Saturday, March 2, 2013

The Missing Recovery

Dees Illustration
Paul Craig Roberts
Activist Post

Officially, since June 2009 the US economy has been undergoing an economic recovery from the December 2007 recession. But where is this recovery? I cannot find it, and neither can millions of unemployed Americans.

The recovery exists only in the official measure of real GDP, which is deflated by an understated measure of inflation, and in the U.3 measure of the unemployment rate, which is declining because it does not count discouraged job seekers who have given up looking for a job.

No other data series indicates an economic recovery. Neither real retail sales nor housing starts, consumer confidence, payroll employment, or average weekly earnings indicate economic recovery.

Neither does the Federal Reserve’s monetary policy. The Fed’s expansive monetary policy of bond purchases to maintain negative real interest rates continues 3.5 years into the recovery. Of course, the reason for the Fed’s negative interest rates is not to boost the economy but to boost asset values on the books of “banks too big to fail.”

The low interest rates raise the prices of the mortgage-backed derivatives and other debt-related assets on the banks’ balance sheets at the expense of interest income for retirees on their savings accounts, money market funds, and Treasury bonds.

Despite recovery’s absence and the lack of job opportunities for Americans, Republicans in Congress are sponsoring bills to enlarge the number of foreigners that corporations can bring in on work visas. The large corporations claim that they cannot find enough skilled Americans. This is one of the most transparent of the constant stream of lies that we are told.


Foreign hires are not additions to the work force, but replacements. The corporations force their American employees to train the foreigners, and then the American employees are discharged. Obviously, if skilled employees were in short supply, they would not be laid off. Moreover, if the skills were in short supply, salaries would be bid up, not down, and the 36% of those who graduated in 2011 with a doctorate degree in engineering would not have been left unemployed. The National Science Foundation’s report, “Doctorate Recipients From U.S. Universities,” says that only 64% of the Ph.D. engineering graduates found a pay check.

As I have reported on numerous occasions for many years, neither the payroll jobs statistics nor the Bureau of Labor Statistics’ job projections show job opportunities for university graduates. But this doesn’t stop Congress from helping US corporations get rid of their American employees in exchange for campaign donations.

There was a time not that long ago when US corporations accepted that they had obligations to their employees, customers, suppliers, the communities in which they were located, and to their shareholders. Today they only acknowledge obligations to shareholders. Everyone else has been thrown to the wolves in order to maximize profits and, thereby, shareholders’ capital gains and executive bonuses.

By focusing on the bottom line at all costs, corporations are destroying the US consumer market. Offshoring jobs reduces labor costs and raises profits, but it also reduces domestic consumer income, thus reducing the domestic market for the corporation’s products. For awhile the reduction in consumer income can be filled by the expansion of consumer debt, but when consumers reach their debt limit sales cannot continue to rise. The consequence of jobs offshoring is the ruination of the domestic consumer market.

Today the stock market is high not from profits from expanding sales revenues, but from labor cost savings.

US economic policy has been focused away from the real problems and onto a consequence of those problems–the large US budget deficit. As no interest group wants to be gored, Congress has been unable to deal with the trillion dollar plus annual budget deficit, the continuation of which raises the specter of dollar collapse and inflation.

John Maynard Keynes made it clear long ago, as has Greece today, that trying to reduce the ratio of debt to GDP by austerity measures doesn’t work.

Among the countries in the world the US is in a unique position. It not only has its own central bank to provide the money necessary to finance the government’s deficit, but also the money that is provided, the US dollar, is the world’s reserve currency used to settle international accounts among all nations and, thus, always in demand. The dollar thus serves as the world’s transaction currency and also as a store of value for countries with trade surpluses who invest their surpluses in US Treasury bonds and other dollar-denominated assets.

Without the support that the reserve currency status gives to the dollar’s exchange value (its price in foreign currencies), the enormous expansion in the quantity of dollars produced by the Fed’s years of quantitative easing would have resulted in a drop in the dollar’s exchange value, a rise in interest rates, and a rise in inflation. Since my time in government, the US has become an export-dependent economy, and export-dependent economies are subject to domestic inflation when the currency loses exchange value.


To sum up, the corporations’ focus on the bottom line has disconnected US incomes from the production of the goods and services that the American people consume, thus weakening and ultimately destroying the domestic consumer market. The Fed’s focus on saving banks, which mindless deregulation allowed to become “too big to fail,” has created a bond market bubble of negative real interest rates and a dollar bubble in which the dollar’s exchange rate has not declined in keeping with the large increase in its supply. Both the corporations and the Fed have created a stock market bubble based on profits obtained from labor arbitrage (the substitution of cheaper foreign labor for US labor) and from banks speculating with the money that the Fed is providing to them.

This situation is untenable. Sooner or later something will pop these bubbles, and the consequences will be horrendous.

This article first appeared at Paul Craig Roberts' new website Institute For Political Economy.  Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His Internet columns have attracted a worldwide following.



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4 comments:

Anonymous said...



PLAN A: 

There are 40-50 million baby boomers who remain employed in the work force. We suggest that the United States government offer each of those employed baby boomers $1 million dollars each, tax free, as severance to retire from their employment within 90 days of receipt of the $1 million dollar severance with the following stipulations:

I.          The new EFSA retiree MUST cease their current employment and not hire on as an employee anywhere in America ever again. 40-50 million job openings will occur – Younger potential employees and college graduates are then hired.  Unemployment costs saved and employment opportunities will immediately be resolved. (The new retirees CAN start a business, and they can eventually hire new employees too).

II.         The new EFSA retiree MUST buy a new AMERICAN made energy saving, green rated automobile. With 40-50 million new American made vehicles ordered the auto industry will once again become stable and solvent with jobs and needed resources enjoying economic growth- Employment, Environment and Auto Industry fixed.

III.        The new EFSA retiree MUST either buy an American house/condo or pay off their existing mortgage thereby increasing jobs, and stabilizing the housing and mortgage issues – Employment and Housing Crisis fixed.

IV.       The new EFSA retiree MUST purchase a life insurance policy to insure that those who depend on them for support will be taken care of in the event of untimely death or medical setback. –Dependents and Caregiver Coverage Fixed.

V.        The new EFSA retiree MUST purchase and carry yearly medical, dental and vision coverage for themselves and their dependents, decreasing healthcare costs and burdens for the nation, and ensure continued wellbeing and quality of life.  – Financial, Employment and Healthcare Coverage Fixed.

VI.       The new EFSA retiree MUST forfeit all future Social Security, Medicare, and/or Medicaid benefits decreasing trillions of dollars of social welfare costs; eliminating the financial burdens on the coming generations, and encouraging self-determination.  Budget Deficit fixed.





AMERICAN VETERAN ACKNOWLEDGEMENT OF SACRAFICE ACT (AOS)

PLAN B:


THE AMERICAN VETERAN ACKNOWLEDGEMENT OF SACRIFICE ACT– AOS

1.      10-20 ACRES OF AMERICAN LAND AND AN AMERICAN MADE TRUCK (NEW OR USED) WILL BE PROVIDED ALL HONORABLY DISCHARGED VETERANS.

2.      VETERANS MUST GROW SOMETHING FOR THE GOOD OF THE COMMUNITY ON THE LAND (FOOD, LIVESTOCK,
WILD GAME, PRODUCTS, ETC)

3.      VETERANS CANNOT SELL, CONVEY, USE AS COLLATERAL OR TRANSFER OWNERSHIP OF THE LAND
FOR 10 YEARS.  THE TRUCK CAN BE SOLD OR OWNERSHIP CONVEYED AFTER FIVE YEARS.

4.      THE LAND CAN BE INHERITED BY DEPENDENTS OF THE VETERAN BUT CANNOT BE SOLD, CONVEYED, USED AS COLLATERAL OR TRANSFERRED OUT OF THE FAMILY FOR 10 YEARS.

5.      VETERANS ARE RESPONSIBLE FOR STEWARDSHIP OF THE LAND TO INCLUDE ALL WASTE CREATED ON THE LAND.

6.      THE LAND CANNOT BE A BLIGHT ON THE COMMUNITY, OR THE LAND CAN BE RECOVERED BY THE GOVERNMENT AS FORFEITURE FOR FAILURE TO MAINTAIN THE LAND AS IT WAS INTENDED TO BE USED.

 
STUDENTS TO PROFESSIONALS ACT – (STP)

PLAN C:

THIS PROGRAM WAS CREATED TO CONNECT HIGH SCHOOL AND COLLEGE STUDENTS TO EMPLOYERS WHO WILL ACT AS BENEFACTORS, MENTORS AND INVESTORS IN THE STUDENTS’ FUTURE PROFESSIONAL AMBITIONS BY FUNDING A STUDENT’S EDUCATION OR SKILL TRAINING ON A 1:1 RATIO:


ONE YEAR OF EMPLOYMENT WITH THE SPONSORING COMPANY FOR ONE YEAR OF COLLEGE OR SKILL TRAINING.

1.      A SPONSORED STUDENT WILL WORK SIX TO EIGHT WEEKS OF EACH SUMMER ATER THEIR SOPHOMORE YEAR IN HIGH SCHOOL UNTIL THEY GRADUATE FROM HIGH SCHOOL, AS AN INTERN WITH THE EMPLOYER-SPONSOR WHO HAS CONTRACTED TO INVEST IN THE STUDENT’S COLLEGE OR TRADE SCHOOL TUITION.

2.      ONCE THE STUDENT GRADUATES FROM THE COLLEGE OR TRADE SCHOOL OF THEIR CHOICE, THE STUDENT WILL WORK ONE YEAR FOR THE EMPLOYER-SPONSOR FOR EVERY YEAR THE EMPLOYER-SPONSOR FUNDED THAT STUDENT’S EDUCATION OR TRAINING.





Anonymous said...

Fascinating concept, but I'm curious about what the baby boomers who have been laid off, unemployed and with out any assistance, struggling to survive that past year or so get out of this deal?

Hide Behind said...

Stop kissing militarys backsides!
They do not deserve anything other than what was stipulated in the contract they "Voluntarily" signed.
If anything at all can be attributed to their value to freedom and liberty in nation it is all in the negative column.
No other social ordering contributed anywheres near the destruction and bankrupting of this nation and aided by copoperating with that military ordering the installation of a police state as was done by the military.
None!
And the stench of Iraq in a sane world not built upon corruption recognizes that genocide was commited by our military and political people.
AM not disclaiming my own guilt as I did not try hard enough to speak against it.Rubber bullets, police batons smoke and teargas aside.
The idea of mandatory pay off of productive people in the system so some snot nose can find a job is not new.
The youths in every Sksndinavian and lowland nations of europes youth have been crying about. Doing it for over 30 years.
That is what is underway here but if you are 15 and older forget it as those younger than you are already fitting into our new militay regimented society and social structuring.
There is no way this ordering will be stopped it has been in place and is just now coning to fruition.
Do webring back indentured servitude for that is exactly this job training by employer and servitude of your skills for years.
There is hardly an industry today that sic skills of 4 years ago are the norm hell we would be trsining until we are too damed old and some snot nose says retore I want your job.
.

Anonymous said...

It's called editing. Try it, you'll like it.

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