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Since June 2009 Americans have lived in
the false reality of a recovered economy. Various fake news and manipulated
statistics have been used to create this false impression. However,
indicators that really count have not supported the false picture and were
ignored.
For
example, it is normal in a recovering or expanding economy for the labor force
participation rate to rise as people enter the work force to take advantage of
the job opportunities. During
the decade of the long recovery, from June 2009 through May 2019, the labor
force participation rate consistently fell from 65.7 to 62.8 percent. https://www.bls.gov/charts/employment-situation/civilian-labor-force-participation-rate.htm
Another
characteristic of a long expansion is high and rising business investment.
However, American
corporations have used their profits not for expansion, but to reduce their
market capitalization by buying back their stock. Moreover, many have gone further and borrowed money in order to
repurchase their shares, thus indebting their companies as they reduced their
capitalization! That
boards, executives, and shareholders chose to loot their own companies
indicates that the executives and owners do not perceive an economy that
warrants new investment.
How is the alleged 10-year boom reconcilled
with an economy in which corporations see no investment opportunities?
Over the
course of the alleged recovery, real retail sales growth has declined, standing
today at 1.3%. https://www.multpl.com/us-real-retail-sales-growth This
figure is an overstatement, because the measurement of inflation has been
revised in ways that understate inflation. As an example, the consumer price
index, which formerly measured the cost of a constant standard of living, now
measures the cost of a variable
standard of living. If
the cost of an item in the index rises, the item is replaced by a lower cost
alternative, thus reducing the measured rate of inflation. Other price
increases are redefined as quality improvements, and their impact on inflation
is neutralized.
Real
retail sales cannot grow when “for most U.S. workers, real wages have barely
budged in decades.” https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/
For full-time employed men real wages have
fallen 4.4% since 1973. https://www.businessinsider.com/record-median-household-income-is-hiding-a-chilling-fact-2017-9
Economic
shills explain away the facts. For example, they argue that people are
working more hours, so their real earnings are up although their real wages are
not.
Others
argue that the declining labor force participation rate reflects baby boomer retirements. Of
course, if you look around in Home Depot and Walmart, you will see many
retirees working to supplement their Social Security pensions that have been
denied cost of living adjustments by the undermeasurement of inflation.
Other
economic shills say that the low unemployment rate means there is a labor
shortage and that everyone who wants a job has one. They
don’t tell you that unemployment
has been defined so as to exclude millions of discouraged workers who could not
find jobs and gave up looking. If you have not looked for a job in the
past 4 weeks, you are no longer considered to be in the work force. Thus,
your unemployment does not count.
It is
expensive to look for employment. Scarce money has to be spent on
appearance and transportation, and after awhile the money runs out. It is
emotionally expensive as well. Constant rejections hardly build
confidence or hope. People
turn to cash odd jobs in order to survive. It turns out that many of the homeless
have jobs, but do not earn enough to cover rent. Therefore,
they live on the streets.
The propagandistic 3.5% unemployment rate
(U3) does not include any of the millions of discouraged workers who cannot
find jobs. The government does
have a seldom reported U6 measure of unemployment that includes short-term
discouraged workers. As of
last month this rate stood at 7.1%, more than double the 3.5% rate. John
Williams of shadowstats.com continues
to estimate the long-term discouraged workers, as the government formerly did. He
finds the actual US rate of unemployment to be 21%.
The 21%
rate makes sense in light of Census Bureau reports that one-third of Americans
age 18-34 live at home with parents because they can’t earn enough to supprt an
independent existence. https://www.cnsnews.com/news/article/terence-p-jeffrey/census-more-americans-18-34-now-live-parents-spouse
According
to Federal Reserve reports, 40 % of American households cannot raise $400
cash. https://www.cnbc.com/2018/05/22/fed-survey-40-percent-of-adults-cant-cover-400-emergency-expense.html
The US economy was put into decline by
short-sighted capitalist greed. When the Soviet Union collapsed in the
last decade of the 20th century, India and China opened their economies to the
Western countries. Corporations
saw in the low cost of Chinese and Indian labor opportunities to increase their
profits and share prices by producing offshore the goods and services for their
domestic markets. Those
hesitant to desert their home towns and work forces were pushed offshore by
Wall Street’s threats to finance takeovers unless they increased their profits.
The shift of
millions of high productivity, high value-added American jobs to Asia wrecked
the careers and prospects of millions of Americans and severely impacted state
and local budgets and pension funds. The external costs of jobs offshoring were extremely high. The cost to the economy
far exceeded the profits gained by jobs offshoring. Almost
overnight prosperous American cities, once a source of manufacturing and
industrial strength, became economic ruins.https://www.claritypress.com/product/the-failure-of-laissez-faire-capitalism/ The
“trade war” with China is an orchestration to cover up the fact that America’s
economic problems are the result of its own corporations and Wall Street moving
American jobs offshore and because the US government did nothing to stop the
deconstruction of the economy.
The
Reagan administration’s supply-side economic policy, always misrepresented and
wrongly described, cured stagflation, the malaise of rising inflation and
unemployment described at the time as worsening “Phillips curve” trade-offs
between inflation and unemployment. No one has seen a Phillips curve since
the Reagan administration got rid of it. The Federal Reserve hasn’t even been
able to resurrect it with years of money printing. The
Reagan administration had the economy poised for long-run non-inflationary
growth, a prospect that was foiled by the rise of jobs offshoring.
Normally a government would be protective
of jobs as the government wants to take in tax revenues rather than to pay out
unemployment and social welfare benefits. Politicians want economic success, not
economic failure. But
greed overcame judgment, and the economy’s prospects were sacrificed to
short-term corporate and Wall Street greed.
The profits
from jobs offshoring are short-term, because jobs offshoring is based on the
fallacy of composition—the assumption that what is true for a part is true for
the whole. An
individual corporation, indeed a number of corporations, can benefit by
abandoning its domestic work force and producing abroad for its domestic
market. But when many firms do the same, the impact on domestic consumer income
is severe. As
Walmart jobs don’t pay manufacturing wages, aggregate consumer demand takes a
hit from declining incomes, and there is less demand for the offshoring firms’
products. Economic growth falters. When this happened, the solution of Alan
Greenspan, the Federal Reserve Chairman at the time, was to substitute an
expansion of consumer debt for the missing growth in consumer income. The
problem with his solution is that the growth of consumer debt is limited by
consumer income. When
the debt can’t be serviced, it can’t grow. Moreover, debt service drains income into interest and fee
charges, further reducing consumer purchasing power. Thus,
the offshoring of jobs has limited the expansion of aggregate consumer demand. As
corporations are buying back their stock instead of investing, there is nothing
to drive the economy. The
economic growth figures we have been seeing are illusions produced by the
understatement of inflation.
Much of America’s post-World War II
prosperity and most of its power are due to the US dollar’s role as world
reserve currency. This
role guarantees a worldwide demand for dollars, and this demand for dollars
means that the world finances US budget and trade deficits by purchasing US
debt. The
world gives us goods and services in exchange for our paper money. In
other words, being the reserve currency allows a country to pay its bills by
printing money.
A person
would think that a government would be protective of such an advantage and not
encourage foreigners to abandon dollars. But the US government, reckless in its
arrogance, hubris, and utter ignorance, has done all in its power to cause
flight from the dollar. The US government
uses the dollar-based financial system to coerce other countries to accommodate
American interests at their expense. Sanctions on other countries, threats of
sanctions, asset freezes and confiscations, and so forth have driven large
chunks of the world—Russia, China, India, Iran—into non-dollar transactions
that reduce the demand for dollars. Threats against Europeans for purchasing
Russian energy and Chinese technology products are alienating elements of
Washington’s European empire. A country with the massive indebtedness
of the US government would quickly be reduced to Third World status if the
value of the dollar collapsed from lack of demand.
There are
many countries in the world that have bad leadership, but US leadership is the
worst of all. Never very good, US
leadership went into precipitous and continuous decline with the advent of the
Clintons, continuing through Bush, Obama, and Trump. American
credibility is at a low point. Fools like John Bolton and Pompeo think they can
restore credibility by blowing up countries. Unless the dangerous fools are fired, we
will all have to experience how wrong they are.
Formerly
the Federal Reserve conducted monetary policy with the purpose of minimizing
inflation and unemployment, but today and for the past decade the Federal
Reserve conducts monetary policy for the purpose of protecting the balance
sheets of the banks that are “too big to fail” and other favored financial
institutions. Therefore, it is problematic to expect the same results.
Today it is possible to have a
recession and to maintain high prices of financial instruments due to Fed
support of the instruments. Today it is possible for the Fed to prevent a stock
market decline by purchasing S&P futures, and to prevent a gold price rise
by having its agents dump naked gold shorts in the gold futures market.
Such things as these were not done when I was in the Treasury. This type
of intervention originated in the plunge protection team created by the Bush
people in the last year of the Reagan administration. Once the Fed
learned how to use these instruments, it has done so more aggressively.
Market watchers who go by past trends
overlook that today market manipulation by central authorities plays a larger
role than in the past. They mistakenly expect trends established by market
forces to hold in a manipulated economic environment.
