This year, France experienced 283 protest rallies on Labour Day in cities from Marseilles to Bordeaux, Grenoble and Paris. Although not as dramatic as 1968, the estimate by one of France’s largest trades unions of 1.2 million protesters was five times higher than the protests in May 2008.

In addition, compared to 1968, the 2009 Labour Day protests were more widespread throughout Europe. On 1 May in Germany, union leaders estimated 484,000 people demonstrated in 400 rallies across the country. In Berlin, 237 police were injured after running battles with stone-throwing activists, leading to 289 demonstrators being arrested and five cars torched. In Istanbul, more than 100 protesters were arrested and dozens of people injured as supermarkets and banks were deliberately targeted. In Athens, rioting was dispersed by tear gas, and in Linz in Austria, 20 people were injured and five arrested.

This violence was unrepresentative of the majority of peaceful demonstrations that occurred on 1 May, which is a traditional day of socialist, worker and union-led protests. Nonetheless, the geographic spread of the violence and diversity of motivations behind it reflected an underlying trend: revolutionary and protest movements have become more active across Europe amid the global economic downturn.

If you want to describe this recession, and this bear market, it seems to be easiest to give them a letter grade. At one point the debate was between a V (a sharp recovery after a sharp fall) and a U (a slower recovery with a longer time spent at the bottom). After the stock market crash last October, people started talking about the dreaded L (in which economic activity falls off the side of a cliff and then stays horizontal).

The rally of the past two months reflects the belief that the L has been decisively averted, and suggests investors are betting on a V rather than a U for the economy. This seems optimistic, particularly after much data last week reminded us that the global economy still looks weak.

But another letter is looming on the horizon: W.

In a W-shaped recession, or bear market, we hit bottom, rally, and then sink back once more before finally recovering. This arguably describes both the stock market and the economy of the US during the 1930s, where a renewed sell-off, and a renewed dose of human misery, ensued late in the decade when policymakers believed that the recovery was complete and tightened the economic screws prematurely. It is arguably the story of this decade: since 2000 stock markets have taken a vertiginous lurch down, rallied from 2003 to 2007, and then suffered an even greater lurch downwards.

But the case for a W for the markets from here, with a rally more like the 2003-07 recovery than a typical bear market rally, followed by yet another leap off the cliff, looks quite a strong one.

Jonathan Davis advanced the latest theories of Jeremy Grantham in this space last week. The founder of GMO now expects a VL shape, which is, in practice, a kind of W. In such a recovery, to quote Mr Grantham’s latest letter “the stimulus causes a fairly quick but superficial recovery, followed by a second decline, followed in turn by a long, drawn-out period of sub-normal growth as the basic underlying economic and financial problems are corrected”.

Reliable valuation metrics have not yet reached the lows that they reached in previous bear markets. These would imply a low of about 400 for the S&P 500, which is currently hovering close to 900. But Mr Grantham suggests that important differences with previous cases, and the sheer amount of money that has been thrown at the problem, could justify the market bottoming at a higher level this time.

Thus he is bullish for now, even though he has been a long-term bear. This may essentially still be a bear market, but if this is a W-shaped rally then institutional investors want to be part of it.

That is the imperative for now, and we can leave until later the longer-term drags – dealing with the effects of reduced paper wealth, lower asset prices and a reduced financial sector – that mean, for Mr Grantham, that stocks will eventually move horizontally for a long time.

Russell Napier of CLSA suggested a rather purer W in an interview earlier this month on ft.com (at www.ft.com/shortview). His suggestion is that stocks can rally now because the fear of deflation has been vanquished. Any signs that inflation is creeping up can be dismissed as signs of normalisation and egg on the markets – until a savage bear market in bonds brings the edifice crashing down.

At this point Mr Napier, a historian of bear markets, believes stocks will retreat to the extreme valuation lows of previous bear markets (400 or so on the S&P) before recovering. But as it will take a while for inflation to recur, or for bond yields to rise to the kind of level that has damaged stock markets in the past, he suggests the current upward leg of the W could carry on for a matter of years.

To be clear, he is not using the discredited “Fed model” – valuing stocks by comparing their earnings yields to bond yields. Rather, the suggestion is that there could come a tipping point in the bond market when high interest rates have a depressive effect on the economy, and derail the stock market.

These are two different but persuasive arguments that we are in a W. Testing either hypothesis is difficult, as governments did not respond so aggressively to the deflationary scares of the past, and so we lack precedents. What history suggests, however, is that the worst bear markets do not end with a simple V – which is alarming as the last four months have produced a perfect V on the charts. Rather, bears tend to end with minor falls followed by incremental recoveries, built on rising volume.

This year has seen a big fall followed by a big rally on shrinking volume, exactly the opposite of this, so it might be best to brace for a W.

Many commentators are suggesting that the recent data from the manufacturing, housing market, labor markets suggest that the ‘green shoots’ of an economic recovery are blossoming. While there do seem to be some signs of improvement, ie that the pace of contraction has slowed, the most recent data may still suggest that the global economic contraction is still in full swing with a very severe, a deep and protracted U-shaped recession.

Although the outlook for global manufacturing and service sectors is still consistent with a significant fall in global GDP, the pace of contraction began to slow towards the end of Q1, even in Europe and Japan which have lagged the U.S. and China. Globally, surveys suggest that the manufacturing outlook has improved from the freefall of the end of Q4 2008 and early 2009. Some emerging economies like China may now be experiencing expansion based on government investment, but those of most advanced economies remain well in contraction territory. In part, inventory adjustment following the sharp destocking could contribute to a revival in demand, but a real increase in end user demand needed for a sustainable fast-paced recovery could be far off.

Another necessary condition for a global recovery is a bottoming in not only the U.S. but also global housing markets. So far in most markets, housing prices seem far from their bottom and the outstanding inventory continues to be very high.

Moreover there is a risk that the increase in commodity prices might choke off a sustainable recovery if it weighs on industrial production and consumption. The recent increase in commodity prices, driven in part by an increase in Chinese demand for crude oil and other commodities, has contributed to an increase in the Baltic Dry shipping index. Yet, given the significant inventory in commodities like oil, prices might suffer renewed declines. Moreover although trade finance is no longer quite as impaired as at the turn of the year, global trade continues to be quite weak as evidenced from recent data from China, the U.S. and other countries.

Accompanied by the rally in stocks starting in March, the wide variety of central banks’ liquidity facilities have finally started to show clear effects in the interbank lending and money markets. Stress indicators such as the 3 month LIBOR-OIS spreads have narrowed significantly as well as the TED spread. The stock market rally extended also to the bond market with spreads receding significantly and junk bonds outperforming all other asset classes in the month of April. Is the worst over or have markets overextended themselves?

United States

Some green shoots emerged in the U.S. starting January and February 2009 providing relief to rest of the world that the global engine of growth, the U.S. economy, might be on the path to recovery.

Government transfer payments, public sector wages and holiday discounts boosted personal disposable income, consumer spending and retail sales in January/February. However, spending and retail sales are set to drop again in March. Optimism about recovery and tax cuts via fiscal stimulus have boosted consumer sentiment recently. But the rise in consumer spending witnessed in Q1 2009 might be unsustainable in the coming months amid hiring freezes (indicated by record high continued claims), slower compensation growth, stringent borrowing conditions, fading impact of lower energy prices and the need to increase savings to de-leverage and offset wealth erosion.

Auto plant closures and removal of temporary workers hired for government census might cause another spike in jobless claims and job losses in spite of some optimism in the April data. The ISM manufacturing index, industrial production and imports are also contracting at a slower pace since January/February as firms have been aggressively slashing inventories and conditions for trade finance have improved. But if sales continue to plunge, the currently high inventory levels will have to continue to fall sharply in the coming months, which will be a negative for U.S. trade partners.

Similarly, some stabilization in starts and rise in construction spending starting February/March signal that the supply side of the housing sector might be close to a bottom and will continue to move sideways for some time. The persistent high level of inventories though, implies that the adjustment in terms of home prices in the U.S. housing sector might continue until mid-2010, possibly at a somewhat slower pace.

Canada

With its fortunes tied to the U.S. which absorbs about 75% of its exports, Canada would seem a strange candidate for early green shoots, but there are some signs of improved sentiment.

Canada actually added jobs in April 2009 – albeit all in self-employment – but a breather from the sharp declines experienced from November 2008 to March 2009. Moreover, the descent of the Canadian housing market also seems to have slowed, at least temporarily due to seasonal factors.

Canada’s shift back from trade deficit to surplus in February and March though reflects a weak loonie’s dampening effect on imports rather than any revival of demand in Canada’s exports.

The relative soundness of Canada’s banks, which are still extending credit to households and businesses, does protect Canada from some of the woes facing other G7 economies but a recovery could be far off.

Europe

Just as the European Commission, the IMF, and the OECD revised down their 2009 forecasts to at least -4% after a dismal Q1 performance, Eurozone economic indicators are starting to paint a brighter picture starting in April.

In particular, German manufacturing orders rose again on a monthly basis thus corroborating the recovery signaled by business sentiment indicators. Similarly, both manufacturing and services PMI indicators recorded an increase although hovering firmly in contractionary territory.

The most upbeat indicator so far has come from the OECD’s 6 month leading indicator signaling that both France and Italy might have reached a possible trough in Q1. Already commentators are speculating about the shape of the recovery but important structural headwinds remain. See Green Shoots In the Eurozone? OECD Leading Indicators Turn For France and Italy

United Kingdom

In the UK, more and more analysts have suggested that the housing sector is bottoming despite the mixed signs shown by different pricing and lending measures. April Nationwide data showed that prices registered a m/m decline of 0.4%, bringing the y/y rate to -15% even as Halifax house prices fell by a bigger than expected 1.7% in April, returning the average house price to 2004 levels. The fall in house prices was still the smallest monthly decline since December, though.

On the economic activity side, April CIPS/Markit manufacturing PMI rose to a reading of 42.9, up from 39.5 in March. The index has now recovered substantially from the record weakness of November to February but remains firmly in contraction territory. Moreover, the services PMI for March, a survey of businesses ranging from banks to restaurants also increased. This increase, the fourth monthly rise again, continues to reflect contraction even if a less steep one. Even though the survey is bringing a slowing pace of decline in new business and business expectations, companies are still shedding staff at the fastest rate since records began in 1996. Retail sales for February were also on the downside while unemployment is at the highest rate since 1997.

Russia

Despite the recovery in commodity prices, there are few green shoots in Russia where the EBRD suggested that the economy might contract by -7% in 2009. Although Russia’s PMI has now risen to 43 in April, the contraction is already longer and more severe than during the 1998 financial crisis.

Moreover, the unemployment rate neared 10% already in March, and wage arrears suggest further job losses are to come, despite government support. The increase in commodity prices may alleviate the worst of the revenue deterioration but even at an oil price of $50-55 a barrel, Russia would draw heavily on its past savings (as it has already been doing) and in any case hydrocarbon output is falling. Meanwhile despite some reductions in external debts in H2 2008, vulnerabilities in the financial sector will weigh on growth even once the recovery at last begins.

MENA

As for the Middle East and North Africa, a region relatively less hit by the global financial crisis but vulnerable to tighter global and regional liquidity conditions as well as lower demand for its exports, some nascent green shoots appeared in the real estate and property sector as early as Q1 2009.

Continued price corrections in 2009 contributed to an increase in residential sales in Dubai as early as February 2009. Mortgage lending started to pick up slightly from a virtual standstill between September 2008 and March 2009. However overcapacities and a shrinking population suggest prices have further to fall.

More generally, MENA bank recapitalizations and increased government expenditure – together with a return of global risk appetite – are improving the liquidity situation.
The outlook for the MENA region in general and the GCC in particular, remains quite tied to oil prices, meaning that the recent correction in commodity prices have reduced the revenue and macroeconomic deterioration somewhat but economic output and credit growth will be much weaker in 2009.

In Israel, inflation started to pick up, bringing forward the possibility that the Bank of Israel might even begin tightening before the end of 2009. Consumer confidence also increased in April 2009 which may imply an improved outlook fro the Israeli economy. It is important to note that despite a contraction in Israel, overall MENA growth will likely be positive- a rarity globally.

Asia

Exports plunged between 20% to 40% y/y in ASEAN and Asian Tigers in December 2008 and January 2009 due to large inventory buildup in Asia and G-3 and the crunch in trade finance. But exports are now contracting at a somewhat slower pace across most countries starting in February 2009. In fact on a monthly basis, Asian exports improved in February and March.

Asian exports to China, a large share of which are re-exported to the G-3, are also recovering while Chinese fiscal stimulus might also be boosting domestic demand for Asian exports. This is clearly reflected in the industrial production data which has recovered in most of Asia starting February as their export destinations themselves had slower contraction in industrial production and goods orders. While exports and industrial output corrected again in a few countries in March, the trend going forward will be determined by the pace of inventory adjustment and demand stabilization in the G-3 and therefore in China. Also, as deleveraging by firms and consumers in the West continues and global recovery remains sluggish, Asian exports will continue to contract though most of 2009 and much more than during 2001 or 1997-98.

Japan

Has Spring sprung in Japan? Some are seeing signs of green shoots.

Industrial production rose 1.6% month-over-month in March (the first gain in six months), while exports were up 2.2%. Japan’s Economy Watchers’ Survey has picked up from its record-low in December 2008. Meanwhile, the government’s roughly $150 billion fiscal stimulus package, announced in April, is expected to provide a big jolt to the economy.

When you scratch the surface, however, these green shoots seem like nothing more than flights of fancy. Industrial production may have risen m/m in March, but production was still in freefall in y/y terms, dropping 35%. And while most analysts agree that the fiscal stimulus package will boost growth, most see this as only a short-term phenomenon.

Exports, production and capital expenditure have collapsed and the seeds of recovery are not yet visible. Given Japan’s anemic domestic demand, most analysts agree that economic recovery depends upon the future course of Japan’s exports. That means a recovery will depend heavily on an upturn in overseas economies or a restructuring of Japan’s domestic economy.

China

So far, China may have some of the most persistent green shoots as the government’s investment program and massive credit extension are leading to a q/q acceleration of growth from the near stall of Q4 2008 and Q1 2009. The most recently released OECD composite leading indicators suggest Chinese output may have reached a trough in March, rising the most of any of the OECD and non-OECD economy the organization tracks.

China’s PMIs have risen above the 50 threshold indicating that the manufacturing sector may now be expanding, job losses seem to have slowed, and credit extension may be financing investment rather than merely plugging balance sheets. The residential property market is also finally showing signs of improvement at least in transactions volumes and the erosion of the large inventories and property investment rose slightly in April. Industrial production has improved from the negative growth in January, but could slow from the 8% level attained in March, especially since electricity demand continued to contract in April.

Moreover, it remains uncertain whether China can stimulate sufficient domestic demand to shift away from exports and export-oriented investment particularly at a time of external weakness and still impaired credit conditions. If it does not, the increased production could further contribute to overcapacities and disinflationary pressures at home and abroad. Consumption began to slow towards the end of Q1- albeit only slightly – despite vouchers to boost spending. Absent increased government spending on health, pensions and other social spending, the structural incentives to save and not to consume will remain. See Has The Chinese Economy Bottomed Out?

Korea

Korean GDP growth barely missed a technical recession in Q1 2009 by inching up 0.051% q/q (but shedding 4.3% y/y) after plunging in 5.6% q/q in Q4 2008. The Q1 rebound was signaled by the electronics sector, which drove a revival in industrial production and exports. Private consumption rose 0.4% q/q and construction rose 6.1% q/q in Q1 2009 – both with the help of fiscal stimulus packages. Net exports were positive as imports dropped faster than exports. Korea’s ‘green shoots’ may just be a technical recovery, with the pace of economic contraction slowing but economic activity stabilizing at low levels. Restructuring has further to go – Korea still needs to whittle down its excess inventory of houses and ships and clean up bank balance sheets.

A true recovery in Korea would require domestic consumption to revive not only on pent-up demand but on a more secure income and employment outlook. Retail sales got a lift from tourists taking advantage of a weaker won earlier this year but the won’s recent appreciation and a bear market rally in Korean equities has turned the tables in favor of domestic spenders. According to a Bank of Korea survey, consumer sentiment leaped in April along with asset price expectations. A key question going forward is whether Korea can sustain the domestic demand rebound when credit continues to contract.

Bank loan growth slowed to 8.4% y/y in March 2009 as banks tightened lending standards in anticipation of asset quality deterioration and the looming suspension of FX derivative contracts, which may weigh on bank earnings. A domestic credit crunch remains a risk even though the Bank of Korea has lowered its Base Rate to a record low 2% because many banks fund themselves through bonds at higher rates and economic concerns have elevated the yield on corporate bonds.

Latin America

It is quite fair to say that so far in the Latin American region there is limited evidence of a sustained recovery and in some cases the reality is actually of a still deteriorating outlook either due to the strong inertia of the global economic crisis and the deleveraging process or due to specific events such as the swine flu in Mexico.

In Brazil, the latest data on industrial production definitely showed improvements on the margin. March industrial production was up 0.7% m/m s.a., pushing the y/y rate up from -16.8% to -10%, mainly driven by a sharp increase in the production of automobiles. In fact, the tax cuts given by the government to boost auto sales have been quite successful. But the recovery is not widespread throughout the economy. Retail sales surprised on the upside in January but the downward trend resumed in February and more deterioration is expected in March as the labor market brings signs of continued deterioration.

In Chile, the latest economic activity data showed a -0.7% reading in March, which was above estimates and surprising in light of the poor mining, industrial production and retail sales results. Copper prices, Chile’s main export is up now by more than 35% YTD, largely because of an increase in exports to China and could be a trigger to further improvements in activity. The central bank of Chile has been the most proactive within the region, slashing rates by 7 percentage points so far in 2009, with more cuts expected. Thus, both monetary and fiscal accommodation should certainly support a quicker and stronger recovery in Chile, despite the fact that so far those signs are still mixed.

In Mexico, analysts recently revised their growth estimates once the own government’s estimates were sharply reduced (from -1.8% to -4.8% for 2009). Furthermore, economists are trying to calculate the impacts of the swine flu on the country’s economy which could subtract of -0.5 to -1.0 percentage points from GDP depending on how long the flu affects the tourism and entertainment sectors. The latest economic activity indicators have failed to bring any signs of recovery so far and the overall sentiment seems to be of a relatively far bottoming of the economy. The economic activity indicator from IGAE declined by 10.8% y/y in February, worse than expected as all components contracted but it did expand on a seasonally adjusted month-on-month basis.

By Alexander Cockburn, Counterpunch

On any rational assessment the popular new president is skating on thin ice. Pollyanna bulletins about the economy puff up from the White House and Federal Reserve, like auguries of a new Pope through the  Vatican chimney. “Habemus spem.” We have hope. We’ve just heard it from President Obama: “We are starting to see glimmers of hope across the economy.” From Fed Chairman Ben Bernanke, who’s so far unleashed $12 trillion in booster money, we get the always sinister reassurance, like Death giving the Appointee in Samarra a friendly tap on the shoulder, “the foundations of our economy are strong”.

The economic news in the near and medium term is ghastly, as Mike Whitney outlined on this site last Thursday. Retail sales crashed again in March, nowhere worse than in the car market, though electronics and building materials were way off too. They now reckon there’ll be just over two million housing foreclosures in 2009, up 400,000 from 2008. Industrial output is going through the floor at an annual rate of 20 per cent, the biggest quarterly drop since the end of the Second World War. US industry is now running at only 70 per cent of capacity, the worst number since they started tracking this stat in 1967. Job losses are currently running at 650,000 a month.

Round the next corner is credit card delinquency and  the long-heralded slump in commercial real estate, where vacancy rates are already running at 15 per cent,. Capital One, a huge issuer of Visa and Mastercard, just  said the annualized net charge-off rate for U.S. credit cards — debts the company reckons will never be paid — rose to 9.33 percent in March from 8.06 percent in February. In other words, Capital One – whose credit card promotions take up  hefty space in the mailbag of every US postman – is in big trouble, and  under one in ten of these credit card holders will have a messed up credit rating for several years to come.

Wall Street and its boosters are trying to pretend that indeed the worst is over. The Dow and S&P Index have been rallying for five weeks. Wells Fargo, the huge San Francisco-based bank, second biggest home lender, announced that first quarter net income rose 50 per cent to $3 billion.  No one seriously believes the bank is in anything other than continuing huge trouble, and will soon need – so Blomberg News surmises – $50 billion to settle near-term commitments. The profit figure stems from newly relaxed rules about the valuation of Wells Fargo’s assets.

In other words it’s thin economic ice from here to the horizon. Robert Reich, now teaching economics at Berkeley and formerly labor secretary in the Clinton administration, wrote a piece recently, titled “Why We’re Not at the Beginning of the End, and Probably Not Even At the End of the Beginning”. There are huge problems with the whole orientation of the US economy. The “free market” outsourcing model has failed. Even at the best of times the US consumers who account for over 70 per cent of all economic activity in the country, don’t have purchasing power to keep the whole show on the road, unless they put it on the credit cards which are now maxed out and going into default, or borrow on houses they can’t afford.

Amid a hail of well founded criticism from liberal and conservative economists alike, Obama, with Geithner, Summers and Bernanke at his elbow, remains absolutely committed to giving the bankers everything they ask for, trillion upon trillion.  As William Black, deputy director at the former Federal Savings and Loan Insurance Corp. during the thrift crisis of the 1980s, recently remarked in an acrid interview in Barron’s, (reprinted here last week) “ Unless the current administration changes course pretty drastically, the scandal will destroy Obama’s administration, both economically and in terms of integrity. We have failed bankers giving advice to failed regulators on how to deal with failed assets. How can it result in anything but failure?”

In foreign policy the ice is just as treacherous. As the nation emerges from its disastrous adventure in Iraq, Obama redeploys to the Afghan-Pakistan theater. The administration delightedly touts claims that its remote-controlled missiles are decimating al-Q’aida. The Washington-based journalist Gareth Porter last Thursday cited here data leaked by the Pakistani government showing that only ten out of 60 drone attack in February and March hit al Qaida leaders and the rest did what bombs and missiles usually do, namely kill civilians, 537 of them – thus immeasurably strengthening the hand of the Taliban  in the battle for hearts and minds.

Obama is no doubt unworried by this since the hearts and minds he’s mostly interested in belong to the American people and especially opinion-forming elites, who remain unflustered when high explosive falls on a wedding party in Waziristan. Failure in Iraq was re-labeled “victory” and in terms of domestic politics the chickens only come home to roost when there’s film of people climbing off the roof of the US embassy into a helicopter, or when the casualty rates among US soldiers start soaring. Soaring Pentagon budgets are popular with Congress, whose members nix any effort to cut back.

Where the ice is giving way for Obama is among those who thought he might strike out in a new direction in foreign policy. There’s not much sign of that. Whether it’s a sell-out of Haiti’s poor or acquiescence in Israel’s grim plans for the Palestinians, Obama’s game is strictly business as usual, up to and including the Cuban blockade whose damage, as Fidel Castro said here last week, “cannot be calculated only on the basis of its economic effects, for it constantly takes human lives and brings painful suffering to our people. Numerous diagnostic equipment and crucial medicines –made in  Europe, Japan or any other country– are not available to our patients  if they carry U.S. components or software.”

Obama has welshed on promises that America will stop kidnapping its enemies and “rendering” them to secret prisons overseas. As under Bush, enemy combatants languish without rights or recourse in prisons like Bagram. The torturers who flourished in the Bush years will not be prosecuted. Electronic eavesdropping continues unabated. It seems, so CounterPunch’s Fred Gardner is reporting in exclusives on this site, he and his attorney general are welshing on commitments not to harass medical marijuana operations in states where local laws sanction such activity.

Will the liberal-left mutiny? Never. Remember, Bill Clinton bombed Yugoslavia and kicked away life supports of America’s poorest and most of the liberal-left stayed loyal to the end and cherish his memory. The labor movement has already seen defeat for its cherished “card check” bill, designed to win a level playing field for union organizers, thus presumptively boosting effective purchasing power among working people, vital to the nation’s economic well-being.  They’re not really blaming this on Obama, even though it is his chief aide, Rahm Emmanuel who, in his years on the Hill, picked Democratic candidates who feel no loyalty to labor and refused to push for the card check bill, and though Obama recently stressed he is a “new” Democrat – transparent code for someone distancing himself from the labor movement.

Obama’s polling numbers remain good. He has only to say there are “glimmers of hope” and the pollsters duly find increasing sentiment among Americans that they feel the economy is moving in a “positive” direction. He gets good assessments from Democrats and Independents. Many  Republicans don’t like him but here again Obama is lucky, just as he was lucky – at least in the near term -  to have three Navy SEALS off the horn of Africa who were good shots. The Republican opposition is in appalling shape, lumbering from one ill-conceived stunt to the next.

Obama’s lucky to have succeeded a terrible president. He gets out a lot and talks a great game. His problem is the same as the country’s. The economic ice is cracking under his feet, and the “stimulus” is going to be about as efficacious as those cushions under the seats the flight attendants assure us are going to come in handy when the plane goes down in the North Atlantic.

The Curse of Rockefeller

He died in action thirty years ago, in intimate activity in a subterranean sanctuary at the end of a secret tunnel under a street in the West 50s in New York.  Nelson Rockefeller was one of the richest men in the world, but he never found a way to buy his way into the Oval Office. As Bruce Jackson writes in our April 16-30  newsletter, just published:

– he was the individual more responsible than any other for the rise to power of Henry Kissinger. Kissinger was on Rockefeller’s personal payroll for a decade; it was because of Rockefeller that Kissinger was brought into the Nixon administration;

– he was responsible for the September 13, 1971 bloodbath at Attica prison;

– in 1973 he created the most repressive drug laws in the nation. In 1973, he got the New York legislature to pass what immediately became known as “the Rockefeller Drug Laws,” These laws imposed very long sentences, many with mandatory minimums, for what were often minor offenses everywhere else. Sale of two ounces of heroin, morphine, opium, cocaine or cannabis in any form, or possession of four ounces of those same drugs brought the same sentence as second-degree murder: 15 or 25 to life, with no parole before the minimum was served and no judicial discretion.

Thousands of drug dealers, drug users and “mules” went to prison for decades under the Rockefeller laws, but few big time dealers did any more time under them than they would have under the laws that had been in place before 1973, primarily because many of them – like Nicky Barnes and Frank Lucas – were not only willing to turn informer, but had enough people to snitch on to make massive sentence reductions worthwhile to the prosecutors.

Now by agreement between Gov. Paterson and the New York state assembly, these laws are about to be repealed. Read Bruce Jackson in CounterPunch newsletter on the true reasons for repeal and the awful legacy of a truly appalling human.

Also in this terrific new issue: As the economy implodes, the social fabric frays and nutball groups organize for Armageddon. Pam Martens sets forth the national game-plan of the “Free State Project”. Is it coming to a town near you?

Half a million new jobless every month and the salesmen of “free trade” still hawk their credo. Paul Craig Roberts describes what offshoring has done to America.

Alexander Cockburn can be reached at alexandercockburn@asis.com

It’s clear that the torrents of money poured in the banking systems since Lehman went bust last September haven’t halted the recession, but have so far prevented the worst, namely a generalized depression. Unlike in the early 30s, the Fed’s stance has been countercyclical  (the ECB, much less so). This is enough to mitigate nosediving, but not enough to rescue the economy from the doldrums of recession. Only Obama’s fiscal stimulus has a chance in that respect. Merkel’s (and also Sarkozy’s) stubborn insistence on not expanding deficits amid a world recession, could make the situation worse for the international economy and much worse for the eurozone.

We on the radical and reformist left must stop thinking that since neoliberalism has been proved wrong by history, this automatically translates into a revival of progressive policies of wealth redistribution and welfare expansion. It won’t happen until we have shaken off the bankrupted elites of europe. They are still dictating the terms of the game, making employees and households pay for the gargantuan errors of managers, bankers, and the politicians bribed to sing their song.

Let’s shred the Maastricht Treaty! Let’s overthrow Europe’s failed élites!

By PETER S. GOODMAN
Published: March 8, 2009

As the world is seized with anxiety in the face of a spreading financial crisis, the one place having a considerably easier time attracting money is, perversely enough, the same place that started much of the trouble: the United States.

American investors are ditching foreign ventures and bringing their dollars home, entrusting them to the supposed bedrock safety of United States government bonds. And China continues to buy staggering quantities of American debt.

These actions are lifting the value of the dollar and providing the Obama administration with a crucial infusion of financing as it directs trillions of dollars toward rescuing banks and stimulating the economy, enabling the government to pay for these efforts without lifting interest rates.

And yet in a global economy crippled by a lack of confidence and capital, with lending and investment mechanisms dysfunctional from Milan to Manila, the tilt of money toward the United States appears to be exacerbating the crisis elsewhere.

The pursuit of capital suddenly seems like a zero sum game. A dollar invested by foreign central banks and investors in American government bonds is a dollar that is not available to Eastern European countries desperately seeking to refinance debt. It is a dollar that cannot reach Africa, where many countries are struggling with the loss of aid and foreign investment.

“Virtually all of the low-income countries are in very serious trouble,” said Eswar Prasad, a former official at the International Monetary Fund and a senior fellow at the Brookings Institution, the liberal-leaning research organization in Washington.

He went on: “This is the third wave of the financial crisis. Low-income countries are getting hit very hard. The flow of private capital to the emerging market has dried up.”

Private money invested in so-called emerging countries plunged from $928 billion in 2007 to $466 billion last year and is likely to fall to $165 billion this year, according to the Institute of International Finance.

Not that the United States is enjoying a great influx of money. Globally, investors are holding tight to cash and extracting it as quickly as they can from risky ventures.

In the United States, investments by foreigners have slowed markedly. But as Americans eschew foreign deals and keep their dollars at home, and as foreign central banks — especially China — buy Treasury bills, the United States is absorbing money that used to be scattered around the globe. And that is making money tighter elsewhere in the world.

The most immediate crisis appears to be in Eastern Europe, where investors borrowed exuberantly in foreign currencies — notably the euro and the Swiss franc — using those funds to build office towers and factories. Their debts are growing as their currencies decline in value, leading to bank losses and requiring government bailouts along with aid from the I.M.F..

Economists liken this episode to the financial crisis that assaulted much of Asia in the late 1990s. Then, as now, investors borrowed in foreign currencies. When investment left the region, local currencies plummeted, particularly in Thailand and Indonesia, setting off defaults and sowing job losses and poverty.

“Eastern Europe looks incredibly similar to Asia in the 1990s,” said Brad Setser, an economist at the Council on Foreign Relations in New York.

In one key regard, this crisis is more problematic: In the 1990s, the rest of the global economy was growing vigorously. Once danger abated, Asian countries were able to resume growth by selling goods to the United States, Europe, Japan and China.

Indeed, the very plunge in currencies that precipitated the crisis also provided a fix, making Thai, Malaysian, Indonesian and Korean goods that much cheaper on world markets.

This time, as many low-income countries again see their currencies fall, they are confronting a world beset by recession, in which demand for their products is weak and falling.

In a report released Sunday, the World Bank predicted that the global economy would shrink in 2009 for the first time in more than half a century and forecast that global trade would decline for the first time since the early 1980s.

“Depreciation isn’t enough now to offset the global contraction,” said Mr. Setser, noting that export powers like Japan, Korea, Taiwan and Brazil have had rapid declines in sales in recent months. “Everybody’s looking vulnerable. All commodity exporters are potentially subject to currency crises.”

Fears are growing that a much broader group of countries will plunge into trouble. Mr. Prasad’s list of potential danger zones includes Vietnam, the Philippines, Malaysia and Indonesia, as well as Pakistan and Ecuador.

In the Asian financial crisis, countries at the center of the storm were particularly vulnerable because the values of their currencies were mostly pegged to the dollar. Once central banks ran out of dollars to exchange for their own currencies, they lost their ability to influence the exchange rate. As a result, their currencies fell, turning already large debts into impossible debts.

Many more countries now allow their currencies to float with the whims of the market, removing this grim chain of events. Still, as economic activity slows and banks are stuck with larger losses, the damage could swell beyond the ability of governments to finance bailouts, said Kenneth S. Rogoff, a former chief economist at the I.M.F. and now a professor at Harvard.

“Debt collapses are going to wreak havoc with exchange rates,” Mr. Rogoff predicted. “A lot of countries in Europe are already on the brink of default.”

Only two years ago, many analysts were suggesting that the I.M.F. — created more than 60 years ago to rescue countries in financial distress — no longer had a clear reason to exist. Now, the fund is scrambling for contributions from developed nations to bolster its $350 billion war chest. Mr. Setser suggested it needed $1 trillion for all that might yet unfold.

Because worries are deeper nearly everywhere else, the United States and the dollar have essentially benefited from the worldwide panic. In the last year, the dollar has risen 13 percent against major foreign currencies after adjusting for inflation, according to Federal Reserve data. Foreign holdings of Treasury bills rose by $456 billion in 2008.

“It’s a huge safe haven effect,” said William R. Cline, a senior fellow at the Peterson Institute for International Economics in Washington. “The basic assumption that people are making is that the U.S. government will never default on its debt.”

As the dominant flavor of money used in business worldwide, the dollar has once again been affirmed as the global reserve currency.

Only last year, some analysts said that as the American economy sagged, foreign central banks would be reluctant to sink national savings into the dollar. That has been soundly debunked.

In ordinary times, the rise of the dollar would provoke American worries that it would crimp exports by making goods more expensive on world markets. But for American policy makers, what matters now is attracting enough buyers of American debt to finance the rescue plans, and if the dollar must rise along the way, that is a cost worth paying.

“The fact that we can still borrow at lower interest rates is saving us from much more severe adjustments,” Mr. Rogoff said. “We’re really still staring down an abyss.”

Julia Werdigier contributed reporting.

This was annualization for 009 of last quarter of 008. but the Great Recession is gathering momentum and will end up be even worse than that. Germany and Italy will be whacked. The UK is spiralling down the drain, Starbucks top asshole sez.  Steinbrueck said Germany would do wot it takes to keep Ireland in the euro. Ukraine and Eastern Europe hang on a thread before financial ruin strikes and pulls Austria with them into the abyss. Wall Street and the City days are gone. They were the Twin Towers of global finance. A new world has opened up, so forget about your bad banks with our good money. You bankers are the only ones that should be fired. If you say it’s socialism, then let the socialists do it. Nationalization will have to mean socialization. We have to make’em pay. But this means keeping up the temperature in the streets and focus the minds. We have to make’em pay. Not only because it’s moral and it’s our right. But because it is a major demand solution to a major demand crisis. Give money and power back to the people. They’ll spend it and make it work much better than Madoff and the dumbsters that assisted him could ever do. Since GreatRecession endorses MayDay, consider the following exclusive preview this blog’s small contribution to the ongoing generalized agitation vs business and political élites in Europe, America, Asia.
ciao & solidarity vs precarity!

****MAYDAY 2009****

To All Those Who Fight 4: Anarchy, Autonomy, Ecology, Queerness

To all media activists, creative workers, radical artists, union
organizers, immigrant and precarious youth

In 2009, as millions are made unemployed by stupidity and greed, we
call onto all insurgent people and networks out there to unite on the
1st of May for a global MAYDAY against financial capitalism and state
repression, and for social redistribution and self-emancipation.

MAYDAY, MAYDAY, MAYDAY, THE FIRST OF MAY WE’LL MAKE U PAY!

YOU, the financial and political élites, we’ll make YOU pay for your crisis.

The economic and moral collapse of capitalism is for all to see. But it’s us who’s paying for the crisis with our money and jobs. They’re robbing us blind! States are throwing trillions at bankers, while jobs, wages, incomes, services are savagely cut, and millions are thrown into poverty.

We can fight and reverse this process. The Great Recession, the biggest crisis of capitalism in 80 years, opens up opportunities for social conflict and radical transformation.

We the Precarious, We the Unemployed, We the Immigrants, We the Antiracist, We the Antiauthoritarians, we are already fighting together from Athens to Reykjavik, from Capetown to Gaza, from Los Angeles to Buenos Aires, from Melbourne to Tokyo, from Shanghai to Mumbai, and across all seas and states where migrants risk their lives and freedom, in all the cities where dissident and discriminated people are fighting for social equality, autonomous culture, a better life.

Let’s unite in an ideal world brotherhood all our actions and demonstrations on the 1st of may in all the cities large and small around the globe. Let’s make our states and corporations know that at least on that day we are ONE against their capitalist crisis that threatens us all.

Let’s make’em pay on the 1st of May (and of course in the coming months in London, Berlin, Strasbourg, and in all the demos, strikes, riots across the planet).

We’ll try to do our bit. Let’s link our networks and associations for a common creative and rageful celebration of the global day of the exploited and the excluded. Let us know on movement lists that you
care about a common mayday. Maybe you thought of this already!

euromayday network
www.euromayday.org
MayDay? for us, it’s a pink, black, red, green thing…

(!new! check out this:
http://zoescope.wordpress.com/2008/12/22/comparing-usa-outlay)

Capitalism is in crisis. Neoliberalism is dead. Neoconservatism is deader.

We are in the Great Recession, the biggest slump since the Great Depression. And 2009 will see many more us unemployed and our wages slashed.

America, Europe, China, Russia, all the regions of the world are reeling from the consequences of the financial tsunami. The Zero Interest Rate is the last bastion of business-as-usual capitalism. Massive inflation will come next, as Central Banks will print money and buy bonds and assets to avoid deflation.

This situation presents ample opportunities for radicals of all stripes to put forward new forms of conflict, political organization and social relations, but the possibility of an authoritarian solution looms just as large, exploiting the fear and uncertainty of the millions who will be laid off, or live in the shadow knowing they could be next.

This blog comes from people that predicted the oncoming of a recession of historical proportions as early as 2004 and wanna share their knowledge of macroeconomics, political economy, and the riot sciences with people at large, starting from women, youth, immigrants, and including students, activists, unionists, free-thinkers, rabble-rousers. One thing: we might be lefties, libertarian marxians, pink radicals, green hacktivists or what have you, but we certainly are not dogmatic.

We wanna look at the chaotically unfolding economic, social, geopolitical reality with a critical mind which makes use of the tools of radical social theory and keynesian-kaleckian macroeconomics.

We wanna know how things happen for, to, and by movements. We wanna describe and discuss how insurgent strata affect socioeconomic reality and determine the redistribution from capital to labor, from state to multitude, from investment bankers to office temps.

So we’ll write, explain, report on the crisis and its consequences, while trying to keep it entertaining, and expect that you do the same. Let’s get the facts straight, keep the theory grounded, and start building in the cracks exposed by the Great Recession.