CRASH TALK

Shamus Cooke, Global Research - Regardless of what the media says, the reasons for calling this crisis the "worst since the Great Depression," still exist. Not only this, but new problems are being created that are compounding the old.

One of the original, major concerns of the economy was the fact that the banks were bankrupt. This problem still persists, even after trillions of dollars of taxpayer money was given away, not to mention a "stress test" where the banks in fact "negotiated" the terms of the test. By pretending this problem doesn't exist, the Obama administration is continuing the Bush-era approach to the banks: don't ask, don't tell. Banks will thus continue to be bailed out when their problems are too explosive to be ignored; credit will continue to be restricted, and a general level of instability will taint the system itself.

Another major problem of the economy is that consumers are bankrupt. Unemployment continues to skyrocket, ensuring that every month hundreds of thousands of less people will be able to consume, driving more establishments out of business. The people who lose their jobs thus fail to pay their mortgages, credit cards, student loans, etc., all furthering the losses of the banks. . .

Households are rapidly getting rid of expenses they can no longer afford, due to either joblessness, low wages or lack of credit. They are thus saving more than they are spending. For an economy that depends on 70 percent consumer spending, this is a huge problem, not only for the U.S., but for the world as well, since many countries constructed their economies as export machines directed towards U.S. consumers.

Is this problem likely to go away anytime soon? Probably not. The recession is creating such dramatic effects on so many people that the consuming culture is being changed, much like what happened after the Great Depression. . .

If the U.S. consumer can no longer be the driving force of the economy, what will replace it? The elitist Economist magazine offered a cure: because consumer spending will be debilitated, "something else will have to grow more quickly. Ideally that would be exports and investment."

There is in fact little else that can be done if one is playing by the strict rules of the market economy. Obama again gave his allegiance to this broken system by agreeing with the Economist, when he stated, "We must lay a new foundation for growth and prosperity, where we consume less at home and send more exports abroad." . . .

In order for US corporations to sell products on the world marketplace, they must have competitive prices. Labor is a key ingredient in determining the price of a commodity, since the other ingredients have relatively stable prices. The price of labor in the U.S. was, in part, the result of a strong labor movement, which achieved a living wage. This not only drove down profits for corporations, but made them less competitive on the world market - they consequently defected to countries that pay slave wages.

How, then, does Obama plan to "send more exports abroad?" The answer is simple: by insuring that Americans are able to "consume less." For example, Obama's Auto Task Force told Chrysler and GM workers that their incomes were too high, that they needed to make less so that their companies could "remain viable" (compete) on the global market. They were thus threatened with bankruptcy if they did not offer "significant concessions." The workers conceded, and bankruptcy happened anyway - a phenomenon bound to happen again soon at GM - unless workers fight back. . .

But falling wages have a negative side effect, aside from disgruntled workers. As Nobel Prize- winner Paul Krugman points out:

"Families are trying to work that debt down by saving more than they have in a decade - but as wages fall, they're chasing a moving target. And the rising burden of debt will put downward pressure on consumer spending, keeping the economy depressed." His conclusion is sobering: "The risk that America will turn into Japan - that we'll face years of deflation and stagnation - seems, if anything, to be rising." . . .

This debt is of course unsustainable. There are numerous signs that overseas' buyers are likely to reduce their investment, worried as they are about the U.S. money printing bonanza. In an effort to bolster confidence, Obama has plans to balance the budget by the end of his presidency. Again, a massive de-leveraging of debt will need to happen. Obama has made no secret of where this restructuring will come from: he has made repeated references to "reforming entitlement programs" (Social Security, Medicare, etc.).

It should be noted that the only other way Obama could balance the budget is if he taxed the super rich at a high rate while slashing military spending, neither of which is going to happen on its own. Nevertheless, these items must be central demands for the American worker, who is already under immense economic pressure, with more to come. . .

The fight for jobs, a living wage, progressive taxation, social security, and single payer healthcare are all topics capable of uniting the vast majority of U.S. citizens. If properly organized, and with the labor movement playing a leading role, such a coalition would have no problem overcoming the objections of those who oppose it - the tiny group of super rich benefiting from how things are currently.