The Federal Reserve’s dereliction of duty is central to the financial failures. It betrayed the purpose for which the central bank was first created, in 1913, abandoning the sense of balance the Fed had long pursued and that Congress requires. Most politicians, not to mention the press, are too intimidated to question the Fed’s daunting power, but their ignorance is about to compound the problem. Instead of demanding answers, the political system is about to expand the Fed’s governing powers–despite its failure to protect us. Treasury Secretary Paulson proposed and Democratic leaders have agreed to make the insulated Fed the “supercop” that oversees not only commercial banks and banking conglomerates but also the largest investment houses or anyone else big enough to destabilize the system. This “reform” would definitely reassure club members who are already too cozy with the central bankers. Everyone else would be left deeper in the dark.

The gravest danger is that the national economy will weaken further and spiral downward into a negative cycle that feeds on itself: as conditions darken, people hunker down and wait for the storm to pass–consumers stop buying, banks stop lending, producing companies cut their workforces. That feeds more defaulted loan losses back into the banking system’s balance sheets. This vicious cycle is essentially what led to the Great Depression after the stock market crash of 1929. I offer not a prediction but a warning. The comparison may sound farfetched now, but US policy-makers and politicians are putting us at risk of historic deflationary forces that, once they take hold, are very difficult to reverse.

I’m thinking the answer is “yes”, which will lead me to say cause and effect.

I heard the rate in the Detroit area was 9.7%

Unemployment numbers do not mean an economy is bad but Graham made a mistake. Yes the economy is not as bad as the Great Depression with 30% unemployemnt. Yes there is a lot of subjective fear in the public.

The problem is the underlying economy of the world is at critical right now. Credit is drying up. Banks are too overectended to issue small business loans needed to buy materials to meet orders.

This credit cruch is the same credit drought that precipitated the Great Depression. Recently Walmart, hardly poor, went to Japan to borrow money. A half billion. Supposedly for the better terms. Terms have been better in Japan a long time with prime interest rates taken as low as zero to prop their economy.

The credit cruch is not simply the working class over charging their credit cards or buying houses they cannot afford. It is a world wide drought that made all previous debt defficult to re pay and future credit shrivel.

Because the world economy runs at all levels on debt, when credit dries up the dominos fall.

The first ones to fall through the rotted floor are not the perps. Tell them there is no problem while you move your investments to Asia and accelerate the collapse.

McCain did the right thing.

They want to know that our leaders understand the economic realities of all americians….The economy is not all rosy. For some it is down right diffucult. Failure to understand that because you and yours are doing ok is not a way to win elections. It makes you seem “out of touch”

unseen on August 1, 2008 at 1:01 PM

Read my comment again. Which of our leaders understand the contributors to our current economy?

What you suggested and what McCain did is called pandering. Pandering to get votes (in order to win elections) led to FIXES we can’t afford, and which DO NOT address the real underlying reasons of how we got here in the first place. Pandering let our leaders put a new coat of paint on the house but not doing anything else.

http://www.youtube.com/watch?v=nqWJoVUEV1Y

You know, our fearless leaders make it so easy to make fun of them.

Given Thursday’s disappointing report on gross domestic product growth, Wall Street is becoming more certain that the United States is in a recession — and one that could be prolonged.
- Yahoo Finance (August 1, 2008)

Why Gramm got it wrong, at least on tone.

Clueless Gramm is in a mental recession.

Sir Napsalot on August 1, 2008 at 12:14 PM

No it isn’t. You can “feel” someones pain without doing anything about it. You can understand the hardships for millions of people without giving charity or handouts. the Americian people don’t want or need handouts. Most Americians I know don’t want charity either.

They want to know that our leaders understand the economic realities of all americians. For a large part of the population the economy is fine, for a large part of the population the economy isn’t fine.

The suck it up mindset costs the repubs elections. The let them eat cake attitude loses elections.

8.8million people are unemployed. 51,000 people lost their jobs last month. Gas is at $4.00/gal wages are going up at around 3%. Inflation is running rampent, the dollar is falling, housing is the worse since 1930′s. The stock market is in a bear market, the bond yeilds are at there lowest in a long time.

The economy is not all rosy. For some it is down right diffucult. Failure to understand that because you and yours are doing ok is not a way to win elections. It makes you seem “out of touch”

Sefton on August 1, 2008 at 12:04 PM

Are you suggesting that it is far easier for white teens to find work? That employers will hire white teens before anybody else?

I’m really making a point here. Your post would have read the same without the inclusion of race. Unless, of course, you are actaully saying that there is a double standard where whites get preferential treatment in hiring. As dirty as racial discussions are getting with Obama in reach of the presidency, one has to be vigilant to bat down these myths like black teens can’t find employment because “whitey” gets special treatment.

It’s a tough balance to strike. McCain does it best when he focuses on these legitimate concerns about the economy’s health and argues that incentivizing investment and lowering taxes will spur the growth that will provide long-term strength

.

But then he ruins whatever gains he made by talking about capping oil company profits, initiating the business crushing aspects of Kyoto, and other anti-business measures that make employers skittish. You can’t get to the stuff that matters to the individual so long as the business interests don’t trust what is being said about their futures. Teens may be taking the hit this summer but that can easily spread to other no/low-skilled employees in short order if there is the perception that the incoming administration is going to “fix” the economic problems by charging them more to do business.

unseen on August 1, 2008 at 11:33 AM

If you think it is ok for McCain to speak thus so that he does not appear ‘out of touch’ with people who suffer right now, the next logical step would be ‘what can you do for me?’. Which of course leads to McCain (Leiberal Lite) brand of bi-partisan fixes.

The whole article is to point out those REAL people who suffer right now is a very tiny minority. As it had been pointed out OVER AND OVER that people view their own personal finance as good but the overall economy is bad due to 24/7 msm meme “If this isn’t recession, it sure FEELS like it”.

And OUR job is to debunk the mentality that grips this nation.

Most of this increase has occurred in oil and gas extraction and in support activities for this industry.

The jobless rate for teenagers increased to 20.3 percent in July

Yes, it’s true that the minimum wage hurts entry level employees, but it seems to me that this whole teenage unemployment thing is a bit silly. How do you even measure teen employment accurately? Aren’t most teen jobs part time – nights, weekends, summers since the majority of teens are supposed to be in school?

That being said the high price of gas has probably de-incentivized teens from seeking work, whether it be part time (or full time for those who have graduated high school or dropped out).

Also note that while most sectors show declining employment numbers, health care and mining show an increase:

In July, employment continued to grow in mining (10,000). Mining employment has
expanded by 222,000, or 45 percent, since reaching a low in April 2003. Most of this
increase has occurred in oil and gas extraction and in support activities for this
industry.

Just imagine what a positive affect there would be in employment numbers if we were to push full steam ahead with drilling.

Whiney-assing around never fixed a dang thing and it never will. If you don’t have enough money, quit spending or make more. You live in the greatest country on the planet, if you can’t make it here, your not trying hard enough.

nice to see you start to “get it” still have a little ways to go yet but admitting there is a problem is a good first step. The “what recession” line of attack is not a winner. In fact it will lead to defeat. The gallop poll numbers showing more voters trust BHO on the economy tells you all you need to know. Once the repub get rid of the “suck it up” and “whinner” mental issues the voters can start to understand the differences. As long as the repubs say the economy is fine then the voters will look at them as out of touch

There, I fixed it.

If 51,000 represents .2% of our workforce, we have 25.5 Million workers in the US. If it is an unhappy coincidence caused by rounding and the numbers have gone from 5.5401 to 5.651 or some thing similar, then the workforce maxes out at just under 50 million.

Layers and layers of editors, none of them can do arithmetic.

The biggest jump in the rates came — again — from teen workers:

Why can’t teen workers find jobs? Are they facing some unmentioned competition?