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Economic Roadkill
Economic Roadkill
Courtesy of guest author MIKE WHITNEY
Originally published at CounterPunch
If you really want to know what’s going on with the economy, you should take a look at the Fed’s Consumer Credit Report that was released on Thursday. Yes, it’s a real snoozer, but it does reveal the truth behind all the “recovery” hype. So, let’s cut to the chase: When unemployment is high and wages are stagnant, the only way the economy can grow is through credit expansion. That’s why economists pay so much attention to the credit report, because it lets them see if we’re making progress or not. Right now, we’re not making any headway at all. Of course, the cheerleading media see things differently. Here’s a clip from an article in Bloomberg that puts a positive spin on a truly dismal report:
“Credit increased $12 billion after a revised $11.3 billion rise in June, the Federal Reserve said today in Washington. Economists projected a $6 billion gain, according to the median forecast in a Bloomberg News survey. The rise in non-revolving loans was the most since November 2001.” (“U.S. Consumer Borrowing Rose by $12 Billion in July, Twice Amount Forecast”, Bloomberg)
Hooray! The US consumer is off the canvas and borrowing again. Let the celebration begin!
Not so fast. The uptick in credit spending is entirely attributable to subprime auto loans and government-backed student loans, both of which are a mere extension of the same Ponzi-finance scam that put the global economy into cardiac arrest. Every other area of credit expansion is on-the-ropes. Commercial banks, finance companies, credit unions, savings institutions, nonfinancial businesses, and pools of securitized assets are all flatlining. No progress at all. In other words, the only way to induce tightfisted consumers to spend money they don’t have is by either seducing them with “No-down, easy-pay, 60-month-no-interest” financing or by hoodwinking them about the 6-figure income they’ll net after they finish their college education at Lunkhead U.
Case in point; check out this article on subprime auto loans in Reuters:
“Lenders are making more subprime auto loans again, reversing the cautious approach they adopted after the credit crisis, an industry research firm said on Tuesday. The portion of car loans made to subprime borrowers rose to 40.8 percent in the second quarter from 37.2 percent a year earlier, according to Experian Automotive, a unit of credit bureau and research firm Experian Plc.
The data shows how keen lenders are to boost their loan books amid a sluggish economy….
Average credit scores for borrowers declined and the average term for their loans extended by one month to 63 months on new cars and 59 months on used cars, according to Experian.
“We are continuing to see growth in subprime, both new and used, and loans are becoming looser,” Melinda Zabritski, director of automotive credit for Experian, said in an interview.
Executives at Ally Financial said in May that subprime car lending had become “very attractive” because profit margins on the loans more than cover the cost of expected losses from borrowers who fail to repay what they owe. Making the loans is part of Ally’s strategy to grow by lending on more used cars….
Industry veterans have said that while the loans have been attractive recently, more lenders are entering the market and competing for business by lowering prices, a trend that could lead to higher losses in the future.” (“Lenders making more subprime car loans: report”, Reuters)
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Bigger profits off lower credit scores. Now where have we heard that load of malarkey before?
We haven’t even paid for the last subprime meltdown, and we’re on to the next? Might a little regulation be a good idea here? Maybe some standardized loans so the banksters running these loan-laundering operations don’t blow up the system again and come around begging for more bailouts?
Oh no, of course not. That would be an intrusion on the divine workings of the free market.
Bottom line: Yes, it is possible to boost credit if one is willing to lend gobs of money to anyone who can fog a mirror, but is that really an indication of “economic recovery” or just more proof that the system is staggeringly out-of-whack?
And then there’s the student loan biz, as big a fleecing operation as ever existed. This is where the real pros hang-out now, luring their prey with promises of hefty salaries after they graduate and then loading them up with enough debt to make their eyes pop out. But, hey, let’s not forget the upside of all this chicanery; all that fleecing beefs up the Fed’s Credit Report and makes it look like the economy is bouncing back. That’s got to be worth something, right? And, besides, everyone is “doing it”; fleecing college kids, that is. Here’s an excerpt from an article in The Atlantic:
“How do colleges manage it? Kenyon has erected a $70 million sports palace featuring a 20-lane olympic pool. Stanford’s professors now get paid sabbaticals every fourth year, handing them $115,000 for not teaching. Vanderbilt pays its president $2.4 million. Alumni gifts and endowment earnings help with the costs. But a major source is tuition payments, which at private schools are breaking the $40,000 barrier, more than many families earn. Sadly, there’s more to the story. Most students have to take out loans to remit what colleges demand. At colleges lacking rich endowments, budgeting is based on turning a generation of young people into debtors.
As this semester begins, college loans are nearing the $1 trillion mark, more than what all households owe on their credit cards. Fully two-thirds of our undergraduates have gone into debt, many from middle class families, who in the past paid for much of college from savings. The College Board likes to say that the average debt is “only” $27,650. What the Board doesn’t say is that when personal circumstances go wrong, as can happen in a recession, interest, late payment penalties, and other charges can bring the tab up to $100,000. Those going on to graduate school, as upwards of half will, can end up facing twice that.” (“The Debt Crisis at American Colleges,” The Atlantic)
Do you think these pillars of rectitude would ever dream of warning our kids that they might they might be getting in-over-their-heads, that they might want to reconsider what they’re doing so they don’t spend the rest of their lives trying to get out of the red?
Nah. It’s not my problem, they figure. Besides why rock the boat. If these kids ever figure out that they just flushed $100,000 down the latrine for a mid-level management job at Herfy’s that pays $22K per year with no-time-off, they might just go ape and torch our lovely new sports pavilion. We can’t have that, now can we?
Here’s more from another article in The Atlantic:
“Student loan debt has grown by 511% over this period. In the first quarter of 1999, just $90 billion in student loans were outstanding. As of the second quarter of 2011, that balance had ballooned to $550 billion.
How does the housing bubble debt compare? If you add together mortgages and revolving home equity, then from the first quarter of 1999 to when housing-related debt peaked in the third quarter of 2008, the sum increased from $3.28 trillion to $9.98 trillion. Over this period, housing-related debt had increased threefold. Meanwhile, over the entire period shown on the chart, the balance of student loans grew by more than 6x. The growth of student loans has been twice as steep — and it’s showing no signs of slowing.
Obviously the number of students didn’t grow by 511%. So why are education loans growing so rapidly? One reason could be availability. The government’s backing lets credit to students flow very freely. And as the article from yesterday noted, universities are raising tuition aggressively since students are willing to pay more through those loans.
All this college debt could put the U.S. on a slower growth path in the years to come. As Americans grapple with high student loan payments for the first few decades of their adult lives, they’ll have less money to spend and invest. All that money flowing into colleges and universities is being funneled away from other industries where it would have been spent in future years. Of course, this would be a rather unfortunate irony: higher education is supposed to enhance a nation’s growth, but with such an enormous debt burden, graduates might not be able to spend and invest enough to allow that growth to occur.” (“Chart of the Day: Student Loans Have Grown 511% Since 1999?, The Atlantic)
Young people are just the latest subset of victims in Big Capital’s endless search for roadkill. No sense getting all huffy about it. But it does help to shed a little light on underlying condition of the economy vis a vis the Fed’s Credit Report.
Indeed, credit is expanding, but only in the areas where the sinister lifting of consumer protections (deregulation) has allowed finance vultures to do their dirty work. As for the economy, it still stinks. But, then, you already knew that.
*****
See also Michael Panzner's Another Disaster in the Making
Here's a graph from Michael:
Picture credit:
Image (top) from www.michiganimaging.com
Image (bottom) from http://users.frii.com/donlight/archive/97arc.htm
Via: Worms & Germs Blog. Learn what to do when you find a dead animal on the road here. Okay, okay, here's a hint about what not to do:
Bottom line: the risk of contracting rabies from roadkill is very low. Roadkill contact has never, to my knowledge, been identified as a source of infection. Rabies transmission from dead animals has been documented, however, such as a couple cases of rabies from people preparing dead animals for food.
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RE: Sheeplize:
http://uncyclopedia.wikia.com/wiki/File:ShumanTwo.jpg
Lest we forget where most of these so-called economists got their educations... It's payback time for the institutes of "higher learning" to get some rebate for installing the very people who brought us this mess in the first place. Dues are a bitch, eh?
A phenomenal statement.
Ten years after...have we learned anything?
Here is an excellent video by AE for 9/11 truth:
http://www.youtube.com/watch?v=YW6mJOqRDI4
http://www.ae911truth.org/
Pass this around folks and especially send it to those who still think some clown in a cave and 19 guys with box cutters outsmarted our 400 billion dollar NORAD defense system.
Also, a big question to ask them is, if fires bring down buildings at the speed of gravity, why doesn't my BBQ or fireplace grill come crashing down at the speed of gravity when lit and on fire for hours and hours?
Who was responsible for 9/11?
http://republicbroadcasting.org/?p=7058
" if fires bring down buildings at the speed of gravity, why doesn't my BBQ or fireplace grill come crashing down at the speed of gravity when lit and on fire for hours and hours? "
Uhhh..... is this a fucking joke ? Assuming you are serious, and further assuming you know nothing about metallurgy, then I will answer your basic question.
Your barbecue is made of cast iron, good for taking high heat but having limited strength.
Open web trusses are made for relative light weight and high strength but weaken and stretch under high heat. Utimately the steel will melt just as if you used a cutting torch.
Question the government , don't trust the government, but let's use our brains here a little , please.
Oh Gawd Kman... don't do it, don't look at them, don't engage, don't breathe... just quietly back away and whatever you do-never, ever use the phrase "open web trusses".
Brains. Understood.
Would you please provide examples of high-rise buildings or skyscrapers that have collapsed into their own footprint at freefall speed from a kerosene fire? Anywhere on the globe will work... I looked, but couldn't find any. Tho, I figure smart people like you could prolly find at least two or three.
TIA.
I love strawman games...can I play too?
"Would you please provide examples of high-rise buildings or skyscrapers that have collapsed into their own footprint at freefall speed from a kerosene fire? Anywhere on the globe will work..."
Would you please provide examples of skyscrapers, suffering severe structural damage by passenger jets crashing into them, with the remaining fuel then softening the point of impact even further, that didn't eventually collapse into their own footprint?
Anywhere on the face of the planet will do.
TIA ;-)
There are none so blind as those that refuse to see.
Capitalism without regulation on a sociatal level and compassion or scrupels on a personal level will end up as a failed experiment with tragic results all around. It is worhip at the altar of the most base of gods.
Please tell me where is this capitalist system? For the record our system is called a Mixed Economy. This is defined as an "economy that includes a variety of private and public enterprise, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety of government-sponsored aspects."
For practical terms what this means is we allow the private industries and banks to keep their profits but socialize their losses.
Name one capitalism alive today that hasn't been heavily regulated for at least 50 years.
The era of regulation is over. It's been a complete failure.
the era of regulation is over??? That's like saying we'll play football or basket ball from now on w/o the refs! The more the sport is popular, the greater the greed and grab or the money factor, the greater the need for strong refereeing and regulation.
The dirtier the market, totally a function of its profit potential, the more regulation it will get. Or it won't be a market but a kept woman of Oligarch.
THATS HUMAN NATURE. IT HAS NOTHING TO DO WITH THE MAGICAL LAW OF SELF REGULATING MARKETS.
Self regulating markets are as commonplace as self regulating, self inflicted, sexual coitus. You want children you've got to put YOUR knife into HER honey bun. It won't happen on its own... the baby thing.
c'est la vie!
I think your missing the point, using your analogy about referees. The referees are the problem. They are paid off and they penalize teams for imaginary infractions, but allow other teams do whatever they want, and your solution is to hire more referees and make new rules? What will this accomplish?
The referees are the problem. They are paid off and they penalize teams for imaginary infractions, but allow other teams do whatever they want, and your solution is to hire more referees and make new rules? What will this accomplish?
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No.
In a system like US citizenism, the exercize of authority does not generate revenues by itself. In a system like US citizenism, authority derives its revenues from the players.
Referees are not corrupt in this system. No one needs to pay them off.
As refereeing does not generate revenues, referees look at favouring the solutions they can derive the most revenues from. And that is by favouring the big players, the ones that bring the most input in the system.
One example:
A,B,C,D are players. Semi-finals: A vs C, B vs D. A and B are big players. A final pitting A vs B will bring in much more money (hence more revenues to be derived from for the referees) than a final C vs D.
In both semi finals, without being paid off, referees are going to favour A and B because it will help create the best money event for them, a final A vs B.
US citizens like to call for stuff like corruption, salvation can be found through honest people etc...
But in a system like US citizenism, honest people are destroyed, they are led to take relentlessly decisions adverse to their best interests and against their self preservation.
No, referees are not the problem. The problem is US citizenism, a system in which even honest people are coerced into taking biased decisions to favour big players.
The US is not the solution, the US is the problem.
Hey, if the referees are corrupt, its time to call Caesar. Period. No markets, no Oligarchs, no nothing. Its back to Dictatorship. You are so nihilist in your thinking you are inviting that solution.
You won't admit that PEOPLE have to be honest and if honesty is NOT THE BEST POLICY percieved by them in their own interest; then its game over. KAiseridée rules the day!
And if that starts a revolution then its back to acquiring a civic sense or else it will invite the barbarian in to take over Rome!
Can't run away from citizens having to bite their own bullet in the end; make the rules and reinforce them. Or its goodbye civilization.
what's going on now is not capitalism. It's rule by sociopaths.
Wrong. Crony Capatalism which does not allow connected banks and entities (See Tarp and GE who needed and could not roll over 90 billion in short term paper, Imelt should be unemployed, not the "Jobs" Czar) to go bankrupt when they can't pay their creditors is THE issue... People should be in jail, instead they sre /were rewarded.
Got it but remember it's easier to repo the car and sell it fast
+2 or 3 reality shows to prove it.....................