Jobs offshoring, financial deregulation, and ten years of wars have severely damaged the US economy and the economic prospects of 90% of the American population. The signs are everywhere in front of our eyes. They are in the income distribution data, the BLS jobs data, the Census data, the poverty figures, and the high number of food stamp recipients.
The signs are in the foreclosed and boarded up homes and the accompanying homelessness. They are in closed strip malls, in office building, warehouse, and shopping mall vacancies, and in the huge population losses of America’s manufacturing cities.
The New Economy was a hoax, like Saddam Hussein’s “weapons of mass destruction” and the “war on terror.” Americans were deceived by “their” corrupt government, by greed-driven corporations, and by corporate shills among economists and the pundit class into believing that they were trading middle class “dirty fingernail” jobs in manufacturing for better middle class “clean fingernail” high-tech service jobs. Instead, reasonably paid manufacturing and professional skill jobs, such as software engineering and information technology, were traded for lowly paid jobs as waitresses and bartenders and for jobs in ambulatory health care.
Consequently, real median US income fell for the vast majority of the population. To keep consumers spending when they had no raises, the Federal Reserve used low interest rates to create a real estate and credit bubble. The low interest rates drove up housing prices, and Americans refinanced their mortgages and spent the equity in their homes. Americans maxed out credit cards. The rise in consumer indebtedness kept consumer demand growing and the economy afloat.
But there is a limit to how far debt can outpace income, and the bubble burst. And when it burst the financial fraud that had been hidden in the euphoria was revealed. That set off the financial crisis.
As the US government is controlled by financial and armaments interests and not by the people, the government responded to the financial crisis by shoveling more debt and more hardships on the American people in order that financial interests did not have to pay for their own mistakes and crimes. Instead of blaming the responsible parties, “our” government handed the bill to the American people.
An important part of the bill is the huge number of new dollars being created in order to keep “banks too big to fail” afloat and in order to finance the federal government’s enormous budget deficit from its illegal wars. Sooner or later, the proliferation of dollars will cost the American people sharply higher prices.
We will return to the dollar crisis later in this column. First, let’s look at what the loss of manufacturing and manufacturing related jobs have done to the economy and the prospects of US citizens.
In the first decade of the 21st century, Detroit, Michigan, lost 25% of its population. Gary, Indiana, lost 22%. Flint, Michigan, lost 18%. Cleveland, Ohio, lost 17%. In St. Louis, Missouri, 19% of the housing is vacant. These population losses were not the result of the Black Plague or killer viruses or a nuclear attack. They were the result of corporate CEOs, pushed by their own greed, by the greed of Wall Street and that of large retailers such as Wal-Mart, aided and abetted by “our” government, into moving millions of manufacturing, software engineering, information technology, engineering, research, development, and design jobs offshore.
The process of moving American jobs offshore left cities, counties, and states with shrunken tax base. The resulting state and local budget deficits are being used to dismantle public sector unions and to cut social services. Public assets, such as water companies, and future income streams from parking meters, toll roads and bridges, are being sold off to foreign buyers in order to insure another year of local and state government solvency.
In the first decade of the 21st century, Americans lost 5,500,000 manufacturing jobs. US employment in the manufacture of computer and electronic products fell by 40%; in the production of machinery by 30%, in motor vehicles and parts by 44%, and in the manufacture of clothing by 66%.
In other words, in ten years the US economy was decimated by jobs offshoring for the sole purpose of higher rewards to capital in the form of multi-million dollar executive bonuses and large shareholder capital gains. A few hedge fund executives were paid a billion dollars in annual renumeration and a couple of dozen of them were paid $500 million in annual compensation. What sense does that make? Huge fortunes paid for one year’s work, not in productive activity but in destroying the financial system and the value of pensions that tens of millions of Americans had worked their lives to achieve.
While this was happening, “our” government squandered several trillion dollars in Iraq and Afghanistan on wars based on lies and deception. The American people were lied to and deceived, and continue to be, in order that arms industries can enjoy record profits and in order that crazed neoconservative war criminals could pursue their ideology of world hegemony and empire. We were even lied to about US war casualties. As Dennis Loo points out in his book, Globalization and the Demolition of Society (2011), the 4,801 Americans killed in action in Iraq leaves out the 50,000 suicides of veterans and active duty US troops. The truth of the matter is that the casualties of the Iraq war are as high as those of the Vietnam war.
With all income gains redirected to the financial and war sectors, the distribution of income in the US has become, according to the Organization for Economic Co-operation and Development (OECD), the worst of all developed countries. The Central Intelligence Agency—yes, the CIA—concluded that America had achieved not only the worst income distribution of all developed countries but also a worst income distribution than Iran, Cambodia, Uganda, Nicaragua, Russia, and China.
The economic “recovery” that Washington and the financial press hype is all talk and no reality. The “recovery” is produced by understating the inflation rate, which overstates GDP growth, and by dropping the long-term unemployed out of the measurement of unemployment. An economy, the driving engine of which has been moved offshore, cannot recover unless the economy is brought back home, and that requires the repeal of Globalism.
Overstatement is common in order to produce good news, but eventually it catches up with the spinmeisters. Last month the National Association of Realtors reported that it had overstated home sales by 3.5 million. Statistician John Williams (shadowstats.com) reports that the “birth/death” model, which the Bureau of Labor Statistics uses to estimate the net effect on jobs data of unreported business closures and new start-ups, overstates the annual number of new jobs during troubled economic times by approximately one million jobs annually. Each year the accumulated monthly overstatements are quietly revised away by BLS.
Similarly, data can be understated in order to hide bad news. The understatement of inflation results from basing the Consumer Price Index (CPI) on substitution rather than on a fixed basket of goods, the traditional method. During the “progressive” Clinton regime, a deceptive change was made to the CPI. If the price of a good rises, for example, sirloin steak, the higher price does not appear in the index. Instead, the CPI assumes that consumers switch from sirloin to a cheaper cut, such as round steak. Thus, the rise in prices is negated by substituting goods that represent a lower standard of living.
By understating inflation, the government has been able to produce a “recovery,” when in fact the positive economic growth number is created by counting inflation or nominal GDP growth as real GDP growth. John Williams says that when inflation is measured in the old way, prior to Clinton, the US has experienced essentially no real GDP growth in the 21st century. In other words, we have had a decade of essentially no growth in the GDP while the presstitutes in the media proclaim “recovery.”
The government’s forecasts of its budget deficits are based on the assumption that an economic recovery is underway. If in fact there is no recovery and the economy is about to worsen, the trillion dollar plus deficits that the government forecasts for as far as the eye can see will be even larger. As more debt creation likely means more money creation by the Federal Reserve, the future purchasing power of the US dollar appears to be dismal.
The federal government’s reckless issuance of debt in order to finance its hegemonic wars and the Federal Reserve’s misuse of its authority to create $16.1 trillion in secret loans to US and European banks (as revealed by the GAO audit of the Fed) have created an enormous number of new dollars. In addition, financial deregulation has resulted in banks creating paper claims on real assets that far exceed the value of the underlying real assets. This is an untenable situation. How is it likely to be resolved?
This is a two-part question: there is the banks’ debt and there is the federal government’s debt. Both are serious problems.
Mortgage-backed derivatives exceed the value of the homes, and Credit Default Swaps and other financial innovations have resulted in the paper claims on assets exceeding the value of the underlying real assets. Consider Credit Default Swaps, a form of unreserved “insurance.” Investors, really speculators, do not have to own a Greek government bond or a mortgage-backed derivative in order to purchase a “swap” that insures its value. Thus, the total value of swaps issued on Greek bonds, for example, can far exceed the total value of Greek bonds. The value of swaps issued on mortgage-backed securities can exceed the total value of mortgaged real estate.
Financial institutions, such as US banks, which sold “swaps” on Greek bonds were gambling that Greece would be bailed out and would not default. The financial institutions regarded as gravy the fees paid to them for “guarantees” on which they cannot make good. I don’t know the extent of swaps on sovereign debt, but I recently saw a report that the Bank of America alone has sold $2.1 trillion in swaps on sovereign debt. Imagine the crisis if the Bank of America had to pay off these swaps.
Obviously, if European sovereign debt blows up, the US financial crisis will become deeper.
The GAO audit of the Federal Reserve showed that the Fed made secret loans to banks of $16.1 trillion between December 2007 and June 2010. To put that figure in perspective, it is larger than the US GDP and larger than the US public debt. In other words, it took a tremendous amount of new money to keep the financial system from collapsing. Despite this huge sum pumped into the banking system, the banks are still regarded as weak and troubled. The insecurity of bank depositors is reflected in the one basis point interest rate on Treasury bill money funds. Many Americans are willing to receive a negative interest rate in order to have their money in instruments that can be paid off with newly created money.
When the paper claims on assets exceed the value of the underlying assets, one solution could be slow write downs of bad paper over time as the banks’ profits permit. This would require suspending the mark-to-market rule and permitting the banks to remain “solvent” by counting bad assets as good until profits permitted write-downs.
This would be a sensible solution if the banks have profitable prospects. But with consumers too indebted and broke to borrow and the consumer market too impaired for good sales prospects for businesses, what profitable prospects do banks have? Only those created by the Federal Reserve’s support of the “carry trade,” the ability of financial institutions to borrow from the Federal Reserve at essentially zero interest rates and to put the money in Greek and Italian sovereign debt. This is gambling, otherwise known as “casino banking.”
If reality rules out the solution of gradual write-downs, all that remains is bankruptcy or inflation. The Federal Reserve and the US government have ruled out permitting the banks to fail. That leaves inflation.
Except for a relatively few indexed Treasury bonds, financial instruments are in nominal values. Thus bad debts can be inflated away by driving up the nominal values of the underlying real assets and the nominal values of wages and salaries. It seems that the path that policymakers are taking is to reduce the purchasing power of money in order to drive up nominal asset values so that they exceed the claims against them.
For example, consider a person with a $200,000 mortgage whose home, if he could sell it, is only worth $175,000. This person’s asset is under water. However, if inflation drives up the price of his home to $250,000, the person has gone from a balance sheet $25,000 in the red to one $50,000 in the black. It seems clear that in order to save the financial institutions and itself, the government will sacrifice the purchasing power of the dollar.
Thus, the same solution appears to be in effect for the government’s growing debt. For the moment the US dollar is benefitting from flight from the euro due to the hyped sovereign debt crisis in Europe. As in the past, a scared financial world takes refuge in the dollar and in US Treasury debt instruments. The main difference between Greece’s indebtedness and America’s is that Greece cannot print euros, but the US can print dollars. Thus holders of US debt can always get back the nominal dollar value of Treasury debt issues. Of course, the real purchasing power of these printed dollars can be very low.
The dollar as a refuge is a short-run phenomenon. Once the transfer out of euros into dollars has occurred, how does the Treasury sell the next round of bonds to finance trillion dollar deficits? Sooner or later the Federal Reserve will be back to monetizing the new Treasury bond issues, that is, the Federal Reserve will create new money with which to purchase the new Treasury bond issues.
Sooner or later the new money will find its way into the economy and drive up prices, or the continual monetization of new US Treasury debt will cause the world to lose confidence in the dollar. Heavy sales of US dollars in currency markets would drive down the exchange value of the dollar and raise the prices of imports such as energy, manufactured goods, and food. Either way inflation is the result. Indeed, both can occur together, which is the likely result.
Normally, inflation is associated with a booming economy, but as too much of the US economy has been moved offshore, there is little left to boom other than prices. Therefore, the combination of high inflation with high unemployment is a likely fate that awaits Americans.
I cannot predict how long policymakers can hold economic armageddon at bay with spin, money creation, currency swaps, intervention in gold and silver markets, and outright lies. The onset could be sudden and take place this year, but we shouldn’t underestimate the power of spin over a gullible public that trusts “their” government and fervently believes that Muslim terrorists are out to get them and that the demise of the Constitution, the product of a eight hundred year struggle that produced Anglo-American civil liberty, is worth the price of “safety.”
There is no safety in a police state and a debauched currency. The comfortable world that Americans have known is falling apart at the seams.
This article was originally published at PaulCraigRoberts.org. It has been republished here with permission from the copyright owner.
The Western world is burning while their political/financial/military leaders indulge in senseless orgies of war, mayhem and cultural genocide. This, like Rome, must surely mean the end of the Western world as we know it. As though the greater Middle East is not enough fodder for the US, it is now putting its feet into Asia, AGAIN. I would have thought that with vietnam still fresh in our minds, Obama would refrain from stepping into that region again. But the white supremist psyche is strong and needs to be fed. We watch in morbid anticipation of the senseless expenditure of man and weapons in conflicts that need not happen. It must be true that whom the gods wish to destroy, they first make mad.
To add even more perspective to the consequences of outsourcing so much of our manufacturing to other countries, you might also want to read a poem called “It used to be made in America.” You can see it online at http://www.itusedtobemadeinamerica.com
-Robert Barrows, San Mateo, CA
So sad,but all of this was predicted years ago. When you decouple man from the natural law and he becomes a materialistic zombie , the result is the sick society that we have today.
Politics and economic activity are reflective of the populace. We vote ourselves other people’s money. Entertainment and sports are the new religions. We mock virtue. Either there will be another ‘Great Awakening’ or we’ll be in a death spiral.
What’s a body to do? Concentrate on getting out of debt. Stockpile non-perishable food, water, and some other emergency supplies. Parents of school age children should homeschool them if at all possible. ( One of the main reasons high tech jobs have been outsourced is the fraudulent education system.Thank you teachers unions! ) And then, pray as if your lives depend upon it. They do.
I know that only a Civilized, Educated, and Humane society can be in a position to act wisely and especially calmly; so as to understand that these things need to be said as the Only way to restore the Economy, and create the jobs that all People need and are entitled to.
Unless the European Union is sufficiently Civilized, Educated, and Humane, they will not be able to handle the cure for the disease of the Euro Zone, because they will not be intelligent enough or forgiving enough to for that, and so I understand if the Web Site realises this, and removes this comment.
I was asked at another Web Site to provide evidence for what I think I cannot provide evidence for, and so it can only remain a genuinely held opinion, but I will provide a Method for finding any evidence for my opinion.
It is my honest opinion that Many European Union Politicians are the Puppets of German Banks, and that they have Voluntarily Agreed to be Secretly Filmed in Acts of Bestiality, and in some instances they have Voluntarily Agreed to be Secretly Filmed in Acts of Paedophilia to ensure their continued Puppetship to their Fourth Reich Puppet Masters.
I will give my reasons why I think this is the way it is at the end of the comment, and I have already published that elsewhere, but I want to give my Method for finding any evidence.
The first thing I need to say, is, that because none of the People involved in this matter will ever Confess willingly, and that is the only credible evidence that can be said to be evidence, if it is Confessed without any duress or compulsion.
The Euro Banksters and Plutocrats who find the Puppet Politicians and make the Films, will not volunteer to give them to the Public, and because they Rule their part of the World, and so, unless they stumble upon them accidentally, no one can find these Secret Films of Puppet Politicians who have Voluntarily Agreed to be Secretly Filmed in Acts of Bestiality, and in some instances they have Voluntarily Agreed to be Secretly Filmed in Acts of Paedophilia to ensure their continued Puppetship to their Fourth Reich Banskter Puppet Masters.
If a former Puppet Politician were to confess, then People could accuse that former Puppet Politician of being paid Money to lie.
We know that if a lie is repeated often enough, then most People will believe it, and they will act on that belief, regardless of the fact that it is a lie.
The Unprincipled have used this Proven Method to manipulate People, and even today, Many Americans believe that Saddam Hussein was behind the September 11 2001 attacks, even though the have been told that Saddam Hussein was innocent on that account.
There are other examples, but the important thing is that we know how People are deceived by repeated lying, and they are manipulated by what is just another form of nagging.
The Banksters and the Plutocrats own the Main Stream Media, and if they and the Media deny that there are any European Politicians who have Voluntarily Agreed to be Secretly Filmed in Acts of Bestiality or Paedophilia, in order to become Rich, then the Public will believe the Media.
This is because we know that a lie repeated often enough will be believed by most People, where the bigger the lie is; the better are the chances of it being believed.
We all know that the Banksters and Plutocrats will not allow the Puppet Politicians to bring a camera to Film themselves, and that there would be no reason why the Initiating Puppet Politicians would want to Film themself, because they Strongly Lust for the Dirty Money from their Puppet Masters, and let us just say to put it mildly, that they value some privacy.
I am not a Detective, but I think that a Special Secret Detective Unit in each Country, set up after an International Summit Conference of Detectives would come up with the best ways to prove this Crime against Humanity and this crime against Democracy.
We know that former American Rulers such as Abraham Lincoln and John Kennedy who did not do what the Banksters wanted were assassinated.
The Official Reasons that were given by the American Investigators were always lies, but the real reason was because they were not Puppets of the Banksters.
After the murder of John Kennedy that was blamed on an innocent man, the American Plutocrats and Banksters had to invent a more subtle way to prevent disobedience from their Puppet Politicians.
I cannot provide the evidence because no Puppet would admit to it, but I could ask anyone to disprove what I said, and they cannot.
We know that President Nixon said that he was very poor, and he come just after President Kennedy and he gave the Banksters the Fiat Currency that they wanted, or more Correctly the Banksters gave themselves Fiat Currency, and Nixon just happened to be there to announce it, and this has caused the problems in the Global Economy.
In this World where certain People will murder others for power and money, then it would be naive in the extreme to suggest that they would not Demand that those who Strongly Lust after their Dirty Money of the Euro-American Plutocrats and Banksters would be too moral to have a System of Guarantees that their Puppets will always obey their Decrees, because those who want Dirty Money must have A Dirty Personality.
If a Person is Filmed in Acts of Bestiality, they will not go to jail, but they probably never work again.
However, if they are Filmed in Acts of Paedophilia, then they could go to Court, even as the former Prime Minister of Italy is going to Court over a similar mater, and if they were not good enough Puppets, then they will go to jail, and we know what it would be like there for Convicted Paedophiles.
I do not think that all European Union Politicians have Volunteered to be Filmed in Acts of Paedophilia and Bestiality.
However, my genuinely held opinion is that many Have Volunteered to be Filmed in Acts of Paedophilia and Bestiality to Receive their Dirty Bribe Monies, and this is why we are seeing a Democratic Deficit in Europe.
It is because of this situation, that I suggested that All European Politicians and High Official be granted a Pardon, even though Many will be Innocent of such Crimes in the past, but the Pardon must not for the date after the Pardon.
I do not see the fuss really, because after World War 2, there was an acceptance that the German Army were Nazis and Murdered People, but that was Confessed to, and People began to concentrate on the Economy.
We cannot Prove that certain Police Officers are Corrupt and that they take Bribes and even commit Criminal Offences, but we all Know that these things are Proven Facts.
The only real evidence will be if Detectives are able to catch them in the act, or if they can Secretly tape record them using the latest technology and training of professional Detectives, because the Banksters are in control of the situation.
The problem here is that they can always bribe People, and get the charges dropped, because they know the Judges.
They are some of my thoughts on the matter, and I cannot offer People proof, but it is my genuinely held opinion on this matter.