Just like a scene in one of those Sci-Fi flicks...

More than ever,  with each passing day of late, as I read more and more about the ongoing and imminent devastation of our national and global economies, I'm getting the sense of  watching one of those formulaic, sci-fi disaster flicks where a handful of scientists and some people in the White House are the only ones aware of some impending catastrophe that's going to change just about everything in our lives as we now know it.

At this point,  as far as the national and global economies are concerned, I would have to concur that the writing is, indeed, on the wall, and things are quickly spiralling out of control on a worldwide basis, economically.  It's a catastrophe that very rapidly lies not too far ahead of us, too. We really are "Facing a Greater Depression." And, as even President-elect Obama now openly discusses it, things are going to get much worse before they get better.

A few of you may remember my blogging signature from the dozens of diaries I've written about our national economy over the past year. But, today, with President-elect Obama announcing his appointments for the various diplomatic and national security posts in his cabinet, I just wanted to touch upon the--possibly far more severe consequences for this country--writing that's on the wall on an international scale, and how this is going to affect all of us at here at home.

Things are bad--and getting worse--all over. When people everywhere don't have enough to eat and they cannot maintain a dry roof over their heads, instability ensues.

Today's ominous global economic headlines underscore these realities, both now, and in terms of what they foretell for the coming months and years ahead for President Obama and his foreign policy and national security teams--the folks to whom we're being introduced later this morning.

Turning our focus to an international view as far as the global economy's concerned, things are bad and rapidly deteriorating from there. We are--quite frankly--talking about world economic instability, potentially at a level unlike anything this country's (and the world's) ever witnessed before.

Stating the obvious, with  global economic instability comes inherent global political instability, and the doo-doo economics of eight years of BushCo laissez faire mismanagement morph into something far more troubling than just a debate about the survival of the U.S. auto industry.

When tens of million of people are out of work in China and Russia (and Pakistan and India, for that matter), whether we like it (or care about discussing it in political arenas such as this) or not, it becomes our problem, too.

Nowhere is this more self-evident on the day when President-elect announces his latest cabinet appointments than in this story running near the top of Bloomberg Media right now:"America Exports Unemployment As Slump Shrinks Consumer Demand, Investment."

Eventually, all of the totally legitimate concerns about things such as nuclear terrorism and massive political upheaval around the globe take on a much more urgent ring.

So, I ask all of us to look beyond the Obama administration-in-waiting's press announcements today to the other headlines in the national and world press, such as this: "Russia Manufacturing PMI Drops to Lowest on Record."


By Alex Nicholson

Dec. 1 (Bloomberg) -- Russian manufacturing shrank more in November than during the 1998 financial collapse as the global economic crisis drove output and new orders to record lows and companies cut jobs, VTB Bank Europe said.

[...]

"The sense of doom and gloom was only deepening," in November, Tatiana Orlova an economist in Moscow at ING Group NV said by telephone. "The mood isn't getting any better."

Industrial production has slumped and unemployment is rising as declining commodities prices and the seizure of credit markets prompt an outflow of capital. Investors withdrew $190 billion from the country since August, BNP Paribas SA estimates, as oil fell below the $70-a-barrel average needed to balance the 2009 budget.

"Driving the rapid contraction of the manufacturing sector in November was a record fall in incoming new work," the bank said in the statement. New export contracts tumbled because of "fallout from the global financial crisis."

...and this:

"China's November Manufacturing Contracts by Record."


By Nipa Piboontanasawat

Dec. 1 (Bloomberg) -- China's manufacturing shrank by the most on record and export orders plunged, adding to evidence that recessions in the U.S., Europe and Japan are dragging down the world's fastest-growing major economy.

The Purchasing Managers' Index fell to a seasonally adjusted 38.8 in November from 44.6 in October...PMI, released by CLSA Asia-Pacific Markets, also showed a record contraction.

Export orders, output and new orders all shrank by the most since the surveys began as the global financial crisis sapped demand for the nation's toys, textiles and computers. The CSI 300 Index of stocks has fallen 69 percent from a record in October last year and President Hu Jintao describes the economic situation as a test of the Communist Party's ability to govern.

"Another grim month for China manufacturing," said Eric Fishwick, head of economic research at CLSA in Singapore. "Export orders will weaken further and we expect further cuts in production and employment."

[...]

China is very exposed to the global crisis, President Hu said Nov. 29.

[...]

The government last month announced a $586 billion stimulus package and the biggest interest-rate cut in 11 years to revive the economy and counter the risk of spiraling unemployment and social unrest.

Toy Company Riot

Fired workers seeking more compensation from a toy factory in Guangdong province clashed violently with police on Nov. 25.

(Bold emphasis is diarist's.)

As Stoneleigh and the folks at The Automatic Earth said it so well in the very first paragraph of Stoneleigh's brilliant diary posted on DKos, yesterday, "Facing a Greater Depression":


We are facing the most serious financial crisis since the 1930s. Once again we are facing a deflation that will take most of the population by surprise and will have deep repercussions on the international stage.

At any given moment in the months ahead, it's the work that these folks (the dream team being introduced to us now that's about to go to work for us in the Defense, State, Judiciary and Homeland Security Departments in roughly 50 days),"Obama Turns To Friends And Foes For Top Posts," will do, under the guidance of President Obama,  that might very well determine the difference between success and failure for many generations of Americans--and citizens of all nations--to come.

Yes, in my make-believe catastrophe flick--the one I reference at the beginning of this diary--folks like President-elect Obama, Gates, Clinton, Holder, Rice, et al, really are aware of the horror show that awaits them...while the rest of the population just sits around in a fog of mainstream media that barely addresses these realities for us now.

But, just like in those stereotypical movie scripts, the folks our President-elect is announcing tomorrow know--or by now have a pretty good idea of--what lies ahead.

Hundreds, if not thousands, of paid government planners, analysts and consultants have already supplied them with more material about these nightmares (that I barely touch upon in my diary) than they could probably read, even if they did nothing else but read for the entire four year's of the President-elect's first term.

These people marching in front of us on Monday's newscasts have an incredibly difficult--if not impossible--job in front of them. And, just like those folks in those SciFi catastrophe flicks, they know it, too.

Tags: Attorney General nominee Eric Holder, global economy, President-elect Barack Obama, Secretary of Defense Robert Gates, Secretary of State nominee Hillary Clinton, the Economy, UN Ambassador nominee Susan Rice (all tags)

Comments

16 Comments

In Hollywood it's always a happy...

...ending...in Washington, D.C., not so much.

by bobswern 2008-12-01 12:51AM | 0 recs
Well, I just hope...

That President Obama can do what President F. Roosevelt did in not just implementing short-term fixes for the current economy, but also instituting the kind of real change our economic system needs. We really do need a new New Deal. Perhaps Obama doesn't want to call it that, but it's needed.

I just hope that universal health care, restoration of common sense Wall Street regulations, renewable energy investment, and other infrastructure investment can do the job...

by atdleft 2008-12-01 06:57AM | 0 recs
What I hear most often is...

...the big difference between our country now, versus where we stood as far as our economy was concerned back in the 1930's, is that we really no longer control our own destiny.

On top of that, we really don't manufacture ("make") things like we used to, and that's all a very significant part of the mix, too.

We're in a very different world than we were, as a country and as a world, 75 years ago.

by bobswern 2008-12-01 07:05AM | 0 recs
Re: What I hear most often is...

I thought US manufacturing was not terribly capable until it was forced to keep pace with German (and Japanese) manufacturing during WWII.  Is that an oversimplification?

by the mollusk 2008-12-01 09:05AM | 0 recs
Books have been written in response...

...to this question, actually.

There's a widely (not universally) accepted school of thought that says, essentially, we never really recovered from the Depression; and/or, if it wasn't for World War II, there never would have been a recovery.

Necessity is the true mother of invention, at least when it comes to reshaping our economy to meet the needs of the time(s). And, I truly look towards the Obama administration to lift us out of this outsourced business environment, and to get this country moving in the right direction, in terms of energy and infrastructure development that makes sense for the 21st Century. But, that's going to take a LOT of time...more than just one or two presidential terms.

We have this perfect storm, right now, which needs to be addressed, even in many instances prior to Obama taking office on January 20th. And, there doesn't seem to be all that much being scheduled for implementation over the next seven plus/minus weeks, other than the development of significant legislation which, according to the media, may be available for Obama's signature at that time.

In the interim, the world's economy, and our own country's economy can't wait.

On another matter, the Industrial Revolution started back in the 19th Century (some say it started with Eli Whitney's Cotton Gin earlier in the century; others say it was the Transcontinental Railroad in the latter half of the century which sparked that period), and much of what was done to accommodate the needs of our war economy in WWII related to retooling existing factories to facilitate that effort.

But, yes, necessity trumps everything...at least, from a hopeful perspective, if nothing else!

by bobswern 2008-12-01 09:20AM | 0 recs
On NPR a few weeks ago...

an economist, discussing plummeting gas prices, noted that precipitous price drops were a harbinger to the great depression. When he made that remark, gas prices were more than a dollar higher than they are now.

by Bob Sackamento 2008-12-01 05:59AM | 0 recs
Re: Just like a scene

If I could rec this, I would. It's a big world out there, and things are not looking good. Thanks for the reminder.

by BobzCat 2008-12-01 06:14AM | 0 recs
Question

bobswern;  in your reference to the Dkos Diary "Facing a Greater Depression", could you educate us on what people should do about the Diarist's item #3:

3.  Don't trust the banking system, deposit insurance or no deposit insurance

3.  Keeping the savings you need in the banking system is problematic.

If we do see a rash of bank failures, each of which weakens the position of others as the sale of their assets and unwinding of their derivative positions can re-price similar 'assets' held by other parties, then deposit insurance will not be worth the paper it's written on. When everything is guaranteed, nothing is, as the government cannot guarantee value. Savings held in these institutions are at much higher risk than commonly thought due to the systemic threats posed by a derivatives meltdown and spreading crisis of confidence. Fractional reserve banking depends on depositors not wanting their money back all at once, in fact with reserve requirements so whittled away in recent years, it depends on no more than a fraction of 1% of depositors wanting their money back at once. This is a huge vulnerability and the government deposit guarantee is a bluff waiting to be called.

In other words, what is a "safe" investment?

by cameoanne 2008-12-01 04:27PM | 0 recs
Just so we're clear, I'm nowhere near...

...being anything close to an "expert" on any of this. Perhaps I understand slightly more about some of this "stuff" than the average individual. But that's about it.

And, from a disclosure standpoint, I do have professional experience in the credit-granting industry (on the tech/marketing side), as well as having handled significant account management experience, again, in my marketing/technology business in real estate and, tangentially, in the information side of the financial services industry, too.

But, in terms of handing out investment advice, I'm certainly not a pro.

I think what Stoneleigh's referencing is more in line with some basic myths about the banking industry--perhaps the entire financial services industry if you talk about insurance and those types of businesses--in general.

More specifically, reserve requirements are relatively nominal in relation to what's occurring, across the board. And, when you add the derivatives and credit swaps businesses--both highly unregulated segments--into the equation, it only takes a point or two of all assets being withdrawn to turn the entire financial system upside down.

As to where one puts their excess cash, Stoneleigh says, 'Pay down all your debt, and go from there.'

If you're fortunate enough to have a positive balance sheet (i.e.: net worth), after the past 12 months--where we've witnessed 20%, 30%, 40% and greater residential devaluations as well as a 50%+ loss in the equities markets over the past year--then that's a nice problem to have. At that point, among other things, Stoneleigh's suggesting precious metals...maybe...and a few other options.

Sorry, but that's all I have for you on this one.

by bobswern 2008-12-01 06:10PM | 0 recs
Re: Just so we're clear, I'm nowhere near...

Thanks bobswern.  I guess what concerned me is the way I interpreted Stoneleigh's Point #3 was that I could not count on my Suntrust Money Market savings account being FDIC insured.  

It would be tempting to put it in the mattress, but my preference would be to leave it where it is.  heh!

by cameoanne 2008-12-01 06:30PM | 0 recs
Another Question

bobswern; Since you seem you have such a wealth of knowledge, do you have any idea why the stock market tanked so badly today?

by cameoanne 2008-12-01 05:19PM | 0 recs
Re: Stock Plunge

Hmmm, guess this is why:

Dow Plunges 680 Points as Recession Is Declared

NEW YORK (CNNMoney.com) -- The National Bureau of Economic Research said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy .

by cameoanne 2008-12-01 05:47PM | 0 recs
If you understand just one thing...

...about the equities markets, it's this: Markets have little or NOTHING to do with the realities of our economy, especially on a day-to-day basis.

Markets are strictly emotional, rumor-, and news-driven entities. And, as we all know, emotions, rumors and news may all be fabricated derivations of nothing but spin and sentiment.

Markets behave irrationally.

The old saying, as most old-time traders will tell you, is: "Buy on the rumor, sell on the news."

Today was a big news day, in terms of negative reports coming from just about...everywhere on the planet.

by bobswern 2008-12-01 06:16PM | 0 recs
One more tidbit...

...almost all of the numbers you'll hear out of Washington are, IMHO, bullshit.

If you want to know the real deal, I'd suggest taking a gander at http://www.shadowstats.com.

by bobswern 2008-12-01 06:19PM | 0 recs
Re: If you understand just one thing...

That's true to an extent, but prices in the markets have a floor, a ceiling, and a point of equilibrium, and the markets can't stay disconnected to that economic realities forever.  There's a reason they're called "bubbles".

by Jess81 2008-12-01 06:21PM | 0 recs
But, like all "rules"...

...new standards are established, especially at times like this. Volatility is the rule of the day ('rules are broken'); 'floors' are broken though, and so forth...in other words, the rules are tested at moments like this...and they change.

by bobswern 2008-12-01 06:50PM | 0 recs

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