Republicans leave another mess for Dems to clean up
December’s unemployment numbers are out, showing another 524,000 jobs lost, the largest monthly drop since the last Bush left office, in January 1993.
This brings the official rate to 7.2% from last month’s 6.8%– 11 million people. This doesn’t count the number of underemployed or those who’ve given up searching for work, which if included would roughly double the official numbers. For the year, the number of jobs lost was 2.6 million, the largest drop since World War II.
January isn’t shaping up to be any better, as Christmas retailers, auto factories, and companies like Alcoa are handing out pink slips by the tens of thousands. This is consistent with the velocity of the the last 4 months in which some 1.9 million of the 2.6 million layoffs occurred.
Meanwhile, “the U.K. is lowering its interest rates to the lowest it’s been since 1694! Expectations are that rates will be lowered even further in the second quarter.
In the U.S., the rate is already effectively zero as investors abandon return for the safety of short term instruments like Treasury bills and bank CDs. Wall Street’s financial institutions, recipient of nearly $350 billion in taxpayer bailout money to date, are hoarding the money out of fear rather than lending it out as was intended. So much for Congressional oversight.
The futility of using monetary policy to stimulate economic activity in the current situation is now evident, the equivalent of pushing on a string. All that is left to halt the plunge into a worldwide Depression is coordinated government intervention– fiscal stimulus huge enough to bring people out their regressive psychological funk. We’re all Keynesians now, even the “fiscally conservative” Reaganite supply siders.
But the scale of Obama‘s recovery plan requires someone to buy the mountains of US debt needed to finance it. China is already the largest purchaser of Treasury bonds, holding some $ 1 trillion worth. But a front page article in yesterday’s NY Times reports that they have their own problems and might not be buying any more of US paper.
Trust is a fragile commodity, and once abused, not easily restored .
Heck of a job, Bushie.
[Graphic credit here.]
