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END OF DENIAL FOR THE WALL STREET JOURNAL?

September 25, 2013

END OF DENIAL FOR THE WALL STREET JOURNAL?

Our Sunday newspaper here has an insert devoted to Wall Street Journal columnists. Al Lewis is my favorite of those offered, but others are vying for that honor (?) as well.  I am amazed to read some of the (un-WSJ ish) offerings which show up in my local paper’s WSJ inserts, especially that offered in last Sunday’s edition. It was written by Simon Constable and his piece is entitled “Just a Couple of Hiccups From Another Recession.” If available, I recommend reading it to my followers. He is spot on.

Can it be that the WSJ is taking another look at Wall Street’s coming demise, one the Street has brought on itself? In short, can it be that the WSJ is starting to tell it like it is rather than playing the village apologist for the Street’s greed run amok?  Can’t the Street’s money grubbing MBAs see the train wreck coming down the track? Constable can; I can; the WSJ apparently can, as can anyone else who is awake and otherwise cognizant of reality. An economy sans adequate demand is a train wreck-in-waiting.

I welcome Constable and (perhaps) the WSJ’s editorial board to what I have been preaching in so many blogs that my followers must think I have nothing else to write about. It is all about stagnant aggregate demand, the stuff of recession and depression, without which this or any other free market economy will wither into recession or even (if untreated) depression, a price all will pay for deepening inequality.

As for Wall Street, when this economy goes south (which is where it is headed with the chronic inequality brought on by low wages and consequent loss of demand), their stock values will go south as well. These Street people will last longer than those of us who have to live with what they brought us because they still have a huge cash buffer and operate on a global level, both of which may temporarily insulate them from the coming crash (a virtual certainty unless we quickly alter policies to avoid it). With global slowdown (even in China), their wait will not be a long one. With a withering world-wide demand, the Street will ultimately have no place to go and will join the rest of us in the figurative soup line.

Constable recognizes this in advising investors to “get defensive.” This is the old Warren Buffett method of investing. Buy and hold stock in companies whose products people buy no matter what – like soap, shampoo, and food, i.e., so-called consumer staples. Buffett’s Berkshire Hathaway investment company buys and holds Coca Cola, railroads, insurance companies etc., all staples or near staples that are likely to slow but not fail in a recession economy. Greek junk bonds and credit derivatives are not on the list.

Buffett is not a fancy investor who buys into exotics in order to make a big killing; he takes positions in companies based on what the companies actually do in the real economy, not the paper exchange economy Wall Street casinos shuffle daily (which produces nothing).He is a fabulously successful investor; he doesn’t buy into banks and investment houses whose antics keep them in bailout territory. That is the milieu for crapshooters like the big Wall Street banks, not responsible investors.

We have been on the edge (by a point or so) of recession for several consecutive quarters to date. With the end of government spending of its stimulus package and the reign of austerity economics in Washington these days (even less spending), Constable’s “hiccup” description is a virtual certainty. Without a change in policies that put more money in the hands of people who will spend it (stimulating demand), recession is a certainty. Keynesianism is the answer, but no one seems interested. GERALD  E

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3 Comments
  1. So, proverbially, what can be done by us, the so-called average citizen? My cursory view of history tells me this will not end well, that the lords of the castle (the Corporate Class and Corporate Government) will not go down without a fight. Even as we quickly evolve technologically, the economic (and religious) extremist evolve quickly as well and get ever more dangerous. We can see quite clearly the social divides all around us. It’s not rocket science. There are herd mentalities on all fronts, fighting (or suspicious) with one another. Gangs in the inner cities are merely a microcosm of the overall reality of our fragmented society. As a person who is informed week to week, year to year, on people’s plights and sufferings, it is difficult to see any positive improvements in concrete terms either short or long haul. Capitalism practiced as a predatory game of winner take all is killing, not just society, but the planet. I dare say, it is an evil system. I refer to Old Testament prophets to give stark descriptions of how the shepherds (1%) steal from the sheep (the people of Israel).

    • The tail is wagging the dog, and we are the dog. We have tremendous but unexercised power to alter the situation, but, inexplicably, don’t use it. I am trying to light a fire under the hoi polloi to step up and take the rough edges off capitalism so that we can escape Third World status and elevate the poor to middle class status. We have ample resources to make this happen; all we need if the political will and perseverance to make a greater sharing of the wealth available to all. I am not now and have never been a communist, socialist etc., but I have always been a believer in fair play. Today’s economic scene abound with economic favoritism and lack of fair play. Tsk! Incidentally, I have subscribed to a magazine for you (which Niel and I read). It is called The Week, and is a succinct look at current issues. I hope you will like it. If not, there is always the circular file next to your desk. Jerry

      On Thu, Sep 26, 2013 at 12:00 PM, elderblogger

      • That is very kind. Thank you! I, too, see it as my task to “light a fire” under anyone willing to listen, anyone who presumably gives a damn about what is going on all around us and the world. Jesus put the screws to those who were part of the economic domination system of his day. In Luke alone, he speaks to the evils of wealth upon the backs of the working poor on average about every 7 versus! The Magnificat, all by itself, is a radical economic call to arms. Funny how, through the years, it has been domesticated (if not ignored as foolish otherworldly wish-wash) and not fully understood by modern capitalistic ears. Christendom has had a lot (everything) to do with the whitewashing of Jesus’ harsh messages and teachings since, after all, The Church has, through the centuries right up to today, largely thrived as a bed-mate to the domination systems, hence Marx’s apt and spot on criticisms in his day. I believe Jesus was more a socialist than a capitalist. He certainly advocated for an egalitarian, sharing community. Again, all throughout his teachings.

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