Jobless claims are rising, manufacturing is slowing, housing sales have fallen off a cliff, GDP is shrinking. The whole notion of declaring "mission accomplished" over the recession seems ridiculous, which is why "Recovery Summer" has turned into a public relations nightmare.

By MIKE WHITNEY Counterpunch August 24, 2010

At the time, the idea of a nationwide "Recovery Summer" tour must have seemed irresistible. After all, the stock market was inching its way higher every week and there were convincing signs that the economy was on the rebound. What better time for President Barack Obama to barnstorm his way across the heartland singing praise for his $787 fiscal stimulus package?

All of that has now changed.

Jobless claims are rising, manufacturing is slowing, housing sales have fallen off a cliff, GDP is shrinking. The whole notion of declaring "mission accomplished" over the recession seems ridiculous, which is why "Recovery Summer" has turned into a public relations nightmare. The economy hasn't reached "escape velocity" as economics czar, Lawrence Summers boasted earlier in the year.

It's is barely limping along and the prospect of another slump looms larger by the day. Obama's woefully undersized stimulus is quickly evaporating leaving a gigantic hole in spending that will inevitably lead to another contraction.

That's what makes the whole "Recovery Summer" pitch so pathetic and shows just how out-of-touch Obama's economics troupe really is. The latest downturn was entirely foreseeable. Obama needs to get rid of the Wall Street suck-ups and build a new team

This is from the New York Times for Monday, August 23:

"Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group...If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked....

“On Friday, Fidelity Investments reported that a record number of people took so-called hardship withdrawals from their retirement accounts in the second quarter. These are early withdrawals intended to pay for needs like medical expenses." ("In Striking Shift, Small Investors Flee Stock Market Graham Bowley, New York Times)

Retail investors are saying "enough" and heading for the exits. The market-flight has gone on for some time, but it's gained momentum since the May 6, "Flash Crash" when the Dow Jones plunged nearly 1,000 in less than an hour. That really put the stampede in motion. A late-day rebound did nothing to allay investor fears or convince traders that the problems had been fixed. The trust is gone. Investors feel that the new architecture of the markets has fundamentally changed and that innovations like high-frequency trading, dark pools and complex derivatives have stacked the odds against them, making it impossible for them to succeed. That's why they continue to leave in droves. They've lost confidence in the markets.

Who has confidence in these markets? Who believes that a well-informed investor that has reasonable expectations of future performance can compete with high-speed speculators? No one. That's why more money is being stuffed into mattresses than into stock funds.

Chief enabler of fraud

The Fed's task is to perpetuate the "free market" fraud for as long as possible. That's why the Fed has pushed for "regulatory forbearance" so that insolvent, capital-starved banks can conceal their losses from the public. The Fed has transferred $1.7 trillion in toxic securities and non-performing loans from the banks to its own balance sheet to preserve the illusion that "all is well" and that asset prices will eventually return to precrisis levels. It's all smoke and mirrors.

Securitization, derivatives trading, and repo market activity are all based on the same principle, which is, to give the financial giants the ability to generate windfall profits on microscopic morsels of capital that have been leveraged into bloated debt-balloons. The banking system is not funded on loans made from deposits, but through the exchange of high-risk securities with shadow banks in the repo market. This is the system that crashed after Lehman Brothers collapsed in September 2008. The Fed and Treasury have committed trillions in public funds to stitch this wobbly, crisis-prone system back together to preserve the profit-centers of their primary constituents--the big banks and Wall Street. The system itself is a scam designed to shift wealth from the middle class to under-capitalized financial raptors.

Is it any wonder that confidence is at an all-time low?

Mike Whitney lives in Washington state. He can be reached at

Who has confidence in these markets? Who believes that a well-informed investor that has reasonable expectations of future performance can compete with high-speed speculators? No one.

Back To The Main Page

Iran Professional Services

Disclaimer: Opinions expressed on this site are solely Hamsayeh.Net’s own and do not represent any official institutions’, bodies’, organizations’ etc.

Similarly, Hamsayeh.Net would not be responsible for any other opinions that may be expressed therein by other sources through direct or indirect quotations.