Debt Deflation in America
What the Jump in the U.S. Savings Rate Really Means
By Michael Hudson
URL of this article: www.globalresearch.ca/index.php?context=va&aid=14153
Global Research, June 29, 2009
Happy-face media reporting of economic news is providing the usual upbeat spin on Friday’s debt-deflation statistics. The Commerce Department’s National Income and Product Accounts (NIPA) for May show that U.S. “savings” are now absorbing 6.9 percent of income.
I put the word “savings” in quotation marks because this 6.9% is not what most people think of as savings. It is not money in the bank to draw out on the “rainy day” when one is laid off as unemployment rates rise. The statistic means that 6.9% of national income is being earmarked to pay down debt – the highest saving rate in 15 years, up from actually negative rates (living on borrowed credit) just a few years ago. The only way in which these savings are “money in the bank” is that they are being paid by consumers to their banks and credit card companies.
Income paid to reduce debt is not available for spending on goods and services. It therefore shrinks the economy, aggravating the depression. So why is the jump in “saving” good news?
It certainly is a good idea for consumers to get out of debt. But the media are treating this diversion of income as if it were a sign of confidence that the recession may be ending and Mr. Obama’s “stimulus” plan working. The Wall Street Journal reported that Social Security recipients of one-time government payments “seem unwilling to spend right away,” 1 while The New York Times wrote that “many people were putting that money away instead of spending it.”2 It is as if people can afford to save more.
The reality is that most consumers have little real choice but to pay. Unable to borrow more as banks cut back credit lines, their “choice” is either to pay their mortgage and credit card bill each month, or lose their homes and see their credit ratings slashed, pushing up penalty interest rates near 20%! To avoid this fate, families are shifting to cheaper (and less nutritious) foods, eating out less (or at fast food restaurants), and cutting back vacation spending. It therefore seems contradictory to applaud these “saving” (that is, debt-repayment) statistics as an indication that the economy may emerge from depression in the next few months. While unemployment approaches the 10% rate and new layoffs are being announced every week, isn’t the Obama administration taking a big risk in telling voters that its stimulus plan is working? What will people think this winter when markets continue to shrink? How thick is Mr. Obama’s Teflon?
Coup d’Etat Underway in Honduras: OBAMA’S FIRST COUP D’ETAT
By Eva Golinger
URL of this article: www.globalresearch.ca/index.php?context=va&aid=14152
Global Research, June 29, 2009
President Zelaya of Honduras has just been kidnapped
[Note: As of 11:15am, Caracas time, President Zelaya is speaking live on Telesur from San Jose, Costa Rica. He has verified the soldiers entered his residence in the early morning hours, firing guns and threatening to kill him and his family if he resisted the coup. He was forced to go with the soldiers who took him to the air base and flew him to Costa Rica. He has requested the U.S. Government make a public statement condemning the coup, otherwise, it will indicate their compliance.]
Caracas, Venezuela – The text message that beeped on my cell phone this morning read “Alert, Zelaya has been kidnapped, coup d’etat underway in Honduras, spread the word.” It’s a rude awakening for a Sunday morning, especially for the millions of Hondurans that were preparing to exercise their sacred right to vote today for the first time on a consultative referendum concerning the future convening of a constitutional assembly to reform the constitution. Supposedly at the center of the controversary is today’s scheduled referendum, which is not a binding vote but merely an opinion poll to determine whether or not a majority of Hondurans desire to eventually enter into a process to modify their constitution.
Such an initiative has never taken place in the Central American nation, which has a very limited constitution that allows minimal participation by the people of Honduras in their political processes. The current constitution, written in 1982 during the height of the Reagan Administration’s dirty war in Central America, was designed to ensure those in power, both economic and political, would retain it with little interference from the people. Zelaya, elected in November 2005 on the platform of Honduras’ Liberal Party, had proposed the opinion poll be conducted to determine if a majority of citizens agreed that constitutional reform was necessary. He was backed by a majority of labor unions and social movements in the country. If the poll had occured, depending on the results, a referendum would have been conducted during the upcoming elections in November to vote on convening a constitutional assembly. Nevertheless, today’s scheduled poll was not binding by law.
Read more
