The Dow's at 10,000, and the bankers are reaping huge bonuses, but the economy in which the rest of us live is a disaster.
On Oct. 14, the Dow Jones Industrial Average barely passed the 10,000 mark for the first time in over a year.
That gave the "green shoots" crowd spasms of joy at the possibility of a recovery from the worst recession to hit America in seven decades. Of course, the last one eventually morphed into the Great Depression lasted at least a full decade, rewired our currency, led to world war, ruined countless lives and set a universal standard for societal implosions.
The fire this time? It's almost out, say a series of decorated financial experts within and without the mainstream.
But most of them blew the call on the implosion, and are still blowing it today. We are not in Paul Krugman's Great Recession, or the "deep and long recession" coined by the optimistic National Association for Business Economics. We're not even mired in Wikipedia's comparatively boring Financial Crisis of 2007-2009.
No, we're neck-deep in another Great Depression, which is unfurling into a devaluation nightmare of everything from our lives and currency to, given curve balls like catastrophic climate change and peak oil and water, our very existence.
"There are always unexpected disasters out there waiting to happen," Jeffrey Frankel, a Harvard economist and member of the National Bureau of Economic Research's Business Cycle Dating Committee, explained to AlterNet.
Frankel took pains to clarify that he's speaking for himself, not the nonprofit NBER, which is the largest economics research organization in the U.S. and usually gives the last word on when recessions begin and end -- or turn into depressions.
Frankel's public stance on such loaded terms can be costly. But another clarification Frankel offered added firepower to theory that the differences between recessions and depressions are as ideological as they are statistical.
"There is no standard definition of depression," Frankel said.
Like "socialism" and "democracy," an economic depression is terminology fueled by ideology. It can be colored in using whatever palette the powers that be decide to wield.
The last few economic depressions were concretized in hindsight, with the benefit of much analysis and more controversy.
The Long Depression of 1873-1896, depending on whom you ask, arguably lasted over two decades and set the table for the 20th century's Great Depression. Centuries later, it is still a matter of contention. Most notably, from neoconservative guru Milton Friedman and Anna Schwartz, who argued in their influential, The Monetary History of the United States, that the Long Depression was "severe" but "shorter in length and far less severe than it has been generally judged."
In other words, even the so-called experts can't agree on what an economic depression really is, much less a deep and long Great Recession, even while they're trapped within one.
Logically, one can call the chaos we're now stuck in a depression, and there's not a damn thing anyone can do about it. Score one for the linguistic and financial relativists.
But if you're on the lookout for more statistically convincing evidence, then chew on the raw data.
"The rule of thumb for a depression is unemployment over 10 percent," Thomas Palley, explained by phone to AlterNet. Palley is a Bernard L. Schwartz economic growth fellow at the New America Foundation, as well as the author of a recent Financial Times column, "A Second Great Depression is Still Possible." "If you look at the U.S. Bureau of Labor Statistics' official U3 number, then we're darn near close to it. If you count the discouraged who aren't looking for work, or part-timers, then we're already there."
The BLS' official unemployment rate is another clever example of economic and terminological manipulation. Its favored U3 does not count the U4, U5 or U6 contingent, which ranges from "discouraged workers" and "marginally attached workers" to part-timers, which is a very large hedge.
If they were all mashed into a more faithful rendering of the employment landscape, the resultant percentage would be closer to 20 percent than 10 percent. The economic recovery would be summarily stripped of its clothes.
"There's a very strong case for saying that we're already in a depression," Palley concluded. "Lawrence Summers, [Treasury Secretary] Timothy Geithner and the Federal Reserve have been much more subdued and even gloomy. I think something is registering."
Perhaps that could be the fault of the other categorical imperatives for economic depression, which are being fulfilled as you read.
They include not just surprising increases in unemployment but also decreases in credit availability and investment (check), rising bankruptcies and bank failures (done), cratering trade and commerce (sure), volatile fluctuations (yup) and currency devaluation. And trust me on that last one: You don't want to know. It's not pretty.
The only serious holdout in this nasty bit of game theory is duration, and that's a safety net. Because you have no choice but to wait a long while before you can confirm whether calling this mess the Great Recession was shifty legerdemain designed to keep the stock market alive, or prudent financial wisdom.
And the waiting, so far, sucks.
The scary part is that it could get much worse. According to legendary foreign correspondent Robert Fisk, up-and-coming BRIC nations like Brazil, Russia and China, as well as Middle East fossil-fuel peddlers who used to be our pals, have recently conspired to dominate oil outside of the dollar.
It's not just Middle East countries that have been considering a regional currency rethink: In September, seven South American nations, led by oil-rich Venezuela, announced their intent to create an international bank of their own, outside the reach of the United States and the International Monetary Fund.
Meanwhile, disastrously costly wars in Iraq and Afghanistan haven't helped do anything other than suck trillions out of American taxpayer pockets. Even World Bank President Robert Zoellick, a former Goldman Sachs player and George W. Bush's appointed replacement for disgraced neocon Paul Wolfowitz, argued that the "United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency."
And that's just the trouble abroad. At home, Social Security could enter the red next year. We're still shedding a couple hundred thousand jobs a month. Commercial real estate loans are about to go belly up. Consumer credit keeps falling through the floor. Pensions are evaporating. Home prices are still tanking, and few expect the situation to seriously stabilize before 2020.
Bank of America argues that around 40 percent of junk bonds are set to default by 2013, throwing ever more billions down the black hole. Powerhouse states like California are possibly deteriorating into failed states. The economic terrorism watch list goes on (and on).
2013 and 2020 are years from now, of course, meaning that by the time we get there, we'll probably look back on this talk of a Great Recession and have a hearty laugh. Even the optimists, including Frankel, will probably feel let down.
"As bad as the recession of 2007-09 has been, it has been nowhere near as bad as the Great Depression, or the Long Depression," he explained. "Even though the labor market is still very bad, there are many signs that the economy hit bottom sometime during the summer. The advance estimate of third-quarter GDP that the Commerce Department will announce at the end of this month will almost certainly show positive growth. If that holds up, even though we will probably be in for a slow recovery, we have dodged the bullet of depression."
Wait for it.
"Of course," Frankel clarified, "this could all change, for example, if there were a new financial collapse or a hard landing for the dollar. A double-dip recession is a danger, because at the moment the demand expansion is coming from federal fiscal stimulus and firms' rebuilding of inventories, both of which will end in 2010."
The double-dip recession is another cute terminological choice. Isn't a recession that devolves backward to its worst state the same as a depression? Isn't revisiting a collapse that almost nuked the global marketplace confirmation of recovery's failure?
A double-dip, W-shaped recession isn't just a visual confirmation that the Bush administration's disaster capitalism succeeded in bleeding the New Deal dry. It's confirmation that the United States government, as Texas Republican Congressman Ron Paul argued, is basically one massive toxic asset.
But at this stage of the so-called Great Recession, you can pick your poison from the "alphabet soup," Palley said. "It could be a W or even a L, or a W that ends with a L."
Just make sure you stop calling it a recession. That ship has sailed.
"I thought the financial markets were nuts two or three years ago, when they failed to reflect that there were any risks out there," Frankel said. "If we had continued to accumulate the budget surpluses that were bequeathed to the nation in January 2001, that would have put us in much better shape to deal with the recession of 2007-09, as well as with any rude shocks, as yet unknown, that may still be lying in wait out there."
What's out there is what will ultimately warrant the change in comfortable terminology. There are still securitized debts yet to be deleveraged, as our dystopian iteration of "pass the parcel" continues, according to Margaret Atwood, award-winning speculative fiction author, most recently of Year of the Flood, as well as debt historian behind Payback: Debt and the Shadow Side of Wealth.
"The music is played, and when it stops, someone gets to peel off a layer of the parcel," Atwood explained by phone during a tour supporting Year of the Flood, released in September. "At the end, someone gets to open it up. This is what happened with the mortgages, except that when the music stopped, the parcel was empty because it was based on toxic debt.
"There's nothing wrong with debt as a tool; in fact, we probably couldn't get along without it. But it's when you incur a debt that you cannot pay back that the ripple effects begin."
Those ripple effects began in late 2007, although it can be argued (as it always can) that our current recession started, as Frankel argued, once we started throwing away the nation's surplus. Either way, we're climbing up on four years of a deep, long, painful recession that most everyone is too afraid to call a depression, even when the evidence is before their bleary eyes.
Geithner says the U.S. is going to be on what amounts to indefinite life support. The Fed is vigorously hiding its dirty books from the public, while opening its vaults for pretty much any corrupt bank still standing, but especially Goldman Sachs and JP Morgan Chase, whose $3.6 billion in earnings initially sent the Dow over 10,000 in October.
If you think that earnings report and the Federal Reserve's historical changes in borrowing aren't related, then I have a McMansion to sell you in Detroit.
Even as they rake in bloated profits and ride a 2009 stock rally propped up by government spending and intervention, banks are still refusing to pay back money they owe to the United States.
Bank of America is under investigation by the Justice Department. Presumed economic sages as different as the jocular doom prophet Marc Faber and activist investor Carl Icahn are arguing that collapse, disaster and chaos are on the docket.
But don't take my word for it, or theirs. Pop the champagne on a lame Dow Jones lap around 10,000 and keep telling yourself that it's going to be fine.
The human race has experienced this devaluation of empire many times before, and it has usually failed to wake up when it mattered most. The American people have lived on a steady diet of hyperreal debt securitization, excessive consumption and currency devaluation for decades now, and they've yet to snap out of their American Idol fantasy. (Or is that American Idle?)
When they finally do, they could find that the America they knew has come and gone, and that a new world economic order has sprung up around them in red shoots instead of green.
By the time their blurred eyes read U.K. economist Sir Nicholas Stern's 2006 report asserting that climate change will downsize the global economy by 20 percent more -- or perhaps wipe us out altogether, others worry -- they'll be ready to go right back to sleep.
This time, in the fetal position, aghast at the power of words to reshape reality.
Scott Thill runs the online mag Morphizm.com. His writing has appeared on Salon, XLR8R, All Music Guide, Wired and others.
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