big diatribe on how pathetic the MSM is on not focusing in at all at how bad the situation is for working America but also notes what we have been saying, yes us little Populists, the peanut gallery...

that by continuing to screw working America, the middle class, it is literally destabilizing the entire economy.

I believe we've hit that tipping point, where the middle class squeeze is bringing down the entire economy so it's nice to see a Professional imply it as well.

I added a couple relevant links.

Earlier today, Karl Denninger put this chart up to ponder over the weekend.

Denninger goes on to explain what is, and is not represented here. But it is especially noted that, this graph does NOT include mortgages!!

KD's conclusion is:

I have often been asked what it would take to bring the consumer credit picture back into balance with incomes. My "off the cuff" estimate was that we had to take a 10% adjustment to GDP in 2000, a 20% adjustment now, and that credit would have had to contract by about 20% in 2000.

This graph makes it clear - as of 2006 the answer is "roughly a 40% decrease in credit outstanding, a 40% increase in per-capita income, or any combination of the two."

Of note the "correction" required was 25% in 2000.

It was 40% in 2007.

It is likely better than 50% now.

Not bad for my "back of the envelope" computations when one puts hard numbers to the question, eh?

This graph, more than any other, illustrates the folly of "kick the can" when it comes to recessions. We are in this recession and facing an economic depression due to consumers "hitting the wall" - the spread between per-capita income and per-capita debt became impossible to service, and the defaults started to snowball.

To fix our economy consumer incomes must be brought back in line with per-capita debt - period.

There is no path out of this mess that involves taking on more debt, as is clear from the above, as doing so will simply cause the divergence between income and debt to widen further.

Wake up America.

To this I say Amen Brother! But the factories are closed and there are just so many burgers we can flip for each other.

I might add some graphs later on.

I admit to never having been a Krugman fan - I feel he's all over the place, but eventually he hits the target.

The major flaws with this article, IMHO, is that he is not speaking of the finest economic minds. (One exception: Keynes, who he correctly represents.) Milton Friedman...Nobel Prize or not, many of his ideas are sheer looney tunesville. The others, mediocre at best.

Go back to Jean-Baptiste Say. Examine Henry George's writings, his may very well turn out to be the major solution.

Much of Keynes' suggestions weren't adopted at Bretton Woods as they favored a balanced, economic continuum. Keynes believed that government financial infusions should be used to tweak the economic cycle, not to be the underlying foundation of it (which we are now experiencing).

Once this poorly thought-out stimulus bill has ended what minimal impact it has had, what then? Where's the economy outside of the Great Financialization?

Not looking good.

Also, there were those who correctly predicted this meltdown -- just not the geniuses Krugman pays any attention to -- in that way he's just like the MainStreamMedia.

about American citizens in the US Senate, casting "nay" votes on confirmation of these birds. It costs a minimum of $20 mil to get elected to US Senate in Florida, and none of the viable candidates are talking about the revolving door. Why? Could it be that the $20 mil will have to come from this oligarchy? And they like things just the way they are.
Frank T.

It's interesting that Paul Krugman wrote this long article for the NYT the other day which didn't get a lot of notice until the last 18 hours or so. Indeed, macroeconomics is a very messy business and a lot of underlying assumptions need to be carefully thought out and re-investigated. So, at this moment it is really foolhardy to get into food fights over devining the future from current estimates of aggregates. Besides, as you say, there is enough reality around us that make the latest numbers seem irrelevant.

For instance, this article was published the other day at mybudget360.com, which lays out the severity of the unemployment problem in California alone (the 6th largest economy in the world was it?).

California Economy: $80 Million in Unemployment Insurance Being Paid out Per Day. 143,000 Exhausted Their Jobless Benefits on September 1. One in Four Unemployed Workers without a Job for 27 Weeks or More.

That comes out to a cool, annualized amount just under $3 Billion. All of the other states are in the same relative boat, albeit with much smaller absolute $ deficits.

As I have said in other threads, this is not just an economic crisis, it is a full blown political crisis with potentially awesome consequences. And the fools in the Beltway just continue to fiddle around, much as Nero did in his day. We in the blogosphere need not dance to their tune, and those that do will be exposed in due time.

welcome to EP!

well, they are just starting on offshore outsourcing attorneys...

but doesn't it seem like if there is any disposable income anywhere, i.e. anything left out of the middle class...

they are trying to squeeze it?

What is the ROI on college these days in comparison to even say 20 years ago?

I'd love to see that post, i.e. you invest time money for let's call it a law degree, what's the payout over say 10 years now vs. 20 years ago and include the $$ to obtain said investment.

And I recall back in the day....one of the biggest problems, competition wise at that time were the students getting a full free ride, did not have to work plus could spread out their course loads over more time vs. us poor people, who did have to work and could not afford that extra semester/year of tuition to spread out the course load...just right there you were "hit in the GPA" trying to keep up...

so what's that situation now, with "hyper hype" on "accomplishment feathers" and demand for 4.0's, to the point of absurdity (but hey, get a degree from abroad and barely pass....you're still going to get into U.S. graduate schools, unlike the same scenario for U.S. undergrads!)

I'm trying to avoid direct confrontation with the "happy people", esp. since EP is a community site and they can express their analysis on here directly, minus "pie fight", (although sometimes i contemplate getting ahold of what they are smokin').

I do point to things I think are completely out of whack, such as a "V" recovery and so on.

I'm also not huge on determining the exact technical recession end point because I'm personally more interested in the structural problems, glaringly obvious, like income inequality, how the U.S. long term is selling itself down the economic river, the destruction of quality of life, standard of living...

I just went over and read the two posts.

ok, here's a difference. While they believe the decline in job destruction rate is good, I say, the destruction rate of jobs is bad. Period.

This is the nonfarm payroll rate, which is defined as the estimated total number of jobs that are ones which you're an employee, get a paycheck.

Ok, here it is zeroed in for this recession:

Then, here it is longer term

So, basically we're still losing jobs that are at deep recession levels.

So, here is the rate of change of nonfarm payrolls

I think that shows the absolute numbers are still in recession land from past historical data. So, you can see a bit "uptick" on nonfarm payrolls change but still that "line" is about on track with 1980's and below the worst of the last recession....

so to me that ain't out of the woods by any stretch.

It needs to be positive, esp. considering how many jobs have been lost.

i.e. they are looking at current slope, I'm looking at absolutes and trying to compare that to the past.