Editorial
Spinning Bad Financial News Into Good
Friday's payroll jobs report says that 96,000 new jobs were created in August and that the unemployment rate (U.3) fell from 8.3% to 8.1%. As 96,000 new jobs are not enough to keep up with population growth, the decline in the U.3 unemployment rate was caused by 368,000 discouraged job seekers giving up on finding employment and dropping out of the work force as measured by U.3. Discouraged workers are not included in the U.3 measure of unemployment, which makes the measure useless. The only purpose of U.3 is to keep bad news out of the news. the U.3 unemployment rate only measures those who have not been discouraged by the inability to find a job and are still actively seeking employment.
The government produces another unemployment measure, U.6, which includes people who have been discouraged by the inability to find a job and have been out of the work force for less than a year. This measure of unemployment is 14.7%, a number that would get attention if reported.
When the long-term (more than one year) discouraged workers are included, the US unemployment rate is about 22%. In other words, the real US rate of unemployment is almost three times higher than the reported–headline rate–of 8.1%.
What is the purpose of reporting an unemployment rate that is about one-third the real unemployment rate? The only answer is deception through Happy News.
Let's have a look at those 96,000 jobs. What kind of high-tech, high-income super jobs is "the world's only superpower, the indispensable nation, the world's greatest economy and capitalist heaven" creating? The answer is lowly paid third world jobs, which is why there is not and cannot be an economic recovery. All the good jobs have been moved offshore in order to maximize the incomes of the rich.
According to the US Bureau of Labor Statistics (BLS), 28,300 of the 96,000 jobs or 29% are waitresses and bartenders.
Health care and social services, primarily ambulatory health care services and home health care services, provided 21,700 jobs or 22.6% of the jobs.
So 52% of the new jobs created by the American superpower are lowly paid waitresses, bartenders, practical nurses and hospital orderlies.
Highly paid manufacturing jobs declined by 15,000. The incomes lost by these jobs most likely exceed the income gains from the waitresses, bartenders and hospital orderlies jobs.
Where did the other 46,000 jobs come from?
Formerly, in hard times government employment would expand but, despite Republican propaganda, not today in today's mean times. Government (federal, state and local) lost 7,000 jobs.
Professional and business services gained 28,000 jobs, primarily in computer systems design and related services (mainly Indians on H-1B work visas) and management and technical consulting services (mainly former corporate professional employees who now eke out a living by consulting, without pension or health benefits, with their former employers; in other words, they are working the same for less).
These three categories account for 81% of the new jobs.
Where are the remainder?
A few thousand jobs in finance and insurance, jobs that absorb consumer incomes but produce no product. Telephone, cable, water, electricity and heating produced 8,800 jobs. Transportation and warehousing to store unsold goods produced 5,700 jobs. Retail trade, primarily food and beverage stores (alcohol), produced 6,100 jobs.
And there you have it. The "powerful American economy" is an economy that cannot produce its own clothes and shoes, or the manufactured products, including high technology products, that it consumes, or its own energy, all of which it imports by issuing more debt.
The "great hegemonic American economy" is on the verge of total collapse, because the only way it can pay for the imports that sustain it is by issuing more debt and printing more money. Once the debt and money creation undermine the dollar as world reserve currency, the US will become overnight a third world country, much to the relief of the rest of the world.
Last week Mr. Draghi, the head of the European Central Bank, announced for propaganda purposes that the ECB would buy up the sovereign debt of the troubled EU member governments if, and only if, the assisted member governments agreed to the conditionality that would be imposed.
In other words, Draghi told Greece, Spain and italy that the ECB will buy your bonds if you do what we tell you. Draghi's conditions are a combination of austerity on the countries' populations and the surrender of the countries' financial sovereignty. Since the troubled debtor countries already had that option, Draghi's scheme doesn't change anything. However, the NY Stock Exchange used Draghi's announcement to gin up day-trading profits.
Draghi says that the money that the ECB will pour into purchasing Greek, Italian and Spanish bonds will be offset by draining reserves from the European banking system, hardly a helpful operation to stressed banks and European recession.
It is difficult to image worse news than Draghi's. Yet stock markets rose. This result is more evidence that financial markets are not to be trusted.
But you will never, ever, hear this fact from the financial press.
A financial system based on lies and deceptions cannot forever last.
This article originally appeared at www.paulcraigroberts.org, republished here with author's permission (copyright Paul Craig Roberts).
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Posted by dotti on 09/10/12 07:26 PM
I have seen several of these analyses of the employment/unemployment data, but this impresses me as being the best. I say that based on the assumption that it is factually correct.
It surely is not encouraging.
Oh, I forgot. If things are really, really super bad, then it's really great because the Fed will save us with easy (free) money.
How long can this game continue? I know people who are still convinced that the stock market is the place to be. Where else, they say?
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Posted by Danny B on 09/10/12 10:30 PM
Hi dotti
Dear Bell, this is a post that I sent to 2 free energy groups.
Patric Kelley and Panacea.
It isn't the same type of composition that I would send to my economically literate correspondents. It is a view about current problems that I don't normally see.
I have to start with the basics.
As each new country passes into the industrial revolution, it's productive capacity grows enormously. This adds to the total global-production capacity.
After WW II, America had 3% of the world's population and 50 % of the manufacturing capacity. We built up a great standard of living. By about 1970, the ROW,,,Rest of the world had rebuilt their own manufacturing capacity. Europe and Japan managed to keep a wage standard close to America. Just the same, America lost part of market share. This caused wages to stagnate.
In an effort to reclaim part of our lost market share, America went off the gold standard.
This allowed a big increase in money printing. The resulting internal inflation was in reality, a wage cut.
The money-printing continued unabated. This was seen as higher prices rather than as a wage reduction.
Fast-forward about 20 years and there was even more competition from newer producer countries. This necessitated even more money printing to lower wages and maintain market share. This was only implemented to a certain point. To maintain our standard of living in the face of ever-increasing competition from low-wage producers, we borrowed our way to prosperity. We borrowed 80% of savings worldwide.
Our standard of living should have reverted close to a global mean. We borrowed to keep the party going.
A few more years down the road and we hit an enormous roadblock.
The perfection of containerized shipping threw ALL of our manufacturing into international competition. The Indians and Chinese moved UP to [ $15] a day. Americans and Westerners in general could never survive at that rate.
As billions of new people moved into manufacturing, global productive capacity grew enormously. As global wages fell towards a mean average Western consumptive power declined considerably. Our current, Western wage-and-cost structure can not be compatible with $15 a day wages. We stupidly bought Chinese stuff, not even thinking that we pushed ourselves out of jobs.
Our current financial system can NOT work unless there is a growing credit and money supply. With wages and trade shrinking, the bankers had to extend credit always farther out. We constantly dipped into future-earnings to pay for our lifestyle today. We lived on money that we HOPED to earn. This, at the same time that we sent our money and jobs out of the country.
GOV continues to print more money,,, to lower wages,,, to keep market share. This is referred to as a "race to the bottom". Every step of the race, they lower wages and wipe out consumptive power. It's like racing barefoot through a field of broken glass.
The people who are tossed out of the job market are the collateral damage from the race.
All countries are printing in unison because nobody wants to be priced out of the labor / manufacturing market. High unemployment will be ever-increasing.
Currently, 100 million Americans are out of work.
Click to view link
The poverty level is going way up. As we morph nearer to a global mean wage, the cost-and-price structure in America will fall apart. There is plenty of blame and stupidity to go around. But, at the same time, A lot of this is due to market forces.
The West has been great at producing lots of money but, very little wealth. Credit and money grew at 6 times the rate that GDP grew. Like an over-stretched rubber bank, it's all going to snap back.
The reason that I focus on manufacturing is because it is of primary importance as one of only 3 main enterprises that add value. Mining, Farming and Manufacturing are all value-added enterprises. The rest just shuffle around the money.
If you look at a graph of lost industries and a graph of money printing, there is a clear correlation. The West can't very well operate with Eastern wages so, we print. We print to reduce wages and keep market share. Then we print to maintain our standard of living.
Jim Willie said that the FED is now buying 81% of bond issue. The rest is being bought by Caribbean banks [CIA] and Great Britain. The FED purchases the British-bought bonds on the secondary market a few weeks later.
This is the state that we now find ourselves in.
Dan
Reply from The Daily Bell
Thanks.
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Posted by dotti on 09/11/12 03:49 PM
Hi, Dan!
Thanks for your post. I infer that it is for the "illiterate" since you say "It isn't the same type of composition that I would send to my economically literate correspondents."
I enjoyed it. (Does that say something about my own economic literacy?)
At this point, I have to question your definition of the "economically literate". Are any of our leaders, political, economic, or otherwise, literate? It doesn't take much to see that if you run a trade deficit year after year after year you will reach a point of insolvency--no matter how many fiat dollars you produce via press or electronic shenanigans.
I have heard some fairly tortured explanations of how we, because we are superior, will be able to continue our profligate behaviors indefinitely. Most notably, the myth: we want to be a service economy. That convinced people in the 70's and 80's that it was in our best interest to ship manufacturing overseas.
Not all Americans are to blame. Our culture has been perverted. The fiber of our society is no longer strong enough to hold us together. Individuals like myself who consider themselves to be hard working, fair minded people, have been put into a position of feeling isolated--no longer a part of a culture we can relate to.
Oops. I got off track there.
BTW, I remember when we went off the gold standard. That was NOT the BEGINNING of our problems. However, it was a time that we could have regained our footing with far less pain than would now be required. I remember my Dad talking about how Charles DeGaulle was trying to take all our gold by converting dollars into gold.
Does it make you wonder just how much gold is in our vaults?
thanks for your post. It was very concise and informative.
dotti
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Posted by Danny B on 09/11/12 08:51 PM
BELL,, "thanks",,,,I post something this different and all you can say is "thanks" This idea is somewhat non-mainstream. If somebody will refute, I'll certainly recant.
Go ahead, shoot some holes in it.
Printing to reduce wages is not something that CBs talk about. They say that they are "going to stimulate the economy". They never get around to explaining how they can cause spending in a society that is debt-saturated.
Helicopter Ben said that he could drop money from a helicopter. He forgot to mention that these money drops would only go to his friends.
0% for his friends and 4--5% for the consumer. He's trying to inflate away the debt. Someone forgot to tell him that inflation is mostly driven by wages;
Click to view link
Aggregate employment is falling. Wages are falling. Money velocity is falling.
We have inflation in a few areas like food and energy. But, with aggregate income falling, people keep buying essentials and cut out more and more discretionary spending. Any price inflation in essentials results in decreased spending for non-essentials. Even energy consumption is falling.
The CBs have finally started to notice that increased printing isn't helping.
Jobs and wages are the key, NOT money. The Central Bankers are a bunch of IDIOTS.
They drive down bonds and think that people will stay in the market.
They drive up stocks that have no P/E and think that people will stay in stocks.
They have ZIRP and a printing press. That's like giving a teenager an axe and a flamethrower.
Dotti, I'm not going to talk about comparative knowledge. The free energy people are smart but, they don't look at economics.
They look at stuff like this;
Click to view link
Click to view link
This particular story is about a Peruvian inventor who won an award for his invention at a competition in Geneva. His device allows a 1 hp. motor to drive a 20 hp generator. It works on some variant of the Archimedes principle. I'm going to duplicate. I'm fluent in Spanish.
This paper is by an extremely intelligent Frenchman, Raoul Hatem. He has very interesting ideas on the universe that don't agree with mainstream.
Click to view link
I replicated his very interesting device.
Re: the gold standard. Everything has a lag. Gold was fixed at $35 and ounce. The Bretton Woods agreement was a great idea for bringing stability.
GOV printed $ to trash Viet Nam. GOV printed $ to create the "Great Society"
This caused inflation. Since the price of gold couldn't float, it was CHEAP. The French noticed this and picked up a bunch on sale. This wasn't Nixon's fault.
Blame JFK and LBJ.
"Are any of our leaders, political, economic, or otherwise, literate?"
Not really. Even if they were, they're eminently corruptible.
Ron Paul said that he didn't know any lobbyists.
You can guess for yourself about the rest.
Power corrupts and attracts the already corrupted.
We're always falling towards fascism.
Democracy always self-destructs.
They're in a big tug-o-war right now.
There is an old Indian saying "when the elephants fight, it is the grass that suffers". Prepare to be "mowed". :)
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Posted by dotti on 09/12/12 06:35 AM
Dan, thanks for your followup.
I considered the things that you said so undeniably true and the MSM so undeniably corrupted that the truth of your post was not in question.
The motives may be a little more varied. I think that the whole idea of taxes and of inflation is to distort economic flows in order to benefit some rather than others. It reminds me of the lava lamps--was it the 70's? They tipped one way and all the lava went to one side, then the other way and the lava went that way.
All the push and pull via the Fed's various machinations cause money flows one way and then the other. The "in crowd", as in Power Elite, always know when and where the money will flow and position themselves accordingly.
The regular "fixed income" crowd, which I think of as mostly retirees, had been dependent on said monies. I think that the goal has been achieved: money got channeled into the stock market to give the illusion that the economy was doing just fine, thank you. How long they can keep it bouyed up, I can't imagine. It surprises me every day. Will it collapse today? Dunno. Tomorrow? Dunno.
I have considered if Bernanke does not have "news" this week and if the Germans don't come through for the ESM, that there could be some deflation. however, when I read the headlines from the main page of Yahoo Finance, there is some really troubling stuff, but the market just shrugs it off and keeps going up.
You gotta admit that what they are doing is working--for some people.
I'm traveling today and need to finish getting ready, but I was glad to see your update. I'll check back, but it may be evening.
I do appreciate your posts and feel that they add to the overall knowledge here at DB.
and thanks to dB for providing the forum.
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Posted by Danny B on 09/12/12 11:20 PM
Dotti, you have to keep a perspective on inflation AND velocity. In a limited sense, they are interchangeable in their effects. Velocity was low so, Ben instituted ZIRP.
Nobody could make money in traditional investments. Ben forced them to move into riskier investments to beat price inflation and ZIRP.
Nobody could find any yield. Even CALPERS earned just 1% before inflation.
GOV piled into the TIPS market to make sure that nobody could earn anything there.
GOV has distorted ALL yields to lower interest. That's what LIBOR was about.
ALL yields driven down. The PPT pumped about $ 6 trillion into equities to keep it alive. It's all about managing perception. They have to manage perception because they can't actually produce any jobs. As I mentioned above, they can't even prop up wages. Seems that Japan wasn't the only ones to step back in time;
Click to view link
These are market forces. Jobs are created by market forces and demand. The FED can print money and lower wages but, that isn't the same as creating demand.
The German court came through but, Reuters already said that it wouldn't work. Reportedly, the private investors would be given seniority and the public would have to get in line. Any haircut would go straight to GOV.
This is ALL BS stopgap stuff.
I suspect that things are going exactly according to plan for the TOP level of PTB
The bankers, being the next level down are completely hopeless and lost. How many 'saves" have they already done?
This is all about population reduction. The banking crash is just one preparatory step. The writing is on the wall.
Click to view link
Click to view link
The fools in high office and the thieves in finance haven't figured out that they are just another set of tools. They haven't a prayer of pulling off a real "save".
Everywhere you look, somebody rich is working to lower the population.
Click to view link
Repeatedly, we see disease caused by vaccines;
Click to view link
PLENTY more examples.
You know what this means???
Time to PARTY.
