News stories on the economy are full of many subjects that would have seemed strange to American readers just a few years ago – European banking, the developing world, clever financial instruments, and so on.  There is one word that is strangely absent, however – “Recovery”.  This once prominent term has apparently been banished from reporting, possibly because no one believes that there is such a thing anymore.

That’s not to say there won’t be a Recovery, but as is typical of a credit-meltdown fueled Depression there has to be a Restructuring first.  Money and labor and all the other resources you can name have to start going into areas that are going to be productive in the new economy that replaces the one that crashed and burned back in 2008.  Barataria has led some discussion on how jobs appear to be shifting rapidly, a sign of Restructuring, but there are some fascinating things happening that show how much our world is changing.

Some of those stories come from the world of oil, the mysterious black gunk that fuels the world.

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Since October, most of the financial news has been about Europe and the potential for a global meltdown.  The credit squeeze resulting from this crisis has become painful enough to demand serious action, which in global terms means our own Federal Reserve taking the lead.  Very little has changed since this crisis began upwards of two years ago, except the brick wall is approaching rapidly.

But what about the other big economic problem, unemployment?  Very little has been written about jobs in the US since it appeared in September that something like a turnaround has occurred.  Unemployment Initial Claims were 390k-400k each week, seasonally adjusted, through October and November with little change.  That’s a net loss of 1.7M jobs per month before we add in the total creation to arrive at the total employment picture.

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Back in 2009, there was a lot of talk about the “moral hazard” of bailing out big financial institutions.  The concern was that, once bailed out, the banks would learn that no matter what happened the Federal Reserve and government would be there to cover all of their bad loans – and thus make more.   In short, providing insurance for default makes it more likely that it will occur.

The term is something like a pop psychology term for the system of socialized risk that defines our entire financial system.

With the benefit of hindsight we can now ask whether or not the bad loans stopped after the big bailouts of 2008.  Did large financial institutions change their behavior and start to behave?  The answer, increasingly, appears to be no, there has been no substantial change in lending behavior since the bailout.  The “moral hazard” appears to be very real – big bets on big risks have continued without much change.  And that’s not only why there is a new crisis but also why serious policy changes must take place.

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