How Economists & Policymakers Murdered Our Economy

“Capitalist greed aided and abetted by economists and policymakers will have destroyed America.”

The economy has been debilitated by the offshoring of middle class jobs for the benefit of corporate profits and by the Federal Reserve’s policy of Quantitative Easing in order to support a few oversized banks that the government protects from market discipline. Not only does QE distort bond and stock markets, it threatens the value of the dollar and has resulted in manipulation of the gold price.

When US corporations send jobs offshore, the GDP, consumer income, tax base, and careers associated with the jobs go abroad with the jobs. Corporations gain the additional profits at large costs to the economy in terms of less employment, less economic growth, reduced state, local and federal tax revenues, wider deficits, and impairments of social services.

When policymakers permitted banks to become independent of market discipline, they made the banks an unresolved burden on the economy. Authorities have provided no honest report on the condition of the banks. It remains to be seen if the Federal Reserve can create enough money to monetize enough debt to rescue the banks without collapsing the US dollar. It would have been far cheaper to let the banks fail and be reorganized.

US policymakers and their echo chamber in the economics profession have let the country down badly. They claimed that there was a “New Economy” to take the place of the “old economy” jobs that were moved offshore. As I have pointed out for a decade, US jobs statistics show no sign of the promised “New Economy.”

The same policymakers and economists who told us that “markets are self-regulating” and that the financial sector could safely be deregulated also confused jobs offshoring with free trade. Hyped “studies” were put together designed to prove that jobs offshoring was good for the US economy. It is difficult to fathom how such destructive errors could consistently be made by policymakers and economists for more than a decade. Were these mistakes or cover for a narrow and selfish agenda?

In June, 2009 happy talk appeared about “the recovery,” now 4.5 years old. As John Williams (shadowstats.com) has made clear, “the recovery” is entirely the artifact of the understated measure of inflation used to deflate nominal GDP. By under-measuring inflation, the government can show low, but positive, rates of real GDP growth. No other indicator supports the claim of economic recovery.

John Williams writes that consumer inflation, if properly measured, is running around 9%, far above the 2% figure that is the Fed’s target and more in line with what consumers are actually experiencing. We have just had a 6.5% annual increase in the cost of a postage stamp.

The Fed’s target inflation rate is said to be low, but Simon Black points out that the result of a lifetime of 2% annual inflation is the loss of 75% of the purchasing power of the currency. He uses the cost of sending a postcard to illustrate the decline in the purchasing power of median household income today compared to 1951. That year it cost one cent to send a post card. As household income was $4,237, the household could send 423,700 postcards. Today the comparable income figure is $51,017. As it costs 34 cents to send one postcard, today’s household can only afford to send 150,050 postcards. Nominal income rose 12 times, and the cost of sending a postcard rose 34 times.

Just as the American people know that there is more inflation than is reported, they know that there is no recovery. The Gallup Poll reported this month that only 28% of Americans are satisfied with the economy.

From hard experience, Americans have also caught on that “free trade agreements” are nothing but vehicles for moving their jobs abroad. The latest effort by the corporations to loot and defraud the public is known as the “Trans-Pacific Partnership.” “Fast-tracking” the bill allowed the corporations to write the bill in secret without congressional input. Some research shows that 90% of Americans will suffer income losses under TPP, while wealth becomes even more concentrated at the top.

TPP affects every aspect of our lives from what we eat to the Internet to the environment. According to Kevin Zeese in Alternet, “the leak of the [TPP] Intellectual Property Chapter revealed that it created a path to patent everything imaginable, including plants and animals, to turn everything into a commodity for profit.”

The secretly drafted TPP also creates authority for the executive branch to change existing US law to make the laws that were not passed in secret compatible with the secretly written trade bill. Buy American requirements and any attempt to curtail jobs offshoring would become illegal “restraints on trade.”

If the House and Senate are willing to turn over their legislative function to the executive branch, they might as well abolish themselves.

The financial media has been helping the Federal Reserve and the banks to cover up festering problems with rosy hype, but realization that there are serious unresolved problems might be spreading. Last week interest rates on 30-day T-bills turned negative. That means people were paying more for a bond than it would return at maturity. Dave Kranzler sees this as a sign of rising uncertainty about banks. Reminiscent of the Cyprus banks’ limits on withdrawals, last Friday (January 24) the BBC reported that the large UK bank HSBC is preventing customers from withdrawing cash from their accounts in excess of several thousand pounds.

If and when uncertainty spreads to the dollar, the real crisis will arrive, likely followed by high inflation, exchange controls, pension confiscations, and resurrected illegality of owning gold and silver. Capitalist greed aided and abetted by economists and policymakers will have destroyed America.

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Paul Craig Roberts, Boiling Frogs Post contributing author, is a former Assistant Secretary of the US Treasury and former associate editor of the Wall Street Journal. He has been reporting on executive branch and cases of prosecutorial abuse for two decades. He has written or co-written eight books, contributed chapters to numerous books, and has published many articles in journals of scholarship. Mr. Roberts has testified before congressional committees on 30 occasions on issues of economic policy, and has been a critic of both Democratic and Republican administrations. You can visit his website here.

© PaulCraigRoberts.org

The Real Crisis Is Not the Government Shutdown

At This Time, Collapse Seems the Most Likely Forecast

The inability of the media and politicians to focus on the real issues never ceases to amaze.

The real crisis is not the “debt ceiling crisis.” The government shutdown is merely a result of the Republicans using the debt limit ceiling to attempt to block the implementation of Obamacare. If the shutdown persists and becomes a problem, Obama has enough power under the various “war on terror” rulings to declare a national emergency and raise the debt ceiling by executive order. An executive branch that has the power to inter citizens indefinitely and to murder them without due process of law, can certainly set aside a ceiling on debt that jeopardizes the government. [Read more...]

Profiting from Food Stamps, Student Loans, Unemployment: Wall Street, US Congress, Obama Cash-in

Rockefeller-Obama Nest Eggs Turn Gold!

 “Despite being the richest country in the world, poverty remains an important social issue in the United States. All too often poverty in America is used as a political weapon by both political parties to galvanize their voting base. What is lost in the midst of such politicking is the crony connection of corporations that have positioned themselves to profit from poverty. The welfare programs we use to attempt to alleviate poverty actually play directly into the plans of companies that lobby on behalf of legislation lauded as anti-poverty programs. Rather than overcoming poverty, these programs line the pockets of their promoters. Such crony connections must end.” Government Accountability Institute

According to the US Census Bureau’s Median Value of Debt by Household (2011), the median household debt (both secured and unsecured) for 35-44 year olds was $108,000 (USD); for those 45-54, $86,500; and for 55-64 age group it was $70,000. The data in the Census Bureau report also shows that the less formally educated one is the less debt one has.

The median debt for someone with no high school diploma is $20,000 (with a high school diploma is $42,000), while the median debt for a holder of a graduate or professional degree is $130,705. So while America’s educational leaders say that a college degree will likely lead to increased income over the years, they don’t mention that secured and unsecured debt increases the “smarter” one becomes. [Read more...]

Another Phony Jobs Report From A Government That Lies About Everything

“Washington’s claim that Americans have “freedom and democracy” is the sickest joke in human history.”

June 7, 2013. The payroll jobs report for May released today continues the fantasy.

Goods producing jobs declined, with manufacturing losing another 4,000 jobs, but the New Economy produced 179,000 service jobs.

Are these jobs the high-powered, high-wage “innovation jobs” that economists promised would be our reward from Globalism. I’m afraid not.

According to the Bureau of Labor Statistics, the jobs created are the usual lowly paid non-exportable domestic service jobs–the jobs of a third world country. [Read more...]

How Elites and Media Minimize Dissent and Bury Truth

We tolerate no dissent. That part of the Constitution is gone, along with the rest of it.

Over the last several years I have watched the rise of an important new intellect on the American scene. Ron Unz, publisher of The American Conservative, has demonstrated time and again the extraordinary ability to reexamine settled issues and show that the accepted conclusion was incorrect.

One of his early achievements was to dispose of the myth of immigrant crime by demonstrating that “Hispanics have approximately the same crime rates as whites of the same age and gender.” You can imagine the uproar, but Unz won the debate. [Read more...]

The Financial Press–A Disinformation Machine

In America Everything is Hype for a Buck

Dave Kranzler of Golden Returns Capital declares the April payroll jobs report that was released on May 3 by the Bureau of Labor Statistics to be “fictitious.”

Statistician John Williams (shadowstats.com) says both the jobs report and unemployment rate are “nonsense.”

I agree with both. But don’t expect the financial press to report the facts.

Let’s take a walk through the BLS report and you can arrive at your own conclusion.

The BLS report says that the private sector created 185,000 service jobs in April. Even if this report were true, it would have negligible effect on the unemployment rate as about 127,000 new jobs are needed each month just to stay even with population growth and current unemployment rate. [Read more...]

When Truth Is Suppressed Countries Die

“The corrupt corporations, the corrupt media, and the corrupt US government have insulated the country from truth”

Over a decade during which the US economy was decimated by jobs offshoring, economists and other PR shills for offshoring corporations said that the US did not need the millions of lost manufacturing jobs and should be glad that the “dirty fingernail” jobs were gone.

America, we were told, was moving upscale. Our new role in the world economy was to innovate and develop the new products that the dirty fingernail economies would produce. The money was in the innovation, they said, not in the simple task of production.

As I consistently warned, the “high-wage service economy based on imagination and ingenuity” that Harvard professor and offshoring advocate Michael Porter promised us as our reward for giving up dirty fingernail jobs was a figment of Porter’s imagination. [Read more...]

Staring Armageddon in the Face but Hiding It with Official Lies

“The Fed has produced a perfect storm that could consume the US and perhaps the entire Western world”

According to the Bureau of Labor Statistics, the US economy created 236,000 new jobs in February. If you believe that, I have a bridge in Brooklyn that I’ll let you have at a good price.

Where are these alleged jobs? The BLS says 48,000 were created in construction. That is possible, considering that revenue-starved real estate developers are misreading the housing situation.

Then there are 23,700 new jobs in retail trade, which is hard to believe considering the absence of consumer income growth and the empty parking lots at shopping malls. [Read more...]

The Missing Recovery

“Sooner or later something will pop these bubbles … and the consequences will be horrendous.”

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. [Read more...]

Washington’s Hegemonic Ambitions Are Not in Sync with Its Faltering Economy

“Americans were told a packet of lies designed to win their gullible acceptance to an economy that produces high returns for Wall Street, shareholders, and corporate executives at the expense of everyone else in the country.”

BDIn November the largest chunk of new jobs came from retail and wholesale trade. Businesses gearing up for Christmas sales added 65,700 jobs or 45% of November’s 146,000 jobs gain. With December sales a disappointment, these jobs are likely to reverse when the January payroll jobs report comes out in February. Family Dollar Stores CEO Howard Levine told analysts that his company’s customers were unable to afford toys this holiday season and focused instead on basic needs such as food. Levine said that his customers “clearly don’t have as much for discretionary purchases as they once did.”

For December’s new jobs we return to the old standbys: health care and social assistance and waitresses and bartenders. These four classifications accounted for 93,000 of December’s new jobs, 60% of the 155,000 jobs. [Read more...]

More Phony Employment Numbers

If the “free and democratic” Americans cannot even find out what the unemployment rate is, how do they expect to find out about anything?

PhonyNumbersStatistician John Williams (shadowstats.com) calls the government’s latest jobs and unemployment reports “nonsense numbers.”

There are a number of ongoing problems with the released numbers. For example, the concurrent-seasonal factor adjustments are unstable. The birth-death model adds non-existent jobs each month that are then taken out in the annual downward benchmark revisions. Williams calculates that the job overstatement through November averages 45,000 monthly. In other words, employment gains during 2012 have been overstated by about 500,000 jobs. Another problem is that each month’s jobs number is boosted by downside revision of the previous month’s jobs number. Williams reports that the 146,000 new jobs reported for November “was after a significant downside revision to October’s reporting. Net of prior-period revisions, November’s seasonally-adjusted monthly gain was 97,000.”

Even if we believe the government that 146,000 new jobs materialized during November, that is the amount necessary to stay even with population growth and therefore could not be responsible for reducing the unemployment rate from 7.9% to 7.7%. The reduction is due to how the unemployed are counted. [Read more...]

America R.I.P.

“A country so poorly led can do nothing but decline.”

unempDuring the second half of the 20th century the United States was an opportunity society. The ladders of upward mobility were plentiful, and the middle class expanded. Incomes rose, and ordinary people were able to achieve old-age security.

In the 21st century the opportunity society has disappeared. Middle class jobs are scarce. Indeed, jobs of any kind are scarce. To stay even with population growth from 2002 through 2011, the economy needed about 14 million new jobs. However, at the end of 2011 there were only 1 million more jobs than in 2002. http://www.bls.gov/webapps/legacy/cesbtab1.htm

Only 426,000 of these jobs are in the private sector. The bulk of the net new jobs consist of waitresses and bartenders and health care and social assistance. According to the Bureau of Labor Statistics, over the 9 years, employment for waitresses and bartenders increased by 1,188,000. Employment in health care and social assistance increased 3,087,000. These two categories accounted for 1,000% of the net private sector job growth.

As for manufacturing jobs, they not only did not grow with the population but declined absolutely. During these nine years, 3.5 million middle class manufacturing jobs were lost.

Over the entire nine years, only 48,000 new jobs were created for architects and engineers.

In the 21st century the US economy has been able to create only a few new jobs and these are in lowly paid domestic services that cannot be offshored, such as waitresses and bartenders. [Read more...]

Reaching the Keynesian Long Run, and Yet Not Dead

John Maynard Keynes: From Social Fascism to Economic Fascism?

keynesLast Thursday morning, while driving my daughter to her play group, as I was listening to NPR’s usual circle of experts dissecting and interpreting Bernanke’s press conference, it all came back to me: numerous economic courses taken during my bachelors’ and graduate studies, the Bible of academics in the field of economics - Keynesian economics - the absolutism minus common sense, unquestioning conformity as a prerequisite to acceptance by one’s elite peers, and in the middle of all these convoluted ingredients the questioning  little ‘me.’ I assure you, not the kind of memories you want to come rushing back during a hectic drive. But ‘they’ started it: the Keynesians.

Please don’t be tempted to stop reading further only because you haven’t taken those mandatory courses in economics or because you don’t consider yourself an economic expert. In fact, you may have been saved and still in possession of ‘common sense’ easily erased by systematic academic indoctrination in economic fascism. The following general description of the Keynesian model, if read with sufficient common sense and a bit of critical thinking, should give anyone a pretty good idea of what I mean by economic fascism or an economic model enabling government fascism: [Read more...]