This is fairly intense stuff. I'm tired of running around the damn internet to find data on this recession - depression and hearing the second hand flacks say, 'we're through the worst of the subprime mess. Well, that's simply not the case, not at all. The middle class 30 somethings etc. using Alt-A loans, are a bit better off than the subprime loan holders, but not by much. 40% of these Alt-A's (ARMs, interest only, balloons, etc.) come due in 2011 - F O R T Y Percent. The home owners wont be able to cover it.

Now here's the rich part -- the solution, the $75 billion package, is VOLUNTARY for the banks and it has an overriding mission - to make every home owner pay every damn cent they can to the banks who ran this program. The banks should be cleaned out of all personnel who participated in this from the lowest right up the chain of command. But that would only happen in a real business. Not so randomly, I ran across an article about Greenspan's book after leaving the Fed. He commented, "We had to take out Saddam" for oil price stability. Wait a damn minute, guru Greenspan said in PUBLIC that we had to "take out" a world leader. I have never heard any mobster make a public statement, for attribution, that he was going to "take out" someone. They simply don't say that tin public.

Greenspan lives in such a bubble that he's unaware that he's by utterly vulgar and violent in his public rhetoric when compared to the toughest mob guys, the late John Gotti (former head of the Gambino family of NYC), for example. Ever hear about John Gotti saying he's going to "take out" someone IN PUBLIC MEDIA.

It will come as no surprise to any of you that this was a criminal enterprise.

Talk about killing the Golden Goose. Well it wasn't really Golden, and the Goose part is in question too.

See the reply I post to this. It has which states and regions are most at risk when these loans melt down.
http://img.photobucket.com/albums/v474/autorank/APJ.jpg
http://tinyurl.com/c6abhk

Too Little Too Late?
http://img.photobucket.com/albums/v474/autorank/Articles/numb3rs.png
The Money Party at Work

By Michael Collins

Wash. DC, Feb. 19 -- President Obama announced a $75 billion assistance package to address home foreclosures yesterday. He also promised a $200 billion infusion into Freddie Mac and Fannie Mae, the nation's underlying lenders. That's exactly $275 billion more dollars than the previous administration committed to citizens to help ease their very human crises surrounding foreclosure.

Is this enough to stem the tide for those losing their homes? Will those "who have played by the rules," as Obama calls them, be salvaged the indignities and financial oblivion that begin in earnest if they're thrown onto the street? Or will those who broke all the rules profit immeasurably?

In order to understand the current situation, it's necessary to take a hard look at some really ugly numbers from 2008 summarizing the "nonprime" home lending situation. (The data in this article is from Federal Reserve Bank of New York Dec. 2008 summary of "nonprime" lending).

http://img.photobucket.com/albums/v474/autorank/Articles/nonprime1.jpg

The nonprime home lending market consists of 2.2 million "Alt-A" home loans to those with good credit who chose "innovative" adjustable rate mortgages plus 2.7 million subprime home loans to those with marginal credit who, often times, used funds to purchase a first home. The total 4.9 million nonprime loans were used to purchase homes that house around 12 to 15 million people.

The total balance due for the five million "nonprime" loans is $1.2 trillion as of December 2008. The loans at risk (60 days overdue) have a balance due of $160 billion (40% for Alt-A's, 60% for subprimes). Preserving home ownership for those at risk in just the nonprime financed homes will eat up the proposed $75 billion package and reduce the Fannie-Freddie funding increase from $200 to $115 billion dollars.
http://img.photobucket.com/albums/v474/autorank/Articles/np3.jpg

That presumes every cent pledged today was used for these 714,000 loans. What about the six million additional home foreclosures anticipated over the next two years? More will be needed or a comprehensive approach like a national cramdown may gain the attention of our public servants.

To understand how the future will look, let's examine what happened in the nonprime market in 2008. The following graph shows the risk in just the nonprime loans. Traditional fixed interest loans are less vulnerable at the moment but when GM and Chrysler implode and as small businesses disappear, traditional loans will show up at risk in droves.

The nonprime lone market has 1.2 million loans at risk of entering foreclosure due to substantial arrears in payment. What will change to allow these people to catch up? There's no credit line left, in most cases, and no room for a "second" in a home loan where the current value is less than the loan value.

If anyone tells you that we're finished with the "subprime" crisis, recall these figures above. Over 800,000 subprime loan holders are currently at substantial risk for defaults and foreclosure.

The next wave of loan defaults and eviction risks will come from the Alt-A loans. They are, "typically higher-balance loans made to borrowers who might have past credit problems-but not severe enough to drop them into subprime territory--or who, for some reason (such as a desire not to document income) chose not to obtain a prime mortgage" (NY Federal Reserve) These are often borrowers who took Alan Greenspan's 2004 advice seriously when he pitched borrowing through a "mortgage product alternative," (e.g., ARMs), take some cash out, and spend that money (all to "help" the economy).

Small business owners, professionals, and corporate employees from generation X forward used the ARMs, and interest only loans to move into more suitable homes. Why not? Home prices were increasing exponentially. It looked like a good investment. And "the man" Greenspan said so.

The advice and loan programs have turned sour and many are now trapped in loans that will soon change dramatically. In the first few years of an Alt-A or subprimes, interest rates are kept low. In fact, some loans allowed substantially reduced "interest only" payments. It was all about getting people in homes to fuel a housing boom. The "affordability" of new homes pushed the market up in general and created artificial wealth. Now the party is over and these Arthur Geeenspan specials are "resetting."

When a nonprime loan "resets," it adds an average of three to six points to the loan payment for Alt-A's and subprimes respectively. It's quite a shock.
http://img.photobucket.com/albums/v474/autorank/Articles/np2.jpg

"Average Margin" is a specified amount added to the
rate of the mortgage when it "resets" a few years into the loan.

This chart shows the percent of nonprimes resetting in the coming years. In 2009, 630,000 combined nonprime l

oans will reset to a substantially higher interest, 320,000 in 2010. By 2011, all but 3% the subprimes will have reset. However, starting in 2011, nearly 40% of the Alt-A's, 850,000 in all, are scheduled to reset. Families and individuals in these homes will have a home loan well over the assessed home value and a substantial increase in interest payments. They'll be in a recession economy.

The loss of homes is not the sole manifestation of rampant fiscal mismanagement and systemic corruption. It's a symptom of an economy going in to a steep decline after years of looting by insiders.

Why are we going through all of these gyrations and special programs to prop up a financial system that clearly created this exposure with full knowledge of the substantial risks? Why are we diverting funds to cover bad loans by U.S. banks and bad investments in securities based on those loans by financial interests overseas?

A partial answer is that the U.S. banks that knowingly made these bad loans must be preserved and have their investments preserved. Overseas banks and others who invested in special stock offerings based on this high risk housing bubble must see their investments preserved in some profitable form. (See the next installment of "The Money Party at Work" for a broader explanation.)

We may not know how this crisis will end but it's clear how it started. Despite warnings from some of the most respected housing experts in the public and private sector, the die was cast by failed financial guru and Wall Street promoter Alan Greenspan in 2004 when he offered uncharacteristically clear advice to home buyers.


From Money Party to Citizens: Drop Dead! Feb.1, 2008
http://tinyurl.com/3qmjw2

In 2004, Greenspan told a credit union association crowd that "the refinancing phenomenon" had been supportive for the economy and that the use of home equity "helped cushion" declining stock prices. Then Greenspan showed his supposed genius with this advice to home buyers and owners:

"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home." Understanding household debt obligations, Federal Reserve Board, Feb. 23, 2004

END

This article may be reproduced in whole or in part with attribution of authorship and a link to this article.

The Money Party Series
http://tinyurl.com/br7zsh

Information Sources:

The Federal Reserve Bank of New York Nonprime Loans Dec. 2008
http://www.newyorkfed.org/regional/subprime.html
Below items at the link listed.
Subprime Home Loan Market as of Dec. 2008 xls
Alt-A Home Loan Market as of Dec. 2008 xls
Interactive Maps of Loan Status Data by Zip, County, State, Nation

(If you want to know about your area, go here to the interactive maps. You can get data on foreclosure rates and more on a zip code basis. It's really amazing: http://tinyurl.com/2bbdpy )

SO, WHO IS GETTING NAILED, WHO WILL TAKE THE HARDEST BLOWS IN ORDER
TO SACRIFICE SUFFICIENTLY FOR THE GOONS WHO CREATED THIS MESS?

You asked where the most distress can be found. The NY Fed's data is extremely useful but it has it's limitations. However, here's some interesting stuff. The worst of the worst, in terms of collapsing subprime and Alt-A loans would be the co-occurrence of high credit risk rate IIN both categories of "nonprime" loans (Alt-A's plus subprimes). I define as 30+ days over due in this case. THE OTHER FACTOR PREDICTING A BEAT DOWN WOULD BE contiguous states with the "Double Greenspan" - collapsing nonprime loans for poor and middle class. AFTER THAT, tight geographic region wiht more than one state with the "double Greenspan."

http://img.photobucket.com/albums/v474/autorank/Articles/numbersWorstCase.jpg

Louisiana and Mississippi struggle economically in a good economy. When you've got a recession-depression and the presence in the top tier for risk in both nonprime loan categories, you have a problem. Georgia is with them in suffering and Alabama has a very high credit risk profile for subprimes but not Alt A's. That section of the Southeast is going to get hammered.

Maryland, Virgnia, and West Virginia are each twofers for subprime and Alt-A risk factors. The states are contiguous and very much a region.

Massachusetts and Rhode Island are merged at the hip and they each have double trouble.

Michigan stands alone with its significant credit risk, default, and foreclosure problem. This is a wild card. A large state with heavy unionization, the retrenching of GM poses a special problem. In Michigan and surrounding states with GM or GM supplier plants, the picture could change immediately.

Here's a chart of the most serious credit risks for the top tier states. The risks for Alt-A loans are much less as a percentage of total loans, 13% and up. The risks for subprimes are much higher 30% and up.
http://img.photobucket.com/albums/v474/autorank/Articles/numbersSubAltTbl.jpg

This is a serious mess.

It's not going away any time soon UNLESS the assumption is challenged - namely that the defrauded public is obliged to pay off the fraudulent bank debt. That's the sole rationale for all this dancing around the "BushCo" remnants.

http://capwiz.com/nlihc/issues/alert/?alertid=12670816&queueid=[capwiz:queue_id




Summary of the Housing Provisions in Recovery Conference Agreement
Congress Agrees to Stimulus Compromise; Votes on Friday
Some details of the House and Senate conference agreement on the economic stimulus bill were released this afternoon.

Appropriations for HUD programs in the conference agreement are as follows:


* $4 billion for the Public Housing Capital Fund (House and Senate had both passed $5 billion in their versions).
* $2.25 billion for 12-month renewals of the project-based Section 8 rental assistance program, with $250 million of this going toward energy retrofitting and green housing (had been $2.5 billion in the House bill, $2.25 billion in the Senate package).
* $2 billion for the Neighborhood Stabilization Program to redevelop foreclosed and abandoned homes ($4.19 billion in the House, $0 in the Senate).
* $1.5 billion for homeless prevention through the Emergency Shelter Grant program (the same as in the House and Senate-passed versions).
* $2.25 billion to fund HOME, with $2 billion of this to fill gaps in approved Low Income Housing Tax Credit projects and jump start these stalled projects ($1.5 billion was in the House bill just for HOME, without the LIHTC provision; $2.25 billion was in the Senate bill, with $2 billion for LIHTC gap fix).
* $1 billion for the Community Development Block Grant program (House had $1 billion; Senate had no CDBG funds).
* $100 million for lead paint reduction (same in both the House and Senate bills).
* $510 million in Native American Block Grants (had been $500 million in the House; $510 million in the Senate).


Low Income Housing Tax Credits:

Details of the tax provisions have not been released but it is our understanding that, in addition to the $2 billion for LIHTC gap financing mentioned above, the conference agreement will include the House's proposal to allow housing credit allocating agencies to receive up to 40% of their 2009 credits as cash and use this to fill financing gaps from approved but stalled projects. It is NLIHC's understanding that the Senate bill's acceleration provision is not in the conference agreement.

Homeownership Tax Credit

It is NLIHC's understanding that the Senate's $35 billion homeownership tax credit has been significantly scaled back in the conference report. It appears that the conference agreement would amend the current $7,500 first-time homebuyer tax credit to repeal the current tax credit's requirement that it be repaid to the federal government. The benefits of the current tax credit, available to people who have not owned a home during the last three years, phase out for higher income households.

Other Programs

The Emergency Food and Shelter Program within the Federal Emergency Management Agency will receive $100 million in the conference agreement.
The Low Income Home Energy Assistance Program receives nothing (the House had funded it, the Senate did not).
The Social Services Block Grant program will receive nothing (the Senate had funded it, the House did not).
The Census Bureau will receive $1 billion.

What is Not in The Conference Agreement

The final compromise does not include revenue for the National Housing Trust Fund, nor does it allocate funding for 400,000 new Housing Choice Vouchers.

The funding for housing programs fell tremendously short of what advocates had sought. In fact, 547 national and state organizations signed an open letter requesting equity in funding for low income families with the upper class. Specifically, the letter asked that programs for people with low income be increased by at least $35 billion - the same cost as an amendment accepted by voice vote in the Senate that approved a $15,000 homebuyer tax credit.

Background on Conference Agreement

A small group of conferees made up of Senators and Representatives agreed to a compromise of H.R. 1, the American Recovery and Reinvestment Act of 2009. Key leaders in both chambers of Congress signed off on the deal yesterday, February 11. Support from moderate Senate Republicans Olympia J. Snowe (ME), Susan M. Collins (ME), and Arlen Specter (PA) are critical to ensure passage in the Senate. Negotiators of the deal did not want to stray too far from the version passed by the Senate on February 10, and the conference brokered the final deal on February 12. The House is expected to vote on the conference agreement on February 13. The Senate is expected to vote on February 14.

Next Steps

The next step for NLIHC's campaign to capitalize the National Housing Trust Fund and get new vouchers is to advocate for funds as part of a forthcoming, broad housing bill in the works in Congress.

Many thanks for your advocacy efforts in support of the low income housing funds in this package. We did not get all that we asked for but we achieved a great deal.

More details will be available in the next issue of Memo to Members.
Tell-A-Friend

New York Times, Business Section
http://www.nytimes.com/2009/02/20/business/20lend.html?_r=1&hp


Most banks no longer hold the loans they make, content to collect interest until the debt comes due. Instead, the loans are bundled into securities that are sold to investors, a process known as securitization.

But the securitization markets broke down last summer after investors suffered steep losses on these investments. So banks and other finance companies can no longer shift loans off their books easily, throttling their ability to lend.

The result has been a drastic contraction of the amount of credit available throughout the economy. By one estimate, as much as $1.9 trillion of lending capacity — the rough equivalent of half of all the money borrowed by businesses and consumers in 2007, before the recession struck — has been sucked out of the system.


The Obama administration hopes to jump-start this crucial machinery by effectively subsidizing the profits of big private investment firms in the bond markets. The Treasury Department and the Federal Reserve plan to spend as much as $1 trillion to provide low-cost loans and guarantees to hedge funds and private equity firms that buy securities backed by consumer and business loans.


The program also does not try to change securitization practices that, many investors say, spread risks throughout the world and destroyed financial institutions. Policy makers acknowledge that for now, fixing credit ratings, reducing conflicts of interest and improving disclosure can wait.


Simon Johnson, an economics professor at the Massachusetts Institute of Technology and a former chief economist at the International Monetary Fund, said many people might take a dim view of the TALF program because it provided government subsidies to investors like hedge funds. Investors who borrow from the Fed could enjoy annual returns of 20 percent or more.

“The TALF,” he said, “raises a lot of questions.”

It's fookin' Business Burlesque...

Yatta tata tata... Da tata tata tata... Tata tata ta ta ta da boom.
Barump bump...

"The Obama administration hopes to jump-start this crucial machinery by effectively subsidizing the profits of big private investment firms in the bond markets. The Treasury Department and the Federal Reserve plan to spend as much as $1 trillion to provide low-cost loans and guarantees to hedge funds and private equity firms that buy securities backed by consumer and business loans."

EXACTLY and that's the problem. What about the people.

Subsidizing hedge funds, what lunacy. Makes you wonder if the people behind these policies are trying to create a movement to overthrow their own system.

"The Obama administration hopes to jump-start this crucial machinery by effectively subsidizing the profits of big private investment firms in the bond markets. The Treasury Department and the Federal Reserve plan to spend as much as $1 trillion to provide low-cost loans and guarantees to hedge funds and private equity firms that buy securities backed by consumer and business loans."

EXACTLY and that's the problem. What about the people.

Subsidizing hedge funds, what lunacy. Makes you wonder if the people behind these policies are trying to create a movement to overthrow their own system.

First this:

http://img.photobucket.com/albums/v664/lsteele/George_Bush_Hubris.jpg

Then that:

http://www.wilsonsalmanac.com/images2/nemesis1.jpg

Back in February 2006, LEAP/E2020 estimated that the global systemic crisis would unfold in 4 main structural phases: trigger, acceleration, impact and decanting phases. This process enabled us to properly anticipate events until now. However our team has now come to the conclusion that, due to the global leaders’ incapacity to fully realise the scope of the ongoing crisis (made obvious by their determination to cure the consequences rather than the causes of this crisis), the global systemic crisis will enter a fifth phase in the fourth quarter of 2009, a phase of global geopolitical dislocation.

According to LEAP/E2020, this new stage of the crisis will be shaped by two major processes happening in two parallel sequences:

A. Two major processes:
1. Disappearance of the financial base (Dollar & Debt) all over the world
2. Fragmentation of the interests of the global system’s big players and blocks

B. Two parallel sequences:
1. Quick disintegration of the current international system altogether
2. Strategic dislocation of big global players.

We had hoped that the decanting phase would give the world’s leaders the opportunity to draw the proper conclusions from the collapse of the global system prevailing since WWII. Alas, at this stage, it is no longer possible to be optimistic in this regard (1). In the United States, as in Europe, China and Japan, leaders persist in reacting as if the global system has only fallen victim to some temporary breakdown, merely requiring loads of fuel (liquidities) and other ingredients (rate drops, repurchase of toxic assets, bailouts of semi-bankrupt industries,…) to reboot it. In fact (and this is what LEAP/E2020 means ever since February 2006 using the expression « global systemic crisis”), the global system is simply out of order; a new one needs to be built instead of striving to save what can no longer be saved.

http://www.leap2020.eu/English_r25.html

man, the djia has been really sucking lately.

America’s Imperial Economy: What The Republicans Are Too Squeamish To Admit (http://exiledonline.com/americas-imperial-economy-what-the-republicans-are-too-squeamish-to-admit/)

By Mark Ames

In the great debate about the stimulus package — which, underneath all the cant is really nothing more than a debate about how America’s scarce wealth should be divided – one of the right wing’s favorite mantras was their claim that the New Deal did nothing to end the Depression. Instead, they argue, it was World War Two that ended the Depression.

So far, the liberals’ counterargument is to throw out a bunch of statistics arguing that the New Deal did work. Both sides take their argument to the real of hypothetical realities: either the ’30s could have been worse without the New Deal (liberals argue) or the 30s would have been better off without the New Deal (right-wingers argue). But let’s stop and consider the Republican right wing’s argument about World War Two’s effect on its own merits: if it really was the war that pulled America out of the Depression, that is hardly an argument in favor of endless tax cuts and small government. The wartime economy was the very opposite of the Adam Smith model of free trade and minimal government interference — it was, instead, New Deal economics to the tenth power, in which the government managed and controlled just about every single facet of the citizenry’s lives. And then of course there’s the war’s outcome: America emerged victorious and largely unscathed with comparatively little cost in lives compared to the war’s other major participants, while all of America’s global competitors essentially committed mass suicide and were left prostrate at our militarized feet.

The Republican right unintentionally raised a very serious issue, but no one seems to want to call them on it, not even their own supporters. The can of worms they’ve opened leads to this: what if America’s booms and busts are tied not to monetary policy, taxation levels or government regulation, but rather to our success or failure as an imperialist war machine? What if our wealth is a consequence of our ability to plunder the world’s wealth, often by default thanks to our competitors’ suicidal behavior?

Consider this very simple, surface chronology of the past 100 years (and why not stick with the surface — after all economics, despite all of its complex statistical mathematics, has turned out to be little more than glorified astrology):

1914-1918: World War I. America ends up on the winning side at comparative little cost in American lives, no destruction to the homeland or to our economy. Whereas America’s European competitors commit mass suicide both demographically and economically. This is followed by:

1920-1929: One of the greatest boom decades in American history. No great wars, no new mass suicide by competitors. That is, nothing new to plunder. This leads to:

1929-1939: The Great Depression. No new wars, no new imperial expansion, and with it, feeble economic expansion. This is followed by:

1939-1945: World War II. America ends up on the winning side at comparative little cost in American lives, no damage to the American homeland. America’s European and Asian competitors commit mass suicide both demographically and economically. Global markets (minus Communist world) are America’s for the taking. Which leads to:

1945-1960: American economic boom. America’s economy makes up half of the world’s GDP in 1950, and rides its biggest sustained boom in U.S. history, including an unprecedented rise in living standards.

1945-1960: French and British empires, already weakened competitors of America’s empire, decline and collapse for good, allowing the American empire to expand further by filling the vacuum. America fights Korean War 1950-52; wisely halts it to a draw after just 2 years, meaning little net gain or loss. Communist empire expands — communist countries by nature are uncompetitive against the U.S. economically, except inasmuch as they deny markets to U.S. goods and keep the empire in check. This leads to:

1960-1970: The American economic boom, still riding off the momentum of the World War II wealth transfer, gradually begins to sputter as the decade wears on. This economic decline accelerates in tandem with:

1963-1975: America loses its first war ever in Vietnam. With its first imperial defeat, the American empire is in retreat. Once-compliant countries from Latin America to the Middle East assert themselves; Third World becomes increasingly either socialist or “non-aligned”; America plunders less and less of the world’s wealth. This leads to:

1970s: Economic stagnation, decline in standard of living. This eventually leads to the election of an avowed American imperialist, Ronald Reagan, which is followed by:

1981-1989: American economy ramped up for Cold War against “Evil Empire.” Reagan racks up massive debt and pours enormous state funds into “winning” the Cold War against the “evil empire.” Militarizes the economy and the culture. Imperial decline halted. Latin America reabsorbed into soft American empire, while many Arab states also become more compliant, especially following the bombing of Libya. Fund war against Soviets in Afghanistan, letting them bleed, without any damage to American homeland. This leads to:

1980s: American economy begins to grow again, though still not as fast as in the 60s or 50s, the period after victory in World War II.

1989-1991: American victory in the “Cold War”: the Communist empire collapses. American empire absorbs these new markets without firing a shot or suffering damage in the homefront, opening up massive new opportunities for wealth plunder. America’s biggest economic competitor, Japan, essentially collapses. In 1991, America wins Gulf War 1, its first big war victory since Vietnam. American empire, without rivals, suddenly resurgent again. This leads to:

1990s: Economic boom, which accelerates towards the end of the decade, reaching levels of growth not seen since the 50s and 60s.

2001: Brief recession which many say will spell doom to America’s booming economy. But then:

2001-2: America wins war against Afghanistan, leading to world recognizing for the first time that America is not only an empire, but a “hyperpower.” Economy quickly turns around and begins to boom again, until:

2003-8: America loses only its second war in its history against Iraq. The victory in Afghanistan slowly unwinds and starts morphing into another defeat. That’s two war losses in one decade. Which leads to:

2007-present: The new Great Depression.

So if you follow the Republican right-wing’s own logic, the question isn’t whether or not we should raise or lower taxes, or whether we should fund programs that teach kids about STDs. America’s economic booms and busts have nothing to do with Adam Smith’s three-pointed-hat Calvinist fantasies and everything to do with whether we win or lose wars, and, more importantly, if our competitors commit mass suicide in these wars, allowing us to ride in at the end, after our competitors have bankrupted and bled themselves to death, as we did in World Wars I and II, and again in the Cold War. The more we behave like sly jackals feeding on the steaming, nutrition-rich corpses of other peoples’ collapsed empires, the stronger our economy, and the better we live (the more we can cut our taxes or increase our social spending or both, depending on the amount we’ve plundered). But if we start a war, fight it by ourselves, and lose — as the idiots did in Iraq and in Vietnam and now in Afghanistan — then prepare for the Big Decline. University of Chicago professor Robert Pape recently characterized (http://www.nationalinterest.org/Article.aspx?id=20484)

America’s imperial collapse as: “one of the largest relative declines in modern history. Indeed, in size, it is clearly surpassed by only one other great-power decline, the unexpected internal collapse of the Soviet Union in 1991.”

Of course, like every economic model bandied about these days, this one has its flaws — and yet, it’s the most obvious model of all. The only difference is that this most obvious model is the one model no one, left or right, has the guts to consider. Maybe because it’s too obvious; more likely because it offends the sensibilities of both liberals and conservatives, whose professed openness for the “hard truth” only refers to “truths that are hard on the other side.” As Paul Krugman recently admitted, “Well, the Great Depression did eventually come to an end, but that was thanks to an enormous war, something we’d rather not emulate (http://www.nytimes.com/2009/02/20/opinion/20krugman.html?_r=1)."

The left wants to believe that the economic history of nations has a moral to it, and that moral is that greed inevitably leads to the collapse we’re witnessing today; the right wants to believe the flipside to this morality tale, that a nation’s economic history serves a Calvinist god and his “invisible hand”: individuals must be allowed to prove themselves, freed from the shackles of a secular and therefore evil state, and God rewards the economically pious (i.e. free-marketers who believe in hard work); if the state assumes the role of god and interferes in the wealth-division, then the Calvnist god gets very angry and strikes down that state with stagflation or smites it with nagging low growth. Or something silly like that.

So now I’m wondering: if the right-wing wants to put a giant fence around its new argument against the New Deal, stopping their own line of reasoning at the point where it debunks Keynsian economists, censoring their own line of reasoning before it can go to the next logical step, which is that victorious wars which destroy your competitors are good for the American economy, and are the reason why America had such an unprecedented boom in the post-war period; and its opposite: when you lose a war like the one in Iraq, the right-wing Republicans’ pet project, it leads to the sort of economic collapse we’re witnessing today. By their own logic, they are responsible for screwing us for the next decade because these would-be imperialists are circus monkeys, as useless as AIG’s bosses when it comes to managing their imperial fantasies.

It also raises the question of what the hell we’re doing ramping up the war in Afghanistan, just as it’s become clear that we’ve lost. It’s the graveyard of empires; what is Obama planning there, two consecutive losses? Has any nation ever screwed up that badly? Moreover, wars are only good for the American economy when there’s something to plunder at the end of it all. What’s there to plunder from Afghanistan, assuming we even win: dirt? Opium? (Well, OK, I’m all for the opium, but even I know that won’t create a nation of happy nuclear families; happy junkies, yes, but not wealthy new homeowners.)

If war is what fuels American prosperity, as the George Wills and others on the right are half-arguing in their sly, cowardly way, then have the guts to say so, and stop lying about private enterprise.