sunnsea

Our Current Economic Illusions

If you want to see what a real growth recovery looks like, check the GDP numbers from 1933 to 1936. Then it was 9 to 10% annually climbing out of a 25% unemployment rate in 1932. Enough to cut the unemployment rate to 14% by 1936, an 11% drop. You need at least 8 to 9% annual growth to reduce unemployment by 3%.

In our situation you have TARP money being day-traded, stimulus money that is mostly tax cuts with only about 10% directed toward actual projects. Therefore, most of the GDP "growth" is non-productive and even today's job figures all of the high wage sectors are still losing lots of jobs. So the overall "productivity" numbers are highly misleading. Simply adding trillions of dollars from day-trading gains divided by a shrinking workforce is not "productivity." Clearly a whole new set of numbers and criteria are needed to match an economy that is doing less and less work and more and more program stock trading but not distributing the gains from the program trading throughout the economy, in fact I would call this new paradigm, the "anti-economy." It is in fact, the end of work for most people but not the end of program trading.

Another Crisis Looms Right Around the Corner

One thing that Japan has that we no longer have is a great industrial base from which to operate. That is why our "recovery" will not last. Two mistakes that Japan made: 1) not letting the big banks fail and 2) putting more money into infrastructure in a country which already had an excellent physical infrastructure, so it came down to make-work projects (kind of like our "defense" budgets) such as bridges to no where, high speed rail lines in thinly populated parts of northern Japan, etc.. Many Japanese I speak to feel that in retrospect the social and health infrastructure should have been upgraded instead and there would have been much more benefit and money circulating in the real economy.


On Nov 25 12:33 PM woollyB wrote:

> What scares the perma bears is that the debt bubble that we are (not)
> dealing with right now is far greater than the one that caused the
> Great Depression. Notwithstanding his claims of Depression "scholarship,"
> Bernanke & Co. are following the same patterns that were followed
> back then, and repeating all the mistakes that Japan made.
>
> This isn't the end of the world. We will come through it. But not
> without a depression, no matter how hard we try to fight it off.
> The time to avoid a depression was years ago.

Another Crisis Looms Right Around the Corner

Good post. Thanks for the link to globalresearch.ca. Leave it to a Canadian to provide a good history which pretty much sums up the past 40 years. It does take a look back that far to see how all this got started and developed. It also shows how much we have lost in many different ways and that really there is no economy left, only printing money. I especially like the part about Nixon, China and the banks. This part of the 70s is often overlooked and is at the root of the Great American De-industrialization, an act of national suicide by a 1000 cuts.
Only quibble is about FDR and the GD. The common US folk wisdom is that WWII got us out the GD and not the New Deal.. However, I take a different view. When FDR took office unemployment was at 25% and by 1936 it was down to 14% or an 11% drop in the rate, so some people were going back to work. This employment growth coincided with annual growth rates of from 8 to 9.5% from 1934 to 1937, like China now. (We are far, far from this type of growth rate now). The economy was definitely recovering. But the mistake FDR made was in not continuing his recovery policies forcefully after 1936 thinking that they were not fully necessary. However, the recovery from the GD was too fragile in 1937 and without cotinued jobs programs and direct stumulus, it could not be sustained. There was stagnation from 1937 to 1941. If you think about it, the huge increase in public spending and manpower utilization of WWII shows just how much stimulus and direct spending was needed to pull the US out of the Depression. Same as now except we do not have the industrial base any longer and essentially have to start over from scratch, an immense effort that would require a unified nation in a common cause of rebuilding, like China now. But, sapped as we are from endless cable TV and a fraudulent financial sector, we have neither the will nor the ambition for any large undertakings anymore that are not in some way connected to violence. We prefer to bash each other calling each other names on cable-TV and have the upper class get richer from better ratings.


On Nov 25 08:24 AM SusanGrisanti wrote:

> You are right on. For a 40 year amazing look also see globalresearch.ca/...

And Bernanke Didn't Think Unemployment Would Reach 10%

Yes, Reagan's path to recovery: cut taxes on the wealthiest Americans, borrow the difference from foreigners amd change from being a creditor nation to a debtor nation. Then start allowing the same foreigners to buy up US companies with the remaining US corporations start having their products made in the foregin countries. And of course curse government from the inauguration for the next eight years. Yes, let's keep following that path. It sure has been working....Wrong. I want a government big enough to stand up to the largest global corporations, not kowtow to them. And that "govmunt" that Reagan hated was ultimately you and me.


On Nov 08 09:05 AM long_on_oil wrote:

> My God, we have been through this once before when Reagan got elected.
> For Petes sake politicians, swallow your pride and do what Reagan
> did. His plan set us on a path to recovery and prosperity that lasted
> over 20 years. We all know what he did now all we have to do is replicate
> it.

How to Boost U.S. Exports

It's the US corporations that benefit from the 0% US tariffs and it is the US Chamber of Commerce among other lobbyists that promoted this. They have never been interested in exporting US- made products. Their entire interest has been in finding lowest wage, no tax or subsidized locations anywhere on the planet from which to increase profit and then reducing US tariffs from the same countries to zero under the false rhetoric of a "global economy." It has nothing to do with a "global economy" only in destroying uppity US workers. Of course, this foolish short-term thinking is the basis of our current economic calamity. Your article leaves out the critical percentage of the so-called "China trade" made up of US products made under contract or in a special economic zone in China and shipped bacl to the US. It may be as high as 60% of all "China trade" is simply US products made there.

How Low Can the Dollar Go?

you forgot Blackberries, small jet liners, Bombardier transit cars....and now the relocation of a Toyota plant from California to BC. See what a single payer national health insurance system will get you? Instead of paying extortion money to private health insurance you can take the savings and put it to useful manufacturing.

On Sep 12 04:43 PM Mad Hedge Fund Trader wrote:

> iivn Hedge fund longs have been bunching up in the Canadian dollar
> for the past two months. Canada makes what everyone wants and doesn’t
> have enough people to consume it, making them a major exporter of
> everything hot. I bet you didn’t know that the frozen wasteland to
> the North is our largest foreign oil supplier. Most people guess
> Saudi Arabia. The Canadian supply is slated to double over the next
> 20 years, thanks to the environmental atrocity of oil sands. The
> land of Mike Myers, Jim Carey, and Pamela Anderson (note gratuitous
> photo below) is also a big supplier of gold, silver, lead, grain,
> uranium, wood, and other hard things. As for mosquitoes, they’ve
> got a lock on the market. Use dip to accumulate the loony. If you
> catch me singing “O Canada” in the shower, you’ll understand why.

2009 Is Looking an Awful Lot Like 2008

The "government" isn't controlling the rally unless you want to call Goldman's takeover of the government the government. Their program trading fueled by TARP and other Fed money is controlling the market. Media is a clueless adjunct to what is really going on. The author's analysis provides us with some guidance as to the end of this fake rally.


On Aug 12 02:02 PM aaavoid wrote:

> It's all about market psychology. If the government can manufacture
> such a phenomenal rally since march low, why don't you think they
> can control the damage this time by controlling the media? Unless
> something major gives like big drop in housing prices, or major spike
> is oil price or sudden big movement in the dollar, I really doubt
> we going to drop that much down. Remember, any bad news can but put
> forth by the media in any way they wish to make it look not so damaging.
> It's all about positive spin.

Finding the Real Economy

In February at a press conference Obama stated, and it went over everyone's head at the time and still does judging from most of the comments here, that AIGs CDO and CDS acitivity should not be counted in GDP. Of course not, along with any other unearned income derived from false movement in the markets. This where the so-called $13 trillion GDP comes from, from phony non-economic activity. Real US GDP is probably around $3 to 4 trillion. Live with it. The inner core of the EU is probably exceeding the US in per capita GDP right now, the underlying reason the dollar has been trading in the $1.40 to 1.45 vs. Euro range for some time now. We are well on our way to Second World status and don't even know it!

Back in the U.S.S.A.

Peter:
Unless I mssed something, you did not mention the repeal of Glass-Steagall in 1999. Returning to this act and simply prohibiting banks from speculating in financial markets and enforcing it would end the inherent financial conflict of interest that has contributed mightily to the dotcom, housing and credit bubbles.

Confusing Unemployment Numbers

The measures are no longer appropriate. You can ask the Chinese government on the manufacturing indicator as we are no longer the manufacturing powerhouse that we once were when this measure was formulated and have turned over most if not all such true wealth producing acitvity to them. As far as GDP, as long as the value of derivatives are counted in the GDP you will find that GDP is no longer an accurate measure of anything. Our economy is in reality more akin to Brazil than it is to Europe or Canada or Japan, except that Brazil is waving to us from the up escalator while we are and have been headed down.

13-Week Rally Proves Unlucky

The banks made up some losses with their Fed and TARP pumps and now are ready to cash in on stocks and shift more to oil with $100 a barrel more likely each day. They want to return the TARP money now so they can pay bonuses, come back later in the year after the next leg down in September and get another pump of cash and do it all over again. This is is getting to be a bit boring.

Why a Japanese Style Recovery Model Can't Happen in the U.S.

There's no basis for any commodity increases at this time and no inflationary threat. It is simply banks and others day trading over supply of TARP money and looking for sectors that they have not yet inflated since March 9. Every time the Fed pumps, banks day trade the pump to make up for losses. Trouble is the no matter how much pumping goes on, the returns to the banks from their trading become less and less because their true losses are so huge. Marli, I like your analysis for the yen carry trade but you also have to take into account the Euro-oil correlation. The Euro goes up so does in the price of oil, still priced in dollars, for example.

Unemployment as a Lagging Indicator: Not This Time

The graph that Steve Lisman of CNBC showed this morning included "unemployed", "discouraged" and "part-time" workers by economic necessity. The true rate at the moment combining these categories is at 18% or more. The graph went back to the mid-90s and showed a 9 to 10% 2001 rate growing to 12% or so after 9/11, a slight drop from 2004 to 2006 to around 8% and of course now. We have not had a full-employment economy in decades, maybe since 1968-9. At that time there were 3 or 4 jobs for every worker. Can't have that now, can we.

The Sleepwalkers' Rally

The banks are daytrading the TARP money. That's the only reason why the market is up. As soon as others come in, that will be next leg down in the bear market.

GDP and Debt: On the Cusp of Rampant Inflation?

Actually inflationary pressures are mixed. Of primary concern ought to be oil. Reserves continue to pile up, the "summer driving season" may not materialize this summer, however, speculation and withholding supplies are pushing the prices per barrel higher along with the most troubling trend: the softening of the dollar against the Euro. As the Euro gets stronger oil gets more expensive. Remember last year?