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The Myth of the “Job-less Recovery” 7 comments
Like all good parrots, the talking-heads in the North American media can be counted upon to regurgitate buzz-words over and over again – even when they don't have the faintest idea what those words mean. The latest example of mindless droning from these pseudo-reporters is that the U.S. economy is headed for a “job-less recovery”.
As with all oxymorons, no intelligent person would/should be foolish enough to add these buzz-words to his/her lexicon. By definition, an “economic recovery” means a net increase in economic activity, which also dictates positive wealth-generation. When an economy is producing wealth, this must also result in job-creation.
We can invent scenarios where such job-creation is delayed. For example, an economy with a large, but mostly automated manufacturing sector could see a surge in demand (and production) as economic conditions improve. Over the short-term, it is certainly possible that such an economy could sell most of its production abroad. Thus, an economy generating a significant increase in net wealth could temporarily produce little new employment in the domestic economy.
However, this must only be a temporary situation. Though the “trickle-down” theory of right-wing capitalists has been thoroughly discredited as a model for economic growth, there is a kernel of truth buried within this propaganda. When an economy produces significant amounts of wealth, even if that wealth-creation is focused primarily in the hands of the wealthiest members of society, these people spend some of that money – creating wealth and employment opportunities for the “little people” further down the economic ladder.
The “trickle-down” theory fails as an economic model for the same reason the phrase “job-less recovery” fails the test of rationality. When only the wealthiest people in a society have disposable income (people with enough wealth that they don't need employment income to keep spending), it is mathematically impossible to have a robust economy.
The reason for this revolves around an economic concept known as the “marginal propensity to consume”. While this sounds complicated, like most jargon, it is actually quite a simple and obvious notion when explained in ordinary English. Basically, the lower a person's level of wealth/income the more they spend out of each new dollar they receive.
Thus poor people have a marginal propensity to consume of “1” (or 100%), because due to their minimal wealth, they are forced to spend their money as fast as they receive it – just to survive. Conversely, at most, a billionaire might have a marginal propensity to consume of 0.1 (or 10%) - and likely far less – since these people have so much wealth (and consumer goods) already, that there is little need or motivation to spend any more each time their wealth increases by another dollar.
Plutarch, a Greek philosopher, uttered this famous quotation over 2,000 years ago: “An imbalance between rich and poor is the oldest and most fatal ailment of all Republics”. The reason this is true is based upon our marginal propensities to consume. When wealth is evenly dispersed in a society, this means that a high percentage of that wealth is in the hands of people with a high marginal propensity to consume.
These people spend a high percentage of each dollar they take in. And then the person receiving that dollar spends a high percentage of that dollar, and so on and so on...
Conversely, in a society where wealth is highly concentrated in a tiny percentage of the population (like the United States, today), only a small fraction of each new dollar of wealth which is produced gets spent. This small “multiplier effect” dictates weak economic activity – since instead of being spent and re-spent, money collects in large pools of “idle wealth”, which produces no economic benefit for a society.
Nowhere are these economic principles more true than in a consumer economy like the United States. With the exodus of manufacturing, the U.S. economy now produces little wealth. Therefore, for well over a decade this economy has become totally dependent on ultra-high levels of consumption to sustain the economy. In fact, for over two years, the U.S. as a whole had a negative savings rate – meaning a marginal propensity to consume of greater than 100%.
As we have seen (and as any child could predict), this was totally unsustainable. However, what makes this brief period of insanity truly frightening is that with an extremely heavy concentration of wealth, during the time when the economy had a negative savings-rate, the wealthy were still socking-away billions of dollars per year – meaning those at the bottom were spending much more than 100% of their incomes.
This brings us back (finally) to the mythical “job-less recovery”. Apart from the phony, “economic growth” of the U.S. tech-bubble, followed by the even more-fraudulent housing bubble (where illusory “wealth” produced temporary jobs), all that Americans have experienced for roughly twenty years are “job-less recoveries”.
However, as I have illustrated with fundamental principles of economics (which are based upon both mathematical and logical certainty), you cannot have a healthy economy (i.e. a real “recovery”) without the masses having significant spending power – since at no time in human history has the spending of the wealthy been enough to produce a healthy economy (this was “old news” 2,000 years ago).
Therefore, if the masses don't have jobs, then the only way they can spend money is to borrow money. Here, at last, we expose the truth of the “job-less recovery”: in previous years, Americans were able to create the (temporary) illusion of economic health through excessive borrowing – and then spending those borrowed dollars virtually as fast as they borrowed.
Essentially, simply saying “job-less recovery” became a sort of self-fulfilling prophecy, where like “Pavlov's Dogs”, Americans would automatically begin spending again (with borrowed dollars) as soon as they were told the economy had “recovered”.
There have been no “job-less recoveries” in the past – not in the United States, or anywhere else in the world. All that happened in previous “job-less recoveries” is that Americans mortgaged their futures (and the futures of their children) through dramatically increasing their debt levels, and then recklessly spending those borrowed dollars on mostly pointless consumption.
As stated before, this is completely unsustainable – and now, today, that binge is over. Americans have maxed-out their credit. The days of borrowing-and-spending are over. As a result, the only thing which can pull the U.S. economy out of what appears to be a terminal, downward spiral is real economic growth – and the jobs which always accompany such growth.
When the talking-heads (and the propagandists who put those words in their mouths) say the words “job-less recovery”, what they are really saying is “no recovery at all”. While in past years, the magic of credit-cards could conceal that false propaganda, that “magic” is a thing of the past.
Today, the absurdity of the “job-less recovery” is about to be exposed in the U.S. once-and-for-all – with sufficient clarity that even the mindless, media talking-heads will be able to see the inherent falsehood in this myth.
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This post has 7 comments:
Jeff Nielsens (AKA Tooter Turtle) company pushes gold and silver and from what I can tell he has been pushing it for a long time. He also has this massive conspiracy theory that involves lying and manipulation by almost every major government and financial institution on the globe. He believes that gold prices have been kept down for decades by banks and governments. He believes that all the gold stocks held by governments to be lies, except for of course China.
Please take what you read here with a grain of salt. (read his conspiracy theory on his companies website listed under his profile. It s a great fiction read and maybe a candidate for a made for TV "B" movie.
SHARK
"Gold Wars" Part 1,2,3
This is his big conspiracy theory and LYING, involving every major banking institutions and government in the World, ~Great Fiction READ.
"China Urges Citizens to buy Gold and Silver"
"Increase in Silver Demand comes from from Multiple Sources"
"Gold Demand Driven by Investment.. PERIOD" (love the PERIOD part, makes it so dramatic)
"Gold Has not Begun to Shine"
"Peak Gold: The New Paradigm"
"A Novice Guide to Precious Metals Part 1"
"History of Silver Part III Inventories are Gone"
"History of Silver Part II The Great Build"
The List goes on and on and on, way to numerous to list them all.
From His Companies Website profile: (Please don't miss the ONCE-IN-LIFE-TIME INVESTMENT OPPORTUNITY" Speal!)
"With the enormous upside still ahead in precious metals, this provides nothing less than a ONCE-IN-A-LIFETIME INVESTMENT OPPORTUNITY (at a time when most people are reeling from a series of economic "shocks")."
Every Article he writes/posts is super anti-USA and Europe and has an angle on pushing precious metals which his company website claims is a
"ONCE-IN-A-LIFETIME-IN...
DON"T BUY IT FOLKS!
SHARK
Sure you may disagree with his theories, but I don't see you trying too hard to refute them, bus simple denigrating Jeff personally. I've disagreed with Jeff before, but I turned it into a dialogue, which is the entire point of blogging.
You are in denial if you say that Jeff is totally wrong: there are some key fundamental problems with the U.S. economy, and he points them out accurately in many cases.
numbers, 4 months of Case-Shiller price increases in housing (which started the shit storm), etc.. It doesn't matter to his one tract mind. As soon as something is reported as positive they're lies according to him. Then if the casual reader is not paying attention don't realize he is trying to push buying precious metals down their throat.
There is no rational debating/sparring with him. I don't have the time to try give stats and figures when he simply refutes all of them as propaganda and lies.
SHARK
P.S. I will keep up the discrediting and when I don't have time I will simply cut and paste what I consider at this point to be a "Disclaimer" that should be at the bottom of every article/post he makes.
On Sep 07 11:17 PM Dirtnap wrote:
> dshark, you seem to be working very hard to discredit Jeff. I wonder
> why you are so interested in doing so?
>
> Sure you may disagree with his theories, but I don't see you trying
> too hard to refute them, bus simple denigrating Jeff personally.
> I've disagreed with Jeff before, but I turned it into a dialogue,
> which is the entire point of blogging.
>
> You are in denial if you say that Jeff is totally wrong: there are
> some key fundamental problems with the U.S. economy, and he points
> them out accurately in many cases.
-ISM number jumped 52.9 (The 1st jump above 50 in 1.5 Years and a number above 50 indicates expansion,
a jump in new orders on the magnitude of nothing seen since 2004)
-Productivity has jumped 6.6% the biggest quarterly gain in 6 Years
-GDP projected to increase in the 3rd and 4th quarter, we shall all see if this pans out.
-Case-Shiller home Prices up for 3 months for the 1st time in 3 Years
-Fannie May and Freddie Mac Home Prices up for the 1st time in Years
-Pending Homes Sales up six months running, with the last reading the biggest jump in Years
One more thing about GOLD, It is nothing more than a FIAT currency like paper money. It has value because people perceive it to be valuable and the value fluctuates just like paper money. It has no intrinsic value or use. Tell Why or for what logical reason do we put any value in GOLD??? There is no reason, unless you go back thousands of years and take the reasoning for putting a value on it from what could nearly be considered primates and the fact it was shiny and not much of it was around! It's value is mostly irrelevant in the 21st century. It's not going to $10,000 as Tooter Turtle says it's real worth is in his fictional writings on the "Gold Wars".
ONE BIG QUESTION. When the GOLD venders sell GOLD, WHAT DO THEY TAKE IN PAYMENT? More GOLD? If it's
the only thing with real value. If not why would someone selling GOLD take an exchange with anyone's FIAT currency?
Tooter Turtle (AKA Jeff Nielsen) is just afraid because a recovery is on the way and he's pissed because people haven't bought enough GOLD yet. Sorry the train has passed and in a year or so when the economy is humming along you will be stuck
here at SE still crying.
SHARK
Jeff can defend himself, and has probably elected to ignore your heckling. I will most likely do the same. I simply want others to know that you are full of yourself.
Let me give an example from an outside observer. The president just released his revised 2010 budget, other than it being fiscally irresposible, the real problem is in the obtimistic revenue projections.
The reality is for the next 10 years if we average net annual revenues of 2T we will be fortunate. So as a base you have 2T to spend, thats it. If your debt requires lets say 400B of interest payments, although some of this finds its way back to the treasury, and manditory spending = 1.2T, you have 400B of descretionary spending and to pay down debt.
So, ask yourself this question, will the US be able to repay long term debt based on this analysis? Would you buy a 10 Year Treasury Note at this point, when it looks like the currency will not maintain its value.
A debt that cannot be paid, will not be paid.
The only way to pay out the note at maturity is with devalued money. IMHO at this point in time the credit rating of the US should be S&P CCC at best.
This is why other long term investments that maintain wealth, like gold could be an option as part of your portfolio.
The Revenue for August should be out today at 2:00. We will see how we are doing.
www.fms.treas.gov/mts/...
A few other comments from what I have read.
Well, Gold does not = fiat currencies. Precious metals have been a store of wealth option for investors for a long time, gold is not denominated in fiat relative worth.
Case-shiller has been surprising from a housing price standpoint. But I think that the spike is due to speculation on foreclosures and the new home tax credit. Also, I heard that you could take the credit and use as a downpayment for FHA loan. Anyway it looks like the Treasury and Fed are desparate to produce a move up in house prices. If you look at the house price bubble historically, it still needs to drop another 15% from the last case-shiller low, to finish a traditional bubble.
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