Sunday, April 28, 2013

Recovery for the 7 Percent

Paul Craig Roberts
Activist Post

"From the end of the recession in 2009 through 2011 (the last year for which Census Bureau wealth data are available), the 8 million households in the U.S. with a net worth above $836,033 saw their aggregate wealth rise by an estimated $5.6 trillion, while the 111 million households with a net worth at or below that level saw their aggregate wealth decline by an estimated $600 billion." Pew Research, "An Uneven Recovery," by Richard Fry and Paul Taylor.

Since the recession was officially declared to be over in June 2009, I have assured readers that there has been no recovery. Gerald Celente, John Williams (shadowstats.com), and no doubt others have also made it clear that the alleged recovery is an artifact of an understated inflation rate that produces an image of real economic growth.

Now comes the Pew Research Center with its conclusion that the recession ended only for the top 7 percent of households that have substantial holdings of stocks and bonds. The other 93% of the American population is still in recession. (Source)

The Pew report attributes the recovery for the affluent to the rise in the stock and bond markets, but does not say what caused these markets to rise.

The stock market’s recovery does not reflect rising consumer purchasing power and retail sales. The labor force is shrinking, not growing. Job growth lags population growth, and the few jobs that are created are primarily dead-end jobs in lowly paid domestic services. Retail sales adjusted for inflation and real median household income have been bottom bouncing since 2009.

To the extent that there is profit growth in US corporations, it comes from labor cost savings from offshoring US jobs and from bringing in foreign workers on work visas. By lowering labor costs, corporations boost profits and thereby capital gains for those 7 percent who have large holdings of financial assets. Those in the 93 percent who are displaced by foreign workers experience income reductions. This transfer of the incomes of the 93 percent to the 7 percent via jobs offshoring and work visas is the reason for the stark rise in US income inequality.


Another source of the stock market’s rise is the Federal Reserve’s policy of quantitative easing, that is, the printing of $1,000 billion dollars annually with which to support the too-big-to-fail banks’ balance sheets and to finance the federal budget deficit. The cash that the Fed is pouring into the banks is not finding its way into business and consumer loans, but the money is available for the banks to speculate in derivatives and stock market futures. Thus, the Fed’s policy, which is directed at keeping afloat a few oversized banks, also benefits the 7 percent by driving up the value of their stock portfolios.

The reason bond prices are so high that real interest rates are negative is that the Fed is purchasing $1,000 billion of mortgage-backed “securities” and US Treasury debt annually. The lower the Fed forces interest rates, the higher go bond prices. If you are among the 7 percent, the Fed has produced capital gains for your bond portfolio. But if you are a saver among the 93 percent, you are losing purchasing power because the interest you receive is less than the rate of inflation.

The Pew report puts it this way: Since the “recovery” that began in June 2009, wealthy households experienced a 28 percent rise in their net worth, while everyone else lost 4 percent of their assets.

Is this the profile of a democracy in which government serves the public interest, or is it the profile of a financial aristocracy that uses government to grind the population under foot?

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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5 comments:

Anonymous said...

> Is this the profile of a democracy in which
> government serves the public interest, or is
> it the profile of a financial aristocracy
> that uses government to grind the population
> under foot?

There is no need to be surprised about this. The draft Constitution included a clause to make the sovereign government the source of legal tender. That clause was stricken, because conferees were told that plutocrats would not support such a Constitution. Ever since, with brief exceptions like Lincoln's "greenbacks", the US government has gone
hat-in-hand to wealthy private interests to get new legal tender at interest. In principle this is totally unnecessary, pardon the pun. When you see US government "bonds", you might at least consider thinking of US government "bondage", unnecessarily committing the population at large to payments to a financial elite. From this perspective, the so-called government looks more like an aggregator of public debt for private interest. "Wanna play the game? Good, I'll bankrole your political campaign. Wanna play against me? Ask yourself - is there a lesson to be learned from how that turned out for Lincoln and for Garfield?"

Anonymous said...

"Listen to me, ye rich men, weep and howl for your miseries that shall come upon you. Your riches are corrupted, and your garments are motheaten. Your gold and silver is cankered; and the rust of them shall be a witness against you, and shall eat your flesh as it were fire. Ye have heaped up treasure together for the last days." James 5:1-3

Anonymous said...

When the banks lend $20 to society @ 5% interest, society owes $21 to the private lender due to a bookkeeping interest adjustment.

$20 can't pay back $21 unless the private bankers let them. The private bankers control the government - for no sovereign government would ever allow such a system to exist.

Napoleon understood who he was fighting - the international banking cartel...

“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
~Napoleon Bonaparte

The #1 cause of both poverty and death on the planet is the debt based monetary system that defines someone's monetary wealth as everyone else's unpayable debt.

"If all the bank loans were paid, no one could have a bank deposit,and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in
circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present
civilization may collapse unless it becomes widely understood and the defects remedied very soon."
~Robert Hemphill, Credit Manager of Federal Reserve Bank, Atlanta, Ga., Source: In the foreword to a book by Irving Fisher, entitled 100% Money (1935)

Hide Behind said...

Scary thought, being poor that is; but this article is not about being poor,it is about levels of wealth.
Mr. Roberts may be old enough to of observed poverty within U.S. but that does not mean he lived within it and in spite of it.
The welfare state may of used many and varied excuses to form its overwelming number of job oportunitys and means to flood society with no productive or sustainable programs that actually enrich amyone but they who run the projectsThen again that is what all governments do and always have done.
Mr. Roberts is not part of the poorof the earth., never has been, but a part of the means the so called 7% controll.Is it wealth or money that they control?
The poor of US are almost as poor as earth poor but soon will be, in fact worse off than a lot of earts poor. But it is the ones who grew fat and lazy, the american middle class,off of the 25% who do indeed run the world and produce all wealth who are under attack by lets say the public that built nothing without profiting far greater than what society owed them.
The 20% and the poor are supposed to supply middle class with all the aid programs for their children while paying for the parents needs greeds and just downright depraved lifestyles.
The way the top people made money and managed to concentrate so much on their own hands was because they knew the power to create " wealth" was in how money is "used" and. The US was a society that other than for a 40 year period of mainly under educated but full of common sense knowledge the people did not abuse their wealth.
No it was the great generatoon getting what they in the large did not deserve and their kids and now grand and great grand ones looking for ways to not abuse the monetary system in order to create theirs and maybe a little extra for the real poor, eealth.
SORRY BUT YOU OCCUPYERS OF FIN MIL AND EDUCATIONAL GOV YOUR GONNA HAVE TO COMPETE WITH ALL THE OTHERS WHO DEPEND ON THE 7% TO 20 %.

Hide Behind said...

PS It is true that a lot of the wealyh the top feeders jave inder their control is inheirited but that does not mean they are not out there grubbing for what other means of wealth is out there, and good for them.
Just as I who through fate had to dispose of gold and silver accumulated duringmany years just to pay bills.I see others today holding such.some of which was once mine,paper and material, and are about to aquire wealth beyond their greedy little minds and hearts ever dreamed of. I feel great for them they accomplished their dream
You , most of us, could work like hell smartly and srill never make as much ad they wete born with. One man I have known for over 50 years was born with a worth between 300 and 500 millilion and yet today he is worth multiple times that and has holdings worldwide and his name would not cause a ripple on most "informed" voters and economic bitches on internet.
The US has worlds highest numbers of truly wealthy women, wealth not just your common jollywood slut or local politicos crooked money in banks or almost a man ceo two floors or two one nighters down.
YOU CAN STILL MAKE MONEY EVEN IN THIS CHAOTIC ECONOMIC WORLD,!
Wearher you become or what level of wealth you attain, now that's up to you.
HELL LOOK AT ROBERTS WHO GOT BOOTED FOR FAILED REGANOMICS AND YET TODAY HEHAS PEOPLE PAYING AND READING HIS PAID FOR ADVICE,NOW THAT MAN KNOWS THE ABILITY TO MAKE MONEY WORK FOR HIM.

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