Slow-motion recovery keeps unemployment high … High unemployment isn't going away. The slow pace of economic growth shows the recovery is too weak to generate enough jobs for 15.3 million unemployed people. Layoffs are contributing to the problem. That's evident from an elevated number of weekly claims for jobless aid. Two government reports Thursday offered new evidence on all of those fronts. For many Americans, it doesn't feel much like a recovery. The unemployed face fierce competition for job openings. Those with jobs are watching their paychecks shrink. A growing number of people are at risk of falling into foreclosure. And only people with the most stellar credit are likely to get a new loan. "We're out of recession, but the recovery is not going to bring a whole lot of smiles," said Joel Naroff, of Naroff Economic Advisors. – AP
Dominant Social Theme: Growth is hard to come by and patience wins the day.
Free-Market Analysis: The trouble with economic reporting in the West is that it simply does not tell the truth. This AP story is a good example. Its main point is that the American "recovery" is not going to be strong enough to provide enough jobs for the 15.3 million unemployed. Now this supposition has two problems. First of all there is no "recovery" as it is commonly understood, and second we assume that the 15 million out-of-work figure is based on a 10 percent unemployment rate. In fact, that figure is very much in dispute because of the way American federal government analysts count – and then don't count – the unemployed. Many savvy observers believe that the unemployment rate is twice as high, at 20 percent, and we believe it to be even higher than that.
Anyway, as far as the US recovery itself goes, this is a most misleading conversation within the mainstream press. Even during less severe downturns, Western economies have continually degraded and this is no ordinary downturn as we have pointed out many times. This time around the fiat money system basically collapsed. The entire system has been on life-support for about two years now. What kind of extrication can be expected from such a quandary?
We figured that to save the system, central banks would have to pump an aggregate US$100 trillion into Western economies over a period of time. We're not sure how far along they are, or if they'll reach that figure but the amounts of debt-based money that has been created and loaned out or stuffed into commercial bank coffers is staggering. It hasn't all circulated but watch out (for hyper-inflation) if it does. Of course, that was before this latest sovereign debt crisis. Since central banks do all sorts of things they don't report – engaging in various kinds of swaps and derivatives trading, who knows what the final number may be. Here's some more from the AP article:
The economy grew at a 3 percent annual rate from January to March, according to a new estimate released by the Commerce Department Thursday. The new reading, based on more complete information, was slightly weaker than an initial estimate of 3.2 percent a month ago. Consumers spent less than first estimated. Same goes for business spending on equipment and software. And the nation's trade deficit was a bigger drag on economic activity. Those factors led to slower growth last quarter than first estimated.
Sounds grim? It gets worse. This article was written just as first quarter American growth was revised DOWN – adjusted from an annual rate of 3.2 percent to just 3 percent, according to the Commerce Department. The expected growth rate was to have been about 3.4 percent. It certainly didn't get there.
In fact, there are plenty of statistics that could be marshaled to put this current recovery into focus. But when one starts to do that a trend emerges, and it isn't a pretty one. We recently came across an article in the socialist Monthly Review. The article, "Capitalism, the Absurd System – A View from the United States," was co-written by Robert W. McChesney, whom left-wing Utne Reader in 2008 listed as one of their "50 visionaries who are changing the world".
The article has some fascinating charts, including one that shows GDP growth shrinking from four percent in the 1940s to a little over one percent in the 2000s. The chart is attributed to the Bureau of Economic analysis and we're not sure if it adjusted for inflation. There is another telling chart in the article, showing how wages have fallen. The article describes the trend this way: "Worker productivity is much greater than it was back in 1975, but very little of this increased wealth actually goes to workers themselves. … The wages of U.S. manufacturing workers have fallen rapidly during the last three and a half decades as a share of value added in U.S. manufacturing. The median wage of all nonagricultural workers has stagnated over the same period."
Given this context, it is interesting to see how the article explains the non-performance of Western capitalism – specifically in the United States – by turning to Marx for enlightenment as follows: "Marx's work provides searing insights on how to understand a society that, at the surface, appears to be one thing but, at its deeper productive foundations, is something else. Marx argued that a core contradiction built into capitalism was between its ever-increasing socialization and enhancement of productivity, and its ongoing system of private appropriation of profit."
Of course Marx never did seem to explain adequately how workers were deprived of their share of a growing pie of profits, and when it comes to explaining how current capitalist trends mighty be countered, the authors are similarly fuzzy: "Mere state ownership of key productive forces is not enough to create a socialist society; the people must exercise a sovereign rule over these productive forces and society as a whole, and the society must be organized to promote collective needs."
As usual, we wonder who exactly will "exercise a sovereign rule over these productive forces." Additionally, we would ask, when it comes to the organization of society "to promote collective needs," exactly who will be doing the organizing. This is always where collectivist solutions tend to fall down. They get hazy about who is going to provide the leadership that will lead the people to the promised land.
We think we can explain all this a little more succinctly using some free-market thinking. The problem with Western economies for at least the past 100 is mercantilist central banking. It is central banks, by overprinting money that cause first booms and then busts. The power elite, rarely if ever mentioned in Marxian analysis, stands behind this public/private central banking system – which began as an Anglo-American invention but has now spread around the world. As US Congressman Ron Paul has pointed out, the central bank is an engine of centralization. After every boom cometh a bust and after every bust more businesses go bankrupt and more of the middle class is washed away.
That's why the AP's statement about the American recovery certainly stretches the truth. (Of course it's not fair to pick on AP – the recovery meme is a promotion of the power elite and is virtually everywhere these days throughout mainstream US media.) The point is that Western recoveries under a central banking regime are inevitably fainter and fainter. Each recovery is weaker than the last while crises grow stronger and deeper.
As we recall Bell feedbacker F. Beard recently pointing out, the system is set up so that people "buy at the top" – take out loans and generally expand portfolios during the good times and then are faced with certain consequences when the economy turns sour. The problem is always the same: Loans are suddenly under water as debtors discover that the equity of their investments is worth less than what they owe. Bank lenders know the inevitability of this. Many borrowers do not.
Is the current economic crisis is some sort of turning point? In the past the power elite has shoveled money at commercial banks and securities firms – and then proclaimed a recovery when the stock market began to move up. Even when the recovery was weak and limited the elite could rely on the mainstream media to forcefully proclaim victory over recession, inflation, deflation, etc.
But with stock markets rising and the media crowing, it was never really possible to examine the extent of the damage in a prolonged or realistic way. That's changed now. The Internet has allowed real discussions of the economic fraud of the so-called modern capitalist system. And the system itself has so badly failed in the past few years that it is probably much more difficult to cover-up the damage this time.
For those apt to defend the system, the next few years likely shall prove both difficult and unforgiving. We anticipate continued conversations about alternative forms of money and different ways of approaching the economy. The elite of course shall suggest further centralization and central banking control. But we have a feeling that this will be a hard argument to make. The mainstream press has lost credibility as regards these matters. Articles such as this one published by the AP will be an increasingly hard sell to an increasingly informed public.