CATASTROPHICALLY CRUISING TO OBLIVION.

On March 09, 2009, Paul Krugman wrote an editorial in the New York Times, "Behind The Curve". I agree wholeheartedly with what he wrote, and complemented it with the following comment that the New York Times was kind enough to publish:
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The fierce recession of 1982 was the consequence of extremely high interest rates deliberately inflicted by Fed Chief Paul Volcker to break the back of inflation. The short term interest rates were brought as high as 23%. The recession of 1982 was an act of will.

This recession is different. It is structural, the result of an erroneous philosophy of civilization. Its causes are much deeper than those of the depression of the 1930s (which was just a big bust after a big boom, politically mismanaged, spiked with a trade war for good measure).

The present recession follows from decades of misallocations of economic efforts, the decision by Clinton-Rubin-Summers-Geithner-Greenspan to found the economy on hedge funds and private equity, and the total disdain for an energy efficient economy in the same direction as Europe. The median salary has been going down for 11 years, which means that this depression has seen already 11 summers.

By unit of GDP, the USA emits more than three times as much CO2 than France: as Rubin and Summers and Geithner were building giant monopolistic banks full of themselves and their friends, the real infrastructure was left to die. Meanwhile the countries of the EU forced energy prices way high inside Europe to force their economies to become ever more energy efficient. When the world economic boom brought energy prices too high, weakened by years of useless, Orwellian war, the completely inefficient USA broke down.

Obama is facing an utter catastrophe. But, in a NYT interview on March 6, he informs us that he uses television to watch basketball. I guess it's more lively than the utter destruction out there.

Then Obama goes to see Summers, who orchestrated the Credit Default Swaps in 1998. Summers has got to be happy: everyday that goes by, more taxpayer money is sent to the counterparts of the few giant institutions who lent all the money to the hedge funds, private equity, etc. So the wealthy people Summers love are getting relatively richer everyday (while, and because most of the People become poorer). Tomorrow the world will be theirs even more than it was yesterday: the dream goes on.

These are not ranting charges; Obama did not reinstate various short sale rules put in to stop the Great Depression of the 1930s, so his friends in the hedge funds make a killing destroying the stock market investments that constitute most of the retirements dozen of millions of US citizens have. The same friendly hedge fund managers enjoy their maximum 15% tax rate. Indeed, as Obama insists, he is "not socialist". is there an adjective for "hedge-fundist"?

Obama is facing catastrophe, but he does not look at the right indicators, or he cannot read them: the unemployment rate is a NON LINEAR curve. One can just look at it, and sees this: it's clearly a quadratic curve, or an exponential.

Obama does not understand what this means: he knows basketball and law. The exponential function has not been taught to him. He has proably never met a differential equation in his life. This non linear graph, which is totally obvious, means that the catastrophe is feeding on itself, its rate of increase is proportional to how big it already is. The real unemployment rate is already 17% (and even though. most people in the USA need some sort of employment to get health care, so people will accept whatever job in the USA, differently from, say, France, where they get health care, no matter what).

At the present rate of augmentation, by September, the unemployment rate should be above 13% (it's 8.1% now, higher than France). The speed, and self feeding of the disaster is such that, by September, Obama maybe facing 25% real unemployment, or more (the USA jumped in a month from 14% to 17% in real unemployment, and from 7% to 8.1% in the short term unemployment measure, U-3).

Interestingly the real stimulus in the USA is arguably of the same relative size as the French stimulus (although France just entered recession, and although France has mandated, very strong automatic economic stabilizers that kick in when the economy goes down, because of huge spending on social services).

There are many things that Obama could have put in a real trillion dollars stimulus: rail is an example. Light and high speed: there is a huge need for both in their electric version(very efficient; rail could save the car companies). Another huge need is to go to a closed nuclear cycle (like France, and now Japan, the UK, Germany). It's not a question of liking nuclear or not; the open nuclear cycle now used in the USA is an ecological monstrosity, and an enormous waste.

Soon Obama will have sent all the money to his hedge funds friends, and there will be no more money, and then what?

Patrice Ayme

http://patriceayme.wordpress.com/

(I just wrote on my site an essay on a new method to better avoid catastrophes, that rolls over Descartes' "Cartesian method". Obama would be well inspired to follow it!)
— Patrice Ayme, Hautes Alpes

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