News of the New Depression is slowly spreading.

If you're at all familiar with Michael Fox (the columnist, not the actor), and you're trying to decide if the current economic crisis is a recession or a full blown depression, he certainly makes it hard to be optimistic. Back in November, Mr. Fox reported that the New Depression had already begun. In February, he reported that it had entered Phase Two, and that it had gone global.

Deniers may or may not have paid Mr. Fox much attention, if any at all. But now news of just how bad our current economic crisis really is is starting to bleed into the rest of the Blogosphere. Salon.com's Andrew Leonard writes:

Most economists are no longer debating whether there will be a recession in 2008. Now, they're arguing over when the recession started -- was it last November, or December? -- and how bad it's likely to get. While they bicker, however, a far more terrifying economic specter from the distant past has sent a chill through the infosphere.

"We have not seen a nationwide decline in housing like this since the Great Depression," said the CEO of Wells Fargo late last year. "It is now clear that the U.S. and global financial markets are experiencing their worst financial crisis since the Great Depression," wrote economist Nouriel Roubini last week.

What's kept things from completely collapsing is the hardcore denial by those in power that anything is even wrong. The children running the Federal Reserve "reason" that if they can hold off all public acknowledgment that there is a crisis, and that allowing the "free" market to run wild was the cause, then the problem doesn't exist. And if the problem doesn't exist because no one admits there is one, then the "reasoning" goes that when the next administration comes in and has to tell the public the truth, blame can then be shifted to that bunch. Because, after all, the Depression "didn't exist" until the new folk in charge began talking about it.

Except it does exist, and it shan't be long before even the lazy and all-too-often complicit corporate media are forced to admit it. The independent media has already belatedly come to terms with the fact of the economic crisis. Matthew Rothschild of The Progressive wrote yesterday about the growing problem of looting other people's homes for metals such as copper and steel. People are getting so desperate, they're ignoring things such as televisions and stereos. Guard your plumbing jealously, ladies and gentlemen. That's what robbers are really after in today's Great Depression.

What's that? You're still not convinced? Let's read more from Mr. Leonard.

In 1933, 24 percent of the workforce was unemployed. In February 2008, according to the Bureau of Labor Statistics, the U.S. unemployment rate was 4.8 percent (though there are reasons to believe that number significantly underestimates the true picture). Between 1929 and 1933, U.S. GDP growth declined by around 30 percent, the stock market lost almost 90 percent of its value, and a whopping 40 percent of the nation's banks failed. In the fourth quarter of 2007, GDP growth registered an 0.6 gain. While stocks are down over the last year and a half, there's still no consensus about whether we're living through a "correction" or a full-scale bear market. And even though scores of mortgage lenders have declared bankruptcy in the last year, both the real banking system and the so-called shadow banking system of generally unregulated investment banks and hedge funds are still afloat, thanks in large part to Federal Reserve chairman Ben Bernanke's dogged determination to ensure that if economic disaster does strike, it won't be because the Fed failed to pump enough liquidity into the system (an error that conservative economists are convinced helped cause the first Great Depression).

Now let's read some portions of Mike Fox's report from last November:

The Chinese had begun a sell-off of their US securities. They have dollars held by their government and, separately by their treasury (like the Fed).

Today, that entity has made clear that they will be unloading some $400 billion, which they already began in August (according to the China Daily, they sold off $9 billion - without buying any new debt in that month alone) in an attempt to divest of American Government securities. (They still hold over a trillion dollars of, well, other dollars, stock, corporate paper, etc)

The Japanese, not to be outdone, sold off some $24 billion in US treasuries in August.

Today, GM posted a loss of $40 billion in the 3rd quarter, because they had so much anticipated income from anticipated tax credits that they had opted to show as possible income FOR THREE YEARS in order to minimize the appearances of real losses, that they now had to suck it up and stick it all on the balance sheet for this one quarter, even though, at selling cars, they made a profit in that quarter! Can you wrap your mind around LOSING 40 BILLION DOLLARS IN 3 MONTHS? There are many nations that don't have that number for a GDP, annually. This is America's great manufacturing giant. And, as they used to say, what's good for GM is Good for America.

So, America, let's just all write-down our losses in the third quarter and move on, shall we?

Today, Washington Mutual (the one hitherto considered clean), got nabbed on CRIMINAL charges by Andrew Cuomo, Attorney General of NY for their mortgages (specifically for defrauding Freddie Mac and Fannie Mae with bundled mortgages).

Today, the Europeans (as I pointed out in my January 07 letter, not published on SC - everyone else thought they were safe) are suffering too. BMW and LVMH both took large hits on their stock values, as they realize that all that entry-level luxe crap - that foolish Americans were mortgaging the floorboards to buy - will no longer sell (3-series BMWs are where the money is, but that market just slammed shut, similarly Louis Vuitton, which has opened dozens of mall stores to sell items that used to be exclusive, may as well close those doors, because the market will revert to the rarified air it used to breathe, and all those middle class gals who've been buying $1200 purses will do so no more, because you can't mortgage a house after it's been foreclosed.

Remember, this was back in November, before the bailout of Bear Stearns. Now let's take a look at Mr. Fox's reports from February:

Egg, a British online bank, said it would cancel the credit cards of 161,000 customers it deemed too risky. The cards will stop working in March. The news provoked angry reactions from some credit-card holders who claimed their credit records were spotless. Egg was acquired by Citigroup last year, before the deterioration in money markets. [From The Economist, Feb. 7, 2008]

Citigroup recently found itself short of cash-on-hand, so they sold another 5% of the company to the UAE. That wasn’t enough, evidently, so now they’re tightening up on lending. First was the mortgage sector, now the consumer credit. Dropping 161,000 credit cards in Britain would work out to dropping over 800,000 were they to do likewise in the United States. Only, this is one small subsidiary bank in Great Britain, and this is only the beginning.

Those credit cards they’ve been “pre-approving” and issuing to anyone who’d sign up will soon be gone. Without the credit card - mad consumerism of the last ten years, store closures will be drastic, and accompanying unemployment will go without saying. Meanwhile, the government is printing more money to keep the spending spree going, even if the banks can no longer underwrite the party. Still, the Fed keeps lowering the interest rates to encourage borrowing – if only anyone were lending! Yet as the cost of money drops for the banks, credit card interest rates and fees are skyrocketing.

And:

Okay, people, if the foreclosure rate, the banks closing perfectly good credit card accounts, or the loss of thousands of jobs a month hasn’t convinced you, this is Earthshaking. Because, as depressed as the real estate market has been, and as volatile as the stock market has been, bonds have been the conservative investment of choice for large investment fund managers and long-term individual investors. Secretly, who hasn’t aspired to “retire and clip coupons?” (Note to the young’uns: tax-free municipal bonds used to have perforations like a sheet of stamps, and each coupon represented a monthly or quarterly interest payment that was like tax-free cash, thus the expression amongst the wealthy, “clipping coupons”; it has nothing to do with 20¢ off a box of Tide). Now this:

UBS AG won't buy auction-rate securities that fail to attract enough bidders, joining a growing number of dealers stepping back from the $300 billion market, said a person with direct knowledge of the situation. The second-biggest underwriter of the securities, whose rates are reset periodically at auctions, notified its 8,200 U.S. brokers of the decision yesterday, said the person, who declined to be identified because the announcement wasn't publicly disclosed. Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Citigroup Inc. allowed auctions to fail...Bank of America Corp. estimated in a report that 80 percent of all auctions of bonds sold by cities, hospitals and student loan agencies were unsuccessful yesterday.

That may mean as much as $20 billion of bonds failed to find buyers, based on the $15 billion to $25 billion of auction-rate bonds scheduled for bidding daily…Auctions are failing as confidence in the creditworthiness of insurers backing the securities wanes, and as loss-plagued banks…[Feb. 14 (Bloomberg)]

Yesterday, Warren Buffett, the billionaire head of Berkshire Hathaway Fund offered to personally shore-up the four companies that insure all bonds, and are at risk of having their own credit-worthiness downgraded (which would send a huge ripple of skittishness throughout the economy – a ripple, in my opinion, just waiting to happen). Mr. Bufett’s offer has been publicly rebuffed, and, yet, such bravado on the part of MBIA and Ambac isn’t making anyone feel the rock solid security they’re trying to convey. Everyone knows that when the defaults begin in bundled mortgage backed securities, they will not be able to come up with the $800 billion, and then, those holding more traditional bonds, those issued by municipalities and states, will be dependent upon the tax income of those entities, which are dwindling as the home foreclosure rate goes up.

And the Swiss are having none of it. So, yesterday, New York City's Health and Hospitals Corp.’s auction of $64.9 million failed. Likewise, the Port Authority (of New York and New Jersey), saw its auction debt soar to 20 percent on Feb. 12 from 4.3 percent a week ago.

Meanwhile, the CFO of MBIA, Charles Chaplin (no kidding), has taken his show on the road, telling everyone who’ll listen that everything’s okay, nothing to see over here, have faith. Earlier this week he announced that they had enough to cover any degree of failure that may occur, and today, he’ll be testifying before Congress that “A bailout of highly credit-worthy companies, who, at most, are at risk of losing the very highest ratings available, is misplaced.” But no disclosure of details has been made. So far, this roadshow is all talk, and I, for one would prefer to see the balance sheets. As the bonds themselves aren’t selling, the interest rate will have to go up to entice buyers. But that just increases the risk for the insurers. The problem snowballs.

By the way, did anyone notice that platinum hit $2,000./ounce last night? No wonder.

Convinced yet? If not, don't worry. Sooner or later, the corporate media shall have to acknowledge that the New Depression exists. The only question is whether it will happen under a Democratic or Republican regime. If it's the former, look for blame to be laid on the Democrats. If it's the latter, it'll be those pesky regulations that take the blame, and the resulting wave of further deregulation shall inevitably lead to a meltdown that makes the First Great Depression look like a day at the beach by comparison.

No solutions to the economic crisis in this presidential race.

In a recent EENR entry I posted about Paul Krugman's blog entry regarding the real reason regulators have failed to reign in the excesses of Wall Street. Essentially, the failure was deliberate -- an effort to systematically remove any and all regulation. I guess causing one Great Depression wasn't enough to wake up the laissez-faire jerks into realizing that the days of unrestricted greed should have remained dead and buried; they've been working like hell to create another while making their money, and they appear to have succeeded.

But I digress. In today's New York Times column, Professor Krugman expands upon this failure to reign in Wall Street by bringing the discussion to the presidential election.

I don’t expect much from John McCain, who has both admitted not knowing much about economics and denied having ever said that. Anyway, lately he’s been busy demonstrating that he doesn’t know much about the Middle East, either.

Yet the McCain campaign’s silence on the financial crisis has disappointed even my low expectations.

And when Mr. McCain’s economic advisers do speak up about the economy’s problems, they don’t inspire confidence. For example, last week one McCain economic adviser — Kevin Hassett, the co-author of “Dow 36,000” — insisted that everything would have been fine if state and local governments hadn’t tried to limit urban sprawl. Honest.

If only Professor Krugman knew just how much lower a McCain dictatorship would sink things. But the Democratic prima donnas vying for their political party's nomination don't fare any better under Krugman's scalpel.

On the Democratic side, it’s somewhat disappointing that Barack Obama, whose campaign has understandably made a point of contrasting his early opposition to the Iraq war with Hillary Clinton’s initial support, has tried to score a twofer by suggesting that the war, in addition to all its other costs, is responsible for our economic troubles.

The war is indeed a grotesque waste of resources, which will place huge long-run burdens on the American public. But it’s just wrong to blame the war for our current economic mess: in the short run, wartime spending actually stimulates the economy. Remember, the lowest unemployment rate America has experienced over the last half-century came at the height of the Vietnam War.

Hillary Clinton has not, as far as I can tell, made any comparably problematic economic claims. But she, like Mr. Obama, has been disappointingly quiet about the key issue: the need to reform our out-of-control financial system.

Professor Krugman points out how the country came out of the Great Depression with a strong social safety net, which, given the monumental backlash against laissez faire economics in the wake of the economic crisis, is no surprise. The government bailed out the banks, but only so long as those banks accepted regulation. This meant that the party was over for unrestricted greed.

But, as Krugman goes on to explain, all that reform slowly deteriorated over time, and now we're right back where we were in 1929 -- and we're rapidly approaching 1930-level proportions as the current financial meltdown steadily approaches its peak. In short, no thanks to the Bush regime's continuation of deregulation of the financial markets (which began in earnest under Reagan and has continued unbroken), we're monumentally screwed. Krugman writes:

Now, the shadow banking system is facing the 21st-century equivalent of the wave of bank runs that swept America in the early 1930s. And the government is rushing in to help, with hundreds of billions from the Federal Reserve, and hundreds of billions more from government-sponsored institutions like Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

Given the risks to the economy if the financial system melts down, this rescue mission is justified. But you don’t have to be an economic radical, or even a vocal reformer like Representative Barney Frank, the chairman of the House Financial Services Committee, to see that what’s happening now is the quid without the quo.

Last week Robert Rubin, the former Treasury secretary, declared that Mr. Frank is right about the need for expanded regulation. Mr. Rubin put it clearly: If Wall Street companies can count on being rescued like banks, then they need to be regulated like banks.

As the professor points out, Clinton and Obama have topped the other candidates from both major political parties for corporate campaign contributions (one example, in terms of corporate money from the health insurance and pharmaceutical industries, may be found here).

In short, Wall Street has not only destroyed the economy with happy assistance from the Bush-Cheney regime, it has ensured that no matter who becomes president (or dictator, if McCain manages to steal this one), nothing will be done to clean up Wall Street's mess.