The stock market gets it but not the bulk of economic soothsayers. The “Great Recession of 2009″ is over and we are on the road to recovery. I did read one comment that called this recession the worse since the early 1980’s, quite a major change from comparing it to the “Great Depression.”
I cited 2 April 2009 as the date the situation turned around. That was when we dropped the “mark to market” rules that were hamstringing our financial institutions. Since then we have been on a slow, but sure, return to business as normal. Even our friends in Europe and Asia are rebounding. So what now?
As I have noted, we learned that “securitzed debt” produced the greatest increase in available credit, ever. However, our failure to understand it adequately led to the panic devaluations that damn near destroyed our financial system. We are still having trouble coming to terms with this innovative device, but we are already using it again in substantial amounts. The remaining problem is for the Obama team to come up with rules and regulations that give greater transparency to, and control over, this new key element of our economy. We have learned more about this credit source and how to manage it, but we need the new rules too.
Unemployment remains a nagging problem. As I have stated repeatedly, we need the President’s stimulus plan to be enacted rapidly and completely. With unemployment at near 10% and industrial capacity utilization at historically low levels, there is no danger that this massive infusion of government funds will spark inflation. Given the desperate straits of many state and local governments, the plan managers may want to channel more of this fund through their coffers.
While I have pointed out that the unintended result has been to make the Federal Government the largest single shareholder in the private sector and thereby give it even more control over the economy, I see another unintended result. It may be that this sorry experience has served to widen the divide between the rich and the rest of us.
Just prior to the panic mainstream America was enjoying a major leap in individual wealth generated by a booming housing market. Practically every Tom, Dick and Harry was using the equity in his home to buy second and third homes or other assets, thereby increasing his paper wealth. Those who did not participate directly in the property market, also benefitted when their portfolio investments grew rapidly, spurred by their holdings of “securitized debt” instruments. This paper wealth was translated into cash or even more borrowing. So while wages were not growing rapidly, individual wealth was. All this new found wealth took a nose dive during the panic and we now find our individual wealth severely depleted. Many are turning to saving money to rebuild their wealth position. Others, such as myself, are turning to the stock market.
No matter what we do, however, the panic has caused “Joe Middleclass” to lose substantial wealth. I am not so sure that the rich were equally hurt. Sure, they took major losses, but they had larger cushions. I believe there is fertile soil for a “liberal” or “progressive” economic thinker to explore whether the “Great Recession of 2009″ left the middle class further behind the rich, or if we all came out with equal loss.

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Nice Green Shooting.
The reported unemployment statistic (the one everybody pays attention to) uses a method that started in 1994. In that method, anyone who has exhausted UI benefits and have gotten so discouraged they stopped looking for work is discounted altogether!
When we use the old methodology (the one used in the 1930’s) that simply considers: Are you eligible to work, and are you working yes/no, we find that unemployment by that number is over 18%. And at the height of the Great Depression, it was 24%.
We are very close, and indeed some cities in the US, we are already in Great Depression territory on unemployment. Perhaps the biggest untold story of our day is the unemployment crisis. Compared to how bad it is, the media is barely touching it.
Now as far as the stock market goes, right now it’s liquidity driven, meaning the Fed has pumped banks full of TARP funds (borrowed from future generations) and that money is being pushed into the market through the back door. PEs are > 100, so there are no actual corporate earnings that support these levels of valuation - it’s Fed-pumped funny-money producing a phony baloney run-up. The stock market right now is a bubble, no more than a Generational Ponzi Scheme. It need never be connected to the real economy, it can be puffed up for no good reason other than excess liquidity - it’s essentially a casino where lost money goes.
So Ben Bernanke is wrong?
Glenn See my article on “Employment” I do not believe the media have underplayed the unemployment situation in the USA.