By Jaimeson Champion
Published Aug 22, 2010 10:18 PM
The steady stream of dismal economic reports released in recent weeks has even the most persistent optimists on Wall Street doubting the strength of the so-called economic recovery. Current statistics showing sharp rises in first-time jobless claims and a dramatic widening of the trade deficit have sent many institutional investors running for cover amid heightened fears of a “double-dip” recession.
“People are dumping stocks because they’re afraid earnings will decelerate and the economy is losing steam,” said James Swanson, chief investment strategist at MFS Investment Management. (Businessweek, Aug. 12)
A 265-point drop in the stock market on Aug. 11 was yet another indication that many of those who once saw “green shoots” are now increasingly recognizing the rot of this wilting recovery.
The following day, Aug. 12, more than 100 unemployed workers known as “99ers” gathered outside the New York Stock Exchange on Wall Street to demand the extension of unemployment benefits. 99ers are workers who have exhausted the 99 weeks of federal unemployment benefits. According to the U.S. Bureau of Labor Statistics, more than 1.4 million workers in the U.S have been without a job for more than 99 weeks — and this doesn’t count the millions who have never been able to get a job or who have given up looking and are classified as “discouraged workers.”
The 99ers demonstrating outside the stock exchange conveyed heartbreaking stories of long, fruitless job searches that were followed by repossession, foreclosure and homelessness.
In many ways the events on Wall Street those two days were a microcosm of the way this so-called economic recovery has been experienced in the U.S. Inside the halls of high finance, the well-heeled bankers and investors traded stock and debated whether or not the health of the recovery was diminishing. As the recipients of hundreds of billions of dollars of bailout funds, these wealthy bankers and investors did experience a recovery — a recovery to their profits and dividends.
But outside the highly guarded doors of the New York Stock Exchange, the 99ers gathered to demand benefits that are essential to their basic survival. The 99ers do not need Wall Street prognosticators and profiteers to tell them that the recovery is losing steam. They are painfully well aware of the fact that, for them, the recovery never began. For the 99ers and tens of millions of other unemployed and underemployed workers in the U.S., the economic recovery has always been a mirage. Talk of a rebound has always rung hollow to the tens of millions of workers, and their families, who have lost their jobs, their homes and their way of life in this unceasing economic nightmare.
The Fed’s new/old fix
Following its most recent meeting on Aug. 10, the Federal Reserve Open Market Committee stated that “the pace of recovery in output and employment has slowed in recent months.” In response, the Fed unveiled plans to begin another round of “quantitative easing” by purchasing additional U.S. Treasury bonds.
To put the Fed’s new plan in context, it is necessary to first briefly revisit the central bank’s actions over the past two and a half years.
As the Great Recession began to take root in late 2007, the Federal Reserve employed its traditional recession-fighting tool of slashing interest rates in efforts to increase the money supply and flood the glutted markets with liquidity. But by the fall of 2008, with the federal funds interest rate already near zero and the crisis continuing to deepen, the Fed increasingly turned to more nontraditional policy measures. These measures included printing hundreds of billions of dollars to purchase failing mortgage-backed securities and other toxic assets from the big banks and Wall Street firms.
By early 2010 the Federal Reserve had already handed out more than $1.25 trillion to the big banks in the form of massive purchases of these mortgage-backed securities.
Citing signs of economic recovery and wary of the potential inflationary impact of printing more than $1.25 trillion, the Fed stopped its purchases of mortgage-backed securities in March 2010. “I think the economy is starting its recovery, and there’s reason to be optimistic,” declared Thomas Hoenig, president of the Federal Reserve Bank of Kansas City. (Wall Street Journal, Jan. 8)
But with mounting evidence indicating that the recovery never took root, the Federal Reserve has dropped the façade of an economy on the mend and is returning to its bag of monetary tricks. It now plans on making monthly purchases of tens of billions of dollars of U.S. Treasury debt in further attempts to inject liquidity into the markets and stabilize the markets. So essentially, after two and a half years, the Fed’s new prescription is for more of the same.
Workers have the answer
In response to the loss of tens of millions of jobs and the shuttering of entire industries, the Federal Reserve, which is legislatively mandated to pursue full employment and price stability, has answered by handing out more than $1.25 trillion to bankers.
In response to economic despair and human suffering not seen since the Great Depression, the ruling-class politicians have answered with budget cuts to social programs, school closings and further reductions to affordable housing.
At every nightmarish turn in this continuing economic disaster, the ruling-class policymakers and politicians have proven that they have no solutions to the problems faced by the working class. The supposed government of the people, by the people and for the people has proven itself to be a government of the rich, by the rich and for the rich.
The working class must unite in its own common class interests and advance its own solutions. The answers to the problems created by this crisis lie not in the brains of bourgeois economists but rather in the bonds of solidarity being formed among workers like the 99ers. With every grassroots convergence of workers, the strength to combat this rotten system becomes fortified. With every unified demand advanced by the working class, the solution to this economic crisis gets a little bit closer.
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