Sometimes the lines connecting dots are so overwhelmingly bold and darkly obvious that, despite knowing better, I find myself concentrating too much on the dots and not the lines. At any rate, I did a segment for the Alonya Show on RtTV this afternoon that covered four dots of financial dislocation. As I left the studio in a cab, a fifth dot appeared:

In Los Angeles, traveling eastward on Santa Monica Boulevard, you pass the mansion-laden enclave of Beverly Hills on your left, and a less ornate stretch of police and office buildings on your right. While we were driving, the driver revealed a mark of inequality, seemingly secret and trivial, and yet so significant.

“See that,” he gestured to a sprawling, perfectly manicured estate. “People that order a taxi from there to the airport, pay a flat rate of $30.  But over there,” he points to my right, “you’re on the meter. Forty-five bucks.”  

He shook his head, “They make 100 times more in those homes than what other people make. You tell me why the people with all the money get the cheaper fare.”

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With November’s election in the United States fast approaching, the Republican candidates seeking to challenge President Barack Obama claim that his policies have done nothing to support recovery from the recession that he inherited in January 2009. If anything, they claim, his fiscal stimulus, the bank bailouts, and US Federal Reserve Chairman Ben Bernanke’s aggressive monetary policy made matters worse.

Obama’s Democratic defenders counter that his policies staved off a second Great Depression, and that the US economy has been steadily working its way out of a deep hole ever since. Middle-ground observers, meanwhile, typically conclude that one cannot settle the debate, because one cannot know what would have happened otherwise.

There is a good case to be made that government policies – while not strong enough to return the economy rapidly to health – did halt an accelerating economic decline. But the middle-ground observers are right that one cannot prove what would have happened otherwise. It is also true that it is rare for a government’s policies to have a major impact on the economy immediately.

But here is the remarkable thing: whether one listens to the Republicans, the Democrats, or the middle-ground observers, one gets the impression that economic statistics show no discernible improvement around the time that Obama took office. In fact, the reality could hardly be more different.

This is especially true if one looks at revised data, which show the US economy to have been in far worse shape in January 2009 than was reported at the time. In January 2009, the annualized growth rate in the second half of 2008 was officially estimated to have been -2.2%; but current figures reveal the contraction to have been much sharper – a horrendous -6.3%. This is the main reason why economic activity in 2009 and 2010 was so much lower than had been forecast – and why unemployment was so much ...

As President Obama’s re-election campaign heats up, there are several new accounts of his track record finding their way into print. One item for which he is undeservedly given credit is saving the country from a second Great Depression.

The political elites believe in the salvation from the second Great Depression myth with the same fervency as little kids believe in Santa Claus. And, it has just as much grounding in reality.

While the Obama Administration, working alongside Ben Bernanke at the Fed, deserves credit for preventing a financial meltdown, a second Great Depression was never in the cards. The first Great Depression was brought about not only from misguided policies at the onset of the financial crisis, but also from an inadequate policy response.

The spending associated with World War II ultimately got us out of the depression. There is nothing magical about spending on war; spending of the same magnitude on road, schools, hospitals or anything else also would have lifted out the economy out of the depression at any point after the initial collapse in 1929-1930.

The problem was the lack of the political will to spend in these areas, whereas there was plenty of political support for fighting the war after the attack at Pearl Harbor. The lesson from this period is that the United States could have gotten out of the Great ...

The decision by the Federal Reserve to reduce the interest rate and extend the duration for its dollar swap facility with the European Central Bank is at best a temporarily ameliorative measure that does not come close to addressing the fundamentals of the eurozone crisis.

The problem is that the markets lack confidence in the ability of heavily indebted countries, most important Italy at the moment, to be able to pay their debts. This creates a downward spiral where interest rates rise, making their budget situation more precarious, which in turn leads to higher interest rates.

The austerity conditions imposed by the troika (the European Central Bank, the European Union and the International Monetary Fund) as a condition of past support have made the situation worse. Cutbacks in spending and higher taxes have slowed growth. Slower growth reduces tax collections and raises payments for programs like unemployment insurance. It also leads to a higher ratio of debt to gross domestic product, since slower growth means a lower GDP.

The way out of this situation is for the ECB to temporarily guarantee a manageable interest rate for the heavily indebted countries. It also should aggressively pursue expansionary policies to support growth and ideally aim for a somewhat higher rate of inflation within the eurozone, which would gradually reduce the burden of the debt.

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Now he tells us. On Wednesday Federal Reserve Chairman Ben Bernanke referred to the nation’s unemployment rate as a “national crisis,” an obvious if depressing fact of life to the 25 million Americans who have been unsuccessfully attempting to find full-time employment.

But to finally hear those words from the man George W. Bush and Barack Obama both appointed to lead us out of the great recession is a bracing reminder of how markedly the policies of both those presidents have failed: “We’ve had close to 10 percent unemployment now for a number of years, and of the people who are unemployed, about 45 percent have been unemployed for six months or more,” Bernanke said. “This is unheard of.”

But why is Bernanke just now discovering this after having overseen the Fed’s purchase of trillions in toxic mortgage-backed securities from the too-big-to-fail banks that sacrificed people’s homes in a giant Ponzi scheme? Why did he throw all of that money at the banks without getting anything back in the way of relief for the people the bankers swindled? 

The housing meltdown, which has robbed Americans of a considerable portion of their net worth, has led to the continued depressed consumer confidence that is the prime cause of crisis-level unemployment. In another of his too-late-to-matter moments, Bernanke acknowledged that “strong housing policies to help the market recover” would “clearly be very useful,” but he failed to suggest any. 

Bernanke, along with then-New York Fed President Timothy Geithner, helped implement the Bush strategy of saving the banks in the hope that their rising tide would lift our little boats. That remained the strategy when President Obama rewarded Geithner for having saved AIG and Citigroup ...

You know what’s wrong with the American economy, Bucko? You, that’s what.

Yeah, yeah, it’s true that the reckless global gambling schemes of Wall Street bankers are what wrecked our economy — and, yes, Congress and the Federal Reserve have used trillions of our public dollars to bail out miscreant bankers, while ignoring the plight of people like you whose jobs, businesses, homes and middle-class incomes have been devastated by banker greed. And, sure, it’s also true that corporations are hoarding $2 trillion in cash and getting billions of dollars a year in subsidies from taxpayers like you, yet refusing to hire Americans or to make job-creating investments in our country.

But blah-blah-blah, Bucko, this does not excuse your refusal to do your duty as an American consumer. CEOs say that they won’t start hiring until you consumer slugs get out there and spend, spend, spend.

And don’t use the whiney excuse that you’re out of work or mired in debt — Federal Reserve Chairman Ben Bernanke says that he has looked at macro economic statistics and concluded that you’re just being irrationally negative about the health of our economy. “Households seem exceptionally cautious,” declared the perplexed Fed chairman recently, suggesting that your lack of confidence in the economy is a psychosis that’s fueling a larger depression. Yes, chimed in another Federal Reserve banker, “it’s hard to have a robust recovery when Americans are so dispirited.”

So, hey — perk up, America! Stop waiting on Wall Street, Washington and corporate chieftains to do something. Forget economic reality — just pull out your credit cards, put on a smile, and march to the mall.

Wow, I can’t tell you how much more confidence I have in our economic future knowing that America’s corporate and political leaders are so insightful and in-touch. How about ...

We've just learned about the Federal Reserve's extraordinary secret bailout of the country's big banks. We now know that the TARP bailout program was only the tip of the iceberg, and that financial institutions received a total of $1.2 trillion in loans and other funds while the rest of the country was left to struggle for economic survival.

We also know that, despite all that "we got our money back" rhetoric, these loans represent a cash giveaway to the banks that totals up to tens of billions of dollars - while homeowners and student loan borrowers continue to struggle.

Here's what we now know about this secret bailout, thanks to a Bloomberg report, along with what we already knew - and what we still don't know:

We now know that the 10 biggest banks in America received $669 billion in emergency loans from the Fed.

We already knew that the same 10 banks now own 77% of the country's banking assets, more than before the crisis, making them even more "too big to fail" than ever.

We now know that the low interest rates they received were, in fact, a massive transfusion of cash - courtesy of the American taxpayer -just like TARP. Whenever Tim Geithner or Ben Bernanke says "We've got all our money back," they're distracting you from the real point. These banks received short-term loans at 1.1%, instead of the prevailing 3.8%.

That means each bank received a gift of $27 million each - tax-free, no less - for every billion they received under that particular program.

We already knew that the banks have not been asked to write down any of the principal on underwater homes, even though their industry spent decades persuading homeowners that real estate was a foolproof investment - and even though they often hired adjusters who inflated the estimated value of those homes.

We now know that the American taxpayer was asked to rescue failing businesses without ...