From the former Assistant Secretary of the Treasury, Paul Craig Roberts
Paul Craig Roberts Exposes The Diminishing American Economy
25 June, 2019
How is the alleged 10-year boom reconcilled with an economy in which corporations see no investment opportunities?
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.
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 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 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
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.
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.
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.
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.
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.
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.
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.
They mistakenly expect trends established by market forces to hold in a manipulated economic environment.
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