Thursday, July 24, 2008

MSM Meltdown Coverage

It's very interesting to read, compare, and contrast the guarded coverage given to the meltdown of the American financial system in the mainstream media. Time for a new coinage perhaps? "financial correctness" - describing that paradoxical limbo state in which a commentator wants to write a powerful truth yet durst not do so for fear of engendering a self-fulfilling prediction. Funny stuff, when all the established models, methods, and jargon are found wanting to describe the goings on in the fin d'siecle absolute capitalist hierarchial food powered make work enterprise. In the NYTimes - Bank Investors Expect Less as Losses Mount;
It has now been a year since the credit crisis erupted, and, so far, the optimists have been proven wrong time and again. Skeptics say it could take years for banks to recover from the worst financial crisis since the Depression. And even when things do improve, the pessimists maintain, banks’ profits will be a fraction of what they were before.

There are many reasons for caution. Home prices continue to decline, and defaults are accelerating on a wide range of loans. As lenders struggle, loans are becoming even more scarce for hard-pressed consumers and companies. That, in turn, could slow any recovery in the broader economy.

For now, at least, some investors seem to have become so inured to the bad news that results that would have once been viewed as disastrous are now seen as good, or even great. The sober phrase often used on Wall Street to describe solid corporate results — “better than expected” — has been replaced by “not as bad as feared.”
In the Washington Post - A Depression? Hardly;
The specter of depression stalks America. You hear the word repeatedly. Are we in a depression? If not, are we headed for one? The answer to the first question is no; the answer to the second is "almost certainly not." The use of "depression" to describe the economy is a case of rhetorical overkill that speaks volumes about today's widespread pessimism and anxiety. A short history lesson shows why.

The Great Depression of the 1930s -- the last time the term rightly applied -- was industrial capitalism's worst calamity. U.S. unemployment peaked at 25 percent in 1933; it averaged 18 percent for the decade. From 1929 to 1933, 40 percent of U.S. banks failed. People lost deposits; businesses and consumers lost access to credit. Over the same period, wholesale prices dropped a third, driving farmers and firms into bankruptcy. Farm foreclosures, shantytowns (called "Hoovervilles," after the president) and bread lines followed.

This was a social as well as economic breakdown. Our present situation bears no resemblance to this. In June, unemployment was 5.5 percent, slightly below the average since 1960 of 5.8 percent. It's true that banks and investment banks -- Citigroup, Merrill Lynch, Wachovia -- have suffered large losses. But on the whole, the banking system seems fairly strong. Although profits in the first quarter of 2008 were down 46 percent from 2007, they totaled $19 billion even after $37 billion set aside for loan loss reserves. Overall corporate profits are still running at a near-record annual rate of $1.5 trillion.
The unmentionable turd in the proverbial financial punchbowl is the unmentionable (and largely unperceived) end of the era of cheap energy. Though the normative economic claptrap is the equivalent of pre-Copernican astronomy - and not seeing Peak Oil is the equivalent of believing that the sun revolves around the earth - it is what it is, the dominant narrative constraining folks understanding of what's around that signpost up ahead.