Showdown on growth, by gimleteye

Depending on your point of view, it’s either a slowdown or showdown that accounts for the decision by the Federal Reserve to cut the benchmark interest rate by 50 basis points yesterday.

The mainstream media reported the depth of the cut as a “surprise”, following the same script that appeared to follow on nightly news: that consumers will be encouraged by the interest rate move to keep the merchandise moving.

Surprise? Come on. The news has been filled with bated breath about the "need" to cut interest rates. There's Jim Cramer ranting and raving about it. It's been a chorus since mid-summer, when the crisis in world credit markets finally revealed itself through the tip of the iceberg: subprime mortgages turned rancid.

So it wasn’t a surprise so much as a foregone conclusion that “something had to be done” about the worst crisis in housing and construction in many decades.

What the Fed knows, is that job losses in the economy have only just started to accumulate and that news in the next few months will be grimmer than it has been to date.

So it is with a certain amount of frustration to note that the business of growth-at-any-cost continues unabated: rock miners waving signs in Doral, dismissing the conclusions of a federal judge about violations of federal law by the US Army Corps of Engineers, county commissioners poised to consider expansion of the CSX rail to meet the needs of politically influential land speculators outside the Urban Development Boundary, and FPL planning two new nuclear reactors at Turkey Point with infernal schemes for “air cooling” on a new, multi-hundred acre building pad built twenty feet into the air.

The economist who seems to have the best sense of what is going on, is NYU economist Nouriel Roubini. In his blog today, Roubini writes:

“… today we have a credit crunch – on top of a liquidity crunch – that is caused by the fundamental insolvencies and distress of many over-leveraged households, mortgage lenders, home builders, some financial institutions and even parts of the corporate sector. You cannot resolve fundamental insolvencies with monetary policy injections alone. Those insolvencies and financial distress will take time to work out and will imply tight financial and credit conditions regardless of what the Fed does.”

That certainly seems to be the case in Miami, where condo foreclosures are about to blossom like frangipani in February and inventories are astonishlngly high.

It would seem to be a good time to pause, and to reconsider the growth policies that have brought us to such a point in time. There is no doubt that re-priming the growth machine pump is exactly what the economic elite wants to do.

But the overhang of massive debt is stronger than any logic of homebuilders, engineers, and their lobbyists.

So as you contemplate a time-out, you will likely be doing so from the comfort of your car on your commute to work.

That brings me to the other news of the day, from the Texas Transportation Institute that released its conclusions (an annual event) that traffic has gotten worse. No kidding.

The report concludes that we are spending about a work week per year, in our cars, in delays: for the Miami area, that sounds under-reported by at least a third.

At any rate, arguing about how much traffic there is, is like counting angels on the head of a pin: until there is fundamental reform of the politics of growth in Florida, we are underwater.

What's worse is that people really believe there is nothing we can do about it: about the traffic, about bad government and politics of growth. That is not how democracy is supposed to work. It is closer to tyranny.