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Government Policy Caused America's Unemployment Crisis
The unemployment rate has risen again for the the first time in 4 months. I predicted a growing, long-term unemployment problem last year.
Indeed, even after the
government plays with the numbers to make them look better (using
inaccurate birth-death models and other tricks-of-the-trade), this is
how the current jobs downturn compares with other post-WWII recessions:
In fact, as demonstrated below, the government's actions have directly contributed to the rising tide of unemployment.
The Government Has Encouraged the Offshoring of American Jobs for More Than 50 Years
President Eisenhower re-wrote the tax laws so that they would favor investment abroad. President Kennedy railed against
tax provisions that "consistently favor United States private
investment abroad compared with investment in our own economy", but
nothing has changed under either Democratic or Republican
administrations.
For the last 50-plus years, the tax benefits to American companies making things abroad has encouraged jobs to move out of the U.S.
The Government Has Encouraged Mergers
The government has actively encouraged mergers, which destroy jobs.
For example, the Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry.
This is nothing new.
Citigroup's
former chief executive says that when Citigroup was formed in 1998
out of the merger of banking and insurance giants, Alan Greenspan told him, “I have nothing against size. It doesn’t bother me at all”.
And the government has actively encouraged the big banks to grow into mega-banks.
The Government Has Let Unemployment Rise in an Attempt to Fight Inflation
As I noted last year:
The Federal Reserve is mandated by law to maximize employment. The relevant statute states:
The
Board of Governors of the Federal Reserve System and the Federal Open
Market Committee shall maintain long run growth of the monetary and
credit aggregates commensurate with the economy's long run potential to
increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.***
The Fed could have stemmed the unemployment crisis by demanding that banks lend more as a condition to the various government assistance programs, but Mr. Bernanke failed to do so.Ryan Grim argues that the Fed might have broken the law by letting unemployment rise in order to keep inflation low:
The
Fed is mandated by law to maximize employment, but focuses on
inflation -- and "expected inflation" -- at the expense of job
creation. At its most recent meeting, board members bluntly stated that they feared banks might increase lending, which they worried could lead to inflation.
Board
members expressed concern "that banks might seek to reduce appreciably
their excess reserves as the economy improves by purchasing securities
or by easing credit standards and expanding their lending
substantially. Such a development, if not offset by Federal Reserve
actions, could give additional impetus to spending and, potentially, to
actual and expected inflation." That summary was spotted by Naked Capitalism and is included in a summary of the minutes of the most recent meeting...
Suffering
high unemployment in order to keep inflation low cuts against the
Fed's legal mandate. Or, to put it more bluntly, it may be illegal.In fact, the unemployment situation is getting worse, and many leading economists say that - under Mr. Bernanke's leadership - America is suffering a permanent destruction of jobs.
For example, JPMorgan Chase’s Chief Economist Bruce Kasman told Bloomberg:
[We've had a] permanent destruction of hundreds of thousands of jobs in industries from housing to finance.The chief economists for Wells Fargo Securities, John Silvia, says:
Companies
“really have diminished their willingness to hire labor for any
production level,” Silvia said. “It’s really a strategic change,” where
companies will be keeping fewer employees for any particular level of
sales, in good times and bad, he said.And former Merrill Lynch chief economist David Rosenberg writes:
The
number of people not on temporary layoff surged 220,000 in August and
the level continues to reach new highs, now at 8.1 million. This
accounts for 53.9% of the unemployed — again a record high — and this is
a proxy for permanent job loss, in other words, these jobs are not
coming back. Against that backdrop, the number of people who have been
looking for a job for at least six months with no success rose a further
half-percent in August, to stand at 5 million — the long-term
unemployed now represent a record 33% of the total pool of joblessness.
And see this.
In fact, the Fed intentionally curbed lending by banks in an attempt to stem inflation, without addressing whether public banks could provide credit.
The Government Has Allowed Wealth to be Concentrated in Fewer and Fewer Hands
As I pointed out a year ago:
A new report
by University of California, Berkeley economics professor Emmanuel
Saez concludes that income inequality in the United States is at an
all-time high, surpassing even levels seen during the Great Depression.The report shows that:
- Income inequality is worse than it has been since at least 1917
- "The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007"
- "In the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth."
As others have pointed out, the average wage of Americans, adjusting for inflation, is lower than it was in the 1970s. The minimum wage, adjusting for inflation, is lower than it was in the 1950s. See this. On the other hand, billionaires have never had it better.
As I wrote in September:
The
economy is like a poker game . . . it is human nature to want to get
all of the chips, but - if one person does get all of the chips - the
game ends.
In other words, the game of capitalism only
continues as long as everyone has some money to play with. If the
government and corporations take everyone's money, the game ends.
The fed and Treasury are not
giving more chips to those who need them: the American consumer.
Instead, they are giving chips to the 800-pound gorillas at the poker
table, such as Wall Street investment banks. Indeed, a good chunk of the
money used by surviving mammoth players to buy the failing behemoths
actually comes from the Fed...This is not a
question of big government versus small government, or republican
versus democrat. It is not even a question of Keynes versus Friedman
(two influential, competing economic thinkers).It is a question of focusing any government funding which is made
to the majority of poker players - instead of the titans of finance -
so that the game can continue. If the hundreds of billions or trillions
spent on bailouts had instead been given to ease the burden of
consumers, we would have already recovered from the financial crisis.
I noted in April:
FDR’s Fed chairman Marriner S. Eccles explained:
As
in a poker game where the chips were concentrated in fewer and fewer
hands, the other fellows could stay in the game only by borrowing. When
their credit ran out, the game stopped.***
When most people lose their poker chips - and the game is set up so that only those with the most chips get more - free market capitalism is destroyed, as the "too big to fails" crowd out everyone else.
And the economy as
a whole is destroyed. Remember, consumer spending accounts for the
lion's share of economic activity. If most consumers are out of chips,
the economy slumps.
And unemployment soars.
As former Secretary of Labor Robert Reich wrote yesterday:
Where have all the economic gains gone? Mostly to the top.
***
It’s no coincidence that the last time income was this concentrated was
in 1928. I do not mean to suggest that such astonishing
consolidations of income at the top directly cause sharp economic
declines. The connection is more subtle.
The rich spend a
much smaller proportion of their incomes than the rest of us. So when
they get a disproportionate share of total income, the economy is
robbed of the demand it needs to keep growing and creating jobs.
What’s more, the rich don’t necessarily invest their earnings and
savings in the American economy; they send them anywhere around the
globe where they’ll summon the highest returns — sometimes that’s here,
but often it’s the Cayman Islands, China or elsewhere. The rich also
put their money into assets most likely to attract other big investors
(commodities, stocks, dot-coms or real estate), which can become wildly
inflated as a result.
***
THE Great Depression and
its aftermath demonstrate that there is only one way back to full
recovery: through more widely shared prosperity.
***
And
as America’s middle class shared more of the economy’s gains, it was
able to buy more of the goods and services the economy could provide.
The result: rapid growth and more jobs. By contrast, little has been
done since 2008 to widen the circle of prosperity.
So through it's policies encouraging the offshoring of jobs, mergers,
decreasing of economic activity to fight inflation, allowing wealth to
be concentrated in fewer and fewer hands, and other policy mistakes (like pretending that there is a "jobless recovery"), the government has channeled water away from U.S. jobs, creating a worsening unemployment drought.
Note
for Keynesians: As I have repeatedly explained, the government hasn't
spent money on the right kind of things to stimulate employment. See this and this.
Note for followers of Austrian economic theory: I have repeatedly
railed against the government artificially propping up asset prices and
leverage, so that malinvestments can't be cleared, and we we have a
stagnant, zombie economy which prevents job creation.
- advertisements -
Mis-guided Altruism ( religion.), mis-guided greed ( corporate profit) . No central policy that puts a ---realistic-- view on official public policy.
Every piece of data on the economy is manipulated and has been for the past few decades. If we are to turn the corner we need to see some honest unvarnished data first without which we are like a car without the steering wheel
one of the areas that the Banks could aid in lending is non-owner occupied housing. Yet this is the area that has been restricted by Fannie and Freddie to 4 units total. Banks are holding back non-owner units from the market and they are restricting the numbers of buyers. I know this is an attempt to prop up the housing market prices and to prevent competition but it is the opposite of the goals of the individual. It will not change for a while either, no lobbyist.
Kicking the damned illegals out of the country would increase jobs, but it would increase real private sector wages even more. Any president who refuses to enforce the law should be dragged off to prison in chains.
Well now. That should put us right back on the track of prosperity. Any more ideas you have that you've been holding back?
There seems to be a big gap in connecting the logic dots...
First, and I'd be the last one to give the rich elitists any sort of cover/protection, but really, what could they possibly think would happen when they've gotten it "all?" Does anyone really think that that wouldn't be the same as committing suicide?
Many quasi-rich are sinking just like the rest of us. Yes, there are a FEW who manage to stuff their pockets with yet more wealth as they try to escape through the bogs of the economic climate, but they'll end up sinking.
I have yet to hear people really get past some of these superficial blame games, to take the questions to deeper levels. What is the endgame? What do people really think is probable? Again, remember that in nearly every case in history extreme wealth imbalances have resulted in some pretty nasty times for those with the wealth (yeah, some of the greedy bastards escaped, but on the whole the class doesn't meet with a good outcome). How about we pretend that there's no inequality and no "bad guys" and we just continue playing the game, what then will the endgame be? Keep in mind that with growth being the fundamental driver, that continued depletion of resources is expected. What does everyone think will be the result? Do you think that we'll all just get along until the resources that maintain our growth rates disappear?
Face it, Reagan, Clinton, Bush (both) and Obama (and ALL others before them) were/is a product of their times. They were in "power" to continue the growth paradigm.
Neither all turning libertarian or holding hands and singing kumbaya is going to do a damn thing, except incite blame and hatred for the other side (just as happening now- the rich are programming their minions to encite us against each other, it's their age old ploy, and usually plays with some effect with the nationalist types).
We can blame government, but in reality this outcome would have happened, that it's growth that has landed us here; with or without government we'd meet the same end, the only matter for debate is that of the timeframe.
m,seer
the structure we see today was developed and constructed
according to a speculation or projection, you have been observing
and criticizing, mindless growth. we could be looking at an entirely
different world had sanity dawned on us previously. remember?
government is, functionally, a recursive restrictive. that function
would have been a force in the right direction but capture happens
and integration and insight are hard so , here we are.
even when the will of a people has tired this financial system
demands more and if they are unable to meet those demands,
fantastic, some other party will, until the system runs out of
willing participants, then comes enforcement. ... ..
you know, i know you know. but it is by design and rule of
law, man made, not inevitable.
there is one faction that has a unifying principle, the other
faction doesn't possess that. they have and have always had
nothing but kumbaya, light. now they need something more.
not fatalism and violence. what was it? "reason and accord".
a balance of "intellect and intelligence".
We always were confused that by doing what was right will be, in the end, wrong.
As Dr. Albert Bartlett says, everything that we think is mother and apple pie is actually making our problems worse- and by problems that's over-consumption and over-population. For, if one were to really look at it, we've actually been very good to one another, on whole, otherwise there would have been no way that we'd have reached our current population levels: yes, the argument could be made that the elitists relied on bigger populations as labor forces.
I'm not a fatalist, I'm just trying to understand what there is to understand. But... because I am human I would kind of think that we'd be able to continue our species; if, however, it doesn't happen, then it doesn't happen- it'll only prove our inability to, perhaps, be less uncivilized toward one another? (not look to keep as many people alive for as long as possible; granted, people make money off of this, but nonetheless we have the result that we see). Personally, I don't see that there's any "solution." It's the ultimate conundrum I'm afraid.
off / on topic... speaking of kumbaya... musical break.
.
http://www.youtube.com/watch?v=89VR_lZehw4
The reason there is and will not be a rebound in employment is really quite simple. Its outsourcing, globalization, the internet, etc. The internet was just taking off in 2001 and to cover the massive outsourcing of mfg jobs, the govt start zirp and sub prime lending to create short term job growth in housing. Thats over for decades. Now we are faced with only 55% of the population working compared to 64% in 2000. China is exporting its unemployment to the US and there is absolutely nothing that can be done short of protectionism, a depression, or world war to stop the continuing and growing US unemployment/under employment problem. Public pensions and social security payments must be capped reflecting the new employment reality. Obama needs another vacation because he is so screwed. The US needs 11 million new net jobs to return to 64% of the population working. Thats impossible w/o trariffs which will kick off a depression and world war.
tempo, you are using the WORDs which must never be spoken: Tariff and protectionism.
Hate those words hate the idea for they lead to world wars and other bad things ..think of the children.
The simple fact is both are what we need to correct this mess.. along with rational energy production nukes, and natgas and our own oil and coal.
the china's of the world can develope their own markets..
alas Tariff and protectionism are bogey men to the elites of world finance and gov.
yes and the usa is exporting inflation to china, see keiser,
and the bankers are pocketing the ass ets and gearing up to
capture the credit spreads on both ends.
globalization, "what a country".
of slaves. after all, the system is based on greater/superior debt.
whatever that means? oh yea, that means fascism. control of
the political machinery that has access to the sovereign fiat treasuries.
gone global. new world chaos.
I think this article misses the number one reason the jobs market is difficult in the US - the Federal Government is simply too big. The Federal Government has been controling too large a percentage of the US economy since the 1960's. It's like a corporation with excessive overhead. This is the root cause of most of our problems. The only times we have had strong jobs markets since the 1960's are when we were excessively increasing the debt (1980's), or fueling bubbles (last 2 decades).
I know some other countries are doing better with similar percentages of overhead. But the other countries tend to spend the money on benefits for people rather than wasting it on excessive defense spending.
It's interesting that you put the blame on Ike, who changed the tax code to favor international investment. But the real problem here is that tax on domestic investments is too high, not the other way around.
And you mention that Kennedy "railed against it". There was no need for Kennedy to rail against it. He and Johnson had a majority of their own party in both houses, so they could have changed it if they wanted to. They passed enough crap as it is. They were too busy coming up with excuses to invade Vietnam.
And what is Obama's solution? A 1% tax credit for companies that improve the ratio of foreign to domestic employees. This is a typical democrat solution to impose more controls on the economy without addressing the root cause of the problem.
Other than that, good article.
Gee, more of the usual ignorant libertarian nonsense.
Dude, federal tax revenue has been more or less constant at 19.5%... Germany has more than DOUBLE. But Germany has a very strong exporting economy, a lower unemployement, no real estate bubble, a constantly high savings rate and a much lower private and public debt.
Try explaining that before you keep spouting the usual nonsense about the size of the government.
The federal government is owned by private corporations, so it spends money on what benefits them rather than what benefits the people. That's a much more important problem than whatever simplistic considerations about its size.
What matters is not the size of the public sector, but what it spends money on. For instance wasting trillions on useless wars didn't help.
0% Government doesn't work, 100% doesn't either. What's the optimum nobody knows (apart for political ideologues who base their simplistic reasoning on perfectly worthless assumptions such as anarcho-capitalists and communists). It's better to have a government who spends 40% on things that are beneficial to the people than one who wastes 20% on useless stuff.
JFK wanted us out of Vietnam. He also railed against the imperialists and their evil ways and was killed for it. JFK and Kruschev had been secretely corresponding with each other for years, had grown to trust each other and were about to end the "cold war"; in other words, world peace.
JFK was our last true President.
Dood, federal government's been privatized up the yin yang.
Are you retarded or what?
And who put the govmint up to it?
Starts with a Wall ends with a Street.
There was an excellent example of debt that is no longer working in the comments at Washington's blog in the Irish economy Using the hotel overcapcity as a prime example of what happens when banks aren't forced to recognize their bad loans.
I see that here too. We now have a overcapacity problem in the world of small business. That has come from the continued unwillingness of the banks to recognize bad loans. When the recession started there was much talk about credit was being pulled back from small business causing many of them to fold. This was true. Banks were trying to limit their losses by not loaning additional funds and quickly liquidating businesses who had assets that could easily be auctioned who had open credit lines or were in mid development of projects that would have required more capital to complete. That was Phase one of the destruction of small business.
Now we are in Phase two. This is where the loans had already been made and by March of 2009 when Mark-to-Myth became FASB's new rule imposed by congress, Barney Frank comes to mind, and banks stopped calling the repo guys for equipment leases or loans that were past due. The money had already been loaned so it was now more valuable to call the loan performing and stack it up at 100% of face value.
The net result is many businesses are staying open by not paying rent and/or not paying leases or loan payments on capital equipment use to produce their products and services. The banks don't want to repossess the equipment as their is no secondary market. They would also have to write down the loan similar to the situation in Ireland with the overbuild of hotels. The way it's working here and the reason businesses that didn't have debt are closing or barely hanging on is that they would have customers if the banks had called the loans on the equipment from their competitors and full rent was being charged.
I see this up close. Now the prices have fallen straight to the ground as the zombie businesses have lowered them past the cost of their equipment. If they don't have to pay for the equipment then they can still generate cash at a much lower cost. That creates a permanent problem. As the buyers of the output from the equipment see far lower costs. Small businesses that are accounting for the cost of the equipment that is paid for by cash, via depreciation, are unwillingly being dragged to the cliffs edge by the businesses who don't have to worry about depreciation or servicing loans. Staff has been reduced where in many cases the owners are doing the work, or they have a skeleton staff, as prices have fallen by 50-60% as too many businesses chase after too few customers by lowering prices into the dirt.
I did a price audit a few days ago on my competitors, I saw they were pricing output lower than equipment costs which makes it very difficult to explain to a customer the consequences of a failed economic policy when they say "your prices are too high, I can get it from xyz at...." That makes the notion that the Fed is fighting deflation another great lie. In the real market in the new normal where right is wrong and wrong is right, businesses sell for material cost plus profit. Where before it was material cost, labor, rent, machine debt and maintenance then profit.They don't do maintenance except the bare minimum. Why should they. Business is less frequent and they know they are going to lose it anyway.
As in Ireland , this is hurting businesses that would have provided the foundation for growth when overcapacity disappeared and they would have had pricing power. Now everyone is running on fumes and fighting over price buyers who now think that the recession has taken the fat out of the system. I talked with one customer who I directed to a competitor who was selling below cost. I said "don't price this into your business model because once it all collapses, the prices will go up and your costs will go up substantially which will also be the inflation side after this margin compressions squeezes the life out of all but a few survivors. Even though some of these businesses have had their life extended, they are still on borrowed time. Eventually the machines stop working or cash is too tight to replenish materials, so they toss the keys on the counter and close up.
Had the banks been forced to Mark-to-Market , they would have had to recognize these bad loans, repossess the equipment, buyers like me would have bought the excess equipment at a far lower price which inevitably would have produced capital to expand as pricing power crept back in when capacity began to match demand. Instead, the ones who did everything right have to take a hard look and see if they should close to save their capital and equipment for another day. Yet customers still call , goodwill is still there so it makes that decision doubly hard.
"Hi, we are closing after 20 years not because we are broke but because we don't want to go broke, once these nuts have been tossed out, we will open back up."
I just don't think that will make it easier especially if this goes on for years.
Obama's policy of save the banks ( some of them) at all costs and not letting the business cycle run it's course , is literally causing the deflation they feared the most but won't count in the CPI, a myriad of Zombie companies with Zombie banks all with a misery index that can't be described selling goods and services below the cost of a business that is , you know, paying overhead. . Why don't they just close? Right now they are taking as much money as they can for when the anvil falls and the banks suddenly send them the notices they most feared, they won't have the money to pay. Getting a job is much harder than doing the wrong thing.
So they stay open and stuff their pockets and wait for the notice. As proof, there is actually less equipment on the liquidation lists for my industry than there was when times were considered "good". This also makes the employment numbers artificially high as employees are still working for these Zombie businesses and Zombie banks. That may be a justification for this crazy policy. Ultimately it may end up showing Americans if they do everything wrong they get rewarded and if they do everything right they will be crushed.This isn't going to end well. I have no idea if they have even thought this far. Jobs? Who is going to hire people when they are giving their products away and only surviving because they have stopped paying for 70% of their overhead. They wouldn't dare get credit for new machines now even if it was 100% guaranteed by Uncle Sam. How would they compete if they had to make payments?
Moral Hazard didn't stop at the TBTFs. It has been spreading like stage 4 cancer throughout the consumer and business segments from small to large .
As for the Zombie banks, they pay bonuses to the the higher ups as they cut staff since no one needs to borrow more money as small business cries for customers. Now I have a much better idea why the customers are few and far between. The Zombies are out there like call girls selling it for nothing. The Zombie banks are emptying the vaults by paying sky high bonuses as Bennie is out there warming up the helicopter because, by God, they just didn't ease enough the first time around while Sumners snores and Geithner? Who knows if he even thinks . It must hurt too much. Man the headaches he must have. "The answer must be in one of these spreadsheets".
Obama "I have total faith in these fine douchebags. I say douchebags with strong emotions because douchbags are treated unfairly and badly. They are as misunderstood as anyone in the history of the country. So we have to be more sensitive to douchebags. "Tim, Larry , Ben, they might be douchebags but they're my douchebags."
Snore
"Goddamn Larry just wake the fuck up for once, ya fucking douchebag"
Is it over yet? Nope. Not even close. Interfering in a business cycle no matter how severe it would be turns the whole country into Zombie land. Businesses are inert. Innovation slows down to zero. Mergers and Acquisitions happen more out of boredom, debt is run up at ultra low rates as cash sits stagnating. We see a BS jobs number where 50K less jobs were lost than expected and the market goes wild. See above. Zombie companies need zombie employees. Employment is going to be wishy washy for as long as these policies stay intact. Let the fucker crash. Then we can rebuild it. Fire all govt statistcians. Bring in new ones who will have a gun on them that are specially trained in small arms, hand to hand combat and forensic accounting. Lethal Green Shade Oversight.
I have been though 4 recessions as an adult including the infamous 80-82 recession. I was a petroleum transfer engineer (hah) in the 73-74 recession working at a mob run gas station. Things were good then as I recall. We had plenty of Gas.
I have never seen it this fricking bad. Knowing it's on hold slowly bleeding the life out of the country is especially infuriating. Lets get Zero Hedge Pitchforks and Guillotines and make our presence felt.
Hells yea!
Best long post I've ever read. It just shows you have pathetic we are as a country in that you would never see a story like this in a major metropolitan newspaper.
@ Dburn.
I read your post with great interest and I think I understand most of what you are trying to say BUT what products are exactly going down in price because of the situation you are describing?
I'd be very interested to know......
Internet and hosting services, for one.
dburn nailed my business dilemma, "Yes prospective customer, Govt Sponsored Monopoly A is offering the same speeds for half the price, but they own all the cooper, and are "giving away" their part of the circuit for the term of the special, they don't allow us to "give away" their part of the circuit, though much of that circuit was built with taxpayer assistance".
"Yes, big company B is offering unlimited everything web hosting for 3 bucks a month, but read the fine print, its unlimited, but after x amount of usage, they bend you over in ovrage fees, or, and good luck getting any real help, oh, and say "hi" to "Bob" from Bangalore for me..."
Small companies have higher input costs due lack of volume buying power. So we strip down to minimum staff and do our best to compete pricewise, though sometimes all we can do is just not raise prices. And get very creative sourcing deals on quality new/used equipment and other inputs, offer better, real person support right here in US. If a customer is only concerned about price, let them go elsewhere. Many come back when they discover local live person support actually is a value, and our unmetered , VLAN'ed , non-shaped, and non-over subscribed bandwidth actually is cost effective...and if they think running their business website and email hosting on a 3$ month plan is value, they aren't serious about their business web presence.
</frustrated small biz guy rant off>
Thank you for laying out the nuts and bolts of the outcome of the current economic policies. I think that your message should be required reading for every person in the Fed and Congress. The White House is another matter since I consider the folks there to be impotent. Blame cannot be laid at the feet of any one party, or industrial or banking giant. It's an effort by all of them which seems to be concerted -- but it now has a life of its own. Without a shock to the foundation of this momentum we will end badly. There is much more pain to come, and it is criminal that those who really know the score, and the media (who are in denial) don't fess up and give the people the truth. With a secretive Fed (see Bloomberg suit) there is no way that the fall of this house of cards will not suffocate what is left of the entrepreneurial spirit of the country. John Galt may be speaking soon, and he won't be in the guise of a corporate giant. He will be the voice of the real power in this country: The small businessman.
@ Dburn.
That was the "Post of the Day"! Moral hazard by banks and those unwilling to play by the rules kills those who do. It looks like small business and small manufacturers are most affected.
I would NEVER EVER start a business now in the USA. I had two small businesses in the late 80s and the 90s that did not work out. The ONLY business that has worked out is our bearing import business in PERU (run by my in-laws there). And our business in Peru is doing just fine thank you.
"this fricking bad" is putting it mildly. Almost no one among the small business people I talk with says things are any good. Except for the bankruptcy lawyers where our kid works, she is pulling overtime...
After watching Obama in office for 20 months now, we can venture some forecasts as to where this country is going.
With the:
it is fair to say we're in very deep doodoo. Can we get out of this predicament?
My answer is: Not without a lot of turmoil. First off, there need to be a recognition of how bad things are. Too many people are still in denial about what it'll take to restore the social and econ fabric in the US. Moreover, too many politicians are still in denail that the US is sliding backwards.
There will be blood before things get better...assuming they will.
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Breaking News Alert: Obama's economic team considering new stimulus package September 2, 2010 5:21:20 PM
----------------------------------------
With the recovery faltering less than two months before the November congressional elections, President Obama's economic team is considering another big dose of stimulus in the form of tax breaks for businesses -- potentially worth hundreds of billions of dollars, according to two people familiar with the talks. Among the options are a temporary payroll tax holiday and a permanent extension of the research and development tax credit, say people familiar with the talks.
http://link.email.washingtonpost.com/r/0H2RO6/0GGQXY/2V9IAW/F1R6GN/NGQ5Z...
For more information, visit washingtonpost.com
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Too little too late for that stooge. However, I am very curious to see what comes of it, aside from another 5% gain in the indicies.
P.S. - Let the WaPo whackos go, get news from TheBlaze.com After all, they have the unicorn cow: http://www.theblaze.com/wp-content/uploads/2010/09/unicorn-cow.jpg
GW.
Thanks for the article/s.I have been espousing this since this shitfest began.The worst part is, it's true, and they have done it ON PURPOSE.
Control.......Obama got the majority of HIS agenda passed, and now he's talking jobs.
Too late.
Checkmate.
gw,
nice summary but the title seems off in the phrase
"drought of unemployment" ?
maybe "drought of employment" ?
or "tsunami of unemployment" ?
.
and it is a shrinking group of people who think
"work", through employment, has anything to do with
getting "money". the idea was, i think, that americans
could make money without working by "investing". that
too seems to be decanted away from the average taxpayer.
globalization is being wielded like a steely dan dildo,
bludgeoning the locals for the amusement of the elite.
the government, representatives of the people, are
overwhelmed and do not have the interest or information
or compassion for their countrymen to even begin to correct
the problem. the problem being the fed and the fact that it
is an organization created to facilitate the raping of the
resources of the world, including the united states of america
and it's workers/people for the profit of the international banker.
if one believes that there could be a functioning government
of and by and for the people then the only logical conclusion
is that the government should be the bank and banking should
be as a utility. something along those lines. leaving money
creation in the hands of unknown parties of unknown origin
is simply treason, as is doing business with them.
but then, some do not believe governance of any kind is
possible and perhaps that is a valid argument?
Blindman,
You're right, the title was awkward. I fixed it.
de nada
GW, long time reader... your work is much appreciated.
Very nice George... Very, Very! Nice!! God Bless You George and Yours as well.
Thanks, JW. Me and mine appreciate it!
Despite charters and claims for full employment, no inflation and a steady economy, Central Banks like the Fed and Centrally Planned Economies like the 0 administration created the opposite.
Why else did Jackson, Jefferson, Rothschild or Washington say:
Is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country? Is there not cause to tremble for the purity of our elections in peace and for the independence of our country in war? Controlling our currency, receiving our public monies, and holding thousands of our citizens in dependence, it would be more formidable and dangerous than a naval and military power of the enemy.
A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army... We must not let our rulers load us with perpetual debt.
Let me issue and control a nation's money and I care not who writes the laws.
The one who has the most gold makes the rules.
http://www.pacinst.com/terrorists/chapter2/jackson.html
That graph says it all, Mr. Washington. Guess the mainstream doesn't get the warning until municipals start defaulting openly.
Gads.
Like this?
http://online.wsj.com/article/SB1000142405274870346700457546404005287559...
Which "government" is this exactly?
The real problems are the funds.
They buy up all those companies, and have a portfolio of dozens of companies.
All they care is: 30% return on investment per year.
With 40% real cost of funds (-34% Real deflation plus 6% nominal long bonds),
there is no 30% ROI. Maybe that's why KKR delayed their IPO.
International Business Machines Corp. (IBM), Berkshire Hathaway's Burlington Northern Santa Fe Corp. (BNI), Federal Express Corp. (FDX), Ford Motor Co. (F), Motorola Inc. (MOT) , Norfolk Southern (NSC) and the Wisconsin Electric Power Co. unit of Wisconsin Energy Corp. (WEC) and XOM think real interest rates are going higher or they would not issue century bonds...
http://online.wsj.com/article/BT-CO-20100823-709639.html
This thing was set in motion during the Reagan period. Wages stopped rising, companies started their mergers and got bigger.
But that's not where the problem lies George.
The real problems are the funds.
They buy up all those companies, and have a portfolio of dozens of companies.
All they care is: 30% return on investment per year.
If the profits doesn't come from sales
It will come from costs.
Also don't forget: stripping a company is VERY PROFITABLE.
Second problem:
The generation that started all big companies are now turning 65+
and as much as they would like their kids to take over the company, most of them are to retarted to do so.
So... they sell it to these funds, and with the money they make from the sales they put it into... funds.
It's very common that whenever a fund buys a family owned business the value doubles in value after 2 years.
They strip it from the assets (buildings, cash...) and sell "the concept" at twice the value the bought it. Those buildings are mostly sold to one of their own holdings which they lease back to those same companies.
Those are by then empty shells when sold. And "the concept" is a very easy target for the competition.
What made America and Europe great was the spirit of the entrepreneur. That spirit is dying.
It's almost impossible to start a new bizz. and grow it the size the old once have. Competition is killing.
And to stay affloat, you need to be the biggest.
Look at that company that makes those Iphones! 1.4 million employees in 1 factory!! HOW CAN YOU COMPETE AGAINST SOMETHING THAT BIG?!
It was already predicted in the 80's what the outcome will be.
At the end of the cycle, we'll be left with 4 to 5 giant companies who will run this planet. And once that happens: welcome to the new dawn of men.
You'll be nothing more then a number. And there is nothing going to stop it anymore.
I actually work for a company owned by one of these funds.
I'm a level 10 and my employee number is 532.
We stopped calling people by their names a long time ago. Just another line in the excell files. And every FTE is valued, tracked and traced.
Dood, David Rockefeller, Kravis, Peterson aren't members of the boomer generation --- so give it a rest already.
(This sounds like one of those N.A.M. call center doods who always try to split people apart by gender, age, race or ethnicity.)
The essential fact that very few comprehend:
Leveraged buyouts, hedge funds, public-private partnerships, the entire privatization process are all the same fundamental financial structure.
Once that is understood, everything becomes clear, although admittedly it requires some serious study of the subject matter.
"What made America and Europe great was the spirit of the entrepreneur. That spirit is dying."
Yeah, and pigs fly...
First, "great" is subjective. I'd state that it's but a blip on the wheel of time (brought to us primarily due to the vast fossil fuel reserves that we're rapdily depleting). And speaking of vast reserves of resources...
Having a huge land mass that was easily taken over/away from others (via nice tricks like small-pox infested blankets and broken treaties), gave way to massive resource exploitation. Britain accomplished its rise via exploitation of other countries, the US by way of its "own" country: both were via enslavement and exploitation of native and imported peoples.
Here's the reality - http://dieoff.org/page125.htm (refer to Figure 1). Whether you like it or not doesn't matter. It's the ONLY outcome for a growth-based system.
But I'll have to admit "the spirit of the entrepreneur" sure sounds cooler, and likely plays to those who don't wish to think too hard. Ain't nationalism great?
Most of this stuff is nonsense :
2 reasons :
1. Energy use per capita has not peaked in 1977, but reality is that it has been on a plateau since then
2. Energy use has also become more efiicient. For instance my car consumes less than half the amount of gasoline to transport me over a given distance than it did in 1977 and at the same average speed.
So his conclusion that industrial civilization will end by 1930 is pure malthusian drivel.
NB : I'm not a cornucopian either and I agree that rapidly declining EROI will have an increasingly limiting impact on growth (unlike what mainstream economists think). But I think it's still very difficult to predict how and when and this Ovudai theory is certainly without merit.
Standard Marxist Clap Trap
I'm sure you meant "too retarded".
Two easy ways US and Europe could compete against mass, cheap labor.
1. Automation does not eat or sleep and makes few mistakes
2. Tariffs make the cheap wages less advantageous
China uses the same automated processes we do, using Japanese machine tools. But a manufacturing engineer might get $10,000 compared to maybe $65,000 here.
Bingo.
Fair trade...
The poster got his facts right but his monetary theory is way out of wack.
The fed can not create jobs and certainly inflation can not create jobs, therefore the entire premise of his post is wrong.
The fed should not be in the business of actively encouraging people to take on more debt when savings rates are at rock bottom.
The last thing this country needs is more debt. We have a crisis of savings. Capital investment must come from savings, not inflationary fake money.
When capital investment comes from fake printed money, we can be assured the investment will be horribly allocated which only leads to further gross market distortions.
Solving a debt crisis with more debt is ridiculous. The fed should be dismantled and its operators should be behind bars.