, but the repukes want to make them as bad as they possibly can.

[Up2Late]

21. Great Column, but did you see how many comments it brought at the NYTimes website? 576!!! So far!

The Lame-Duck Economy

So many they had to sort them out as "Editor's Picks!" I've never seen that before.

<http://www.nytimes.com/2008/11/21/opinion/21krugman.html?ex=1385010000&en=8f713128ccbbaf34&ei=5124&partner=facebook&exprod=facebook>

[TexasObserver]

22. Since over 90% of Chapter 11 filings end up in Chapter 7 liquidations ....

It's foolish to think Chapter 11 will fix the Big Three.