This Recession, It’s Just Beginning


Vincent Quinones works on the floor of the New York Stock Exchange Wednesday after the Federal Reserve issued a mixed assessment of the economy. Yesterday, the Dow Jones industrial average closed down 358 points. (By Andrew Harrer — Bloomberg News)

So much for that second-half rebound.

Truth be told, that was always more of a wish than a serious forecast, happy talk from the Fed and Wall Street desperate to get things back to normal.

It ain’t gonna happen. Not this summer. Not this fall. Not even next winter.

This thing’s going down, fast and hard. Corporate bankruptcies, bond defaults, bank failures, hedge fund meltdowns and 6 percent unemployment. We’re caught in one of those vicious, downward spirals that, once it gets going, is very hard to pull out of.

Only this will be a different kind of recession — a recession with an overlay of inflation. That combo puts the Federal Reserve in a Catch-22 — whatever it does to solve one problem only makes the other worse. Emerging from a two-day meeting this week, Fed officials signaled that further recession-fighting rate cuts are unlikely and that their next move will be to raise rates to contain inflationary expectations.

Since last June, we’ve seen a fairly consistent pattern to the economic mood swings. Every three months or so, there’s a round of bad news about housing, followed by warnings of more bank write-offs and then a string of disappointing corporate earnings reports. Eventually, things stabilize and there are hints that the worst may be behind us. Stocks regain some of their lost ground, bonds fall and then — bam — the whole cycle starts again.

It was only in November that the Dow had recovered from the panicked summer sell-off and hit a record, just above 14,000. By March, it had fallen below 12,000. By May, it climbed above 13,000. Now it’s heading for a new floor at 11,000. Officially, that’s bear market territory. We’ll be lucky if that’s the floor.

In explaining why that second-half rebound never occurred, the Fed and the Treasury and the Wall Street machers will say that nobody could have foreseen $140 a barrel oil. As excuses go, blaming it on an oil shock is a hardy perennial. That’s what Jimmy Carter and Fed Chairman Arthur Burns did in the late ’70s, and what George H.W. Bush and Alan Greenspan did in the early ’90s. Don’t believe it.

Truth is, there are always price or supply shocks of one sort or another. The real problem is that the underlying fundamentals had gotten badly out of whack, making the economy susceptible to a shock. The only way to make things better is to get those fundamentals back in balance. In this case, that means bringing what we consume in line with what we produce, letting the dollar fall to its natural level, wringing the excess capacity out of industries that overexpanded during the credit bubble and allowing real estate prices to fall in line with incomes.

The last hope for a second-half rebound began to fade earlier this month when Lehman Brothers reported that it wasn’t as immune to the credit-market downturn as it had led everyone to believe. Lehman scrambled to restore confidence by firing two top executives and raising billions in additional capital, but even that wasn’t enough to quiet speculation that it could be the next Bear Stearns.

Since then, there has been a steady drumbeat of worrisome news from nearly every sector of the economy.

American Express and Discover warn that customers are falling further behind on their debts. UPS and Federal Express report a noticeable slowdown in shipments, while fuel costs are soaring. According to the Case-Shiller index, home prices in the top 20 markets fell 15 percent in April from the year before, and Fannie Mae and Freddie Mac report that mortgage delinquency rates doubled over the same period — and that’s for conventional home loans, not subprime. United Airlines accelerates the race to cut costs and capacity by laying off 950 pilots — 15 percent of its total — as a number of airlines retire planes and hint that they may delay delivery or cancel orders of new jets from Boeing and Airbus. Goldman Sachs, which has already had to withdraw its rosy forecast for stocks, now admits it was also too optimistic about junk bond defaults, and analysts warn that Citigroup and Merrill Lynch will also be forced to take additional big write-downs on their mortgage portfolios.

Read moreThis Recession, It’s Just Beginning

Carter says Israel has arsenal of 150 nuclear weapons

Former U.S. President Jimmy Carter has said Israel holds at least 150 nuclear weapons, the first time a U.S. president has publicly acknowledged Israel’s atomic arsenal.

Asked at a news conference at Wales’s Hay literary festival on Sunday how a future U.S. president should deal with the Iranian nuclear threat, Carter put the risk in context by listing atomic weapons held globally.

“The U.S. has more more than 12,000 nuclear weapons, the Soviet Union (Russia) has about the same, Great Britain and France have several hundred, and Israel has 150 or more. We have a phalanx of enormous weaponry … not only of enormous weaponry but of rockets to deliver those missiles on a pinpoint accuracy target,” he said, according to a transcript of his remarks.

Carter also condemned Israel’s blockade of the Gaza Strip as “one of the greatest human rights crimes now existing on Earth,” according to the Agence France-Presse news agency.

Carter said in reference to the situation of Palestinians in Gaza that, “There is no reason to treat these people this way.”

The 83-year-old was subjected to criticism on a recent visit to Israel for his meetings with officials from Palestinian militant group Hamas as well as his trip to Syria where he met with Syrian President Bashar Assad and Hamas leader Khaled Meshal.

He has also in the past branded a “crime and an atrocity” the Israeli blockade of Gaza, imposed in response to ongoing rocket attacks launched from the territory.

Related articles:

  • Our debt to Jimmy Carter
  • Ex-U.S. President Carter answers questions from Haaretz Editor-in-Chief
  • Jimmy Carter: Israel’s ‘apartheid’ policies worse than South Africa’s
  • Last update – 21:23 26/05/2008

    Source: Haaretz.com

    Carter says U.S. tortures prisoners

    WASHINGTON (CNN)The United States tortures prisoners in violation of international law, former President Carter said Wednesday.

    “I don’t think it. I know it,” Carter told CNN’s Wolf Blitzer.

    “Our country for the first time in my life time has abandoned the basic principle of human rights,” Carter said. “We’ve said that the Geneva Conventions do not apply to those people in Abu Ghraib prison and Guantanamo, and we’ve said we can torture prisoners and deprive them of an accusation of a crime to which they are accused.”

    Carter also said President Bush creates his own definition of human rights.

    Carter’s comments come on the heels of an October 4 article in The New York Times disclosing the existence of secret Justice Department memorandums supporting the use of “harsh interrogation techniques.” These include “head-slapping, simulated drowning and frigid temperatures,” according to the Times.

    Read moreCarter says U.S. tortures prisoners

    Middle East: Beating the Drums of War

    “In a regional war scenario, Israel will deal mainly with Lebanon and Syria while the U.S. and Britain will deal mainly with Iran. [51] The help of Turkey and NATO will definitely be needed by Israel, America, and Britain in such a war. Ankara and NATO will also be involved in both fronts. [52]

    NATO has already built a presence on the western borders of Syria and Lebanon and inside Afghanistan on the eastern borders of Iran with forward positions. Israeli officials such as Shaul Mofaz have also stated, in no uncertain terms, that if they launch an attack on Iran, the U.S. and NATO will come to the aid of Tel Aviv.”

    _________________________________________________________________________________________

    Israel, Syria, and Lebanon Prepare the “Home Fronts”


    The Levant could be the starting point of a major international conflict with global ramifications and which could quickly spin out of control. Such a conflict could even involve the use of Israeli or American nuclear weapons against Iran and Syria. Syria has additionally declared that it is preparing for an inevitable war with Israel despite the fact that it believes that the chances of a war in 2008 are slim. (They are not slim at all. – The Infinite Unknown)

    Read moreMiddle East: Beating the Drums of War

    A human rights crime in Gaza

    By Jimmy Carter
    First Published 5/6/2008

    The world is witnessing a terrible human rights crime in Gaza, where a million and a half human beings are being imprisoned with almost no access to the outside world by sea, air, or land. An entire population is being brutally punished.

    This gross mistreatment of the Palestinians in Gaza was escalated dramatically by Israel, with United States backing, after political candidates representing Hamas won a majority of seats in the Palestinian Authority parliament in 2006. The election was unanimously judged to be honest and fair by all international observers.

    Israel and the US refused to accept the right of Palestinians to form a unity government with Hamas and Fatah and now, after internal strife, Hamas alone controls Gaza. Forty-one of the 43 victorious Hamas candidates who lived in the West Bank are now imprisoned by Israel, plus an additional ten who assumed positions in the short-lived coalition cabinet.

    Regardless of one’s choice in the partisan struggle between Fatah and Hamas within occupied Palestine, we must remember that economic sanctions and restrictions in delivering water, food, electricity, and fuel are causing extreme hardship among the innocent people in Gaza, about one million of whom are refugees.

    Israeli bombs and missiles periodically strike the encapsulated area, causing high casualties among both militants and innocent women and children. Prior to the highly publicized killing of a woman and her four little children last week, this pattern was illustrated by a previous report from B’Tselem, the leading Israeli human rights organization: 106 Palestinians were killed between February 27 and March 3. Fifty-four of them were civilians who didn’t take part in the fighting, and 25 were under 18 years of age.

    Read moreA human rights crime in Gaza

    Obama, Clinton pledge to defend Israel against Iran


    At the debate, Barack Obama (R) said: “An (Iranian) attack on Israel is an attack
    on our strongest ally in the region, one whose security we consider paramount. “

    PHILADELPHIA (AFP)—The Democratic White House hopefuls vowed Wednesday to defend Israel against any Iranian attack but differed on how to engage the Islamic republic over its nuclear ambitions.

    At a televised debate ahead of next Tuesday’s Pennsylvania primary, Hillary Clinton and Barack Obama agreed that a nuclear-armed Iran was unacceptable.

    Both called for diplomacy but Obama went further in renewing a promise of “direct talks” at a leaders’ level with Tehran, along with other US foes.

    Iran should be presented with “carrots and sticks,” the Illinois senator said, while stressing “they should also know that I will take no options off the table when it comes to preventing them from using nuclear weapons or obtaining nuclear weapons.”

    “We cannot permit Iran to become a nuclear weapons power,” Clinton said, ruling out any summit talks and condemning President Mahmoud Ahmadinejad for raising doubts about who really carried out the September 11 attacks of 2001.

    Read moreObama, Clinton pledge to defend Israel against Iran