Wed Aug 6th, 2008 at 05:49:28 AM EST
Bill Engdahl is not everyone's cup of tea but this article in Asia Times is worth a read.
Paulson loses control
The real economy contracting rapidly
Behind the reassuring statements from Paulson and others that the "worst is over", the reality of the credit collapse since August 2007 is a deepening economic contraction which I have said several times in this space will surpass the Great Depression of the 1929-1938 period.
A good friend who is an unemployed homebuilder in a prosperous part of Arizona just sent me the following list of US department retail store closures. It is worth noting that over 70% of the US gross domestic product is consumer spending and that the entire Federal Reserve strategy of then chairman Alan Greenspan after the March 2000 collapse of the stock market bubble was to bring US interest rates to their lowest levels since the 1930s to stimulate consumer spending on credit (that is, debt) to avoid "recession". Note the scale of the following store closures across America in recent weeks:
# Ann Taylor - 117 stores nationwide.
# Eddie Bauer to close more stores after closing 27 stores in the first quarter.
# Cache, a women's retailer - 20 to 23 stores this year.
# Lane Bryant, Fashion Bug, Catherines -150 stores.
# Talbots, J Jill - Talbots will close all 78 of its kids and men's stores plus 22 that are a mix of Talbots women's and J Jill.
# Gap Inc - 85 stores.
# Foot Locker - 140 stores.
# Wickes Furniture is closing all of its stores after filing for bankruptcy protection.
# Levitz, a furniture retailer - 76 in December.
# Zales, Piercing Pagoda - 82 stores by July 31 followed by another 23.
# Disney Store owner has the right to close 98 stores.
# Home Depot - 15 outlets, affecting 1,300 employees. It is the first time the world's largest home improvement store chain has closed a flagship store.
# CompUSA - company closed.
# Macy's - 9.
# Movie Gallery, a video rental company - to close 400 of 3,500 Movie Gallery and Hollywood Video stores in addition to 520 closed last autumn.
# Pacific Sunwear - 153 Demo stores closing.
# Pep Boys, an auto parts supplier - 33.
# Sprint Nextel - 125, with 4,000 employees affected, following 5,000 layoffs last year.
# J C Penney, Lowe's and Office Depot - scaling back.
# Ethan Allen Interiors - 12 of 300 stores.
# Wilsons the Leather Experts - 158.
# Bombay Company - all 384 of its US-based stores.
# KB Toys - 356 stores as part of its bankruptcy reorganization.
# Dillard's - another six stores this year.
For anyone familiar with American shopping malls and retailing, this represents a staggering part of the daily economic life of the nation, from furniture stores to clothing to video rentals to leather. The process has only begun and neither major party presidential candidate has dared to mention this on-the-ground economic reality because they evidently have no solutions to offer that would not jeopardize their campaign finances.
Obama is tied to not only Pritzker but also to Omaha billionaire Warren Buffett and George Soros. McCain depends on the traditional money contributions of the Republican Party, which demands permanent tax reform for highest-income earners and a pro-bank laissez faire treatment of millions of homeowners facing home foreclosure and asset seizure by banks.
Banks across the country have severely cut back on loans, fearful of bad debts. That has aggravated the consumer collapse documented above. Hundreds of thousands of real estate brokers, small and large bankers, furniture workers and salespeople, and construction workers are unable to find work. Jobs are being cut wholesale and those working are often on reduced hours. Car sales in June plunged by 28% for Ford, 18% for General Motors and even 21% for Toyota, which will mean more layoffs in coming weeks. This will be the next wave of unemployment.
The economic reality is not reflected in official US Commerce Department or Labor Department statistics. There the data is constantly being "revised" to hide the grim reality in an election year.
highlights the gathering storm as the draining of credit=money out of the system starts to impact big-time on the productive "Real World".
I agree with Engdahl that what is coming will be worse than the Great Depression with the caveat that it could be avoided if radical action is taken.
This would involve the evolution/transition of the existing system to:
(a) a Clearing Union architecture similar to that proposed by Keynes at Bretton Woods;
(b)a reversal of the polarity of Money from deficit basis to asset basis.
For those who think such a transition is "pie in the sky" I say that it is a logical consequence of the pervasive, organic and unstoppable spread of direct "Peer to Peer" connections - "Napsterisation" or "Bit-Torrentisation" for perfectionists - to the financial sector.