[Terry Haines]

Wall Street Gets Trillions While Workers Get Bupkis
By Mike Whitney

July 28, 2010 "" -- On Tuesday, the 30-year fixed rate for mortgages plunged to an all-time low of 4.56%. Rates are falling because investors are still moving into risk-free liquid assets, like Treasuries. It's a sign of panic, and the Fed's lame policy response has done nothing to allay the public's fears. The flight-to-safety continues a full two years after Lehman Bros blew up.

Housing demand has fallen off a cliff in spite of the historic low rates. Purchases of new and existing homes are roughly 25% of what they were at peak in 2006. Case/Schiller reported on Monday that June new homes sales were the "worst on record", but the media twisted the story to create the impression that sales were improving. Here are a few of Monday's misleading headlines:

"New Home Sales Bounce Back in June"--Los Angeles Times. "Builders Lifted by June New-home Sales", Marketwatch. "New Home Sales Rebound 24%", CNN. "June Sales of New Homes Climb more than Forecast", Bloomberg.

It's all bunkum. The media's lies are only adding to the sense of uncertainty. When uncertainty grows, long-term expectations change and investment collapses. Lying has an adverse effect on consumer confidence and, thus, on demand. This is from Bloomberg:

The Conference Board’s confidence index dropped to a 5-month low of 50.4 from 54.3 in June. According to Bloomberg News:

"Sentiment may be slow to improve until companies start adding to payrolls at a faster rate, and the Federal Reserve projects unemployment will take time to decline. Today’s figures showed income expectations at their lowest point in more than a year, posing a risk for consumer spending that accounts for 70 percent of the economy.

“Consumers’ faith in the economic recovery is failing,” said guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, whose forecast of 50.3 was the closest among economists surveyed by Bloomberg. “The job market is slow and volatile, and it’ll be 2013 before we see any semblance of normality in the labor market." (Bloomberg)

Confidence is falling because unemployment is soaring, because the media is lying, and because the Fed's monetary policy has failed. Notice that Bloomberg does not mention consumer worries about "curbing the deficits". In truth, the public has only a passing interest in the large deficits. It's a fictitious problem invented by rich corporatists (and their think thanks) who want to apply austerity measures so they can divert more public money to themselves. In the real world, consumer confidence relates to one thing alone--jobs. And when the jobs market stinks, confidence plummets. This is from another article by Bloomberg:

"Consumer borrowing in the U.S. dropped in May more than forecast, a sign Americans are less willing to take on debt without an improvement in the labor market.

The $9.1 billion decrease followed a revised $14.9 billion slump in April that was initially estimated as a $1 billion increase, the Federal Reserve reported today in Washington. Economists projected a $2.3 billion drop in the May measure of credit card debt and non-revolving loans, according to a Bloomberg News survey of 34 economists.

Borrowing that’s increased twice since the end of 2008 shows consumer spending, which accounts for about 70 percent of the economy, will be restrained as Americans pay down debt. Banks also continue to restrict lending following the collapse of the housing market, Fed officials said after their policy meeting last month" (Bloomberg)

Consumer confidence is falling, consumer credit is shrinking, and consumer spending is dwindling. Jobs, jobs, jobs; it's all about jobs. Budget deficits are irrelevant to the man who thinks he might lose his livelihood. All he cares about is bringing home the bacon. Here's a quote from Yale professor Robert Schiller who was one of the first to predict the dot.com and the housing bubble:

"For me a double-dip is another recession before we've healed from this recession ... The probability of that kind of double-dip is more than 50 percent. I actually expect it."

There's no need for the economy to slip back into recession. It is completely unnecessary. Fed chairman Ben Bernanke knows exactly what needs to be done; how to counter deflationary pressures via bond purchasing programs etc. He has many options even though interest rates are "zero bound". But Bernanke has chosen to do nothing. Intransigence is a political decision. By the November midterms, the economy will be contracting again, unemployment will be edging higher, and the slowdown will be visible everywhere in terms of excess capacity. The Obama economic plan will be repudiated as a bust and the Dems will be swept from office. The bankers will get the political gridlock they seek. Bernanke knows this.

On Tuesday, a $38 billion Treasury auction drove 2-years bond-yields down to record lows. (0.665%) Investors are willing to take less than 1% on their money just for the guarantee of getting it back. Bond yields are a referendum on Bernanke's policies; a straightforward indictment of the Fed's strategy. 3 years into the crisis and investors are more afraid than ever. The flight to Treasuries is an indication that the retail investor has left the market for good. It is a red flag signaling that the public's distrust has reached its zenith.

British economist John Maynard Keynes showed that the business cycle can be eased by government intervention, that the state can generate demand when consumers are forced to cut back on their spending. Presently, big business is awash in savings ($1.8 trillion) because consumers are on the ropes and demand is weak. The government's task is simple; make up for worker retrenchment by providing more fiscal and monetary stimulus. If private sector and public sector spending shrink at the same time, the economy will contract very fast and recession will become unavoidable. So, Go Big; create government work programs, help the states, rebuild infrastructure and support green technologies. The economy is not a sentient being; it makes no distinction between "productive" labor and "unproductive" labor. The point is to keep the apparatus operating as close to capacity as possible--which means low unemployment and big deficits. When in doubt--keep spending.

Increasing the money supply does nothing when interest rates are already at zero and consumers are slashing spending. Bernanke has added over $1.25 trillion to bank reserves but consumer borrowing, spending and confidence are still in the tank. The problem is demand, not the volume of money. Bernanke knows what to do, but he refuses to do it. He'd rather line the pockets of bondholders, bankers and rentiers. This is from Calculated Risk:

"This report from the National League of Cities (NLC), National Association of Counties (NACo), and the U.S. Conference of Mayors (USCM) reveals that local government job losses in the current and next fiscal years will approach 500,000, with public safety, public works, public health, social services and parks and recreation hardest hit by the cutbacks.

The surveyed local governments report cutting 8.6 percent of total full-time equivalent (FTE) positions over the previous fiscal year to the next fiscal year (roughly 2009-2011). If applied to total local government employment nationwide, an 8.6 percent cut in the workforce would mean that 481,000 local government workers were, or will be, laid off over the two-year period."

The cutbacks will ravage local governments, state revenues and public services. Emergency facilities by the Fed provided $11.4 trillion for underwater banks and non banks, but nothing for the states. The GOP is helping the Fed strangle the states by opposing additional aid for Medicare payments and unemployment benefits. Many cities and counties will be forced into bankruptcy while Goldman Sachs rakes in record profits on liquidity provided by Bernanke. It's a disaster.

On Wednesday, Moody's chief economist, Mark Zandi and former Fed vice chairman, Alan Binder released the first in-depth analysis of the government's emergency response to the financial crisis. The paper evaluates the effects of the TARP, Obama's $787 billion fiscal stimulus, and the Fed's liquidity facilities. Here's an excerpt from the New York Times:

"We find that the effects on real GDP, jobs, and inflation are huge, probably averting what would have been called Great Depression 2.0. For example, we estimate that, without the policy responses, GDP in 2010 would be about 6½% lower, payroll employment would be about 8½ million jobs lower, and the nation would now be experiencing deflation.

When we divide these effects into two components, one attributable to the various rounds of fiscal stimulus and the other attributable to the panoply of financial-market policies (including the TARP, the bank stress tests, and the Fed's quantitative easing), we estimate that the latter are substantially more powerful than the former. Nonetheless, our estimated effects of the fiscal stimulus policies alone are very substantial: In 2010, real GDP that is about 2% higher, an unemployment rate that is about 1½ points lower, and almost 2.7 million more jobs…. ("In Study, 2 Economists Say Intervention Helped Avert a 2nd Depression", Sewell Chan, New York Times)

The bottom line? When Wall Street is hurting, money's never a problem. But when the states are on the brink of default and 14 million workers are scrimping to feed their families, there's not a dime to spare. Explain that to your kids.

[spridget]

I have a final exam today for Government. A lot of the material covers Keynesian theory and economic policy. It's funny how relevant this article is to my studies.

[Rikenbomb]

What's even funnier (not really) is that this is history repeating itself all over again.

[Terry Haines]

The Avoidable Depression; "No one believes the U.S. is the land of opportunity anymore"
By Mike Whitney

August 04, 2010 " -- The economy has gone from bad to worse. Last Friday's report from the Commerce Department confirmed that GDP had slipped from 3.7% to 2.4% in one quarter. Now that depleted stockpiles have been rebuilt and fiscal stimulus is running out, activity will continue to sputter increasing the likelihood of a double dip recession. Consumer credit and spending continue to decline and data released on Tuesday show that a sharp increase in personal savings rate which climbed to 6.4%. Mushrooming savings indicate that household deleveraging is ongoing which will reduce spending and further exacerbate the second-half slowdown. The jobs situation is equally grim; 8 million jobs have been lost since the beginning of the recession, but policymakers on Capital Hill and at the Fed refuse to initiate government programs or provide funding that will put the country back to work. Long-term "structural" unemployment is here to stay.

The stock market has continued its highwire act, mainly due to corporate earnings reports that surprised to the upside. 75% of S&P companies beat analysts estimates which helped send shares higher on low volume. Corporate profits increased but revenues fell, meaning that companies have laid off workers and trimmed expenses to fatten the bottom line. In other words, profitability has been maintained even though the overall size of the pie has shrunk. Stocks rallied on what is essentially bad news.

This is from ABC News: "Consumer confidence matched its low for the year this week, with the ABC News Consumer Comfort Index extending a steep 9-point, six-week drop from what had been its 2010 high....The weekly index, based on Americans’ views of the national economy, the buying climate and their personal finances, stands at -50 on its scale of +100 to -100, just 4 points from its lowest on record in nearly 25 years of weekly polls...It's in effect the death zone for consumer sentiment."

Consumer confidence is plunging because of persistent high unemployment, flatlining personal incomes, and falling home prices. Ordinary working people do not care about the budget deficits; that's a myth propagated by the right wing think tanks. They care about jobs, wages, and providing for their families. Congress's unwillingness to address the problems that face the middle class has progressively eroded their confidence in government. Pessimism abounds. This is from the Wall Street Journal:

"The lackluster job market continued to weigh on confidence. The share of consumers who expected the job market to improve in the next six months fell to 14.3% in July, the second-straight monthly drop and the lowest reading since March...Views of business conditions also worsened. The share of people who expected conditions to improve over the next half-year fell to 15.9% in July, the lowest since April 2009." ("Home prices rise but outlook for sector dims", Conor Dougherty, Wall Street Journal)

No one believes that the U..S is the land of opportunity anymore or that their children will have a better life than their own. As the slump deepens, pessimism will turn to desperation, higher crime and social unrest. Everyone pays for long-term unemployment.

Factory orders, household purchases and personal consumption expenditures (PCE) are all in the dumps. New mortgage applications and home sales have plummeted to historic lows. Housing prices are expected to follow the downward trend in sales. Still, the stock market lunges upward in fits-and-starts utterly disconnected from the underlying "real" economy where personal balance sheets are in ruins and there are 6 applicants for every 1 available job. Things have never been worse.

This is from Naked Capitalism:

"A Wells Fargo/Gallup survey of 604 small business owners conducted in early July showed a plunge in already negative readings to new lows. This gloomy outlook matters because small businesses were the biggest source in job creation in the last upturn and are expected again to be the main source of hiring.

Even worse, small business owners expect things to get worse. The main reason for the decline in the index was the decay in the Future Expectations subindex, which is the first time business owners as a whole have been negative about their companies’ prospects for the upcoming year.

42% of respondents anticipate it will be “somewhat” or “very difficult” to borrow, and 22% forecast their financial condition a year out as “somewhat” or “very bad.” ("Small Business Sentiment Hits New Low", Naked Capitalism, Yves Smith)

Washington has sold out small business to the big banks and multinationals. America's jobs-generating engine has collapsed. Expect more outsourcing, more offshoring, more tax-dodging, and more middle class bloodletting for the foreseeable future. The New World Order continues apace.

Unlike the stock market, the bond market accurately reflects the real condition of the economy. 2-year Treasuries are at historic lows, while the 10-year has dipped below 3%. The flight-to-safety is pushing bond yields down even while equities continue to surge. Deflationary pressures are building, the so-called recovery is stalling. Bondholders are not taken-in by the cheery news of green shoots. They know how to read the data--spending is down, credit is tight, unemployment is headed higher, the banks are hiding their red ink, Europe's in trouble, manufacturing is about to slide, housing is in freefall, the money supply is shrinking, and the Fed is sitting on its hands doing absolutely nothing. When industry-leader Proctor & Gamble missed analysts earnings projections on Tuesday, it became apparent that product prices would continue to be slashed in an effort to retain market share. When prices fall, layoffs ensue and the downward spiral begins. Even so, Fed chairman Ben Bernanke continues to take a wait-and-see attitude.

The next leg down will be falling wages and collapsing asset prices. That will add to unemployment while putting more pressure on bank balance sheets leading to another round of bank closures. The Fed will be forced to restart quantitative easing--the central bank's bond-purchasing program designed to pump liquidity into the economy when interest rates are stuck at zero. Here's an excerpt from the New York Times:


"Pay cuts are appearing most frequently among state and local governments, which are under extraordinary budget pressures and have often already tried furloughs, i.e., docking pay in exchange for time off.....Some businesses are also cutting workers’ pay, often to help stay afloat or to eliminate their losses, although a few have seized on the slack labor market and workers’ weak bargaining power to cut pay and thereby increase their profits and competitiveness….

Factory owners sometimes warn that they will close or move jobs to lower-cost locales unless workers agree to a pay cut. In its most recent union contract, General Motors is paying new employees $14 an hour, half the rate it pays its long-term workers.

Sub-Zero, which makes refrigerators, freezers and ovens, warned its workers last month that it might close one or more factories in Wisconsin and lay off 500 employees unless they accepted a 20 percent cut in wages and benefits…

David Lewin, a professor of management at the University of California, Los Angeles, who has written extensively on employee compensation, says some cuts are also quietly taking place among nonunion employers." ("More Workers Face Pay Cuts, Not Furloughs", Steven Greenhouse, New York Times)

The economy is slipping fast into deflation, but it's not too late to act. The bond market is telling us that the economy needs more fiscal stimulus. The labor market is telling us that the economy needs more fiscal stimulus. The housing market s telling us that the economy needs more fiscal stimulus. Manufacturing, consumer spending, consumer credit and bank lending are all telling us that the economy needs more fiscal stimulus. Every sector and datapoint is telling us the economy needs more fiscal stimulus. But congress, the White House, and the myriad far-right think tanks and foundations are telling us that they want debt consolidation, austerity measures, structural adjustment and belt-tightening. "That is what the market demands", they opine. Here is a response from economist J.Bradford DeLong from his blog "Grasping Reality With Both Hands":

"What else does history tell us? It tells us that in 1925 Chancellor of the Exchequer Winston Churchill was ill-served when he rejected the arguments of John Maynard Keynes and accepted the arguments of his Treasury staff that Britain required retrenchment and austerity: Churchill thus gave Britain a three-year head start on suffering from the Great Depression.

It tells us that from 1930-1936 the belief of government after government of France’s Third Republic that if only they retrenched a little longer that the confidence of world capital markets in France would be so great that it could escape the Great Depression unscathed: the length of the Great Depression and the class war thus engendered in France weakened it enormously in the late 1930s.....” It teaches us that Weimar German SPD leader Rudolf Hilferding was extremely ill-advised to commit the SPD to policies of retrenchment and austerity when his labour economist Wladimir Woytinsky was calling for the SPD to develop a plan for a New Deal for Germany. And it teaches us that in his memoirs U.S. President Herbert Hoover, who was bitter about many things, was bitterest that he had let Treasury Secretary Andrew Mellon hamstring Hoover’s progressive impulses and lead the Hoover administration to policies of retrenchment and austerity.

History teaches us that when none of the three clear and present dangers that justify retrenchment and austerity--interest-rate crowding-out, rising inflationary pressures on consumer prices, national overleverage via borrowing in foreign currencies--are present, you should not retrench and austerity: don’t call the fire truck when there is no smoke. And history teaches us that when economies suffer from high unemployment, enormous excess capacity, incipient deflation, businesses terrified of a lack of customers, and an enormous excess demand for high quality assets, then is the time for expansion and stimulus: when the deck is awash, start bailing." ("Jean-Claude trichet rejects the counsels of history", J.Bradford DeLong, "Grasping Reality With Both Hands")

Depression is avoidable. Unfortunately, policymakers are dead-set on dragging the economy into another Depression. And that's the tragedy.

[Gar]

ditto all that. I've just become unemployed after 31 years this past Tuesday. It sure would be nice to get picked up by another company right away and profit from the severance, but I'm a realist.

I'll keep my special car to the end.

Gar (fixin cars for hire now)

[Terry Haines]

Sorry to hear that,hope something comes up for you. Also,FWIW,once you are past around,well...age XX,you can guess that most do not want to hire..Good luck.

[Terry Haines]

Economists Herald New Great Depression


Monday, Aug 9th, 2010
The world is currently experiencing the modern day equivalent of the Great Depression, according to a prominent economist who has added his voice to scores of others now forecasting ongoing economic doom on a scale not seen since the 1930s.
Robin Griffiths, a technical strategist at Cazenove Capital, told CNBC Monday that he sees the stock market bottoming out in October as the world has entered significant financial depression.
“Equities are for losers and bond markets for winners. Equities are simply for people who like losing money,” Griffiths said.
“A double-dip is inevitable and imminent, as Keynesian stimulus measures have never worked anywhere. We are in the equivalent of a Great Depression following 3 years of credit crisis,” he added.
Griffiths also says he has charted a 20-year secular downturn in the West, which we are currently halfway through.
Griffiths’ comments echo those of other notable economists and experts who have concluded that zero growth, mass unemployment, and devastating monetary tightening spells depression on a 1932 level.
With real measures of unemployment having been at around 20% and rising for some time, other analysts have pointed out that the numbers are in the same ballpark as the Great Depression.
The number of Americans relying on food stamps is at a record level of over 40.8 million, that is one out of every eight, with the figure projected to rise to 43.3 million next year. At the height of the Great Depression, the rate was just one out of thirty-five Americans.
Furthermore, the M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the all the stimulus activity.
July’s dismal jobs report and forecasts of even weaker job growth ahead, along with signs of food inflation, also signals an era of stagflation is upon us, a phenomenon not seen during even the Great Depression


Other economists are beginning to pin the blame for the continuing spiral into depression at the feet of the central bankers:
“The major problem is that quantitative easing has been counter-productive.” Brendan Brown, head of research at Mitsubishi UFJ Securities tells CNBC.
“The central banks have stopped prices from falling. When prices fall, people buy but by shoring up asset prices the central bankers have stood in the way of recovery,” he added.
“The big risk is that the Fed reacts to its own depression. The Fed could over-react and would be better off going on holiday rather than announcing yet more QE,” Brown said on the eve of a Fed meeting to discuss more QE

[Terry Haines]

Fed Leads America “To The Brink Of Collapse” (from around the web)


Bernanke announcement that central bank will buy US debt marks point of no return



Thursday, August 12, 2010
When even the New York Times and CNN are admitting that the United States faces not only a double-dip recession but potentially a new great depression, any alarm bells that have not been rung should now be sounding loudly.
Following in the footsteps of the New York Times’ David Krugman, who in June wrote that the United States had entered a third depression similar to the Long Depression of the 19th century, CNN Money carried an article yesterday brazenly entitled, Is this finally the economic collapse?.
The piece, written by Keith R. McCullough, points out that the Fed’s announcement that it will start buying Treasury debt, is a “crossing the Rubicon” moment and “could lead the country to the brink of collapse”.
“Crossing the 90% debt/GDP threshold is the equivalent of crossing the proverbial Rubicon of economic growth. It’s a point from which it’s almost impossible to return,” states the article, adding that the market has not responded to quantitative easing so to engage in more of the same would be completely futile.
“With 40.8 million Americans on food stamps (record high) and 45% of the unemployed having been seeking employment for 27 weeks or more (record high), what’s left if (or when) QE2 doesn’t kick start GDP growth? Should we start begging for QE3? Should we cancel the bomb of the National Association of Realtors’ existing home sales report, scheduled for public release on August 24th? Or should we bite the bullet and accept that current economic policy dictates 0% returns-on-savings, even as Washington continues to lever-up our future to the point of economic collapse?” writes McCullough.
The Dow Jones slipped by 265 points yesterday as both the Bank of England and the Federal Reserve indicated that, as we predicted all along, the happy clappers who blithely talked of “robust recovery” were in fact completely wrong and now that the futile and transitory life-support machine of quantitative easing has been turned off, the picture looks almost as bad as when the crisis began in 2008.


Predictions on GDP growth seem to be shrinking by the day as Ben Bernanke greases the skids for QE2 – a fresh round of printing money out of thin air, destroying the long term value of the dollar which has already had 9 consecutive down weeks since June but ensuring the central bankers that run the United States continue to reap lucrative interest payments on the spiraling national debt. The U.S. government, via the taxpayer, paid out nearly $20 billion in interest on debt last month alone, as the Federal Reserve enjoys record profits, only 20 per cent of which is returned to the Treasury.
With Barack Obama’s political dynasty crashing and burning just as fast as hopes of an economic recovery combust, while rhetoric and tension with Iran reaches a crescendo, from different directions these three developments race towards an identical and ominous consequence – war.
Just as the Great Depression was only really neutralized by the involvement of American forces in World War II in 1941, conflict on a similar scale could be the only tool with which to reverse the decline.
The elitists who run the planet would seemingly prefer to opt for a slow, suffocating, anemic decline that gradually lowers living standards and stealthily deflates the American dream without the victims being able to sufficiently rouse themselves from their fluoride-induced slumber to do anything about it. But with the pace of events seemingly now getting out of hand even for the custodians of the new world order, more drastic action may be called for.
With the agenda for world government frustratingly behind schedule, the more daring move would be to launch another catastrophic global war in a desperate effort to kill innumerable birds with one huge stone. The consequences would of course be horrific for mankind, but from the ashes of world war three, the globalists would be able to re-build the globe in their image.
The stakes have not been this high for some 70 years, and as Marc Faber advised recently, the best things to do to prepare for whatever is coming are to buy gold, move away from urban areas and purchase farmland, and be prepared to defend that land with force should civil unrest and food riots occur, as many are now forecasting.

[Terry Haines]

CEOs Blame Consumer Class for Joblessness: Admit Economy Grows From Bottom Up
By Eric Blair



The economic debate has been going on for decades: if only we give more money to the wealthy Elite, they will create jobs and some crumbs will trickle down to the hungry public. Many in the middle-class herd bought this carrot in hopes of heehawing their way into the next tax bracket.
Indeed, this approach may have been effective during the industrial revolution when entrepreneurs used the capital to open American factories. And surely this method can also work if fair trade agreements existed that would motivate job growth at home, but that is just not the world we live in anymore.
These days it seems ludicrous to give the international robber barons even more when they have exited the U.S. manufacturing stage and have no intention of returning. They also seem to have no intention of investing in America until public consumption resumes — admitting that middle-class consumption drives domestic job growth, not them with even more money in their already fat pocketbooks.
The Washington Post reported Friday in a revealing article titled, “With consumers slow to spend, businesses are slow to hire.”

Corporate profits are soaring. Companies are sitting on billions of dollars of cash. And still, they’ve yet to amp up hiring or make major investments — the missing ingredients for a strong economic recovery.
Many Democrats say the economy needs more stimulus. Business lobbyists and their Republican allies say it needs less regulation and lower taxes.
But here in the heartland of America, senior executives say neither side’s assessment fits.
They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis.
In other words, if we could only get more money to the consumer-class so they can spend it, then maybe then we can create more jobs. The article stated that David Speer, CEO of Illinois Tool Works which employs 60,000 people worldwide, “As long as U.S. consumers remain deeply strained, he is unlikely to undertake aggressive expansion.”
Siemens Industries’ CEO, Daryl Dulaney, was also quoted as saying ”It’s a different era. Our hiring and investment decisions have to be prudent and reflect that.”
Dr. Paul Craig Roberts, former Assistant Secretary of Treasury in a scathing article this week, describes this “different era” and how Globalism and transnational corporations have mutated ” the New Economy:”
Wall Street and shareholders and executives of transnational corporations have made billions by moving 39% of US manufacturing offshore to boost the GDP and employment of foreign countries, such as China, while impoverishing their former American work force. Congress and the economics profession have cheered this on as “the New Economy.”
Bought-and-paid-for-economists told us that “the new economy” would make us all rich, and so did the financial press. We were well rid, they claimed, of the “old” industries and manufactures, the departure of which destroyed the tax base of so many American cities and states and the livelihood of millions of Americans.
The bought-and-paid-for-economists got all the media forums for a decade. While they lied, the US economy died.
And in Robert’s another article this week he describes how the tax and cut debate is flawed in this New Economy:
Perhaps economists lack imagination, or perhaps they don’t want to be cut off from Wall Street and corporate subsidies, but Social Security and Medicare are insufficient at their present levels, especially considering the erosion of private pensions by the dot-com, derivative and real estate bubbles. Cuts in Social Security and Medicare, for which people have paid 15 per cent of their earnings all their lives, would result in starvation and deaths from curable diseases.
Tax increases make even less sense. It is widely acknowledged that the majority of households cannot survive on one job. Both husband and wife work and often one of the partners has two jobs in order to make ends meet. Raising taxes makes it harder to make ends meet — thus more foreclosures, more food stamps, more homelessness. What kind of economist or humane person thinks this is a solution?
Ah, but we will tax the rich. The rich have enough money. They will simply stop earning.
In July I wrote, “The deficit panic mode is ramping up the rerun political show as fiscal conservatives echo the age-old mantra ‘cut taxes and spending,’ while the progressives pretend to be for the little guy and demand more public spending. However, every economist (and central banker) worth their salt knows that when the money supply contracts, the economy goes into a depression — while expanding the money supply to the consumer class stimulates economic growth.”
Although the monetary base has spiked off the charts, mostly to absorb toxic financial products by bailing out the banks, the supply of money has not yet trickled into the real economy. The Elite are flush with cash, as the Post article states, but they refuse to spend it until consumers start spending — like a game of Chicken. And as Dr. Roberts wrote, the rich “already have enough money” and are unlikely to invest it domestically in this “New Economy.”
Since we have bailed out the top (banksters) with flawed hopes that they will begin lending again, it seems the money would have been better spent going directly to the consumer class without the Elite filter. This would have directly added money supply into the real economy instead of being hijacked by the criminal financial system that caused the collapse.
Unfortunately, because of the engineered deficits to feed the military-industrial complex, off-shore multinationals, and the banksters, we no longer have enough resources should the states or average Americans need help — but the wars are likely to continue and Social Security is likely to be cut. God Bless America — the shining city on the hill.