South By North Strategies, Ltd.

Not This Show Again

Econbrowser explains how the Eurocrisis could impact the economy of the United States.

A significant economic contraction in Europe will reduce demand for U.S. exports. But my bigger concern is with international financial linkages. Which financial institutions have made loans or entered into derivatives with exposure to these troubled debts? A recent assessment by the Congressional Research Service estimated that U.S. banks have $641 billion in loan exposure to Portugal, Ireland, Italy, Greece and Spain. But French and German banks themselves have considerable debt to those same countries, and U.S. banks have another $1.2 trillion in loan exposure to German and French banks.
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And this is the heart of the problem. Who takes the losses, and if they fall, who do they then bring down in turn? If you’re somebody with funds to lend and don’t know the answer, in response to these fears what you do is cut back all kinds of lending. If that sounds familiar, it should, because it’s exactly this kind of ricocheting financial uncertainty that brought down the world economy in the fall of 2008.

Around The Dial – November 15, 2011

Economic policy reports, blog postings, and media stories of interest:

• Naked Capitalism revisits Jane Austen’s still fresh observations on inequality.
• James Galbraith points out that the Euromess is really another banking crisis.
• Uwe Reinhardt argues for “equalizing payments for medical care.”
• Paul Krugman shales his head at “vouchers for veterans.”
• Robert Kuttner tires of “the superfluous super committee.”

Where Did The Anger Go?

Louis Uchitelle wonders why Americans seem so passive about mass unemployment.

More than 25 million people in America are unemployed or stuck in part-time work or parked on the sidelines hoping for jobs, according to the Bureau of Labor Statistics. Roughly 6.2 million are classified as long-term unemployed, which means they have been seeking work for at least six months. Not since the severe recession of the early 1980s has the share of the population wanting jobs or more hours of work been so high. But the numerous rallies and protests that gave vent to the hardships of unemployment in the early ’80s are absent now.
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Then, the manufacturing sector went through its first big shakeout since the 1930s, sidelining and shocking hundreds of thousands of workers who had thought their jobs were secure. In a climactic moment, an estimated 260,000 people marched on Washington in September 1981, protesting President Reagan’s mass dismissal of the nation’s air traffic controllers the month before because they had refused to heed his order to end a strike and return to work.
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Nearly a generation later, the unemployed think differently. They join self-help and job-search groups, but they don’t see a route to employment through protest or through outspoken demand. Activism has given way to acquiescence, although unemployment is once again stubbornly high in the aftermath of a recession that has left the economy persistently weak.

Keeping It Real

In an interview with Naked Capitalism, Dean Baker points out the huge disconnect between economic policymakers and actual conditions.

Well, the first thing is to be clear on where we are. We are up against an opposition that has almost complete control of the public debate. If you just stand back for a moment: here we are with 26 million people unemployed, underemployed or out of the work force altogether, millions of people facing the loss of their home, a huge cohort of baby boomers on the edge of retirement with nothing to support themselves but their Social Security and the topic that stands at the center of national debate is reducing the deficit. This is close to crazy.

Around The Dial – November 14, 2011

Economic policy reports, blog postings, and media stories of interest:

• Naked Capitalism questions, Dean Baker answers.
• Simon Johnson worries about Europe.
• Credit Slips handicaps the multistate foreclosure settlement talks.
• Matt Taibbi asks if Occupy Wall Street is “a culture strike.”
• Paul Krugman laments the “Eurodebacle.”