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.
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?
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.
For
full-time employed men real wages have fallen 4.4% since 1973.
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
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.
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.
Posts
For
full-time employed men real wages have fallen 4.4% since 1973.
According
to Federal Reserve reports, 40
% of American households cannot raise $400 cash.
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