James Galbraith: Economic optimists are wrong

[marmar]

"A Truly Extraordinary Slump": Reports of Robust Recovery Premature, James Galbraith Says
Posted Nov 19, 2009


Disappointing reports this week on housing starts and foreclosures, as well as the index of leading economic indicators, have cast a bit of a pall on the "robust recovery" story, putting a crimp in the stock market's ascent in the process.

University of Texas professor James Galbraith was never a believer in the V-shaped recovery and says it's going to take a very long time for the U.S. to recover from a "truly extraordinary slump."

What the optimists are missing is the impact the housing bust is having on both American's ability to borrow and banks willingness to lend. The resulting credit contraction will prevent this recovery from following the path of those following prior post-war recessions, he says.

"There's no question the U.S. economy has stabilized but remains very weak and will likely continue to be weak," Galbraith says. "There's very little sign the benefits that are being felt on Wall Street will be felt in the broader country anytime soon."

Galbraith predicts the unemployment rate will continue to rise into 2010 and decline "very slowly" thereafter. The U.S. economy needs "substantially greater policy intervention," he says, focused on the following:

* Housing Woes: As of Sept. 30, over 14% of American homeowners with a mortgage are either behind on payments or in foreclosure, the Mortgage Bankers Association said Thursday. Those figures suggest the real inventory of homes for sale is much bigger than the "official" 8-month supply, as The WSJ reports. The government must do more to prevent foreclosures, Galbraith says.

* Smart Jobs: Beyond merely putting people to work, Galbraith seeks policies that would both "create employment and set a strategic direction for the economy," most notably in the area of renewable energy.

* Boomer Blues: With millions of Baby Boomers at or near retirement age, Galbraith advocates aid for new retirees, "so the demographic transition goes more smoothly than it otherwise would. "

In sum, Galbraith still says we need a second stimulus package, as we'll discuss in more detail in a forthcoming segment.

Watch: http://finance.yahoo.com/tech-ticker/article/375136/%22A-Truly-Extraordinary-Slump%22-Reports-of-Robust-Recovery-Premature-James-Galbraith-Says?tickers=XLF,XHB,^dji,^GSPC,DHI,TOL,PHM

[AllentownJake]

1. There will not be one

The first one was botched and there is no political will for a second. The White House is already contemplating PR stunts on deficit reduction like using the TARP money to pay down the debt.

[Warpy]

7. There will be a second stimulus and probably a third

and Congress will develop the will to pass them when their jobs are in jeopardy next year.

Right now they're a whole year away from election day and shaking down the corporations. Sometime next spring, they'll realize that the corporations don't vote but the people who have been thrown out of work do and those people are angry.

The form the stimulus takes is the question. If it's wasted at the top, it will be worse than nothing.

[SpiralHawk]

2. "Smirk." - xCommander AWOL & Republicon FAIL Cronies

"We done strategerized occult Republiconized Shock & Awe for generations to come. Bwaaa ha ha ha ha ha. Too bad - snigger - about you American Proles. Smirk."

- xCommander AWOL & Republicon FAIL Cronies

[ixion]

3. more than just another stimulus

we need to start from scratch and rethink our society, which is not currently structured to sustain itself beyond the days of cheap oil.

We need to start making things again.

We need to produce food locally.

We need to take advantage of technology and allow more people to telecommute, saving time, money and lives.

We need to get serious about alternative energy.

We must demand that our taxes be spent on making our society a better place, rather than killing people abroad in hostile occupations.

We need to stop jailing non-violent drug users, so we can begin to heal the social fabric that the so-called 'war' on drugs has decimated.

These are all things we can do to try and head of the massive collapse that is headed our way. But at this point, I'm seeing none of it. I see patches and wishful thinking. I see clinging to a arcane system that is unsustainable.

I do not see green shoots, at this point.

[Kolesar]

4. Ohio and at least a dozen states have a "renewable energy portfolio" requirement for electricity co.

that's a start

Ohio's governor Strickland used to be a prison psychologist. I wish that he would lead on rehabilitation and quit wasting resources on prosecuting marijuana peddlers.

[glitch]

6. At this point only RoundUp is being promoted, green shoots will have to grow elsewhere. IMO. nt

[arcadian]

5. This won't play well with the rainbows, lollipops and sunshine crowd.

[RagAss]

8. 30% Unemployment by 2011 and blood in the streets.