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Guest Post: Our "Let's Pretend" Economy
Submitted by Charles Hugh Smith from Of Two Minds
Our "Let's Pretend" Economy
There are two economies--the real one, which is in decline, and the "let's pretend" one touted by the State and corporate propaganda machines.
Children love to play "let's pretend." Let's pretend the economy is "recovering." Why does this "recovery" remind me of an addict who's conning his caseworker? (Yes, I'm really in recovery--those aren't tracks, they're insect bites....)
Let's play pretend that jobs are really really coming back, so please ignore this chart, or turn it upside down:
Let's pretend that households, corporations and government are reducing their debt. To do that, we have to ignore that the debt-junkie (i.e. the U.S.A.) hasn't kicked the monkey off its back, it just keeps feeding it more debt. David Stockman dismantled all that propaganda about corporations sitting on trillions in cash--they're sitting on even bigger piles of debt: Federal Reserve’s path of destruction. He also takes out the claim that "consumers are deleveraging." Consumer debt has barely budged.
Never mind, let's pretend we're deleveraging. So please ignore this chart:
Excuse me but that cute little debt monkey on your back is actually an 800-pound gorilla.
Let's pretend that wages are rising. Except they aren't--household income is getting creamed. Real wages are back to the pre-dot-com bubble days of 1996--only the debt load on households and the nation have skyrocketed since then.
Courtesy of the always insightful Oil Empire and Peak Oil, here is a chart of the ratio of wages to gasoline:
Let's pretend your purchasing power isn't in a free-fall. Have you eaten an iPad recently? Yum, crunchy!
Let's pretend unemployment is falling. The only way to make losing 7 million jobs look good is to ignore this chart of the ratio of civilian employment to population. The ratio is back to the 1970 level, back before Mom, Sis and Aunty all went to work. This means there are fewer people working to support the population. Fewer workers means higher taxes on those still standing, and higher debt loads on them, too, as they have to service household debt, student loans, underwater mortgages and a Federal debt that's exploded higher by $1 trillion a year just since the "end of the recession."
Who benefits from the surge of corporate profits to record levels around $1.6 trillion, or 11% of GDP? The 21 million employees of global Corporate America certainly do, but then they represent about 16% of non-farm employment, roughly in line with government employment (22 million).
Too bad Global Corporate America is hiring where the growth is faster and the wages lower, i.e. overseas (Big U.S. Firms Are Shifting Hiring Abroad).
Let's pretend those great profits trickle down to the greater good. Only they don't. Corporate taxes (around $330 billion annually) cover less than 10% of Federal expenditures (Federal Budget 2009) and despite those record profits--surprise, Corporate Tax Receipts Plunge 31% in Q1.
The tax avoidance Panzer divisions of Global Corporate America are simply unstoppable forces of Nature, it seems. Corporate welfare queens never had it so good.
But let's pretend those profits increase the wealth of a broad spectrum of citizens. Oops, the top 5% of households collect 72% of the corporate profits.
Financial wealth such as stocks, bonds and other securities are liquid and therefore easily converted to cash; these assets are what Dumhoff describes as "non-home wealth" on his website Wealth, Income, and Power.
As of 2007, the bottom 80% of American households held a mere 7% of these financial assets, while the top 1% held 42.7% and the top 20% held fully 93%.
Never mind that, let's pretend the corporate profits trickle down via the "wealth effect" to pension funds that benefit workers everywhere. Too bad that according to the Fed flow of funds data, this rousing, raging Bull Market in stocks fueled by stupendous corporate profits has only brought total pension fund assets back to their 2007 level: $13.3 trillion in 2007 and $13.1 trillion in 2011.
Ajusted for inflation (as measured by the Bureau of Labor Statistics), the pension assets would have to be over $14.3 trillion just to stay even with their value in 2007. So pension funds have actually declined by over $1 trillion in real dollars in the Great Bull Wealth Effect.
So the wage earner's pension assets have actually fallen. We got your wealth effect right here, buddy, right next to the "recovery." And the check's in the mail, we promise.
How much longer are we willing to play "let's pretend"? Eventually we'll have to return to the grown-up world and deal with reality.
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My info is that Gerald Ford ordered the "hit".
Gerald Ford couldn't order a take-out pizza
Let's see ... JFK was assassinated in Dallas, Texas. A native-born Texan with decades-long ties to huge corporate and political interests who had supported that Texan in achieving several dubious electoral wins in his career and who further stood to gain immensely from his ascent to the pinnacle of power finally has his way cleared to that post. Do we really need to ask who "they" were?
Talk about "Let's pretend!" The real make-believe is that a Soviet or even a CIA conspiracy was behind the death of JFK.
Nevermind baseball, pretending everything is great in a big red, white and blue circle jerk is the true national pastime.
Any chance related to Cheeky?
No relation, is that a good thing or bad thing?
#31 in our programs, but always #1 in my heart.
We need another big terrorist attack to unite us all again and for a leader to tell us to go shopping.
Where is Al-Qaeda? We need them now more than ever.
May the U.S. get hit with a massive fiery explosion of recovery.
Lunch time raid is right on time! BTFD Silver Bitchez!
Expect another take down at 1pm.
i agree with chs. the usa doesn't really have an economy any more. we have millions of random transactions amidst national drift into the abyss of monetary devaluation, and corporate plunder.
I like to pretend I'm going to be able to pay my student loans off.
you won't have to, the dollar is going to be hyper-inflated away.
I remember Peter Schiff on his old radio show telling students not to worry about paying back their loans due to Hyper-Inflation
Just one catch... since '74, prices go up, wages stay down. How will that change? Will there be a general strike? Spanish guys will work for a cot and a sandwich, will we?
Spanish guys lol.
And can those "guys" do anything other than physical labor? If not who are they displacing other than other laborers? If anything the construction industry slump is forcing them to go away for lack of opportunity.
And to make it clear I agree with the idea about wage deflation but it's not about "Spanish guys."
My point was, in a hyper-inflationary scenario, Latin American immigrants from overpopulated, hungry nations will be willing to work HARD on a barter basis, food, a roof, maybe some gas Stateside. Will Joe Six-Pack, with his truck payment and the rest, be able to do the same? No. Hence, the awful Chilean (1970-1985) mechanism of flat wages and rapidly-rising prices. BTW "Spanish" is the term for Latin Americans here in the Far East of the U.S., "Latino" sounds just too Berkeley.
Latino and latina is what they all call themselves down there.
TORONTO - Nearly one-third of Canadians that responded to a recent survey backed by a major Canadian bank said they didn't have enough money to cover living expenses.
An online survey completed for TD Canada Trust (TSX:TD) also found that 54 per cent of the 1,003 people who answered said it was a real struggle or impossible to save.
The report, released Wednesday, says that 38 per cent of respondents said they had no savings and 30 per cent said they didn't have enough money for their living expenses.
On the flip side, 30 per cent of the respondents said they had enough money saved to cover living expenses for at least four months.
The online survey, based on a representative sample of Canadian adults, was conducted before Christmas from Dec. 2 to 7 by Environics Research for the bank.
Canadian banks charge the highest banking fees on the planet. This must have been a marketing survey used to discern how much more they can crank the heat up on the public.
Apparently not too much.
And they will be able to crank the dial even less if Jack Layton finally makes the grade May 2.
Who knows, the Canucks have kept the spawn of Tommy Douglas around for so long, maybe, however unlikely, they'll go all Iceland on the oligarchs and take back their sovereignty by electing the first ever NDP majority. It is the purpose of a 'relief valve' party like the NDP, after all.
I mean they keep trying the Blue Meanies but they just won't stop lying about so much for so long to so many; with their sneaking malevolent clauses into bills legislating away sovereign powers and provincial/municipal rights... so nothing would surprise me. Might surprise the commodity market...
Though I bet GWN'ers would settle for a minority gov't of any stripe other than Con; it keeps shit real when you need more of a consensus to get things done.
Bonne chance Canada!
CHS is on the money. (pun intended)
And no amount of truth-telling will change the course of the U.S. or the world. We are beyond the point of no return. The U.S. economy, as well as many others, have been captured by the anti-social bankster elite and complicit politicians and regulators. It will take a natural disaster or a revolution before things change for the better for "the small people."
So Oboma, aka he-who-has-no-birth-certificate-and-whose-name-shall-be-always-an-indicator-of-treasonous-destruction-of-this-once-great-Country, wants to cut the defense budget by 400 Billion! Whoot Whoot! Now how's that for an open invitation to China? Ah yes, and you thought Obomao (as he is called in China; they know their own when they see one!) was just eating kumquats when he went over to visit China, uninvited, immediately after his election. Oh noooo. He was laying down the welcome mat for himself, just in case, someone, say someone like Donald Trump, might come along and ask a pesky question that would disallow him living off the American people for the Rest of His Life. Now, in case ya'll haven't heard, we are being told, "Well, of course, those birth-certificate-thingies were just so pesky and inconsequential and irrelevant and a pain to store that we decided we just wouldn't have them around anymore here in Hawaii. We just use those nice little documents, like the one Oboma showed up with and which any third grader who has been using the computer since his birth can create in around, ohhhh, a minute and a half.
So when Admiral Roughead, Chief of Naval Operations, appears on Bloomberg noting that the destruction (my words, not his) of the budget for the military will serve to gut the ship building capabilities (if your not building ships, the ship building companies shut down, hey kumquats, ya think anything else would happen?) and that this create future problems (duh! have we learned nothing about offshoring everything we need/want/must have/desire to China?).
It's an odd thing about America. We used to believe that our country and our land was so great and so valuable that we would defend it at any cost. We knew that once the foreigners gained a foothold it would be a fight like none ever seen in the history of the world. But the government has clearly been putting something in the water along with the flouride because the decision to cede lots of America to the Mexicans (California and Texas and Arizona and New Mexico anyone? Hmm..now let's see, just how much of that high school Spanish Do I remember?) and the east coast and west coast are innundated with Asians. Not good, Americans. Not good. AS with Oboma, when you are raised in a foreign land the infusion into your bones of love of country, fierce and absolute patriotism, and skepticism of the kumbyah-we-can-all-live-together-at-least-until-you-pull-your-shive-on-me-and-laugh-your-hinnie-off-at-my-stupidity-and-take-all-that-was-once-mine-including-my-country.
I mean it's gotta be kinda weird. Here's an Admiral of the United States Navy, someone who has served this country his whole life, being told by a (my words) no-account-"president"-impersonator-without-a-birth-certificate that we should just, oh, pretend the whole world will play fair and that even as China is creating the greatest, biggest, naval armada ever seen, that we should choose, At This Very Moment, to downsize, deconstruct, and demolish are ability to build ships.
Ah my little kumquats, as all pedophiles know. First they groom you. And you know what comes after that right?
End welfare. End immigration. Keep the defense budget. Duh.
+100
Ave Caesar!...
Frankly, the bigger the military budget, the less free we and other peoples are in the world. This nation was once great because of ideas. Your desire to continually increase our war budget is contradictory to those original ideas. Its seems like peoplel ike you have a lot of their personal identity tied up in the countries military bad-assery. Why do we need to spend more than all the other countries combined to feel good about ourselves. Its not about safety.
Did you distort his argument by just being simple, or are you just a dishonest sack of shit?
Great point.
At this time, it is about America's foreign oil addiction. Can she beat it? We will see.
It's about welfare. Which amazingly enough the poster calls for the end of.
Nice work of propaganda.
Was there actually a point to your rant?
Just because you dropped the "left" in the left-right paradigm it does not mean you are not still in it. This place has been had since at least the early 1900s.
Drop the 50s propaganda and realize that your shit stinks too. Only way to deal with what lies ahead. This country has done the bidding for entrenched power since before you were born. Nothing special about it.
Oh, and if we end welfare, and end immigration, how in the hell are we going to keep debt expanding to avoid an implosive collapse? Because government spending is the only thing keeping this puppy from performing the second Roman Waterfall.
pods
You should ban yourself from living.
What is greater socialism and welfare than the military? The U.S. spends more for the Military Industrial Complex than all other nations combined and goes to war unconstitutionally.
I guess you not only like being imprisoned but you also like to pay for it yourself.
What a complete moron you are.
It isn't just Obama. Do you remember this:
http://www.msnbc.msn.com/id/11494815/ns/us_news-security/
I love it when I can witness first class Brain Washing via the American Media and military industrial complex............................
pretentious
economy
The credit crises has been further fueled as no one is ready to take the blame for the following activities :
Not breaking up the too big to fail banks who were the root cause of the credit crises.
Not even changing the management of the banks or companies before showering them trillions of dollars as bailouts to continue doing activities which caused the crises.
Not even a single banker is charged for fraud or criminal activities despite ample proof available.
Fining the banks millions of dollars for crimes in which they earned billions of dollars.
Lack of initiative to reinstall Glass Stegall act which prevented the bankers to use others money to manipulate stock, currency and commodity markets.
Not spending money on improvement of infrastructure of the country which would have created millions of jobs instantly.
Not stopping speculators from increasing the price of essential commodities such as oil to over $100 per barrel which is causing the rest of the population to be pushed below the poverty line.
Manipulating data to give the illusion of low inflation and economic recovery so that the incompetency of the government is hidden from public view.
http://www.marketoracle.co.uk/Article24581.html
No value added on this post. Pls remove CHS posting privileges.
He shoots. He scores! Nicely done CHS. A beautiful rant. Absolute poetry.
I am sure you could have written pages more like this... but short and sweet worked perfect.
Makes it more likely people who understand a little bit of what is going on will share this with people who do not. Hell, I'll send this one to my wife (LOL).
So many charts, so little time....
Speaking of charts did you see this one?
"Glencore Shows Market Peak as Blackstone Did: Chart of the Day"
http://www.bloomberg.com/news/2011-04-19/glencore-shows-market-peak-as-b...
Those Jews know when to get out...
Until Further Notice, Keep an Eye on Japan @ http://seekingalpha.com/article/263836-until-further-notice-keep-an-eye-on-japanLet us pretend some one will buy this junk we are making.
http://www.youtube.com/watch?v=pdUUNF1bOIo
I just posted this video and Tyler took the wind outta my sails with this piece.
Who the F are you Tyler?
Tyler is the man. but the first rule of ZH? You don't talk about Tyler Durden.
www.forecastfortomorrow.com
Ha..ha..
Looking at the wealth pie chart-how is that 1% going to collect from the bottom 80%? Not going to happen. To collect the super rich is going to have to go after the merely rich.
Haircuts coming soon..
The most important economic fact that no one is supposed to pick up on- and of course- the merely rich are too stupid to figure it out. Go support your tax cuts for the mega rich you dolts.
If the government just stole all the rich people's money and gave it to me the world would be a much better place.
The trouble is they divide it among all the indolent slobs out there and I'm lucky to get a few bucks out of the rip off.
It ain't fair!
Another provocative post by Charles Hughes Smith. Simply amazing that he can contribute something other than political idiology, on such a wide variety of topics, on a daily basis. It is great to have a more 'holistic' view of a problem than the useless repub/demo/teawhatever spin.
Just some more proof that the U.S. is still clueless.
Audience Up, ‘Idol’ Defies TV Gravity"After steadily losing audience share for the last several years, it has reversed the trend this season, gaining total viewers for the first time since 2007."
http://www.nytimes.com/2011/04/21/arts/television/american-idol-ratings-...
Them's pre-recession numbers, oh boy, our economy must be improving!
Lol, we can hope and believe so! That employment graph is so damn ugly, it really shows just how rock bottom we hit. I think we're still in a recession, we haven't gotten back to the point where we entered the grey!
www.forecastfortomorrow.com
Let's pretend that my hemorrhoids no longer itch and sting....nope, still there.
Too bad witchhazel doesn't help sovereign debt.
Someone told me to try witchhazel for lots of ailments but I drank a whole bottle with little results ;)
You were supposed to drink the whiskey and sit in the witchhazel, not vice versa!
Yet, no one seems to care. At least with Greenspan the average American could see the Wealth effect with the price of their Home. Most Americans have Homes. Yet, not all Americans have Stocks.
In a single generation, the world's biggest creditor became the world's biggest debtor. The world's biggest exporter of petroleum became the world's biggest importer of same. It's going to take a lot of "let's pretend" to make these two facts go away.
It's also going to take a lot of work and word of mouth to get those two facts into the public's knowledge. Keep in mind that 9.9 out of ten people in America would look at this site like it's written in another language.
www.forecastfortomorrow.com
Bottom line I think we all want Our Market Back. We do not want the Federal Reserve Price fixing the value of Stocks. We do not want the HFT computers churning stocks every day with a constant flatline so the can sell options.
We want people to trade Stocks based on their Value and not on the fact that the Fed is supply the the Market with 200 Billion a week to prop up the Market or the HFT computers are programed to push a Stock up or down based on what the Programer punches in for the Morning to control the price for the day. Usually to make sure all of the Options they bought yesterday are worth more.
We want a market free of the FED being the only driver of the Market and the HFT raping us every day a penny at a time to make Billions.
Just a free Market without condoned Manipulation.
Plus one. Sparkly boy.
Many of us used to be able to make ends meet by trading the Market. But, the HFT and the FED have put an end to that. Now only the Biggest of the Big can play the game with their computers. No individual can trade for a 1 cent profit with trading costs. The Big Banks with their HFT computers know that and they killed the small time Trader for their own gain. Yet, with the volumes getting lower and lower eventually they will have shot themselves in the foot.
But, for me that is no consolidation as I no longer can trade and make a few dollars here and there.
The computers know and calculate how many people buy and how many sell and know what to do to take out the most retail investors or anyone else for that fact. Just look at what they did to that poor guy that was short Nflx.
That pretty much says it all, but for those that may need a condensed version of the authors thesis, let me summarize:
http://www.youtube.com/watch?v=_4e8iAofnrw
thanks, that vid is a lot more entertaining...we're fucked, every which way. the consumer economy is dead and so is the dollar, there's no turning back.
www.forecastfortomorrow.com
Sorry ... but algos are here to stay
Texas Nazis Support Checkpoints and Senator Tommy Williams
http://www.youtube.com/watch?v=3e1TspJEcPc
Nothing to see here, the economy is improving and capitalism will triumph, high oil or not. (Mostly high oil though) /s
http://www.bloomberg.com/news/2011-04-21/index-of-leading-economic-indicators-in-the-u-s-rises-0-4-.html
Pretty simple in my eyes... When silver hits a "Brazillion" dollars, you'll be able to flip 'em a pre-1964 Rosie to pay for your degree that you got in your pajamas from the University of Phoenix...
Looking good SALLIE!
I just sold my son's clothes that don't fit on ebay! It was an effin bidding war! 50 bids! Must have been that free shipping and no reserve! What recession!!!!
Clothing prices at the local Salvation Army store have tripled in the last six months. A pair of blue jeans (if you can find any) sell for $10. What's amazing is that you can buy them brand-spankin' new at Kohl's for $20, which speaks hugely about how far the common folk will go to save a buck or two these days.
It really is as if TPTB gunned this SOB market as a middle finger to the S&P ratings warning. A mighty, 'Oh yeah? Watch this. We don't need no steenkeeeng rating!'
<sniff, sniff> it that fearfulness I smell amongst their arrogance?
I know this will come as a shock to those of you fighting the drug demon but you need to face facts:
People take pain relievers to relieve pain.
And always needing more? When you keep your pain receptors full your body builds more. And more drugs won't make you higher? Of course not. You receptors are temporarily full.
Police can't fix this any more the Helicopter Ben can fix the economy. For the same reason. They don't understand the problem.
http://powerandcontrol.blogspot.com/2008/12/secular-decline.html
Linking the article to "Who Rules America", which argues for punitive inheritance taxes takes away credibility. Somehow, what someone earns over a lifetime, whether they are rich or not, rightfully belongs to the government, not their children?
All of ZH--living in the real economy, helping to destroy the pretend. America's Sheeple? Totally living in the Matrix. what a lovely way to put it Tyler, we really do live in a fucked up world.
www.forecastfortomorrow.com
That was the mindset of the American public back then, the public bought the story of Oswald killing him... hook, line & sinker.
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