China Can't Keep The Russian Economy From Crashing

Because of all the sanctions imposed on Russia because of their illegal war against Ukraine, the Russian economy is suffering -- and on its way to a complete crash. Russia is turning to China for economic support, but that is not going to save the Russian economy.

Nobel Prize-winning economist explains why. Here is part of his article in The New York Times: 

The West has, however, largely cut off Russia’s access to the world banking system, which is a very big deal. Russian exporters may be able to get their stuff out of the country, but it’s now hard for them to get paid. Probably even more important, it’s hard for Russia to pay for imports — sorry, but you can’t carry out modern international trade with briefcases full of $100 bills. In fact, even Russian trade that remains legally permitted seems to be drying up as Western companies that fear further restrictions and a political backlash engage in “self-sanctioning.”

How much does this matter? The Russian elite can live without Prada handbags, but Western pharmaceuticals are another matter. In any case, consumer goods are only about a third of Russia’s imports. The rest are capital goods, intermediate goods — that is, components used in the production of other goods — and raw materials. These are things Russia needs to keep its economy running, and their absence may cause important sectors to grind to a halt. There are already suggestions, for example, that the cutoff of spare parts and servicing may quickly cripple Russia’s domestic aviation, a big problem in such a huge country.

But can China provide Putin with an economic lifeline? I’d say no, for four reasons.

First, China, despite being an economic powerhouse, isn’t in a position to supply some things Russia needs, like spare parts for Western-made airplanes and high-end semiconductor chips.

Second, while China itself isn’t joining in the sanctions, it is deeply integrated into the world economy. This means that Chinese banks and other businesses, like Western corporations, may engage in self-sanctioning — that is, they’ll be reluctant to deal with Russia for fear of a backlash from consumers and regulators in more important markets.

Third, China and Russia are very far apart geographically. Yes, they share a border. But most of Russia’s economy is west of the Urals, while most of China’s is near its east coast. Beijing is 3,500 miles from Moscow, and the only practical way to move stuff across that vast expanse is via a handful of train lines that are already overstressed.

Finally, a point I don’t think gets enough emphasis is the extreme difference in economic power between Russia and China.

Some politicians are warning about a possible “arc of autocracy” reminiscent of the World War II Axis — and given the atrocities underway, that’s not an outlandish comparison. But the partners in any such arc would be wildly unequal.

Putin may dream of restoring Soviet-era greatness, but China’s economy, which was roughly the same size as Russia’s 30 years ago, is now 10 times as large. For comparison, Germany’s gross domestic product was only two and a half times Italy’s when the original Axis was formed.

So if you try to imagine the creation of some neofascist alliance — and again, that no longer sounds like extreme language — it would be one in which Russia would be very much the junior partner, indeed very nearly a Chinese client state. Presumably that’s not what Putin, with his imperial dreams, has in mind.

China, then, can’t insulate Russia from the consequences of the Ukraine invasion. It’s true that the economic squeeze on Russia would be even tighter if China joined the democratic world in punishing aggression. But that squeeze is looking very severe even without Chinese participation. Russia is going to pay a very high price, in money as well as blood, for Putin’s megalomania.

We're In A Recession - Will It Become A Depression?

One recent poll I saw was asking respondents if the United States was going to have a recession. It's a bit late to be asking that. We are already in a recession, and it's a serious one. Considering the huge numbers of unemployment claims and closed businesses, it's going to make the Great Recession of 2007 look like a walk in the park. The real question is whether it's going to be bad enough to be a depression.

The following op-ed is by Robert J. Samuelson (pictured) in The Washington Post. It's worth reading.

When I began writing about economics in the early 1970s, I made a private vow that I would never use the word “depression” in describing the state of the economy. The economists and politicians who occasionally did so were, I thought, engaged in partisan hyperbole. Their game was to scare people into thinking the end of the world was at hand or to pressure Congress to enact a favored piece of economic legislation.

Well, times change. I revoke my vow.

It’s not that I’ve concluded that we’re already in a depression. But we could be. For the first time in my life, I think it’s conceivable. This obviously would be a big deal. It implies permanently higher levels of unemployment (though joblessness would still fluctuate), greater economic instability and a collision between democracy and the economic system.

Since World War II, business cycles have been — with a few notable exceptions — mild and relatively brief. From 1945 to 1990, there were 10 recessions averaging about 10 months each, according to the National Bureau of Economic Research (NBER), an academic group that dates recessions and recoveries. Some slumps were severe. The monthly postwar unemployment rate peaked at 10.8 percent in late 1982; gluts of workers and products put an end to double-digit inflation.

But even the harshest postwar recessions were tame compared with the Great Depression of the 1930s. There are at least three characteristics that define the Depression and set it apart from postwar recessions.

First was the scale of economic havoc and human suffering. In 1933, the unemployment rate averaged 25 percent. For the entire decade, joblessness was in the double digits. There is some technical argument among today’s economists about the precise level of unemployment, but there’s no disagreement that it was huge. From 1929 to 1933, gross domestic product (the economy’s output, or GDP) fell about 25 percent. Defaults on farms and homes were widespread. Industrial output plummeted.

Second, there was an intellectual vacuum in the sense that economists lacked a widely accepted theory to explain the Depression. The prevailing wisdom held that economic downturns would be largely self-correcting. Labor costs and commodity prices would fall, restoring companies’ profitability and enabling them to expand output. But the economy didn’t behave as expected. The Depression kept worsening. Business and political leaders felt powerless. The loss of self-confidence amplified doubts that the economy could recover.

And third, there was, at the outset, no social safety net to cushion the human costs of the economic collapse. As the Depression deepened, one response was to blame the jobless themselves, as historian Robert S. McElvaine notes in his exhaustive “The Great Depression.” The attitude was “there must be something wrong with a fellow who can’t get a job.”

For decades, it has been gospel among economists that another Depression could not happen, because all the underlying causes have been successfully addressed. Yes, economists disagree on some points. Still, there is a broadly accepted theory to control business cycles. Call it modified Keynesianism, after the famous economist John Maynard Keynes. In a recession, cut interest rates and expand the government’s budget deficit.

These steps will stimulate spending and production, preventing an economic free fall. For those who are still unemployed, there is a sizable safety net (unemployment insurance, food stamps, Medicaid) to reduce personal suffering. Public attitudes have shifted. People feel “entitled” to government social protections. This has replaced the sense of shame.

Whatever you think of these policies, they seem to be losing their therapeutic power. We’ve been reducing interest rates and increasing budget deficits for years without protecting ourselves from ever-larger bursts of instability. The Great Recession and current downturn are more virulent than previous postwar recessions. In 2009, we were saved by Congress’s nearly $1 trillion stimulus package and the Federal Reserve’s creation of multiple channels to lend money to besieged borrowers.

Now comes the coronavirus crisis, which makes those efforts seem paltry. Congress has passed a rescue package of about $2 trillion — there are various cost estimates — and the Fed created even more lending programs, presumably channeling more trillions into credit markets. All this has been done in record time. You have to ask yourself: What’s the rush? The answer seems to be that the sheer magnitude of these efforts will reassure the public and financial markets that everything will be okay.

Will it? I don’t know, and probably no one does. But the confidence we once had in our ability to imagine and control the future is fading. Our situation increasingly resembles the early 1930s, when past certitudes no longer match present realities. The dividing line between a depression and a severe recession is murky at best. If we aren’t there yet, we’re closer than at any time since World War II.

Are GOP Policies Leading Us Toward A New Depression ?

In the past, Republican policies (favoring the rich and corporations) created a situation where the gap in wealth and income between the rich and the rest of the country was enormous. A stock market crash in 1929 triggered the Great Depression (which was inevitable because of that wealth/income gap).

Today's Republicans have recreated that wealth and income gap, and it is growing even larger than it was prior to the Great Depression. The policies, deregulation of financial institutions and huge tax cuts for corporations and the rich, have also had another effect. It has created an enormous debt -- both government and private debt.

Some economists believe it is this ballooning debt that will trigger a new depression -- and it could happen before Trump's presidential term ends. Consider this part of a thought-provoking article by John Aldan Byrne in The New York Post:

Ten years ago, it was too-easy credit that brought financial markets to their knees. Today, it could be a global debt of $247 trillion that causes the next crash.

After a decade of escalating US household debt brought on by low wages and the national debt more than doubling over the same time frame, to $21 trillion, debt could soon put the brakes on this economic recovery, analysts warn.

“We think the major economies are on the cusp of this turning into the worst recession we have seen in 10 years,” said Murray Gunn, head of global research at Elliott Wave International.

And in a note, he added: “Should the [US] economy start to shrink, and our analysis suggests that it will, the high nominal levels of debt will instantly become a very big issue.”

The economic stats:

• US household debt of $13.3 trillion now exceeds the 2008 peak. That’s due in part to mortgage lending, which is hovering near its decade-ago level of $9 trillion-plus.
• Student loans outstanding have skyrocketed from $611 billion in 2008 to around $1.5 trillion today.
• Auto loans, at nearly $1.25 trillion, have exceeded the 2008 total, while credit card balances are just as high now as before the Great Recession.
• Meanwhile, global debt — a result of central bankers flooding economies with cheap money to lift them out of a funk — is now $247 trillion, up from $177 trillion in 2008. That is close to 2½ times the size of the global economy.

“We won’t be able to call it a recession, it’s going to be worse than the Great Depression,” said economic commentator Peter Schiff, forecasting a major economic downturn as early as the tail end of the Trump presidency’s first term. “The US economy is in so much worse shape than it was a decade ago.”

Economic theorists say insurmountable debt is the big kahuna. The huge sums today certainly fed the boom times. But since it must eventually be repaid, the tipping point will come when a wave of defaults by overwhelmed borrowers — potentially squeezed by rising interest rates — leads to a widespread reduction in spending and incomes, economists explain.

GOP Policy Setting U.S. Up For Another Economic Disaster

There have been two economic disasters in this country in the 20th and 21st centuries -- the Great Depression of 1929 and the Great Recession of 2007. Both were due to the Republican economic policy called "trickle-down" economics.

That policy tilted the economic playing field to favor the rich. The idea was that giving more to the rich would benefit everyone. It didn't work, because nothing trickled down. It just created a vast inequality in wealth and income that could not be sustained.

After 1929, the Democrats regained power for a significant amount of time, and were able to institute a fairer economic policy and regulate financial institutions. This resulted in several decades of economic growth that benefitted nearly all Americans.

Unfortunately, the Republicans regained enough political power in 1980 to re=institute their failed "trickle-down" policy. That led to increasing inequality, and a serious recession in 2007. The Democrats regained power in 2008 and tried to fix the economy, but they held Congress for only two years. Once Republicans took control of the White House and Congress in 2016, they undid most of the regulations passed by Democrats and failed to enforce those they hadn't overturned.

This, combined with the unfair tax reform, is once again creating a vast inequality of wealth and income -- and it is setting this country up for a third economic disaster. Here is how former Labor Secretary Robert Reich (pictured) describes it:

September 15 will mark the tenth anniversary of the collapse of Lehman Brothers and near meltdown of Wall Street, followed by the Great Recession.

Since hitting bottom in 2009, the economy has grown steadily, the stock market has soared, and corporate profits have ballooned.

But most Americans are still living in the shadow of the Great Recession. More have jobs, to be sure. But they haven’t seen any rise in their wages, adjusted for inflation.

Many are worse off due to the escalating costs of housing, healthcare, and education. And the value of whatever assets they own is less than in 2007.

Last year, about 40 percent of American families struggled to meet at least one basic need – food, health care, housing or utilities, according to an Urban Institute survey.  

All of which suggests we’re careening toward the same sort of crash we had in 2008, and possibly as bad as 1929.

Clear away the financial rubble from those two former crashes and you’d see they both followed upon widening imbalances between the capacity of most people to buy, and what they as workers could produce. Each of these imbalances finally tipped the economy over.

The same imbalance has been growing again. The richest 1 percent of Americans now takes home about 20 percent of total income, and owns over 40 percent of the nation’s wealth.

These are close to the peaks of 1928 and 2007. 

The U.S. economy crashes when it becomes too top heavy because the economy depends on consumer spending to keep it going, yet the rich don’t spend nearly as much of their income as the middle class and the poor.

For a time, the middle class and poor can keep the economy going nonetheless by borrowing. But, as in 1929 and 2008, debt bubbles eventually burst.

We’re getting dangerously close. By the first quarter of this year, household debt was at an all-time high of $13.2 trillion.

Almost 80 percent of Americans are now living paycheck to paycheck. In a recent Federal Reserve survey, 40 percent of Americans said they wouldn’t be able to pay their bills if faced with a $400 emergency. 

They’ve managed their debts because interest rates have remained low. But the days of low rates are coming to an end. 

The underlying problem isn’t that Americans have been living beyond their means. It’s that their means haven’t been keeping up with the growing economy. Most gains have gone to the top.

It was similar in the years leading up to the crash of 2008. Between 1983 and 2007, household debt soared while most economic gains went to the top. Had the majority of households taken home a larger share, they wouldn’t have needed to go so deeply into debt.

Similarly, between 1913 and 1928, the ratio of personal debt to the total national economy nearly doubled. As Mariner Eccles, chairman of the Federal Reserve Board from 1934 to 1948, explained: “As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing.” 

Eventually there were “no more poker chips to be loaned on credit,” Eccles said, and “when … credit ran out, the game stopped.”

After the 1929 crash, the government invented new ways to boost wages – Social Security, unemployment insurance, overtime pay, a minimum wage, the requirement that employers bargain with labor unions, and, finally, a full-employment program called World War II.

After the 2008 crash, the government bailed out the banks and pumped enough money into the economy to contain the slide. But apart from the Affordable Care Act, nothing was done to address the underlying problem of stagnant wages.

Trump and his Republican enablers are now reversing regulations put in place to stop Wall Street’s excessively risky lending.

But Trump’s real contributions to the next crash are his sabotage of the Affordable Care Act, rollback of overtime pay, burdens on labor organizing, tax reductions for corporations and the wealthy but not for most workers, cuts in programs for the poor, and proposed cuts in Medicare and Medicaid – all of which put more stress on the paychecks of most Americans.

Ten years after Lehman Brothers collapsed, it’s important to understand that the real root of the Great Recession wasn’t a banking crisis. It was the growing imbalance between consumer spending and total output – brought on by stagnant wages and widening inequality.

That imbalance is back. Watch your wallets.

Green Party On The Politics Of Suicide And Depression

Despite the view by many that the United States is an "exceptional" country, we have a big problem with depression, suicide and other mental illnesses. Could this be because of economic hardship, various forms of bigotry, and other societal ills? There is some evidence that could be true. Here is the Green Party's take on this -- as written by Green Party Shadow Cabinet member Bruce Levine:

In November of 2014, the U.S. government's Substance Abuse and Mental Health Services Administration (SAMHSA) issued a press release titled "Nearly One in Five Adult Americans Experienced Mental Illness in 2013." This brief press release provides a snapshot of the number of Americans who are suicidal, depressed, and mentally ill, and it bemoans how many Americans are not in treatment. However, excluded from SAMHSA's press release -- yet included in the lengthy results of SAMHSA's national survey -- are economic, age, gender, and other demographic correlates of serious mental illness, depression, and suicidality (serious suicidal thoughts, plans, or attempts). It is these demographic correlates that have political implications.

These lengthy results, for example, include extensive evidence that involvement in the criminal justice system (such as being on parole or probation) is highly correlated with suicidality, depression, and serious mental illness. Yet Americans are not told that preventing unnecessary involvement with the criminal justice system -- for example, marijuana legalization and drug use decriminalization -- could well prove to be a more powerful antidote to suicidality, depression, and serious mental illness than medical treatment.

Also, the survey results provide extensive evidence that unemployment and poverty are highly associated with suicidality, depression, and serious mental illness. While correlation is not the equivalent of causation, it makes more sense to be further examining variables that actually are associated with suicidality, depression, and serious mental illness rather than focusing on variables such as chemical imbalances which are not even correlates (see Psychiatric Times, 2011). These results raise questions such as: Does unemployment and poverty cause depression, or does depression make it more likely for unemployment and poverty, or are both true?

And the survey results also provide extensive evidence that younger Americans are more depressed than older Americans, that women are more likely to be depressed than men, and that Native Americans and biracial Americans are more likely to be depressed than other ethnic/racial groups. Again, while correlation is not the equivalent of causation, depression obviously cannot cause one to become young, female, or Native American. More rationally, researchers should be asking what is it about American society that is so depressing, especially for young people, women, and Native Americans?

These recent SAMHSA survey results provide a golden opportunity for a scientific and societal shift to reconsider what about American society and culture is resulting in emotional suffering and self-destructive behaviors, especially for certain groups. Below is a summary of some of the key statistics in these buried SAMHSA survey results.

Summary of Buried SAMHSA Survey Results

Involvement with the Criminal Justice System: In 2013, the percentage of American adults with serious suicidal thoughts: 10.7 percent for those on parole or a supervised release from jail in the past 12 months, 9.2 percent among those who were on probation, and 3.9 percent for those not involved in the criminal justice system. The percentage for adults with any mental illness: if on probation was 32.3 percent, if on parole or supervised release, 36.5 percent, double the percentage of adults not involved in the criminal justice system (18.3 percent). The percentage of adults with serious mental illness: if on probation was 9.4 percent, if on parole or supervised release was 13.9 percent, more than triple for those not involved in the criminal justice system (4.1 percent).

Unemployment: Among American adults in 2013, the unemployed were more likely than those who were employed full time: to have serious thoughts of suicide (7.0 vs. 3.0 percent), make suicide plans (2.3 vs. 0.7 percent), or attempt suicide (1.4 vs. 0.3 percent). The percentage of adults with any mental illness: for the unemployed was 22.8 percent, for part-time employed was 20.3 percent, and for full-time employed was 15.4 percent. Among adults with serious mental illness: the percentage for the unemployed was 6.6 percent, for part-time employed was 4.8 percent, and for those full-time employed was 2.7 percent. Among those adults having a major depression episode: the percentage for the unemployed was 9.5 percent, for part-time employed was 7.8 percent, and for full-time employed was 5.3 percent.

Family Income: Among American adults in 2013, serious suicidal thoughts occurred in: 6.6 percent of those from family incomes below the Federal poverty level, 4.7 percent of those with family incomes between 100 and 199 percent of the Federal poverty level, and 3.1 percent of those with annual family incomes at 200 percent or more of the Federal poverty level. Among American adults, the percentage with serious mental illness: for those with a family income that was below the Federal poverty level was 7.7 percent, for those with a family income at 100 to 199 percent of the Federal poverty level was 5.1 percent, and for those with a family income at 200 percent or more of the Federal poverty level was 3.2 percent.

Age: No suicidality results were reported for Americans under 18, however, among American adults having serious suicidal thoughts, the percentage: for those aged 18 to 25 was 7.4 percent, for those aged 26 to 49 was 4.0 percent, and for those aged 50 or older was 2.7 percent. And among adults who made suicide plans in the past year: the percentage for those aged 18 to 25 was 2.5 percent, for those aged 26 to 49 was 1.3 percent, and for those aged 50 or older was 0.6 percent. The percentage of Americans having a major depressive episode in 2013: for those aged 12 to 17 was 10.7 percent, for those aged 18 to 25 was 8.7 percent, for those aged 26 to 49 was 7.6 percent, and for those aged 50 or older was 5.1 percent.

Gender: In 2013, adult women were more likely than adult men to have: any mental illness (22.3 vs. 14.4 percent), a serious mental illness (4.9 vs. 3.5 percent), a major depressive episode (8.1 vs. 5.1 percent), and suicidal thoughts (4.0 vs. 3.8 percent). Among American ages 12 to 17, females were more likely than males to have a major depressive episode (16.2 vs. 5.3 percent) and a major depressive episode with severe impairment (12.0 vs. 3.5 percent).

Ethnicity/Race: In 2013, the percentages of adults aged 18 or older having serious thoughts of suicide in the past year were: 2.9 percent among blacks, 3.3 percent among Asians, 3.6 percent among Hispanics, 4.1 percent among whites, 4.6 percent among Native Hawaiians or Other Pacific Islanders, 4.8 percent among American Indians or Alaska Natives, and 7.9 percent among adults reporting two or more races. The percentages of adults with a major depressive episode: 1.6 percent among Native Hawaiians or Other Pacific Islanders, 4.0 percent among Asians, 4.6 percent among blacks, 5.8 percent among Hispanics, 7.3 percent among whites, 8.9 percent among American Indians or Alaska Natives, and 11.4 percent among adults reporting two or more races.

Conclusions

The SAMHSA press release states that among American adults in 2013: 10 million American adults (4.2 percent) experienced a serious mental illness, 15.7 million adults (6.7 percent) experienced a major depressive episode, and states that "major depressive episodes affected approximately one in ten (2.6 million) youth between the ages of 12 to 17." The press release then laments how many Americans with mental illnesses are not receiving treatment.

While these statistics in the SAMHSA press release are troubling, the devil is in the details of the actual lengthy SAMHSA survey results. These results make clear that suicidality, depression, and mental illness are highly correlated with involvement in the criminal justice system, unemployment, and poverty, and occur in greater frequency among young people, women, and Native Americans.

Shouldn't researchers be examining American societal and cultural variables that are making so many of us depressed and suicidal? At the very least, don't we as a society want to know what exactly is making physically healthier teenagers and young adults more depressed than senior citizens?

More Evidence This Recession May Be A Depression

While the pundits argue about whether the current recession is over or not, most Americans know the country has not recovered and may not for many more years. Millions of jobs have been lost and the few jobs currently being created can't even cover the new entrants to the work force. Wall Street may be doing well, but there is no doubt on Main Street that the recession rages on.

In fact, it may be worse than just a recession. It may actually be a full-blown depression. The evidence for this is mounting. A few days ago I wrote a post that showed the percentage of Americans that have been out of work for over six months has exceeded the percentage during the Great Depression. At least 6.2 million people, or 45.1%, of the 13.9 million unemployed in this country have been out of work for longer than six months (and that doesn't count the people who have given up trying to find work).

Now there is more evidence we may be in a second Great Depression. It has now been confirmed that the price of houses has dropped 33% since the start of the recession. That's more than the 31% that the cost of houses fell during the Great Depression. And the fall in prices may not be over, since the banks have a glut of homes they have repossessed and are still foreclosing at a record pace.

It's even worse when you consider that the modern drop in prices has occurred in less than four years -- a much shorter time than it took during the fall in the Great Depression. Paul Dales, senior economist at Capital Economics, put it this way for his clients, "The sharp fall in house prices in the first quarter provided further confirmation that this housing crash has been larger and faster than the one during the Great Depression." He predicts the prices will fall at least another 3% the rest of this year (making a total of 5% for the year).

Currently there are 4.5 million homes where the owners are at least three months behind on payments or banks have issued a foreclosure. The normal yearly average is only about 1 million. That tells us that the housing crises, like the jobs situation, is not going to be solved anytime soon.

The Great Depression was not actually called a depression until years later. At the time it was just a serious recession. I think it's becoming more likely every day that a few years down the road people will be referring to this period of history as the Second Great Depression.

Republican Bag Of Ideas Is Empty

In the last year-and-a-half of his presidency, Bush oversaw the loss of a couple of million American jobs. This month, another 200,000 jobs were lost, and most economists believe the next few months could be just as bad (if not worse). Our nation is quickly sliding from a recession into another depression like that experienced in the 1930's.

Our new president has come up with a stimulus package that would "provide income support to the poor and recently unemployed, distribute aid to state governments, seek relatively quick employment gains through public works spending and aim to spark consumer and business spending through targeted tax cuts." The plan is huge and most of the money would be borrowed, but most economists believe if it is implemented quickly it could be a big boost to the economy.

President Obama has reached out to Republicans to try and get their ideas to see if the plan could be improved. That was a useless gesture. The Republicans are completely out of ideas and have decided their only course of action is to try and obstruct the plan offered by Obama and the Democrats. The only thing the Republicans can come up with is to give their rich buddies some more tax breaks.

Of course, the last time they did that, it just resulted in huge deficits and did nothing for the economy. The truth is that Obama's plan includes some tax cuts, but it is for the working and middle classes. These cuts make sense, because this is money that will have to be spent, helping to spur the economy.

But those aren't the cuts the Republicans want. They want tax cuts for the rich, claiming it will result in job creation. Nonsense! Even in good times, a tax cut for the rich results in only 30% of it being invested in ways that would create jobs. In these uncertain times, it would do nothing. It would simply be hoarded and cause the deficit to be even larger than necessary.

It's bad enough that we must create a huge deficit to stimulate the economy. But if we must do it, the money should go to help those who need it -- and that's not those who are rich. They can take care of themselves. Those without jobs, those losing their homes and those having trouble feeding their families are the ones who need help.

But the Republicans are out of ideas. Most of their old ideas of deregulation, help the rich and letting the corporations write our laws, are what has put us in this mess in the first place. Those ideas have created the biggest gap between the rich and the rest of America in over a hundred years and destroyed our economy.

Their idea of giving all the money to the rich and waiting for it to trickle down to the rest of us, has been shown to be a joke. The times this country is most prosperous is when the common man has money, because then it will be spent and the economy stimulated. Money does not trickle down in a capitalist economy -- it flows upward.

The fact is that the bag of Republican ideas is empty, and has been since the neocons took control of the party.

The Coming Depression

Anyone who has read this blog for very long, knows that I believe the American economy is in very serious trouble. Phil Gramm and Sidney McCain may think things are fine and Americans are just being "whiners", but I think we'll be very lucky to escape with just an extended recession.

Unless we get some decent leadership and start to rein in the current corporatocracy, we're probably going to see another Depression just like the 1930's. That awful time also followed a period of Republican rule where the corporations were allowed to rape the country.

The signs are there. Wages are stagnant and jobs are disappearing (500,000 in just the last six months). Home foreclosures are at record levels, and the houseing market is in shambles. Unemployment is rising and is now about 5.6% (much higher if you add in those no longer eligible for unemployment payments). The Food Banks (modern version of soup kitchens) can't handle the demand for their service which rises each week.

And it's not just the poor and working classes that are caught in the squeeze. With the deflation of their home equities and the inflation of gas, food and nearly everything else, the middle class is being destroyed. There was only one thing missing to make it mirror the Depression of the 1930s -- bank failures. After all, we had been told that bank failures couldn't happen with all the modern safeguards.

But that wasn't true. Last friday, FDIC regulators took over IndyMac Bank and shut it down. Yesterday, they tried to assure people that accounts under $100,000 and retirement accounts under $250,000 would be paid by FDIC (Customers line up in the above picture).

But the fact is that 10,000 people had over $1 billion in the bank that wasn't insured. In an unusually generous gesture, the FDIC says they will cover half of that. But that still means that $500 million of bank customer's money has disappeared into thin air.

Yesterday morning, ABC's economics reporter revealed that at least 90 other banks are in serious trouble. CNBC was even more pessimistic. They said nearly all banks are in trouble to some degree, and it will take at least $1.2 trillion to bail them out.

If a large hunk of these banks go under, there's no way the FDIC could continue to make good on half of uninsured money. It would take a large influx of new government money just to cover the insured funds. Is it any wonder that bank stocks are falling on Wall Street?

And what is McCain's solution for these myriad problems? Just to continue Bush's economic policies and cut taxes for the rich even more. That's no solution at all -- just an invitation to disaster.

Keeping the Republicans in power in the next election will surely lead only to another Great Depression. America must have a change in direction and economic policy. It is essential.