AN ATTEMPT AT INTERPRETATION OF VARIOUS FORECASTS
Predictions, rumors and warnings are flying in thick flocks in media space. Hopeful visions of recovery, backed by assurances that "the worst is behind us" are vying for attention with ominous alarm calls about the tidal wave that may be heading our way. What are some of the most reasonable and prudent conclusions we can draw, without painting a target for the often spurious but effective charge of "conspiracy theorizing"?
Naturally that accusation is used most by detractors bereft of any more specific and arguable reasons to contradict inductions that they do not like so that we should not be intimidated by it but we can make our points without needing to assume the existence of hidden and unproven factors and thus we should remain broadly unassailable.
A FACT CHECK
At the outset, we should point out that, in spite of the official self-serving noises coming from Western capitals and from Wall Street about the "green shoots" of recovery being visible at many places and in spite of Lawrence Summer's recent boast of "having stepped back from the brink", there is no quantifiable, demonstrable reason for such an imminent or incipient recovery. Governments have not eliminated the causes of the crisis and have merely temporarily tried to make up for the astronomical bank and corporate losses by injecting enormous but still insufficient amounts of public money into the largest financial and industrial houses that they decided needed to survive. Otherwise the system has been left broadly intact and in a country like Britain the biggest banks still owe amounts three times higher than the nation's GDP, while in the USA official sources estimate the cost of the crisis at 23 trillion Dollars, about twice the American GDP. This is not surprising if we consider the total face value of derivative financial products that has been emitted - in the range of 550 trillion.
As significant is the fact that both the USA and Britain, following the logic of neo-liberal globalization have de-industrialized and turned as a result into "rentier", mostly financial economies, outsourcing most of their production to poorer countries where labor is cheaper and less organized. Hence all attempts that either of those two countries now may make to revive their production sectors will translate into exporting even more know-how, capital and jobs to nations like China for subsequent import of the finished goods against borrowed capital, thereby increasing the public debt even further, with no end in sight.
Thus, seasoned observers such as Robert Reich have pointed out that the stock market rally of June/July 2009 is caused by corporate profits which in turn are almost entirely resulting from massive cost cutting, in great part payroll cuts (i.e. downsizing). Reich writes on his blog on July 23rd: "there is a limit to how much can be cut without a business eventually disappearing" and his recommendation is: "Keep your eye on the real economy, where unemployment and underemployment keep rising". Other eminent economists like Joseph Stiglitz and Michael Hudson make similar assessments.
His observations are matched by Dave Johnson on the same day (in "Campaign for America's Future") in an article entitled: "Dude, where's my industrial policy?". Johnson notices that the successive measures taken by the Bush and Obama administrations as of this writing are "stopgap, holding action, temporary, make up, back fall and after-the-fact-reaction" as there is no policy to regenerate domestic manufacturing while 45% of the nation's profits are netted by the financial sector while it continues to borrow more than 2 billion Dollars abroad every day (at the end of 2009 it will look more like 4 billion a day).
Johnson's summary is "Face it: if we do not have an active and engaged industrial policy we are handing the business over to those (overseas countries) who do, and they do. And we are. Meanwhile there are interests who benefit from this (lack of) policy and fight to keep it as it is. Where is your voice in this?" he rhetorically asks his fellow citizens.
There is no doubt that the US in particular, and the West in general, are getting poorer in real terms while they continue to live well beyond their means. Such a binge can only lead to a painful hangover. Claims that the crisis is ebbing are delusional at best, misleading at worst, as the talk of a "jobless" recovery may not even be accurate as there is no recovery of any kind to be expected for at least three years, even if some urgently needed reforms are made in the coming months, as they will take time to bear results. The "experts" who announce the imminent return of the fat cows of Egypt are generally those (like Summers) who drove the US and other Western economies into the neo-liberal Eldorado which has now turned into a vale of tears for most. They were affirming less than two years ago that the global economy was solid and sound so that chances of a recession were virtually nonexistent. Unsurprisingly, they are again piping an optimistic tune. It has now been revealed that the Bush administration, acting under similar motives, kept secret US Air Force and CIA photographs that revealed the extent and speed of polar icecap melting in order not to provide support to the stormy petrels in their warnings about global warming, Hiding the truth from their people is one of the chief specialties of governments,
Once we have established from mainstream, authoritative sources that the US, hitherto at least the engine of global growth is continuing its slide into the abyss of insolvency, we can look at some the diagnoses ventured by certain savvy analysts who have earlier been proven right in some of their important predictions.
One of the most thorough among those forecasters is the French group GEAB (Groupe d'Etudes et d'Analyses Boursieres) which accurately predicted the crash of September 2008 almost two years in advance. In its special summer bulletin No. 36, brought out on June 16th 2009 and entitled "Trois vagues scelerates", authored by H-G Fandrich for LEAP/E2020 the GEAB takes a very dim view of the coming months. It question crucially the ability of the USA and of Great Britain to finance their respective sky-rocketing public deficits and predicts that they will both default by the end of this summer.
The "three dastardly, or freak waves" (by analogy with a well known and very dangerous oceanic phenomenon) that the LEAP/E2020 are referring to are three convergent, highly destructive economic processes which are overtaking the global economy, and particularly the western countries, starting with the USA though their most visible effects have so been registered in smaller European nations such as Iceland, Ireland and the Baltic republics as also in a number of American states, notably California, the largest and hitherto the richest in the Union. However by the end of the summer, it is forecast that all areas of the world will experience a major deterioration in their economic situation. The three waves are 1-massive job losses and the resulting endemic unemployment, 2-a series of bankruptcies involving companies, banks, real estate, governments, regional and city administrations and 3-the last throes of the crisis of the US Treasury bonds and Bills, of the Greenback with the correlated resurgence of inflation, The three waves are, according to the LEAP report "simultaneous, asynchronous and non-parallel", which makes them even more devastating. States are now carrying crushing debt burdens, vastly increased by the recent massive bail-out transfers to the banks and MNCs, which will soon make them insolvent even as they openly plunder pension funds and private savings in the name of the national interest.