Singing for Our Salvation

by Dollars and Sense

This posting is from D&S collective member and frequent blogger Larry Peterson. To see more of his posts, click here.


One of the reasons Mozart's Requiem is the sublime work it is is that the end of the "Kyrie" (or, "Lord Have Mercy") expresses such a powerful entreaty that it seems that a superhuman mercy will surely take pity on the petitioners. But the "Dies Irae" ("Day of Wrath") immediately following is so savage, and impresses on us the majesty of superhuman justice so effectively that the former is reduced to a pathetic display of pride that should, and must, be punished accordingly. It seems like the global economy is getting to this part of the record.

At 12.15 PM Eastern time, US and European equity markets are still in positive territory--only just--despite large gains earlier in the morning. The rally has been powered by the Federal Reserve's .5 % rate cut yesterday, the likelihood that the Bank of Japan will cut by a quarter-point (to .25%), and a flurry of bottom-fishing among investors. The Japanese cut is noteworthy not only because Japanaese rates are already so low: instead, the recent Yen strength that developed out of the unwinding of carry trades (a lot carried out by hedge funds cashing out to fund huge redemptions in other trades) promises to choke off Japan's all-important export sector, and that will, in turn, affect Japanese shares, which will hammer the Japanese banks that hold a lot of the shares, thereby making the banks vulnerable to a global bank crunch that only weeks ago Japan's banks were thought to be immune from (remember the Japanese bank, Mitsubishi UFJ, buying a stake in Morgan Stanley a few weeks ago?). Well, the Fed move and hopes for a Japanese one (done by a Bank of Japan that is as spooked by deflation--it's dealt with nearly 2 decades of it-- as the European Central Bank is by inflation) to follow promised to reverse this unwinding, and investors have responded accordingly.


Also, Federal Reserve has teamed up with the IMF to offer swap lines to some important emerging economies. And though this does not, as yet, address the really huge problems in places like Ukraine and Pakistan, which are enduring intense crises, but do not have the dollars to deal with them, it shows global authorities are at least not going to sit back and wait for something really bad to happen before doing something. And that has added to the return of confidence, if you can call it that. Until now.


Today, US GDP figures for the third-quarter came in, and there was a decline of .3%. In addition, bad news about pension underfunding of major US companies and a potential $8 billion charge to hospitals as a result of bad derivatives trading has spoiled the party. But the gloom goes further than this. Ultimately, it is another breakout of extreme pessimism that keeps resurfacing and is founded on the thought that despite all the extraordinary measures--and that's putting it mildly--that authorities worldwide, sometimes even, unusually, working in relative concert, have initiated, the blow to corporate profits (especially for US multinationals as long as the dollars remains a haven of saferty) of the slowdown we're facing now, which is characterized by long wage-and savings poor consumers abruptly cut off from all credit and continuing to face high, if levelling prices, will be particularly severe, especially given the wildly optimistic forecasts of profitablility that held only months ago. Not to mention the wave of deleveraging that is sapping the world of capital, and will continue to do so for a while, at an advanced rate. And this already dire situation is only to be exacerbated by the fact that banks will be cutting back lending even more to shore up their books for the end of the year, and the retail sector will be in for a very, very black Christmas. A true double-whammy here.


Anatole Kaletsky of The Times had a interesting piece in the paper today, in which he mused over the steps that absolutely need to be taken if really, really serious pain is to be spared the US, and the world. His list of proposals includes: "emergency economic measures, which should be quickly implemented. Such measures could include a six-month moratorium on home foreclosures; a compulsory programme for reducing unsustainable mortgage debts; an urgent review of international monetary relations to protect emerging markets from the financial meltdown; and emergency tax cuts to support consumption, paid for by long-term revenues from a large-scale energy or carbon tax."


So far, so good, and, from the point of view of a leftist (unlike the mainstream Kaletsky), a mere beginning. But the politically keen Kaletsky also notes that this stage of the crisis could exert so much of an adverse impact on the economy that the constitutional provisions regarding transfer of power between the incoming Obama (if it's McCain, by some miracle of American stupidity or fraud, we can just forget about it) may make even bold initiatives taken in the first hundred days rather moot in effect. He's hopeful that American politicians will be up to the challenge of speeding up the transition somehow to do something before the nominal transfer of power, something actively involving the presiodent-elect and the incoming administration. I think he's right. But I also believe, rather than sitting around waiting for the politicians, we must get out and agitate, and try like hell to force them, for once, to respond, now, to our concerns. Rather than chanting Kyries under our breath, we need to be chanting slogans, loudly and in unison, on the streets. Now.

Labels: Anatole Kaletsky, financial crisis, financial crisis bailout, Larry Peterson

 

Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!).
10/30/2008 11:10:00 AM