Paulson Should Wake Up and Fight the Depression

Robert Reich has joined the ranks of those saying that the economy is falling off a cliff. His latest blog entry, "Shall We Call It a Depression Now", takes note of Friday's alarming unemployment report -- the US has lost nearly 1.2 million jobs in the past three months -- and makes the appropriate conclusions about where the economy is headed. With consumers cutting back spending in the face of historically high indebtedness, tightening credit, and failing job prospects, there are very real risks that we are heading toward a depression. Someone needs to be bailed out, but who is it?

If the heart of the economy is the consumer, government's response should act directly to help the consumer. It's that simple, and Robert Reich's prescription is exactly in that direction, with this two-pronged approach:

First, the massive Treasury bailout of the financial industry must be redirected toward Main Street -- loans to small businesses, distressed homeowners, and individuals who are still good credit risks.

Second, a stimulus package must be enacted right away. It needs to be more than $600 billion -- which is 4 percent of the national product.

The Great Crash

Finally a noted economist says outright that the markets have experienced a crash. In The Great Crash of 2008 Robert Reich points out that, as of the close on December 1, markets have dropped 47 percent since the peak of last year, which is in the range of the Great Crash of 1929.

Reich also is right that more credit won't solve the problem, because debt loads are unaffordable relative to stagnant incomes ... and now we are hit with a severe economic downturn. That's what you get when the nation's resources have misallocated for years on end -- a bubble economy, bubble markets, and a Great Crash.

Look for the bad news to continue.


Source:
"The Great Crash of 2008"
Robert Reich's Blog, Monday, December 01, 2008
http://robertreich.blogspot.com/2008/12/great-crash-of-2008.html

Money As a Quantum Fluctuation in the Markets?

It turns out that matter isn't so substantial after all. An article in the New Scientist confirms that matter consists of little more than quantum fluctuations in the vacuum, with most of its mass attrituted to the virtual gluons that pop in and out of existence and conduct the strong force that binds particles like protons and neutrons together.

With that news, is it so incredible that the Fed and the Treasury can bind the markets together with virtual money? The risk is that this money will disappear into the deflationary pit of deleveraging.

Virtual money consisting of Paulson, Bair, and Bernanke quarks

Source:
"It's confirmed: Matter is merely vacuum fluctuations"
Stephen Battersby
The New Scientist, 20 November 2008
http://www.newscientist.com/article/dn16095-its-confirmed-matter-is-merely-vacuum-fluctuations.html

Rescuing the Markets

Change is necessary, but for markets to work you need to have something of value to trade. (Author's photo of the ancient agora of Athens)