Unemployment

Let them Eat Twinkies

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Published on The Daily Impact on August 29, 2016

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let them eat twinkies

 

A change in food stamp benefits for up to a million people such as this one is affecting WalMart’s profits. Something must be done. (Photo by FaceMePLS/Flickr)

In this, the eighth successful year of our Glorious Recovery from the Great Recession, things are really looking up for the American Lower Class, formerly known as Middle. The unemployment rate as calculated by the U.S. Government (adjusted for inflation, seasonally adjusted, smoothed, combed and curried) is down to a piddling five per cent, which is regarded by the country-club set as better-than-full employment, because, they suspect, thousands of people are working against their will. Moreover, the number of able-bodied adults capable of working, but not working, classified as “not in the labor pool” and therefore not unemployed (and thus not included in the calculation of the unemployment rate) is only up to 95 million people.

 

Things are looking so good for poor people that between 500,000 and 1,000,000 of them are being dropped from SNAP, formerly known as the Food Stamp program, this year. Some 20 states are reinstating the three-month limit on benefits to adults 18-49 who are not disabled or raising children. Thus freed from a crippling dependency on government handouts, these poorest of the poor are doing much better now, many of them actually motivated to go out and create jobs — in the field of heroin marketing, for example.

Surprisingly, it turns out there’s a downside to cutting Food Stamp benefits. It has been a serious blow to the sales of WalMart and Dollar General Stores — the sector of the retail market known as the Bottom Feeders. In addition to the fact that the employees of these stores need Food Stamps to survive (witness WalMart’s warm-hearted annual drive to collect canned SpaghettiOs so their employees and their families can have a Christmas Dinner), it turns out that the stores also need Food Stamps to survive.

Dollar General last week reported an 18% drop in its stock price after it reported disappointing sales, and found itself in a price-cutting war with WalMart, all since the food stamp cuts started to materialize. DollarTree reported similar problems. Cutting prices on staple items will reduce profits further, of course, but the companies hope it will allow them to hang on to their customers until things get better. (As we all know, things always get better, always before the system breaks down. That rule is as inviolate as the one we all relied on in 2008, the one that said: housing prices never go down.)

As we wait for things to get better, we cannot help but notice that they are getting worse. A Google Consumer Survey conducted this month found that more than 60% of all Americans — not just the Lower Class — have less than $1,000 in total savings. And 20% don’t have any. None.

Forbes, the magazine of the 1%, immediately ran a piece debunking the claim. “It’s Simply Not True,” thundered the headline. After clearing its throat for a number of paragraphs, down near the end, the article admitted that well, yes, it was true, actually, but irrelevant because these people have credit cards, don’t they? They’ll be fine.

So you see the problem.  

Dollar General CEO Todd Vasos said last week he has been surprised to learn that while things seem to be getting better on the surface, they are most definitely not getting better down where his customers live. There, rents are expensive and rising, home ownership is out of the question, and so is health care insurance, while the costs of health care and medicines are skyrocketing. But Mr. Vasos known exactly where to place the responsibility, and find the hope. “Our core customer,” he said proudly, “is very resilient,” and will “figure it out over time.”

So now we know the solution.

Worst Jobs Report in 6 Years

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Published on The Economic Collapse on June 3, 2016

 

 

 

 

 

 

 

 

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102 Million Working Age Americans Do Not Have Jobs

 

xThis is exactly what we have been expecting to happen.  On Friday, the Bureau of Labor Statistics announced that the U.S. economy only added 38,000 jobs in May.  This was way below the 158,000 jobs that analysts were projecting, and it is also way below what is needed just to keep up with population growth.  In addition, the number of jobs created in April was revised down by 37,000 and the number of jobs created in March was revised down by 22,000.  This was the worst jobs report in almost six years, and the consensus on Wall Street is that it was an unmitigated disaster.

The funny thing is that the Obama administration says that the unemployment rate actually went down last month.  Almost every month since Obama has been in the White House, large numbers of Americans that have been unemployed for a very long time are shifted from the “unemployment” category to the “not in the labor force” category.  This has resulted in a steadily falling “unemployment rate” even though the percentage of the population that is actually working has not changed very much at all since the depths of the last recession.

The Bureau of Labor Statistics claims that the number of Americans “not in the labor force” increased by 664,000 from April to May.  If you believe that, I have a giant bridge on the west coast that I would like to sell you.  The labor force participation rate is now down to 62.6, and it is hovering just above a 38 year low.

When you add the number of working age Americans that are “officially unemployed” (7.4 million) to the number of working age Americans that are considered to be “not in the labor force” (an all-time record high of 94.7 million), you get a grand total of 102.1 million working age Americans that do not have a job right now.

This is not a game.

So far in 2016, three members of my own extended family have lost their jobs.

According to Challenger, Gray & Christmas, layoffs at major firms are running 24 percent higher up to this point in 2016 than they were during the same time period in 2015.

It was only a matter of time before those layoffs started showing up in the official employment numbers, and I fully expect that this trend will accelerate in the months ahead.

And here are some other brand new numbers for you to consider…

-Since Barack Obama entered the White House, 14,179,000 Americans have “left the labor force” according to the Bureau of Labor Statistics.

-The quality of our jobs continues to deteriorate.  In May, 59,000 full-time jobs were lost, but 118,000 part-time jobs were gained.

-Since September 2014, 207,000 mining jobs have been lost.

-We just learned that U.S. factory orders have declined once again.  This marks the 18th month in a row that this has taken place, and we have never seen such an extended decline outside of a major recession.

-JPMorgan’s “recession indicators” have just soared to the highest level that we have seen since the last recession.

Needless to say, the financial community is pretty horrified by all of this news.  They were expecting a much better jobs report, and many of them are not hiding their disappointment.  Here is one example from the Wall Street Journal

This was an unqualified dud of a jobs report,” said Curt Long, chief economist at the National Association of Federal Credit Unions, noting “the unemployment rate fell, but for the wrong reason as labor force participation declined for the second consecutive month.”

And here is another example that comes from David Donabedian, the chief investment officer at Atlantic Trust Wealth Management…

We can’t find a positive nugget in today’s job report. If we were looking for signs of strength in this report, there is nothing to hang onto here.”

But of course the mainstream media is doing their best to put a positive spin on these numbers.  For instance, CNN just published a laughable article entitled “America’s economy is stronger than weak jobs report“.

And the White House insists that this new employment report really isn’t that big of a deal

The White House doesn’t get “too disappointed” over the number of unemployed and underemployed Americans.

“I’ve been reacting to jobs numbers here at the White House for more than seven years, and what is true today has been true in the past, which is, we don’t get too excited when jobs numbers are better than expected and we don’t get too disappointed when jobs numbers one-month are lower than expected,” White House Press Secretary Josh Earnest told CNBC.

But of course the truth is that it is a really big deal.  We just received major confirmation that the U.S. economy has slipped into recession mode.

For months, I have been writing about how virtually every other indicator has been screaming that a new economic crisis had already begun.

But the employment numbers had remained fairly decent up until now.  Employment is typically considered to be a “lagging indicator”, which means that it isn’t one of the first places we would expect to see signs of a recession show up.  However, it is inevitable that the official unemployment numbers will reflect an economic downturn eventually, and that is what we are starting to see now.

What this means is that you probably have even less time to get prepared for what is ahead than you may have originally thought.

The U.S. economy has already entered the early chapters of the next great economic crisis, and most of the population is going to be caught totally off guard and will suffer tremendously.

If our leaders had made better decisions since the last crisis, things could have turned out differently.  But instead, they continued to conduct business as usual, and now we will reap what they have sown

 

 

In 1 Out Of Every 5 American Families, Nobody Has A Job

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Published on The Economic Collapse on April 24, 2016

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If nobody is working in one out of every five U.S. families, then how in the world can the unemployment rate be close to 5 percent as the Obama administration keeps insisting? The truth, of course, is that the U.S. economy is in far worse condition than we are being told. Last week, I discussed the fact that the Federal Reserve has found that 47 percent of all Americans would not be able to come up with $400 for an unexpected visit to the emergency room without borrowing it or selling something. But Barack Obama and his minions never bring up that number. Nor do they ever bring up the fact that 20 percent of all families in America are completely unemployed. The following comes directly from the Bureau of Labor Statistics

In 2015, the share of families with an employed member was 80.3 percent, up by 0.2 percentage point from 2014. The likelihood of having an employed family member rose in 2015 for Black families (from 76.4 percent to 77.7 percent) and for Hispanic families (from 85.9 percent to 86.4 percent). The likelihood for White and Asian families showed little or no change (80.1 percent and 88.6 percent, respectively).

For purposes of this study, families “are classified either as married-couple families or as families maintained by women or men without spouses present” and they include households without children as well as children under the age of 18.

Digging into the numbers, we find that there were a total of 81,410,000 families in America during the 2015 calendar year.

Of that total, 16,060,000 families did not have a single member employed.

So that means that in 19.7 percent of all families in the United States, nobody has a job.

And of course there are lots more families that are “partially employed”. In other words, maybe the wife has a job but the husband does not.

So based on these numbers, it would appear to me that the true rate of unemployment in this country is vastly higher than 5 percent, and John Williams of shadowstats.com agrees with me. According to his calculations, the broadest measure of unemployment in the U.S. would actually be sitting at 22.9 percent if honest numbers were being used.

But let’s not just focus on where we are.

Let’s take a look at where we are going.

According to Challenger, Gray & Christmas, job cut announcements by big companies in the United States were up 32 percent during the first quarter of 2016 compared to the first quarter of 2015, and it appears that the job losses are going to continue to mount as we roll into the second quarter. For instance, late last week Intel announced that it is going to be laying off 12,000 workers

As it navigates its path into the future, Intel, the 47-year-old corporation best known for making microprocessor chips that power personal computers, has announced significant changes to its business.

On Tuesday, Intel’s CEO Brian Krzanich said in a letter to employees that the company over the next year will cut its 107,300-person global workforce by 12,000 people, or 11 percent.

Those are good middle class jobs, and they are exactly the kind of jobs that we cannot afford to be losing.

Meanwhile, the “retail apocalypse” appears to be accelerating once again.

Bloomberg is reporting that teen clothing chain Aeropostale is preparing to file for bankruptcy.  Aeropostale currently operates more than 800 stores across the nation, and it is unclear if any of them will be able to stay open as this process plays out. But of course it isn’t just Aeropostale that has gone bankrupt lately. Here are a few more examples of major retailers that have recently filed for bankruptcy

April 16, 2016: Vestis Retail Group, the operator of sporting goods retailers Eastern Mountain Sports (camping, hiking, skiing, adventure sports), Bob’s Stores (family clothing and shoes), and Sport Chalet (general sporting goods), filed for Chapter 11 bankruptcy. It will close all 56 stores and stop online sales.

In the filing, it blamed the going-out-of-business sales at “certain Sports Authority locations,” plus the weather, which had been too warm, and trouble with switching to a new software platform. It’s owned by private equity firm Versa Capital Management LLC.

April 7, 2016: Pacific Sunwear of California, clothing retailer with nearly 600 stores and derailed ambitions of skate-and-surf cool, filed for Chapter 11 bankruptcy. PE firm Golden Gate Capital, a lender to the company, agreed to convert over 65% of its loan into equity of the reorganized company and add another $20 million in financing. Wells Fargo agreed to provide $100 million of debtor-in-possession financing.

March 2, 2016: Sports Authority filed for Chapter 11 bankruptcy. It said it would close 140 of its 450 stores, including all stores in Texas.

Just because the stock market has been doing well in recent weeks does not mean that the crisis has passed.

In fact, many experts believe that the crisis of 2016 is just getting started.  Albert Edwards of Societe Generale is one of them

But what I do know is when in the last few weeks I have heard that Janet Yellen sees no bubble in the US, when Ben Bernanke hones and restates his helicopter money speech, and when Mario Draghi says that the ECB’s policy of printing money and negative interest rates was working, I feel utterly depressed (I could also quote similar nonsense from Japan, the UK and China). I have not one scintilla of doubt that these central bankers will destroy the enfeebled world economy with their clumsy interventions and that political chaos will be the ugly result. The only people who will benefit are not investors, but anarchists who will embrace with delight the resulting chaos these policies will bring!

All over the world, the underlying economic fundamentals continue to deteriorate. Here in the U.S., retail sales have been extremely disappointing, total business sales have been steadily falling, corporate revenues and corporate profits continue to plunge, and corporate debt defaults have soared to their highest level since the last financial crisis.

All of these numbers are screaming that a major economic downturn is here, and with each passing week things look even more ominous for the second half of 2016.

 

 

 

 

 

 

 

 

A Year in Retirement

RE-Ewzgc2reddit-logoOff the keyboard of RE

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Published on the Doomstead Diner on March 13, 2016

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This week is the one year Anniversary of when I left the working world.  Not voluntarily, it was forced on me by an accident at work which I have detailed in numerous blogs and forum posts, along with at least a couple of rants.  Nevertheless, voluntarily or involuntarily the result is the same, I am "retired".

http://www.usnews.com/dims4/USNEWS/27f6743/2147483647/thumbnail/652x435%3E/quality/85/?url=%2Fcmsmedia%2F12%2F18%2Fc182a6924667bca09a4cd1bed6ff%2F140714-seniorgolf-stock.jpgFor the first 7 months of this retirement, it wasn't exactly bliss out on a Florida Golf Course.  Besides the physical issues stemming from the accident, I was under a lot of financial and emotional stress, since it wasn't clear when or even if I would have any income to pay my bills.  I wasn't eligible for Unemployment Insurance because I wasn't able to go to work of any sort.  In fact just getting out of bed is hard many days.  The insurance company representing my old employer "contraverted" the Workman's Compensation claim, which basically means they deny responsibility to pay up.  That case is still under litigation a full year later now.

The final source of support in this situation is Social Security Disability Insurance (SSDI), and for this it takes a minimum of 4-6 months to get processed, and then only around 40% of applicants get their bennies on the first round.  Another 40% get it on the second try, and then 20% are left twisting in the wind.  Finding out anything about what is going on with your application during the initial supposed 4-6 months is about impossible, so you just wait and hope for the best.  It's very stressful though as you watch your savings account dwindle paying your monthly bills, and this of course assumes you have such a savings account with enough money to pay all your bills for at least 6 months, which relatively few people have.

http://www.dumblittleman.com/wp-content/uploads/2011/06/Piggy_on_Money1.jpgThe blame for this lack of savings is often laid at the feet of the individual, but the fact is that unless you make a fairly high income, saving much money is quite difficult to do.  Every month you struggle to meet your regular bills, and then when minor disasters come up each year like an impacted wisdom tooth or the tranny on your 8 year old Toyota gives out, whatever savings you accrued to that point ends up being used to cover the small annual disasters you face.  If you lose a job for any reason and are unemployed for a few months, even if you get your UE Bennies it's not as much as you made in salary, so again you start dipping into your small pile of savings to cover that period.  Over 30 or 40 years of the typical working lifespan in the industrial era, I think just about everyone suffers 1 or 2 periods of unemployment.

Anyhow, fortunately for me as a Doomer I did have my Nest Egg, and I also have made it a point to live very cheap, I keep my bills low and stay out of debt.  An early experience in my life of amassing a fairly decent credit card bill for the time made me very penurious.  It was all of about $6000 and seems like Chump Change now, but at the time it was $6000 more than I had or even was worth in any assets.  All I had was a 7 year old Toyota Tercel 4WD Wagon, vintage 1983 worth about $1500, but they can't take your only transportation from you in a BK.  So I declared Chapter 7 Bankruptcy, the bank didn't even bother to show up at the hearing and I was out from under the debt.  I never went in debt again, in fact I never even held a credit card since then.

RE-BM-Camp3When my final BIG DISASTER occurred, I was not in the majority of people with less than 6 months of savings to cover bills, I had enough to cover more than a year.  While not being in immediate danger of becoming Homeless though, it was stressfull watching the carefully harbored digibits in the Credit Union account dwindle each month, and I busied myself making plans for what I would do if I reached a low enough threshold where I would have to give up my digs and go live in my RV.

A HUGE source of psychological comfort and relief for me during this dark time were my friends on the Diner, 4 of whom offered me a place to come and park my RV while trying to get everything sorted out.  These folks know who they are, and they have my eternal gratitude.  Don't let anyone ever tell you that you can't make true FRIENDS over the internet, you can.  True Friendship cannot be measured when times are good, you only know who your true friends are when times get rough.

3912-Finger-of-God-02Finally for me, after 7 months The Finger of God stepped in one more time to keep me going, I got my first SSDI check in November of 2015, and the digibits have been dropped in my Credit Union Account each month on the 4th Wednesday of the month ever since.  The Credit Union Account no longer dwindles, now it grows again, although not by too much each month.  My bills though are low enough though that SSDI covers them with a little bit to spare.

Many people look at SSDI recipients as "leeches" or the "Free Shit Army" as they liked to phrase it on The Burning Platform when I participated on that Temple of Libertarian nonsense.  Fact is though, SSDI wasn't "free" at all.  It was a mandatory Insurance Ponzi Scheme that I paid into for every year of my more than 40 year working lifespan.  Just like if you have Fire Insurance on your McMansion and it burns down, if you have faithfully paid your monthly premium you EXPECT to be paid off by the Insurance Company!  Of course they often try to weasel out on these claims, like the Workman's Comp Insurance company I am battling with is trying to do, but if your claim is valid you are ENTITLED to compensation!  "Entitlements" are used pejoratively, as though there is something wrong with being entitled to a pension after working 30 years on a GM Production Line?

https://www.bodyrock.tv/wp-content/uploads/2013/11/OldManWithCanes.jpgBeing approved as a Certified Cripple by SSDI also makes it possible for me to get an "Early Pension" from the Union I worked for for 17 years, back in the day.  When this comes through, it will add a bit more to the Monthly Mailbox Money I am ENTITLED to, because much like SSDI, my Union Dues were a REQUIRED monthly payment I had to make every month I was working in that industry.  So that will add to my buffer level when it does finally come through, although there are delays on that one because they want a copy of my Divorce Decree from 30 years ago, which of course I no longer have and now am trying to get from the NYS Dept of Health.  12-14 weeks on that one supposedly, we'll see.

After all of this, sometime in the next year, maybe by summer I hope to have the Workman's Comp case tied up and settled as well, to finish out the first couple of years of my retirement, which while pretty stressful and not too physically comfortable at least I GOT!  Moving down the road into the future, it becomes less and less likely that SS will hold up, that Pension Plans will hold up or that 401Ks and Stock Portfolios of "investments" will hold up too well either.  So all the Pigmen who were ENTITLED to a comfortable retirement by living off their investments also won't be doing too good.  Retirement as a whole is pretty much an industrial society concept, and in Ag Cultures and H-G cultures, once you past the point of being able to do SOMETHING the society valued, you died.

I in fact do have something to give back to the society which nurtured me, although it does not pay any money currently and actually costs me money to do, which is run the Doomstead Diner.  How many people the Diner reaches is an open question, but overall the numbers are pretty good across all the sites under the Diner banner. So I have a REASON to keep going, which is to write for the Doomstead Diner. 🙂

rantBesides their work, besides raising the kids who leave the nest, besides Hobbies like playing Golf in Florida or visiting National Parks, once retired many folks find themselves without purpose, and that is really what leads you into death.  This is a problem I do not have, every day there are new things to write about for the Diner, and in fact I usually am overloaded with projects I want to pursue.  Who can I get on for the next interview?  What topics to discuss in the next Collapse Cafe?  What is sufficiently PISSING ME OFF to rant on? What pictures to select for the latest rant?  I am bizzier than ever as a crippled and retired doomer than I ever was as a member of the for pay working world!  LOL.

So overall, although it is not the retirement I dreamed of in my youth, this is not too bad as retirements go.  I'd like to be in better physical shape of course, but at least my mental faculties are still in decent shape (although some Diners might dispute that. lol).  I'm still hopeful that things will improve some too once all the bureaucratic and legal nonsense is tidied up.  I'm in the midst of a debate with myself on whether I am physically capable of taking myself out on the road one more time to explore North America, to witness for myself the Collapse of Industrial Civilization as it manifests itself in communities around this land mass.  Or perhaps I need to just stay here in my little cave and keep writing until the Internet Goes Dark.  I don't know which one I will pick right now, but either way it is OK with me.  I lived a pretty interesting life in the Age of Oil, and I didn't compromise my principles very much to make it through either.  I certainly got a heck of a lot more than most folks who preceeded me got during their time walking the earth, and more than most folks who succeed me will get either.  So all in all, a pretty good go round on this trip in a Meat Package for me on Planet Earth.

I no longer worry about or fear death, although I hope not to have an extended and painful one.  I am ready to go into the Great Beyond any day, any time, and for this go round my legacy of the Doomstead Diner will stand until the Internet Goes Dark.  Not sure what legacies I left in previous iterations of my life in a meat package on Earth, although I am pretty certain of a few of them.  I know spiritually that I have always been a Nomad and always been a Freedom Seeker. I know that I have each time been anti-authoritarian and put the natural world above technological development.  I know that in every iteration, I have been an independent soul who cares about others.  I know this world will end, but souls are eternal in this universe and others.  I know that my soul, when it leaves this meat package this time, will find again another place to seek FREEDOM.

I was there once before, I am certain of it, Navigating the first cat rigged sailing canoe that made it to the Big Island of Hawaii.  I will be there again after this retirement is finished and I take my next trip to the Great Beyond.

http://pvs.kcc.hawaii.edu/images/graphics/kane_hokulea2.jpeg

She’s Back!

From the keyboard of James Howard Kunstler
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Originally Published on Clusterfuck Nation April 13, 2015


And so, from the dormant volcano that is American politics, out comes Hillary, like Rodan the Flying Reptile pretending to be Granny Goose. Now that she is officially flapping around the electorate, the excitable mainstream press reports the initial caw-caw-cawing of her campaign: it will be “based on diversity, discipline and humbleness.” These are endearing qualities in any giant flying reptile, and reassuring to voters who might otherwise fear something a bit darker on the wing.

The Elmer Fudd in the piece at the moment, former Maryland Governor Martin O’Malley, did get off a clever first shot at the flying behemoth when he cracked that “the presidency of the United States is not some crown to be passed between two families,” but it seems to have only provoked a deeper show of humility from the target. She’ll be starting a “listening campaign” to detect rustles of discontent as she banks over the cornfields of Iowa cawing platitudes across the sky, e.g. “Americans have fought their way back from tough economic times.”

Point of fact: no they haven’t. They are still strewn over the landscape with the economic equivalent of sucking chest wounds, but perhaps a few of them have noticed with vicarious satisfaction the astounding rise of the S & P stock index as they lie in a roadside ditch scanning the skies. It must give them some comfort as their lights go out. Just maybe, their children will also have the chance to become Goldman Sachs employees as history marches on. The flying reptile wants to be their champion! She wants to earn their votes — the old fashioned way, by purchasing as much TV air-time as possible to put across the illusion of sincerity. On such campaigns is the decline of empire propelled.

More to the point, what does the flight of Hillary say about party politics in this land? That a more corrupt and sclerotic dominion has hardly been glimpsed since the last Bourbons cavorted in the halls of Versailles? Hence, my view that America will witness a very peculiar spectacle leading up to and perhaps beyond the 2016 election: the disintegration of seeming normality against a background of mounting disorder and insurrection. Hillary will go on caw-cawing platitudes about togetherness, diversity, and recovery while the economy sinks to new extremes of unravelment, and the anger of a swindled people finally boils over.

Neither party shows even minimal competence for understanding the actual crises facing this land, and indeed the project of techno-industrial civilization itself. If the people don’t overthrow them, and grind their pretenses underfoot, then events surely will. In the trying months leading up to the presidential election of 2016, Americans will witness the death of their “energy independence” fantasy — actually a meme concocted by professional propagandists. The shale oil “miracle” will go up in a vapor of defaulting junk bonds. Violence will escalate through North Africa and the Middle East, threatening the world oil supply more generally. I would give a low-percentage chance of survival to King Salman of Saudi Arabia, and to the Saud part of Arabia more particularly as civil war among the rival clans breaks out there, with an overlay of Islamic State mischief seeding even greater chaos, and the very likely prospect of sabotage to the gigantic oil terminal at Ras Tanura on the Persian Gulf. In comparison, the fiasco of Benghazi will look like a mere Three Stooges episode.

If a third party were to arise in all this turmoil, it might not be savior brigade, either. In 1856 the Republicans welled up as the Whigs expired in sheer purposelessness and the Democrats romanced slavery. The nation had to endure the greatest convulsion in its lifetime to get to the other side of that. This time, I’m not at all sure we’ll get to the other side in one piece.

 


James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

10 Charts of Collapse

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on March 18, 2015

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10 Charts Which Show We Are Much Worse Off Than Just Before The Last Economic Crisis

http://theeconomiccollapseblog.com/wp-content/uploads/2015/03/10-Charts-Economic-Crisis.jpgIf you believe that ignorance is bliss, you might not want to read this article.  I am going to dispel the notion that there has been any sort of “economic recovery”, and I am going to show that we are much worse off than we were just prior to the last economic crisis.  If you go back to 2007, people were feeling really good about things.  Houses were being flipped like crazy, the stock market was booming and unemployment was relatively low.  But then the financial crisis of 2008 struck, and for a while it felt like the world was coming to an end.  Of course it didn’t come to an end – it was just the first wave of our problems.  The waves that come next are going to be the ones that really wipe us out.  Unfortunately, because we have experienced a few years of relative stability, many Americans have become convinced that Barack Obama, Janet Yellen and the rest of the folks in Washington D.C. have fixed whatever problems caused the last crisis.  Even though all of the numbers are screaming otherwise, there are millions upon millions of people out there that truly believe that everything is going to be okay somehow.  We never seem to learn from the past, and when this next economic downturn strikes it is going to do an astonishing amount of damage because we are already in a significantly weakened state from the last one.

For each of the charts that I am about to share with you, I want you to focus on the last shaded gray bar on each chart which represents the last recession.  As you will see, our economic problems are significantly worse than they were just before the financial crisis of 2008.  That means that we are far less equipped to handle a major economic crisis than we were the last time.

#1 The National Debt

Just prior to the last recession, the U.S. national debt was a bit above 9 trillion dollars.  Since that time, it has nearly doubled.  So does that make us better off or worse off?  The answer, of course, is obvious.  And even though Barack Obama promises that “deficits are under control”, more than a trillion dollars was added to the national debt in fiscal year 2014.  What we are doing to future generations by burdening them with so much debt is beyond criminal.  And so what does Barack Obama want to do now?  He wants to ramp up government spending and increase the debt even faster.  This is something that I covered in my previous article entitled “Barack Obama Says That What America Really Needs Is Lots More Debt“.

Presentation National Debt

#2 Total Debt

Over the past 40 years, the total amount of debt in the United States has skyrocketed to astronomical heights.  We have become a “buy now, pay later” society with devastating consequences.  Back in 1975, our total debt level was sitting at about 2.5 trillion dollars.  Just prior to the last recession, it was sitting at about 50 trillion dollars, and today we are rapidly closing in on 60 trillion dollars.

Presentation Credit Market Instruments

#3 The Velocity Of Money

When an economy is healthy, money tends to change hands and circulate through the system quite rapidly.  So it makes sense that the velocity of money fell dramatically during the last recession.  But why has it kept going down since then?

Presentation Velocity Of M2

#4 The Homeownership Rate

Were you aware that the rate of homeownership in the United States has fallen to a 20 year low?  Traditionally, owning a home has been a sign that you belong to the middle class.  And the last recession was really rough on the middle class, so it makes sense that the rate of homeownership declined during that time frame.  But why has it continued to steadily decline ever since?

Presentation Homeownership Rate

#5 The Employment Rate

Barack Obama loves to tell us how the unemployment rate is “going down”.  But as I will explain later in this article, this decline is primarily based on accounting tricks.  Posted below is a chart of the civilian employment-population ratio.  Just prior to the last recession, approximately 63 percent of the working age population of the United States was employed.  During the recession, this ratio fell to below 59 percent and it stayed there for several years.  Just recently it has peeked back above 59 percent, but we are still very, very far from where we used to be, and now the next economic downturn is rapidly approaching.

Presentation Employment Population Ratio

#6 The Labor Force Participation Rate

So how can Obama get away with saying that the unemployment rate has gone down dramatically?  Well, each month the government takes thousands upon thousands of long-term unemployed workers and decides that they have been unemployed for so long that they no longer qualify as “part of the labor force”.  As a result, the “labor force participation rate” has fallen substantially since the end of the last recession…

Presentation Labor Force Participation Rate

#7 The Inactivity Rate For Men In Their Prime Working Years

If things are “getting better”, then why are so many men in their prime working years doing nothing at all?  Just prior to the last recession, the inactivity rate for men in their prime working years was about 9 percent.  Today it is just about 12 percent.

Presentation Inactivity Rate

#8 Real Median Household Income

Not only is a smaller percentage of Americans employed today than compared to just prior to the last recession, the quality of our jobs has gone down as well.  This is one of the factors which has resulted in a stunning decline of real median household income.

Presentation Real Median Household Income

I have shared these next numbers before, but they bear repeating.  In America today, most Americans do not make enough to support a middle class lifestyle on a single salary.  The following figures come directly from the Social Security Administration

-39 percent of American workers make less than $20,000 a year.

-52 percent of American workers make less than $30,000 a year.

-63 percent of American workers make less than $40,000 a year.

-72 percent of American workers make less than $50,000 a year.

We all know people that are working part-time jobs because that is all that they can find in this economy.  As the quality of our jobs continues to deteriorate, the numbers above are going to become even more dismal.

#9 Inflation

Even as our incomes have stagnated, the cost of living just continues to rise steadily.  For example, the cost of food and beverages has gone up nearly 50 percent just since the year 2000.

Presentation Food Inflation

#10 Government Dependence

As the middle class shrinks and the number of Americans that cannot independently take care of themselves soars, dependence on the government is reaching unprecedented heights.  For instance, the federal government is now spending about twice as much on food stamps as it was just prior to the last recession.  How in the world can anyone dare to call this an “economic recovery”?

Presentation Government Spending On Food Stamps

So you tell me – are things “getting better” or are they getting worse?

To me, it is crystal clear that we are in much worse condition than we were just prior to the last economic crisis.

And now things are setting up in textbook fashion for the next great economic crisis.  Unfortunately, most Americans are totally clueless about what is going on and the vast majority are completely and totally unprepared for what is coming.

Surviving Hard Times Together

Off the keyboard of  Jaded Prole
Follow us on Twitter @doomstead666
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no way like the american way

First Published in Veer Magazine, February, 2015.

 

February has been a very hard time for me and my wife. The snow and ice made it much worse. Our car, after much investment in repairs, clunked out in the crowded frenzy of a pre-storm grocery parking lot, its transmission giving in to entropy and poor design. As I approach 60 with aching knees and worn-out joints I’m feeling some sympathy with it as it sits under a shroud of snow, finally at rest.

Economically, I have been on a downhill slide reflecting national trends not often talked about when the delusion of economic recovery is more politically useful. It is true that corporations are reaping record profits and even that hiring may be up a few percentage points but the jobs are mostly part-time low-paying service jobs and wages remain stagnant if not decreasing in relation to actual living costs. The truth is that those being left behind are older workers. People like me.

My last job ended as the economy collapsed back in 2008. In spite of my experience, record of dependability and good work, being unemployed and over 50 made me automatically less desirable to employers. A survey by the Heldrich Center for Workforce Development at Rutgers University found that nearly two-thirds of unemployed workers age 55 and older say they have been actively searching for a job for more than a year, compared to just one-third of younger workers. Economists Dean Baker and Kevin Hassett noted in a New York Times op-ed,

A worker between ages 50 and 61 who has been unemployed for 17 months has only about a 9 percent chance of finding a new job in the next three months. A worker who is 62 or older and in the same situation has only about a 6 percent chance. As unemployment increases in duration, these slim chances drop steadily.”

I can attest to the reality of this. Though I have remained productive as a writer and publisher and have continued to apply for jobs I know I’m qualified for, I rarely, if ever, get a response. The dehumanization of on-line applications adds to the difficulty as we are all reduced to data in competing for fewer positions like a blood-sport version of musical chairs. It is worse than depressing. As that Times op-ed goes on to report,

Economists Daniel Sullivan and Till von Wachter estimate a 50 to 100 percent increase in death rates for older male workers in the years immediately following a job loss. There are various reasons for this rise in mortality. One is suicide. A recent study found that a 10 percent increase in the unemployment rate (say from 8 to 8.8 percent) would increase the suicide rate for males by 1.47 percent. This is not a small effect. Assuming a link of that scale, the increase in unemployment would lead to an additional 128 suicides per month in the United States. The picture for the long-term unemployed is especially disturbing. The duration of unemployment is the dominant force in the relationship between joblessness and the risk of suicide.

A more recent study by the U.S. Centers for Disease Control and Prevention confirmed that one of the primary causes of mortality in people between the ages of 40 and 64 since the recession began in 2007 is suicide directly related to job and economic losses. I am fortunate to have my publishing, writing and activism which give me a sense of personal identity and purpose, as well as the loving support of my wife Beverly and my community of friends. Without these, I might well be another statistic.

Those of us who spent decades in the workforce before the economy crashed under the weight of rampant corruption and record greed, are paying the penalty for the crimes of others who made a killing on Wall Street, in real estate, and in supplying materials for wars begun by the Bush administration.

The same folks responsible for crashing our economy, exporting productive jobs, undermining the quality and security of the jobs we are left with, and slashing the social safety net are continuing to attack your security and mine. Particularly despicable are the continuing attacks on Social Security given the aging population and the high, seemingly permanent unemployment of older workers. I’ll bet you have heard repeatedly that “Social Security is broke.” There is a good chance you believe this. It is a lie which has been repeated like a mantra for decades by those who would like to hand your Social Security over to the same Wall Street financiers who “broke” our national economy to enrich themselves. Social Security is anything but “broke.”

Nancy J. Altman, co-founder of the group Social Security Works writes,

Social Security, in pension jargon, is current-funded. About 75 percent of its revenue comes from insurance contributions withheld from workers’ wages, matched dollar-for-dollar by their employers. This is a permanent and ongoing source of revenue. As long as there are Americans working, Social Security will have this steady, reliable source of income. It would take an Act of Congress to end this source of revenue. And if no Americans were working, our troubles would be a lot greater than Social Security’s financing!

She adds,

“Social Security is conservatively managed. Every year, its income and benefits are projected out not just five, 10, or 15 years, but 75 years. It is unsurprising that projections out that far into the future may sometimes show a deficit. And current projections do show a deficit, manageable in size and over two decades away. That should be addressed, but it is nothing to be alarmed about, certainly nothing that calls for the loaded, misleading, emotionally charged cry of bankruptcy! In fact, our Social Security system is a creditor of the United States. Whenever Social Security runs a surplus, it invests that surplus. Congress requires that those funds be invested in the safest investment on Earth – government bonds backed by the full faith and credit of the Unites States. The United States currently owes around $18 trillion to its creditors; $2.8 trillion of that $18 trillion is owed to Social Security. The bonds held by Social Security in trust for America’s working families have the same legal status as the bonds held by private pension plans, foreign governments and other institutions.

It is true that in about 25 years Social Security could face a shortfall but that could be easily fixed by simply raising the cap in income deductions. Under the current system, any wages over the first $106,800 are exempt from Social Security withholding. People in the highest income brackets, about 6% of us, have finished contributing by March of this year. Raising that cap would keep Social Security solvent well into the next century and beyond.

Part of the undermining of Social Security and for that matter of our real security – yours and mine, is the raising of the retirement age even while employment for older workers disappears. The justification is that we are living longer but the reality is that, except for the wealthiest, we are not. Altman writes,

Under current law, Social Security’s statutory retirement age is already increasing from 65 to 67. Though hard to understand without being thoroughly familiar with the way Social Security benefits are calculated, raising Social Security’s statutory retirement age is indistinguishable from an across-the-board benefit cut. For every year that the statutory retirement age is increased, all retiree benefits are reduced by around 6 percent.

If anything, rather than cuts and higher retirement ages, Social Security should be expanded. The average age of pension eligibility in most developed countries is 60.

Attacks on Social Security are not just aimed at those of us who funded it for decades through paycheck deductions. The latest attack is on the disabled. Those suffering debilitating workplace injuries and those with handicaps. Funding for Social Security’s benefit package are held in two different trust funds, the disability trust fund and the old age and survivors trust fund. Every few years Congress authorizes a transfer of funds from the old age and survivors fund to the disability trust. Republicans in Congress see this as an opening to attack Social Security by holding this transfer up, calling for cuts of up to 20% on the meager benefits to our most disabled citizens and raising the retirement age to 70.

Republicans argue that transferring money from the broader program to the disability program weakens the program for seniors. A recent analysis from the Center on Budget and Policy Priorities concluded that such transfers are routine, have happened 11 times in the past, and that another one right now would be easy to do concluding that

Another reallocation to replenish the DI trust fund wouldn’t threaten seniors, contrary to the rule’s implicit attempt to pit retirement and disability beneficiaries against each other.

Back to you and I. There is no justification in the wealthiest country on earth for young people to be stuck living at home, struggling to find work and feeling they have no future. There is no excuse for the discarding of older workers and the ill. Half of our population is now at the poverty line, in debt and a shaky paycheck away from destitution. Corporate corruption of our government is degrading our economy to third world conditions. Our real economic security is eroding as the disparity between desperate poverty and obscene wealth reaches levels never before seen. We are cynically divided against ourselves with partisan politics by the corporate interests that impoverish us. We do not have to settle for this. What has kept me from giving up is community. Community is really about people looking out for each other whether as good neighbors, church communities or civic and political organizations. I cannot emphasize enough the importance of building community. Community is our strength and in it there is real power. The recognition of our united strength is why so much is spent to keep us divided.

It is easy to be crippled by cynicism, hopelessness and despair. But the reality is that citizen activism has a good record of creating change. Citizen activism created Social Security, better working conditions and Civil Rights legislation. It recently stopped the XL Pipeline, saved the open internet and won Norfolk an elected school board. We have to keep in mind that just as decisions made in back rooms affect each and every one of us, together we can advocate powerfully for ourselves affecting those decisions. From local Virginia issues like off-shore drilling, zoning, and local government accountability, to national issues like electoral reform, climate policy and defending Social Security, we can work with others in groups like the Sierra Club, or other regional and state organizing groups to make a real difference. I have found that doing so has been spiritually empowering and even fun. I have made many friends along the way, friends who have in fact pulled me and my wife through this difficult time with both emotional and material support. Not electing Republicans is important but Democrats aren’t much better. We cannot blindly trust any elected politicians to represent our interests. As the poet and playwright Bertolt Brecht pointed out, no one but ourselves will act for us, it must be all of us or none.


Jaded Prole is the nom-de-plume of a freelance writer and poet as well as a publisher, and philosopher living in Virginia. His blog is hereHe also publishes The Blue Collar Review, a quarterly whose purpose is to expand and promote a progressive working class vision of culture.

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Problems of Deflating Oil Prices

Off the keyboard of Gail Tverberg

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Published on Our Finite World on December 7, 2014

oilwell

Discuss this article at the Energy Table inside the Diner

Ten Reasons Why a Severe Drop in Oil Prices is a Problem

Not long ago, I wrote Ten Reasons Why High Oil Prices are a Problem. If high oil prices can be a problem, how can low oil prices also be a problem? In particular, how can the steep drop in oil prices we have recently been experiencing also be a problem?

Let me explain some of the issues:

Issue 1. If the price of oil is too low, it will simply be left in the ground.

The world badly needs oil for many purposes: to power its cars, to plant it fields, to operate its oil-powered irrigation pumps, and to act as a raw material for making many kinds of products, including medicines and fabrics.

If the price of oil is too low, it will be left in the ground. With low oil prices, production may drop off rapidly. High price encourages more production and more substitutes; low price leads to a whole series of secondary effects (debt defaults resulting from deflation, job loss, collapse of oil exporters, loss of letters of credit needed for exports, bank failures) that indirectly lead to a much quicker decline in oil production.

The view is sometimes expressed that once 50% of oil is extracted, the amount of oil we can extract will gradually begin to decline, for geological reasons. This view is only true if high prices prevail, as we hit limits. If our problem is low oil prices because of debt problems or other issues, then the decline is likely to be far more rapid. With low oil prices, even what we consider to be proved oil reserves today may be left in the ground.

Issue 2. The drop in oil prices is already having an impact on shale extraction and offshore drilling.

While many claims have been made that US shale drilling can be profitable at low prices, actions speak louder than words. (The problem may be a cash flow problem rather than profitability, but either problem cuts off drilling.) Reuters indicates that new oil and gas well permits tumbled by 40% in November.

Offshore drilling is also being affected. Transocean, the owner of the biggest fleet of deep water drilling rigs, recently took a $2.76 billion charge, among a “drilling rig glut.”

3. Shale operations have a huge impact on US employment. 

Zero Hedge posted the following chart of employment growth, in states with and without current drilling from shale formations:

Jobs in States with and without Shale Formations, from Zero Hedge.

Clearly, the shale states are doing much better, job-wise. According to the article, since December 2007, shale states have added 1.36 million jobs, while non-shale states have lost 424,000 jobs. The growth in jobs includes all types of employment, including jobs only indirectly related to oil and gas production, such as jobs involved with the construction of a new supermarket to serve the growing population.

It might be noted that even the “Non-Shale” states have benefited to some extent from shale drilling. Some support jobs related to shale extraction, such as extraction of sand used in fracking, college courses to educate new engineers, and manufacturing of parts for drilling equipment, are in states other than those with shale formations. Also, all states benefit from the lower oil imports required.

Issue 4. Low oil prices tend to cause debt defaults that have wide ranging consequences. If defaults become widespread, they could affect bank deposits and international trade.

With low oil prices, it becomes much more difficult for shale drillers to pay back the loans they have taken out. Cash flow is much lower, and interest rates on new loans are likely much higher. The huge amount of debt that shale drillers have taken on suddenly becomes at-risk. Energy debt currently accounts for 16% of the US junk bond market, so the amount at risk is substantial.

Dropping oil prices affect international debt as well. The value of Venezuelan bonds recently fell to 51 cents on the dollar, because of the high default risk with low oil prices.  Russia’s Rosneft is also reported to be having difficulty with its loans.

There are many ways banks might be adversely affected by defaults, including

  • Directly by defaults on loans held be a bank
  • Indirectly, by defaults on securities the bank owns that relate to loans elsewhere
  • By derivative defaults made more likely by sharp changes in interest rates or in currency levels
  • By liquidity problems, relating to the need to quickly sell or buy securities related to ETFs

After the many bank bailouts in 2008, there has been discussion of changing the system so that there is no longer a need to bail out “too big to fail” banks. One proposal that has been discussed is to force bank depositors and pension funds to cover part of the losses, using Cyprus-style bail-ins. According to some reports, such an approach has been approved by the G20 at a meeting the weekend of November 16, 2014. If this is true, our bank accounts and pension plans could already be at risk.1

Another bank-related issue if debt defaults become widespread, is the possibility that junk bonds and Letters of Credit2 will become outrageously expensive for companies that have poor credit ratings. Supply chains often include some businesses with poor credit ratings. Thus, even businesses with good credit ratings may find their supply chains broken by companies that can no longer afford high-priced credit. This was one of the issues in the 2008 credit crisis.

Issue 5. Low oil prices can lead to collapses of oil exporters, and loss of virtually all of the oil they export.

The collapse of the Former Soviet Union in 1991 seems to be related to a drop in oil prices.

Figure 2. Oil production and price of the Former Soviet Union, based on BP Statistical Review of World Energy 2013.

Oil prices dropped dramatically in the 1980s after the issues that gave rise to the earlier spike were mitigated. The Soviet Union was dependent on oil for its export revenue. With low oil prices, its ability to invest in new production was impaired, and its export revenue dried up. The Soviet Union collapsed for a number of reasons, some of them financial, in late 1991, after several years of low oil prices had had a chance to affect its economy.

Many oil-exporting countries are at risk of collapse if oil prices stay very low very long. Venezuela is a clear risk, with its big debt problem. Nigeria’s economy is reported to be “tanking.” Russia even has a possibility of collapse, although probably not in the near future.

Even apart from collapse, there is the possibility of increased unrest in the Middle East, as oil-exporting nations find it necessary to cut back on their food and oil subsidies. There is also more possibility of warfare among groups, including new groups such as ISIL. When everyone is prosperous, there is little reason to fight, but when oil-related funds dry up, fighting among neighbors increases, as does unrest among those with lower subsidies.

Issue 6. The benefits to consumers of a drop in oil prices are likely to be much smaller than the adverse impact on consumers of an oil price rise. 

When oil prices rose, businesses were quick to add fuel surcharges. They are less quick to offer fuel rebates when oil prices go down. They will try to keep the benefit of the oil price drop for themselves for as long as possible.

Airlines seem to be more interested in adding flights than reducing ticket prices in response to lower oil prices, perhaps because additional planes are already available. Their intent is to increase profits, through an increase in ticket sales, not to give consumers the benefit of lower prices.

In some cases, governments will take advantage of the lower oil prices to increase their revenue. China recently raised its oil products consumption tax, so that the government gets part of the benefit of lower prices. Malaysia is using the low oil prices as a time to reduce oil subsidies.

Most businesses recognize that the oil price drop is at most a temporary situation, since the cost of extraction continues to rise (because we are getting oil from more difficult-to-extract locations). Because the price drop this is only temporary, few business people are saying to themselves, “Wow, oil is cheap again! I am going to invest a huge amount of money in a new road building company [or other business that depends on cheap oil].” Instead, they are cautious, making changes that require little capital investment and that can easily be reversed. While there may be some jobs added, those added will tend to be ones that can easily be dropped if oil prices rise again.

Issue 7. Hoped for crude and LNG sales abroad are likely to disappear, with low oil prices.

There has been a great deal of publicity about the desire of US oil and gas producers to sell both crude oil and LNG abroad, so as to be able to take advantage of higher oil and gas prices outside the US. With a big drop in oil prices, these hopes are likely to be dashed. Already, we are seeing the story, Asia stops buying US crude oil. According to this story, “There’s so much oversupply that Middle East crudes are now trading at discounts and it is not economical to bring over crudes from the US anymore.”

LNG prices tend to drop if oil prices drop. (Some LNG prices are linked to oil prices, but even those that are not directly linked are likely to be affected by the lower demand for energy products.) At these lower prices, the financial incentive to export LNG becomes much less. Even fluctuating LNG prices become a problem for those considering investment in infrastructure such as ships to transport LNG.

Issue 8. Hoped-for increases in renewables will become more difficult, if oil prices are low.

Many people believe that renewables can eventually take over the role of fossil fuels. (I am not of view that this is possible.) For those with this view, low oil prices are a problem, because they discourage the hoped-for transition to renewables.

Despite all of the statements made about renewables, they don’t really substitute for oil. Biofuels come closest, but they are simply oil-extenders. We add ethanol made from corn to gasoline to extend its quantity. But it still takes oil to operate the farm equipment to grow the corn, and oil to transport the corn to the ethanol plant. If oil isn’t around, the biofuel production system comes to a screeching halt.

Issue 9. A major drop in oil prices tends to lead to deflation, and because of this, difficulty in repaying debts.

If oil prices rise, so do food prices, and the price of making most goods. Thus rising oil prices contribute to inflation. The reverse of this is true as well. Falling oil prices tend to lead to a lower price for growing food and a lower price for making most goods. The net result can be deflation. Not all countries are affected equally; some experience this result to a greater extent than others.

Those countries experiencing deflation are likely to eventually have problems with debt defaults, because it will become more difficult for workers to repay loans, if wages are drifting downward. These same countries are likely to experience an outflow of investment funds because investors realize that funds invested these countries will not earn an adequate return. This outflow of funds will tend to push their currencies down, relative to other currencies. This is at least part of what has been happening in recent months.

The value of the dollar has been rising rapidly, relative to many other currencies. Debt repayment is likely to especially be a problem for those countries where substantial debt is denominated in US dollars, but whose local currency has recently fallen in value relative to the US dollar.

Figure 3. US Dollar Index from Intercontinental Exchange

The big increase in the US dollar index came since June 2014 (Figure 3), which coincides with the drop in oil prices. Those countries with low currency prices, including Japan, Europe, Brazil, Argentina, and South Africa, find it expensive to import goods of all kinds, including those made with oil products. This is part of what reduces demand for oil products.

China’s yuan is relatively closely tied to the dollar. The collapse of other currencies relative to the US dollar makes Chinese exports more expensive, and is part of the reason why the Chinese economy has been doing less well recently. There are no doubt other reasons why China’s growth is lower recently, and thus its growth in debt. China is now trying to lower the level of its currency.

Issue 10. The drop in oil prices seems to reflect a basic underlying problem: the world is reaching the limits of its debt expansion.

There is a natural limit to the amount of debt that a government, or business, or individual can borrow. At some point, interest payments become so high, that it becomes difficult to cover other needed expenses. The obvious way around this problem is to lower interest rates to practically zero, through Quantitative Easing (QE) and other techniques.

(Increasing debt is a big part of pumps up “demand” for oil, and because of this, oil prices. If this is confusing, think of buying a car. It is much easier to buy a car with a loan than without one. So adding debt allows goods to be more affordable. Reducing debt levels has the opposite effect.)

QE doesn’t work as a long-term technique, because it tends to create bubbles in asset prices, such as stock market prices and prices of farmland. It also tends to encourage investment in enterprises that have questionable chance of success. Arguably, investment in shale oil and gas operations are in this category.

As it turns out, it looks very much as if the presence or absence of QE may have an impact on oil prices as well (Figure 4), providing the “uplift” needed to keep oil prices high enough to cover production costs.

Figure 4. World "liquids production" (that is oil and oil substitutes) based on EIA data, plus OPEC estimates and judgment of author for August to October 2014. Oil price is monthly average Brent oil spot price, based on EIA data.

The sharp drop in price in 2008 was credit-related, and was only solved when the US initiated its program of QE started in late November 2008. Oil prices began to rise in December 2008. The US has had three periods of QE, with the last of these, QE3, finally tapering down and ending in October 2014. Since QE seems to have been part of the solution that stopped the drop in oil prices in 2008, we should not be surprised if discontinuing QE is contributing to the drop in oil prices now.

Part of the problem seems to be differential effect that happens when other countries are continuing to use QE, but the US not. The US dollar tends to rise, relative to other currencies. This situation contributes to the situation shown in Figure 3.

QE allows more borrowing from the future than would be possible if market interest rates really had to be paid. This allows financiers to temporarily disguise a growing problem of un-affordability of oil and other commodities.

The problem we have is that, because we live in a finite world, we reach a point where it becomes more expensive to produce commodities of many kinds: oil (deeper wells, fracking), coal (farther from markets, so more transport costs), metals (poorer ore quality), fresh water (desalination needed), and food (more irrigation needed). Wages don’t rise correspondingly, because more and more labor is needed to provide less and less actual benefit, in terms of the commodities produced and goods made from those commodities. Thus, workers find themselves becoming poorer and poorer, in terms of what they can afford to purchase.

QE allows financiers to disguise growing mismatch between what it costs to produce commodities, and what customers can really afford. Thus, QE allows commodity prices to rise to levels that are unaffordable by customers, unless customers’ lack of income is disguised by a continued growth in debt.

Once commodity prices (including oil prices) fall to levels that are affordable based on the incomes of customers, they fall to levels that cut out a large share of production of these commodities. As commodity production drops to levels that can be produced at affordable prices, so does the world’s ability to make goods and services. Unfortunately, the goods whose production is likely to be cut back if commodity production is cut back are those of every kind, including houses, cars, food, and electrical transmission equipment.

 Conclusion

There are really two different problems that a person can be concerned about:

  1. Peak oil: the possibility that oil prices will rise, and because of this production will fall in a rounded curve. Substitutes that are possible because of high prices will perhaps take over.
  2. Debt related collapse: oil limits will play out in a very different way than most have imagined, through lower oil prices as limits to growth in debt are reached, and thus a collapse in oil “demand” (really affordability). The collapse in production, when it comes, will be sharper and will affect the entire economy, not just oil.

In my view, a rapid drop in oil prices is likely a symptom that we are approaching a debt-related collapse–in other words, the second of these two problems. Underlying this debt-related collapse is the fact that we seem to be reaching the limits of a finite world. There is a growing mismatch between what workers in oil importing countries can afford, and the rising real costs of extraction, including associated governmental costs. This has been covered up to date by rising debt, but at some point, it will not be possible to keep increasing the debt sufficiently.

The timing of collapse may not be immediate. Low oil prices take a while to work their way through the system. It is also possible that the world’s financiers will put off a major collapse for a while longer, through more QE, or more programs related to QE. For example, actually getting money into the hands of customers would seem to be temporarily helpful.

At some point the debt situation will eventually reach a breaking point. One way this could happen is through an increase in interest rates. If this happens, world economic growth is likely to slow greatly. Oil and commodity prices will fall further. Debt defaults will skyrocket. Not only will oil production drop, but production of many other commodities will drop, including natural gas and coal. In such a scenario, the downslope of all energy use is likely to be quite steep, perhaps similar to what is shown in the following chart.

Figure 5. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.

Related Articles:

Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?

WSJ Gets it Wrong on “Why Peak Oil Predictions Haven’t Come True”

Eight Pieces of Our Oil Price Predicament

Notes:

[1] There is of course insurance by the FDIC and the PBGC, but the actual funding for these two insurance programs is tiny in relationship to the kind of risk that would occur if there were widespread debt defaults and derivative defaults affecting many banks and many pension plans at once. While depositors and pension holders might try to collect this insurance, there wouldn’t be enough money to actually cover these demands. This problem would be similar to the issue that arose in Iceland in 2008. Insurance would seem to be available, but in practice, would not pay out much.

Also, I learned after writing this post that bail-ins were mandated for US banks by the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010. In the language of the summary, bank depositors are “unsecured creditors,” and are thus among those to whom the burden of loss is transferred. The FDIC is not allowed to borrow extra funds, beyond bank funds, to cover this loss.

[2] LOCs are required when goods are shipped internationally, before payment has actually been made. They offer a guarantee that a buyer will be able to “make good” on his promise to pay for goods when they arrive.

Post-peak Italy: the decline continues

Off the keyboard of Ugo Bardi

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Published on Resource Crisis on October 27, 2014

Oil consumption in Italy in million tons. From “MondoElettrico

Discuss this article at the Energy Table inside the Diner

Italy’s free fall continues. The most recent data indicate that oil consumption keeps going down. Oil and gas together have peaked around 2004 and continue the downward trend, as shown in the graph below, (From “Resource Crisis“)
Italy is in full collapse, with all economic and financial indicators in decline. Industries are closing down and restaurants are opening; the system is trying to adapt by tapping the remaining available resources in the form of foreign tourists. Outside the main touristic centers, however, the crisis is clearly detectable. Shops are closing down, traffic is slowing down, unemployed people are everywhere and you can’t miss their presence among friends and acquaintances; especially young people.
At the same time, there is a sensation of ghostliness around, as if everything we are seeing were unreal, happening somewhere else and to someone else. It is as if it were something you watch on TV, but not in real life. The debate in the press and on the web is detached from anything connected with the loss of the capability of the country to move and produce goods. When the crisis is mentioned, different culprits periodically appear in the first pages of the newspapers: the Euro, the European Union, politicians, immigrants, government employees, bureaucracy, lazy workers, terrorism, femicide, Angela Merkel, Valdimir Putin, Silvio Berlusconi, and more. It is a cycle that never stops, it keeps turning, every time pointing at something – new or old – that the government will target to solve the crisis once and for all.
And it keeps going.

Inflation, Deflation & FOOD!

logopodcastOff the keyboard & microphone of RE

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Aired on the Doomstead Diner on September 26, 2014

inflation-or-deflation

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Landscape  Pizza_15c

http://www.free-workout-routines.net/image-files/speed-bag-workout.jpgBefore getting into my rant on this timelessly popular topic in the Collapse-Econ Blogosphere, it’s worthwhile to review some of the Data and Tables tracking Inflation and the disappearing Middle Class in the FSoA for some background.

First, a month by month table for Annual Inflation Rates from 1913 to the Present.  If you look at this table in detail, you’ll probably be a bit surprised about how far the numbers deviate from the storyline that Da Federal Reserve has kept Inflation contained over the last Century.

If you don’t like to review tables, that is what the Rant is for that follows here. 🙂 The Rant looks at the last 40 years from 1970 to present day from Important Parameters everybody is concerned with, Pizza, Gas, College Tuitions & Paychecks.  Scroll down to the bottom here and just listen if you don’t feel like reviewing tables.  I suggest strapping on some Boxing Gloves and listening while working out on the Speed Bag.  Downloads available on the Diner.

Historical Annual U.S. Inflation Rate from 1913 to the present
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2014 1.58 % 1.13 % 1.51 % 1.95 % 2.13 % 2.07 % 1.99 % 1.70 %
2013 1.59 % 1.98 % 1.47 % 1.06 % 1.36 % 1.75 % 1.96 % 1.52 % 1.18 % 0.96 % 1.24 % 1.50 % 1.47 %
2012 2.93 % 2.87 % 2.65 % 2.30 % 1.70 % 1.66 % 1.41 % 1.69 % 1.99 % 2.16 % 1.76 % 1.74 % 2.07 %
2011 1.63 % 2.11 % 2.68 % 3.16 % 3.57 % 3.56 % 3.63 % 3.77 % 3.87 % 3.53 % 3.39 % 2.96 % 3.16 %
2010 2.63 % 2.14 % 2.31 % 2.24 % 2.02 % 1.05 % 1.24 % 1.15 % 1.14 % 1.17 % 1.14 % 1.50 % 1.64 %
2009 0.03 % 0.24 % -0.38 % -0.74 % -1.28 % -1.43 % -2.10 % -1.48 % -1.29 % -0.18 % 1.84 % 2.72 % -0.34 %
2008 4.28 % 4.03 % 3.98 % 3.94 % 4.18 % 5.02 % 5.60 % 5.37 % 4.94 % 3.66 % 1.07 % 0.09 % 3.85 %
2007 2.08 % 2.42 % 2.78 % 2.57 % 2.69 % 2.69 % 2.36 % 1.97 % 2.76 % 3.54 % 4.31 % 4.08 % 2.85 %
2006 3.99 % 3.60 % 3.36 % 3.55 % 4.17 % 4.32 % 4.15 % 3.82 % 2.06 % 1.31 % 1.97 % 2.54 % 3.24 %
2005 2.97 % 3.01 % 3.15 % 3.51 % 2.80 % 2.53 % 3.17 % 3.64 % 4.69 % 4.35 % 3.46 % 3.42 % 3.39 %
2004 1.93 % 1.69 % 1.74 % 2.29 % 3.05 % 3.27 % 2.99 % 2.65 % 2.54 % 3.19 % 3.52 % 3.26 % 2.68 %
2003 2.60 % 2.98 % 3.02 % 2.22 % 2.06 % 2.11 % 2.11 % 2.16 % 2.32 % 2.04 % 1.77 % 1.88 % 2.27 %
2002 1.14 % 1.14 % 1.48 % 1.64 % 1.18 % 1.07 % 1.46 % 1.80 % 1.51 % 2.03 % 2.20 % 2.38 % 1.59 %
2001 3.73 % 3.53 % 2.92 % 3.27 % 3.62 % 3.25 % 2.72 % 2.72 % 2.65 % 2.13 % 1.90 % 1.55 % 2.83 %
2000 2.74 % 3.22 % 3.76 % 3.07 % 3.19 % 3.73 % 3.66 % 3.41 % 3.45 % 3.45 % 3.45 % 3.39 % 3.38 %
1999 1.67 % 1.61 % 1.73 % 2.28 % 2.09 % 1.96 % 2.14 % 2.26 % 2.63 % 2.56 % 2.62 % 2.68 % 2.19 %
1998 1.57 % 1.44 % 1.37 % 1.44 % 1.69 % 1.68 % 1.68 % 1.62 % 1.49 % 1.49 % 1.55 % 1.61 % 1.55 %
1997 3.04 % 3.03 % 2.76 % 2.50 % 2.23 % 2.30 % 2.23 % 2.23 % 2.15 % 2.08 % 1.83 % 1.70 % 2.34 %
1996 2.73 % 2.65 % 2.84 % 2.90 % 2.89 % 2.75 % 2.95 % 2.88 % 3.00 % 2.99 % 3.26 % 3.32 % 2.93 %
1995 2.80 % 2.86 % 2.85 % 3.05 % 3.19 % 3.04 % 2.76 % 2.62 % 2.54 % 2.81 % 2.61 % 2.54 % 2.81 %
1994 2.52 % 2.52 % 2.51 % 2.36 % 2.29 % 2.49 % 2.77 % 2.90 % 2.96 % 2.61 % 2.67 % 2.67 % 2.61 %
1993 3.26 % 3.25 % 3.09 % 3.23 % 3.22 % 3.00 % 2.78 % 2.77 % 2.69 % 2.75 % 2.68 % 2.75 % 2.96 %
1992 2.60 % 2.82 % 3.19 % 3.18 % 3.02 % 3.09 % 3.16 % 3.15 % 2.99 % 3.20 % 3.05 % 2.90 % 3.03 %
1991 5.65 % 5.31 % 4.90 % 4.89 % 4.95 % 4.70 % 4.45 % 3.80 % 3.39 % 2.92 % 2.99 % 3.06 % 4.25 %
1990 5.20 % 5.26 % 5.23 % 4.71 % 4.36 % 4.67 % 4.82 % 5.62 % 6.16 % 6.29 % 6.27 % 6.11 % 5.39 %
1989 4.67 % 4.83 % 4.98 % 5.12 % 5.36 % 5.17 % 4.98 % 4.71 % 4.34 % 4.49 % 4.66 % 4.65 % 4.83 %
1988 4.05 % 3.94 % 3.93 % 3.90 % 3.89 % 3.96 % 4.13 % 4.02 % 4.17 % 4.25 % 4.25 % 4.42 % 4.08 %
1987 1.46 % 2.10 % 3.03 % 3.78 % 3.86 % 3.65 % 3.93 % 4.28 % 4.36 % 4.53 % 4.53 % 4.43 % 3.66 %
1986 3.89 % 3.11 % 2.26 % 1.59 % 1.49 % 1.77 % 1.58 % 1.57 % 1.75 % 1.47 % 1.28 % 1.10 % 1.91 %
1985 3.53 % 3.52 % 3.70 % 3.69 % 3.77 % 3.76 % 3.55 % 3.35 % 3.14 % 3.23 % 3.51 % 3.80 % 3.55 %
1984 4.19 % 4.60 % 4.80 % 4.56 % 4.23 % 4.22 % 4.20 % 4.29 % 4.27 % 4.26 % 4.05 % 3.95 % 4.30 %
1983 3.71 % 3.49 % 3.60 % 3.90 % 3.55 % 2.58 % 2.46 % 2.56 % 2.86 % 2.85 % 3.27 % 3.79 % 3.22 %
1982 8.39 % 7.62 % 6.78 % 6.51 % 6.68 % 7.06 % 6.44 % 5.85 % 5.04 % 5.14 % 4.59 % 3.83 % 6.16 %
1981 11.83 % 11.41 % 10.49 % 10.00 % 9.78 % 9.55 % 10.76 % 10.80 % 10.95 % 10.14 % 9.59 % 8.92 % 10.35 %
1980 13.91 % 14.18 % 14.76 % 14.73 % 14.41 % 14.38 % 13.13 % 12.87 % 12.60 % 12.77 % 12.65 % 12.52 % 13.58 %
1979 9.28 % 9.86 % 10.09 % 10.49 % 10.85 % 10.89 % 11.26 % 11.82 % 12.18 % 12.07 % 12.61 % 13.29 % 11.22 %
1978 6.84 % 6.43 % 6.55 % 6.50 % 6.97 % 7.41 % 7.70 % 7.84 % 8.31 % 8.93 % 8.89 % 9.02 % 7.62 %
1977 5.22 % 5.91 % 6.44 % 6.95 % 6.73 % 6.87 % 6.83 % 6.62 % 6.60 % 6.39 % 6.72 % 6.70 % 6.50 %
1976 6.72 % 6.29 % 6.07 % 6.05 % 6.20 % 5.97 % 5.35 % 5.71 % 5.49 % 5.46 % 4.88 % 4.86 % 5.75 %
1975 11.80 % 11.23 % 10.25 % 10.21 % 9.47 % 9.39 % 9.72 % 8.60 % 7.91 % 7.44 % 7.38 % 6.94 % 9.20 %
1974 9.39 % 10.02 % 10.39 % 10.09 % 10.71 % 10.86 % 11.51 % 10.86 % 11.95 % 12.06 % 12.20 % 12.34 % 11.03 %
1973 3.65 % 3.87 % 4.59 % 5.06 % 5.53 % 6.00 % 5.73 % 7.38 % 7.36 % 7.80 % 8.25 % 8.71 % 6.16 %
1972 3.27 % 3.51 % 3.50 % 3.49 % 3.23 % 2.71 % 2.95 % 2.94 % 3.19 % 3.42 % 3.67 % 3.41 % 3.27 %
1971 5.29 % 5.00 % 4.71 % 4.16 % 4.40 % 4.64 % 4.36 % 4.62 % 4.08 % 3.81 % 3.28 % 3.27 % 4.30 %
1970 6.18 % 6.15 % 5.82 % 6.06 % 6.04 % 6.01 % 5.98 % 5.41 % 5.66 % 5.63 % 5.60 % 5.57 % 5.84 %
1969 4.40 % 4.68 % 5.25 % 5.52 % 5.51 % 5.48 % 5.44 % 5.71 % 5.70 % 5.67 % 5.93 % 6.20 % 5.46 %
1968 3.65 % 3.95 % 3.94 % 3.93 % 3.92 % 4.20 % 4.49 % 4.48 % 4.46 % 4.75 % 4.73 % 4.72 % 4.27 %
1967 3.46 % 2.81 % 2.80 % 2.48 % 2.79 % 2.78 % 2.77 % 2.45 % 2.75 % 2.43 % 2.74 % 3.04 % 2.78 %
1966 1.92 % 2.56 % 2.56 % 2.87 % 2.87 % 2.53 % 2.85 % 3.48 % 3.48 % 3.79 % 3.79 % 3.46 % 3.01 %
1965 0.97 % 0.97 % 1.29 % 1.62 % 1.62 % 1.94 % 1.61 % 1.94 % 1.61 % 1.93 % 1.60 % 1.92 % 1.59 %
1964 1.64 % 1.64 % 1.31 % 1.31 % 1.31 % 1.31 % 1.30 % 0.98 % 1.30 % 0.97 % 1.30 % 0.97 % 1.28 %
1963 1.33 % 1.00 % 1.33 % 0.99 % 0.99 % 1.32 % 1.32 % 1.32 % 0.99 % 1.32 % 1.32 % 1.64 % 1.24 %
1962 0.67 % 1.01 % 1.01 % 1.34 % 1.34 % 1.34 % 1.00 % 1.34 % 1.33 % 1.33 % 1.33 % 1.33 % 1.20 %
1961 1.71 % 1.36 % 1.36 % 1.02 % 1.02 % 0.68 % 1.35 % 1.01 % 1.35 % 0.67 % 0.67 % 0.67 % 1.07 %
1960 1.03 % 1.73 % 1.73 % 1.72 % 1.72 % 1.72 % 1.37 % 1.37 % 1.02 % 1.36 % 1.36 % 1.36 % 1.46 %
1959 1.40 % 1.05 % 0.35 % 0.35 % 0.35 % 0.69 % 0.69 % 1.04 % 1.38 % 1.73 % 1.38 % 1.73 % 1.01 %
1958 3.62 % 3.25 % 3.60 % 3.58 % 3.21 % 2.85 % 2.47 % 2.12 % 2.12 % 2.12 % 2.11 % 1.76 % 2.73 %
1957 2.99 % 3.36 % 3.73 % 3.72 % 3.70 % 3.31 % 3.28 % 3.66 % 3.28 % 2.91 % 3.27 % 2.90 % 3.34 %
1956 0.37 % 0.37 % 0.37 % 0.75 % 1.12 % 1.87 % 2.24 % 1.87 % 1.86 % 2.23 % 2.23 % 2.99 % 1.52 %
1955 -0.74 % -0.74 % -0.74 % -0.37 % -0.74 % -0.74 % -0.37 % -0.37 % 0.37 % 0.37 % 0.37 % 0.37 % -0.28 %
1954 1.13 % 1.51 % 1.13 % 0.75 % 0.75 % 0.37 % 0.37 % 0.00 % -0.37 % -0.74 % -0.37 % -0.74 % 0.32 %
1953 0.38 % 0.76 % 1.14 % 0.76 % 1.14 % 1.13 % 0.37 % 0.75 % 0.75 % 1.12 % 0.75 % 0.75 % 0.82 %
1952 4.33 % 2.33 % 1.94 % 2.33 % 1.93 % 2.32 % 3.09 % 3.09 % 2.30 % 1.91 % 1.14 % 0.75 % 2.29 %
1951 8.09 % 9.36 % 9.32 % 9.32 % 9.28 % 8.82 % 7.47 % 6.58 % 6.97 % 6.50 % 6.88 % 6.00 % 7.88 %
1950 -2.08 % -1.26 % -0.84 % -1.26 % -0.42 % -0.42 % 1.69 % 2.10 % 2.09 % 3.80 % 3.78 % 5.93 % 1.09 %
1949 1.27 % 1.28 % 1.71 % 0.42 % -0.42 % -0.83 % -2.87 % -2.86 % -2.45 % -2.87 % -1.65 % -2.07 % -0.95 %
1948 10.23 % 9.30 % 6.85 % 8.68 % 9.13 % 9.55 % 9.91 % 8.89 % 6.52 % 6.09 % 4.76 % 2.99 % 7.74 %
1947 18.13 % 18.78 % 19.67 % 19.02 % 18.38 % 17.65 % 12.12 % 11.39 % 12.75 % 10.58 % 8.45 % 8.84 % 14.65 %
1946 2.25 % 1.69 % 2.81 % 3.37 % 3.35 % 3.31 % 9.39 % 11.60 % 12.71 % 14.92 % 17.68 % 18.13 % 8.43 %
1945 2.30 % 2.30 % 2.30 % 1.71 % 2.29 % 2.84 % 2.26 % 2.26 % 2.26 % 2.26 % 2.26 % 2.25 % 2.27 %
1944 2.96 % 2.96 % 1.16 % 0.57 % 0.00 % 0.57 % 1.72 % 2.31 % 1.72 % 1.72 % 1.72 % 2.30 % 1.64 %
1943 7.64 % 6.96 % 7.50 % 8.07 % 7.36 % 7.36 % 6.10 % 4.85 % 5.45 % 4.19 % 3.57 % 2.96 % 6.00 %
1942 11.35 % 12.06 % 12.68 % 12.59 % 13.19 % 10.88 % 11.56 % 10.74 % 9.27 % 9.15 % 9.09 % 9.03 % 10.97 %
1941 1.44 % 0.71 % 1.43 % 2.14 % 2.86 % 4.26 % 5.00 % 6.43 % 7.86 % 9.29 % 10.00 % 9.93 % 5.11 %
1940 -0.71 % 0.72 % 0.72 % 1.45 % 1.45 % 2.17 % 1.45 % 1.45 % -0.71 % 0.00 % 0.00 % 0.71 % 0.73 %
1939 -1.41 % -1.42 % -1.42 % -2.82 % -2.13 % -2.13 % -2.13 % -2.13 % 0.00 % 0.00 % 0.00 % 0.00 % -1.30 %
1938 0.71 % 0.00 % -0.70 % -0.70 % -2.08 % -2.08 % -2.76 % -2.76 % -3.42 % -4.11 % -3.45 % -2.78 % -2.01 %
1937 2.17 % 2.17 % 3.65 % 4.38 % 5.11 % 4.35 % 4.32 % 3.57 % 4.29 % 4.29 % 3.57 % 2.86 % 3.73 %
1936 1.47 % 0.73 % 0.00 % -0.72 % -0.72 % 0.73 % 1.46 % 2.19 % 2.19 % 2.19 % 1.45 % 1.45 % 1.04 %
1935 3.03 % 3.01 % 3.01 % 3.76 % 3.76 % 2.24 % 2.24 % 2.24 % 0.74 % 1.48 % 2.22 % 2.99 % 2.56 %
1934 2.33 % 4.72 % 5.56 % 5.56 % 5.56 % 5.51 % 2.29 % 1.52 % 3.03 % 2.27 % 2.27 % 1.52 % 3.51 %
1933 -9.79 % -9.93 % -10.00 % -9.35 % -8.03 % -6.62 % -3.68 % -2.22 % -1.49 % -0.75 % 0.00 % 0.76 % -5.09 %
1932 -10.06 % -10.19 % -10.26 % -10.32 % -10.46 % -9.93 % -9.93 % -10.60 % -10.67 % -10.74 % -10.20 % -10.27 % -10.30 %
1931 -7.02 % -7.65 % -7.69 % -8.82 % -9.47 % -10.12 % -9.04 % -8.48 % -9.64 % -9.70 % -10.37 % -9.32 % -8.94 %
1930 0.00 % -0.58 % -0.59 % 0.59 % -0.59 % -1.75 % -4.05 % -4.62 % -4.05 % -4.62 % -5.20 % -6.40 % -2.66 %
1929 -1.16 % 0.00 % -0.58 % -1.17 % -1.16 % 0.00 % 1.17 % 1.17 % 0.00 % 0.58 % 0.58 % 0.58 % 0.00 %
1928 -1.14 % -1.72 % -1.16 % -1.16 % -1.15 % -2.84 % -1.16 % -0.58 % 0.00 % -1.15 % -0.58 % -1.16 % -1.15 %
1927 -2.23 % -2.79 % -2.81 % -3.35 % -2.25 % -0.56 % -1.14 % -1.15 % -1.14 % -1.14 % -2.26 % -2.26 % -1.92 %
1926 3.47 % 4.07 % 2.89 % 4.07 % 2.89 % 1.14 % -1.13 % -1.69 % -1.13 % -0.56 % -1.67 % -1.12 % 0.94 %
1925 0.00 % 0.00 % 1.17 % 1.18 % 1.76 % 2.94 % 3.51 % 4.12 % 3.51 % 2.91 % 4.65 % 3.47 % 2.44 %
1924 2.98 % 2.38 % 1.79 % 0.59 % 0.59 % 0.00 % -0.58 % -0.58 % -0.58 % -0.58 % -0.58 % 0.00 % 0.45 %
1923 -0.59 % -0.59 % 0.60 % 1.20 % 1.20 % 1.80 % 2.38 % 3.01 % 3.61 % 3.59 % 2.98 % 2.37 % 1.80 %
1922 -11.05 % -8.15 % -8.74 % -7.73 % -5.65 % -5.11 % -5.08 % -6.21 % -5.14 % -4.57 % -3.45 % -2.31 % -6.10 %
1921 -1.55 % -5.64 % -7.11 % -10.84 % -14.08 % -15.79 % -14.90 % -12.81 % -12.50 % -12.06 % -12.12 % -10.82 % -10.85 %
1920 16.97 % 20.37 % 20.12 % 21.56 % 21.89 % 23.67 % 19.54 % 14.69 % 12.36 % 9.94 % 7.03 % 2.65 % 15.90 %
1919 17.86 % 14.89 % 17.14 % 17.61 % 16.55 % 14.97 % 15.23 % 14.94 % 13.38 % 13.13 % 13.50 % 14.55 % 15.31 %
1918 19.66 % 17.50 % 16.67 % 12.70 % 13.28 % 13.08 % 17.97 % 18.46 % 18.05 % 18.52 % 20.74 % 20.44 % 17.26 %
1917 12.50 % 15.38 % 14.29 % 18.87 % 19.63 % 20.37 % 18.52 % 19.27 % 19.82 % 19.47 % 17.39 % 18.10 % 17.80 %
1916 2.97 % 4.00 % 6.06 % 6.00 % 5.94 % 6.93 % 6.93 % 7.92 % 9.90 % 10.78 % 11.65 % 12.62 % 7.64 %
1915 1.00 % 1.01 % 0.00 % 2.04 % 2.02 % 2.02 % 1.00 % -0.98 % -0.98 % 0.99 % 0.98 % 1.98 % 0.92 %
1914 2.04 % 1.02 % 1.02 % 0.00 % 2.06 % 1.02 % 1.01 % 3.03 % 2.00 % 1.00 % 0.99 % 1.00 % 1.35 %

Next, here are some great tables presented by Ben Casselman on FiveThirtyEight Economics:

In 1988, the typical American adult was 40 years old, white and married, with a high school diploma. If he was a man, he probably worked full time. If she was a woman, she probably didn’t.

Twenty-five years later, Americans are older, more diverse and more educated. We are less likely to be married and more likely to live alone. Work is divided more evenly between the sexes. One thing that hasn’t changed? The income of the median U.S. household is still just under $52,000.

The government’s release last week of income and poverty data for 2013 brought renewed attention to the apparent stagnation of the American middle class — not just since the financial crisis hit six years ago this month, but for much of the decade that preceded the crash. The report showed that the economic recovery has yet to translate into higher incomes for the typical American family. After adjusting for inflation, U.S. median household income is still 8 percent lower than it was before the recession, 9 percent lower than at its peak in 1999, and essentially unchanged since the end of the Reagan administration.

“As a country,” New York magazine’s Annie Lowrey wrote Friday, “we peaked in the late 1990s.”

There’s little doubt that the past 15 years have been hard ones for the middle class. But median income isn’t necessarily the best way to show that. The problem is that changes in median income reflect several trends all jumbled together: the aging of the population, changing patterns in work and schooling, and the evolving makeup of the American family, as well as long- and short-term trends in the economy itself. Understanding the state of the American middle class requires digging a bit deeper than median income alone.

Let’s start with what median income does measure: the amount of money earned by the household at the midpoint of the U.S. income distribution — half of households make more, and half make less. Journalists, including me, often refer to it as the amount earned1 by the “typical household,” which is true as long as we’re talking about a moment in time. But as soon as we start talking about change over time, median income becomes trickier to interpret.

casselman-feature-income-tableTo understand why, imagine a simple model in which there are five people. The poorest makes $30,000 a year and the richest $70,000, with the other three evenly distributed in between. The group’s median income would be $50,000. The next year, everyone gets a $10,000 raise — except the richest person, who retires and starts drawing a $40,000-a-year pension. Most people see their income go up, but the median remains unchanged.2

This scenario is oversimplified, but it illustrates a trend. On average, people’s earnings rise in their 20s and 30s, peak sometime in their late 40s or early 50s, and then decline when they retire.3 All else equal, the retirement of the baby boom generation should push down the overall median income.

Aging, at least, is fairly easy to control for. We can look, for example, at how much money people earned at a given point in their lives. The charts below show median income over time for specific ages.4 The details differ, but the trend is similar: Incomes generally rose until 2000 and have generally fallen since then. The aging population certainly isn’t helping the overall decline in incomes, but it isn’t causing it either.5

casselman-feature-income-1

But aging isn’t the only trend that could be skewing the median. Fewer Americans are getting married, and they’re having fewer children. That means the size of the typical U.S. household is shrinking — which is important, because it costs more to support more people. There’s a big difference between an individual living on $50,000 a year and a family of four doing the same. To account for this, economists often adjust incomes for household size, scaling up the income for the person living alone and adjusting it down for the family of four.6

As the chart below shows, adjusting for household size makes a significant difference before 2000. But since then, the trends line up closely.7 The shrinking U.S. household doesn’t explain the past 15 years of stagnation.

casselman-feature-income-2

The U.S. is changing in other ways, too: by race, by education, and by the region where they live. But almost no matter how we break down the population, incomes are down since 1999. Moreover, most groups saw little if any improvement in income between 1999 and 2007, before the recession began.

casselman-feature-income-3

Another problem with focusing on median income is that it only tells us about households in the middle — it doesn’t reveal anything about households elsewhere in the income distribution. And middle class incomes haven’t just been stagnant. The middle class itself has also been shrinking.

In 1970, 55 percent of U.S. income was earned by households in the middle 60 percent of the income distribution. More than half of households were in what Pew Research Center has labeled the “middle tier” of households (those earning between two-thirds and twice the median income). In 2013, both numbers had fallen to about 45 percent. In a 2012 report, Pew researchers called the 2000s “the lost decade of the middle class.”

casselman-feature-income-4

One common definition of the American dream is the belief that each generation will do better than the one before. By that measure, the dream is fading. Take the generation born in 1970. In early adulthood, these Americans outearned their parents, those born in 1950. But their gains stalled in the 2000s, when they were in their 30s. Now in their 40s, their earnings have fallen behind those of their parents at the same stage in their lives.

casselman-feature-income-5

The picture painted by all these figures is the same: The middle class was struggling in the 2000s despite an economy that was, by conventional measures, strong. The recession turned stagnation into an outright decline, and the recovery has thus far been too weak to claw back much of what was lost.

Now let’s FLASHBACK to 1970 to look at some of the Prices and Wages for that year, before I get Ranting on this one:


Economy
President:  Richard M. Nixon 
Vice President:  Spiro T. Agnew 

Population: 
205,052,174 
Life expectancy:  70.8 years 

Dow-Jones 
 
High:  842 (RE Note: Dow Jones today @ 16, 945! 2000% Increase there!)
Low:  669 

Federal spending: 
$195.65 billion (RE Note: 2014 @ $3.77 TRILLION!  Also around 2000% increase!)
Federal debt:  $380.9 billion  (RE Note: CHUMP CHANGE! Da Fed issues that much out every 3-5 months or so now!)
Inflation:  6.5% 
Consumer Price Index:  38.8 
Unemployment:  3.5% 
Prices
Cost of a new home:  $26,600.00 
Cost of a new car: 
Median Household Income:  $8,734.00  (RE Note: 2014 MHI $50K.  Only 600% Increase!  How come J6P doesn’t get QUADRUPLE digit inflation in wages here? Triple Digits is for LOSERS!)
Cost of a first-class stamp:  $0.06 
Cost of a gallon of regular gas:  $0.36 
Cost of a dozen eggs:  $0.62 
Cost of a gallon of Milk:  1.15 

 

What you do need to realize is that Deflation is much more feared than Inflation by anyone in charge of credit creation.  In a deflationary scenario, you can’t issue credit and money essentially disappears from circulation.  Despite the fact the CBs are trying to reinflate through Central credit creation, the credit is not further made available to downstream Biznesses and at the consumer level is near strangulation now except for some specific Goobermint guaranteed Bubbles like Student Loans.  Further consumption cannot occur without further credit being made available at the bottom of the credit food chain, and that simply is not occuring.

With that in mind, and without further ado, today’s Rant tracking Inflation from the 1970s to today. 🙂

Snippet:

http://www.atlantarex.com/urban-pizza-pub-for-sale-in-atlanta/urban-pizza-bar-for-sale-atlanta-pizza-dough.jpg…What got me going on this today was I made a Stop at Fred Myer to pick up a fresh loaf of French Bread to go with my St. Andre Cheese I picked up last week and froze a few of them at $5 each. Very nice cheese this one. As I walked by the Deli Hot counter to the Artisan Bread section, I bypassed a NEW offering, they are now offering By-the-Slice Pizza, just like the old Pizzerias in New York Shity had out when I was a teenager on my way to or from Stuyvesant, or out for Lunch.

In those days, these Pizzas were Hand Tossed by real old Italian Immigrants, or their first generation sons taking over the Biz in many cases. The Tomato Sauce used was different from Pizzeria to Pizzeria, often made from scratch by Grandma from tomatoes grown in the backyard of their Queens tract house. The Slices were a foot long, coming from 24” diameter Hand Tossed Full Pizzas. A slice cost 15-25 cents over those years in the 1970s.

Fast forward to the Fred Myer Pizza Counter. Nobody is Hand Tossing the Pizza Wheel, they cook the pizzas up from the same ones they sell uncooked in boxes in the refrigerated counter. They have a fairly generous supply of cheese and other ingredients dropped on them, but they are 18” wheels, so smaller slices at around 9 inches, which is impressive for a Porn Star but small for a slice of Pizza. Price for one slice of this Pizza? $2….

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Your Recovery Without Drugs

Off the keyboard of Jim Quinn

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Published on The Burning Platform on August 18, 2014

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“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

Thomas Jefferson

Does this chart portray an economic recovery in any way? Wages have been stagnant since the START of the supposed recovery in 2010. Real median household income, even using the highly understated CPI, is on a glide path to oblivion. You just need to observe with your own two eyes the number of Space Available signs in front of office buildings, strip centers and malls across America to realize we have further to fall. Low paying, part-time burger flipping jobs aren’t going to revive this debt saturated economic system. But at least the .1% are enjoying their Federal Reserve created high. Fiat is a powerful drug when administered in large doses to addicts on Wall Street.

The S&P 500 has risen from 666 in March of 2009 to 1,972 today. That is a 196% increase in a little over five years. During this same time, real household income has fallen by 7%. There have been a few million jobs added, while 11 million people have left the labor market. According to Robert Shiller’s CAPE ratio, the stock market valuation has only been higher, three times in history – 1929, 1999, and 2007. He seems flabbergasted by why valuations are so high. Sometimes really smart people can act really dumb.

The Federal Reserve balance sheet was $900 billion before the 2008 financial crisis. Today it stands at $4.4 trillion. The Fed has increased their balance sheet by 220% since the March 2009 market lows. Do you think there is any correlation between the Fed puppets printing $2.4 trillion and handing it to their Wall Street puppeteers, who used their high frequency trading supercomputers and ability to rig the markets so they never lose, and the third stock bubble in the last 13 years? It’s so self evident that only an Ivy League economist or CNBC anchor wouldn’t be able to see it.

sp500fedbal

 

Let’s look at the amazing stock market recovery without Federal Reserve heroine pumped into the veins of Wall Street banker addicts. If you divide the S&P 500 Index by the size of the Federal reserve balance sheet, you see the true purpose of QE1, QE2, and QE3. It wasn’t to save Main Street. It was to save Wall Street. Without the Federal Reserve funneling fiat to the .1% banking cabal and creating inflation in energy, food, and other basic necessities for the 99.9%, there is no stock market recovery. The recovery has occurred in Manhattan and the Hamptons. It’s been non-existent for the vast majority of people in this country. The wealth effect and trickle down theory have been disproved in spades. The only thing trickling down on the former middle class from the Fed is warm and yellow.

sp500fedbalratio

The entire stock market advance has been created on record low trading volumes and record high levels of monetary manipulation. Even though the Federal Reserve has driven senior citizens further into poverty with 0% interest rates, those with common sense have refused to be lured back into the lion’s den. They have parked record levels of fiat in no interest bank and money market accounts. They are tired of being muppets led to slaughter.

Quantitative easing was supposed to force little old ladies into the stock market and consumers to spend their debased dollars before they lost more value. The spending would revive the dormant economy just as the Keynesian text books promised. It didn’t happen. The peasants haven’t cooperated. Quantitative easing and ZIRP sapped the life from the middle class as their wages have stagnated and their living expenses have skyrocketed. Mission Accomplished by the Fed. Of course, the CNBC bimbos and shills would declare this $10.8 trillion to be money on the sidelines ready to boost the stock market ever higher. I love that storyline. It never grows old.

The MSM, government and Wall Street continue to flog the story about a housing recovery. It’s been nothing but a confidence game based upon the Fed’s easy money and the Wall Street scheme to buy up foreclosed properties with the Fed’s money. The scheme was to artificially boost home prices by restricting home supply through foreclosure manipulation, in order to allow the insolvent Wall Street banks to get out from under their billions in toxic mortgage loans.

Shockingly, the Case Shiller home price index has soared by 25% since 2012 despite first time home buyers being virtually non-existent and mortgage applications plunging to 14 year lows. How could that be? Don’t people need mortgages to buy houses? Isn’t real demand necessary to drive prices higher? Not when Uncle Ben and Madam Yellen are in charge of the printing press. Housing bubble 2.0 has arrived. I wonder if the Federal Reserve balance sheet increase of 50% since 2012 has anything to do with the new housing bubble.

It seems a similar result is obtained when dividing the Case Shiller Index by the size of the Fed’s balance sheet. The real housing market for real people is worse than it was in 2009. The national home price increase has been centered in the usual speculative markets, aided and abetted by the Fed’s easy money, managed by the Wall Street hedge funds, and exacerbated by the late arriving flippers who will be left holding the bag again. The Fed/ Wall Street scheme has priced young people out of the market and has failed to ignite the desired Keynesian impact. Investors/flippers account for 34% of all home sales. Foreigners with no knowledge of value metrics account for 30% of all home sales. The lesson of history is that most people don’t learn the lessons of history. The 2nd housing bubble in seven years is seeking a pin.

If ever you needed proof of the confidence game in its full glory, the chart below from Zero Hedge says it all. Mortgage rates have been falling for the past year, home builders have been reporting soaring confidence about the future, and the National Association of Realtors keeps predicting a surge in home buying any minute now. One small problem. Mortgage applications are in free fall, new home sales are at 1991 levels, and existing home sales are falling. Home prices have peaked and are beginning to roll over. The Wall Street hedgies are all looking to exit stage left. Young people are saddled with over a trillion of government issued student loan debt and millions of older subprime borrowers have been lured into more auto loan debt. Home sales will be stagnant for the next decade.

 

Quantitative easing will cease come October, unless Yellen and Wall Street can create a new “crisis” to cure with more money printing. By every valuation measure used over the last 100 years, stocks are overvalued by at least 50%. By historical measures, home prices are overvalued by at least 30%. Ten year Treasuries are yielding 2.4%, while true inflation is north of 5%. With real interest rates deep in negative territory, the bond market is even more overvalued than stocks or houses. These simultaneous bubbles have been created by the Federal Reserve in a desperate attempt to keep this debt laden ship afloat. Their solution to a ship listing from too much debt was to load it down with trillions more in debt. The ship is taking on water rapidly.

We had a choice. We could have bitten the bullet in 2008 and accepted the consequences of decades of decadence, frivolity, materialism, delusion and debt accumulation. A steep sharp depression which would have purged the system of debt and punishment of those who created the disaster would have ensued. The masses would have suffered, but the rich and powerful bankers would have suffered the most. Today, the economy would be revived, saving and investing would be generating needed capital for expansion, and banks would be doing what they are supposed to do – lending money to businesses and individuals. Instead, the Wall Street bankers won the battle and continue to pillage and loot the national wealth while impoverishing the masses.

The arrogance, hubris and contempt for morality displayed by the ruling class is breathtaking to behold. They think they are untouchable and impervious to norms followed by the rest of society. They may have won the opening battle, but will lose the war. Discontent among the masses grows by the day. The critical thinking citizens are growing restless and angry. They are beginning to grasp the true enemy. The system has been captured by a few malevolent men. When the stock, bond and housing bubbles all implode simultaneously, all hell will break loose in this country. It will make Ferguson, Missouri look like a walk in the park. I wonder if the occupants of the Eccles building in Washington DC will get out alive.

“It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.”Henry Ford

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SNAP to RIOT 3: Bring on the National Guard

Off the microphone of RE

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Aired on the Doomstead Diner on August 19, 2014

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Visit Diner Soundcloud for the full archive of Podcasts and Frostbite Falls Daily Rants.  Visit the Collapse Cafe for Diner Vidcast Interviews and Debates

Coming Soon: An Interview with Dmitry Orlov on the Ukraine Conflict and Resource Depletion

SNAP to RIOT 2 in #ferguson             SNAP to RIOT IN #ferguson

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Filed Under: Ferguson, Food Stamps, Militarization, Missouri, National Guard, Nixon, Obama, Police State, Poverty, Race War, Riots, St. Louis, Unemployment, Welfare, Death Penalty, Cop Killers

National Guard troops arrive at a mall complex that serves as staging for the police in Ferguson, Missouri.

Protesters face off with police after tear gas was fired at crowds in Ferguson, Missouri, on Sunday night.

Not such a great holiday: President Barack Obama follows through on a swing while golfing on the island of Martha's Vineyard.

Snippet:

…I was intending on moving on tonight to more International Doom, but #ferguson is the Doom Gift that Keeps on Giving.

For the 3rd night in a row with no sign of slowing down, the looting and rioting continue. The livestreams and pics from tonight’s action look like a War Zone, gas and smoke bombs being fired all over the place, and numerous shots fired, though no reports yet of anyone getting hit.

The Obamanista still hasn’t made an appearance there, you would think after a solid week of this shit escalating it might be worthwhile to fly Air Force 1 into Lambert Field and make an appearance. Even George Bush eventually got the GPS coordinates for where Katrina hit and made it to NOLA.

Even as far as making some speeches are concerned, Potus Telepromptus has so far only been given complete pablum to read by his speechwriters, and Goobernator Jay Nixon hasn’t pitched out anything substantive either.

The Gestapo agent who pulled the trigger has disappeared, his house shuttered and dark. Perhaps he is being given a New Identity by the FBI Shooter Relocation Program. Obviously what the community there wants is to see this guy “brought to justice”, which for them would mean conviction for Murder in the 1st Degree followed by a trip to the High Voltage Recliner. Missouri is a state with the Death Penalty of course…

For the rest, LISTEN TO THE RANT!!!

We Are All Ninja Turtles Now

From the keyboard of James Howard Kunstler

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Originally Published on Clusterfuck Nation  July 7, 2014

With lakes, swimming holes, rivers, and pools beckoning, I went to a sporting goods chain store at the mall — where else? — seeking a new bathing suit (pardon the quaint locution). The store was curiously named Dick’s. All they had were clown trunks. By this I mean a garment designed to hang somewhere around mid-calf, instantly transforming a normally-proportioned adult male into a stock slapstick character: the oafish man-child.

This being a commodious warehouse-style store, there was rack upon rack of different brands of bathing suits, all cut in the same clown style. I chanced by one of the sparsely-deployed employees and inquired if they had any swimming togs in a shorter cut.

“What you see is alls we got,” he said.

Even the Speedo brand had gone clown — except for the bikini brief, which I wore back during 30 years of lap-swimming, but which I deemed not quite okay for an elderly gentleman on the casual summer swim scene. So I left Dick’s without a new suit, but not before having a completely unsatisfying conversation with one of the managers.

“In the old days,” I explained, “bathing suits were designed to minimize the amount of cloth one dragged around in the water. These clown trunks you sell not only make a person look ridiculous, but they must be an awful drag in the water.”

“That’s what they send us,” he said. “It’s alls we got.”

The Fourth of July rolled in just in time to celebrate the disintegration of Iraq following our eight-year, three trillion dollar campaign to turn it into a suburb of Las Vegas. Me and my girl went over to the local fireworks show, held on the ballfield of a fraternal order lodge on the edge of town. The fire department had hung up a gigantic American Flag — like, fifty feet long! — off the erect ladder of their biggest truck, in case anybody forgot what country they were in. Personally, I was wondering what planet I was on. It was a big crowd, and every male in it was dressed in a clown rig.

The complete outfit, which has (oddly) not changed in quite a few years (suggesting the tragic trajectory we’re on), includes the ambiguous long-short pants, giant droopy T- shirt (four-year-olds have proportionately short legs and long torsos), “Sluggo” style stubble hair, sideways hat (or worn “cholo” style to the front ), and boat-like shoes, garments preferably all black, decorated with death-metal band logos. You can see, perhaps, how it works against everything that might suggest the phrase: “competent adult here.” Add a riot of aggressive-looking tattoos in ninja blade and screaming skull motifs and you get an additional message: “sociopathic menace, at your service.” Finally, there is the question: just how much self-medication is this individual on at the moment? I give you: America’s young manhood.

Does it seem crotchety to dwell on appearances? Sorry. The public is definitely sending itself a message disporting itself as it does in the raiment of clowning. Here in one of the “fly-over” zones of America — 200 miles north of New York City — the financial economy is mythical realm like Shangri-La and the real economy is somewhere between the toilet and a rat hole. Under the tyranny of chain stores, there really is no true local commercial economy. The few jobs here are menial and nearly superfluous to the automatic workings of the giant companies.

I don’t have the statistics but I suspect a lot of the males around here are on federal disability payments, and probably in the psychological categories including “depression,” “learning disabilities,” “ADHD, and so on.” In such a situation, wouldn’t a person benefit from presenting himself as child-like, with a dash of menace? And wouldn’t it be advantageous to look that way all of the time, in case one was unexpectedly visited by a government employee?

Down in Brooklyn, a world away, the young men go about in their hipster uniforms: Pee Wee Herman cut casuals. They’re still role-playing “the smart kid in the class” even though they’ve been out of class for a decade. Their computer dreams of IPO glory are formulated with the tunnel-vision of science fair projects. Left out are the realities of the greater unraveling.

Women are not at the center of this story. Theirs is another story. Let some woman tell it before I get to it.

Never has a society entered an epochal transition with such unpreparedness.

Never has a society appeared so childishly decadent.

 

***

James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

 

Statistical Lying & Bullshit

Off the keyboard of Michael Snyder

Published on Economic Collapse on June 25, 2014

http://wizbangblog.com/wp-content/uploads/2011/07/Statistics-Cartoon.gif

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Stone Cold Proof That Government Economic Numbers Are Being Highly Manipulated

Detective - Public DomainHow in the world does the government expect us to trust the economic numbers that they give us anymore?  For a long time, many have suspected that they were being manipulated, and as you will see below we now have stone cold proof that this is indeed the case.  But first, let’s talk about the revised GDP number for the first quarter of 2014 that was just released.  Initially, they told us that the U.S. economy only shrank by 0.1 percent in Q1.  Then that was revised down to a 1.0 percent contraction, and now we are being informed that the economy actually contracted by a whopping 2.9 percent during the first quarter.  So what are we actually supposed to believe?  Sometimes I almost get the feeling that government bureaucrats are just throwing darts at a dartboard in order to get these numbers.  Of course that is not actually true, but how do we know that we can actually trust the numbers that they give to us?

Over at shadowstats.com, John Williams publishes alternative economic statistics that he believes are much more realistic than the government numbers.  According to his figures, the U.S. economy has actually been continually contracting since 2005.  That would mean that we have been in a recession for the last nine years.

Could it be possible that he is right and the bureaucrats in Washington D.C. are wrong?

Before you answer that question, read the rest of this article.

It just might change your thinking a bit.

Another number that many have accused of being highly manipulated is the inflation rate.

But we don’t have to sit around and wonder if that figure is being manipulated.  The truth is that even those that work inside the Federal Reserve admit that it is being manipulated.

As Robert Wenzel recently pointed out, Mike Bryan, a vice president and senior economist in the Atlanta Fed’s research department, has been very open about the fact that the way inflation is calculated has been changed almost every month at times…

The Economist retells a conversation with Stephen Roach, who in the 1970s worked for the Federal Reserve under Chairman Arthur Burns. Roach remembers that when oil prices surged around 1973, Burns asked Federal Reserve Board economists to strip those prices out of the CPI “to get a less distorted measure. When food prices then rose sharply, they stripped those out too—followed by used cars, children’s toys, jewellery, housing and so on, until around half of the CPI basket was excluded because it was supposedly ‘distorted'” by forces outside the control of the central bank. The story goes on to say that, at least in part because of these actions, the Fed failed to spot the breadth of the inflationary threat of the 1970s.

I have a similar story. I remember a morning in 1991 at a meeting of the Federal Reserve Bank of Cleveland’s board of directors. I was welcomed to the lectern with, “Now it’s time to see what Mike is going to throw out of the CPI this month.” It was an uncomfortable moment for me that had a lasting influence. It was my motivation for constructing the Cleveland Fed’s median CPI.

I am a reasonably skilled reader of a monthly CPI release. And since I approached each monthly report with a pretty clear idea of what the actual rate of inflation was, it was always pretty easy for me to look across the items in the CPI market basket and identify any offending—or “distorted”—price change. Stripping these items from the price statistic revealed the truth—and confirmed that I was right all along about the actual rate of inflation.

Right now, the Federal Reserve tells us that the inflation rate is sitting at about 2 percent.

But according to John Williams, if the inflation rate was calculated the same way that it was in 1990 it would be nearly 6 percent.

And if the inflation rate was calculated the same way that it was in 1980 it would be nearly 10 percent.

So which number are we supposed to believe?

The one that makes us feel the best?

And without a doubt, “2 percent inflation” sounds a whole lot better than “10 percent inflation” does.

But anyone that does any grocery shopping knows that we are definitely not in a low inflation environment.  For much more on this, please see my previous article entitled “Inflation? Only If You Look At Food, Water, Gas, Electricity And Everything Else“.

Of course the unemployment rate is being manipulated as well.  Just consider the following excerpt from a recent New York Post article

In case you are just joining this ongoing drama, the Labor Department pays Census to conduct the monthly Household Survey that produces the national unemployment rate, which despite numerous failings is — inexplicably — still very important to the Federal Reserve and others.

One of the problems with the report is that Census field representatives — the folks who knock on doors to conduct the surveys — and their supervisors have, according to my sources, been shortcutting the interview process.

Rather than collect fresh data each month as they are supposed to do, Census workers have been filling in the blanks with past months’ data. This helps them meet the strict quota of successful interviews set by Labor.

That’s just one of the ways the surveys are falsified.

The Federal Reserve would have us believe that the unemployment rate in the U.S. has fallen from a peak of 10.0 percent during the recession all the way down to 6.3 percent now.

But according to shadowstats.com, the broadest measure of unemployment is well over 20 percent and has kept rising since the end of the last recession.

And according to the Federal Reserve’s own numbers, the percentage of working age Americans with a job has barely increased over the past four years…

Employment Population Ratio 2014

The chart above looks like a long-term employment decline to me.

But that is not the story that the government bureaucrats are selling to us.

So where does the truth lie?

What numbers are we actually supposed to believe?

The Fourteen Year Recession

Off the keyboard of Jim Quinn

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Published on The Burning Platform on March 24, 2014

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“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

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“A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men … [W]e have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world—no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.”Woodrow Wilson

When you ponder the implications of allowing a small group of powerful wealthy unaccountable men to control the currency of a nation over the last one hundred years, you understand why our public education system sucks. You understand why the government created Common Core curriculum teaches children that 3 x 4 = 13, as long as you feel good about your answer. George Carlin was right. The owners of this country (bankers, billionaires, corporate titans, politicians) want more for themselves and less for everyone else. They want an educational system that creates ignorant, obedient, vacuous, obese dullards who question nothing, consume mass quantities of corporate processed fast food, gaze at iGadgets, are easily susceptible to media propaganda and compliant to government regulations and directives. They don’t want highly educated, critical thinking, civil minded, well informed, questioning citizens understanding how badly they have been screwed over the last century. I’m sorry to say, your owners are winning in a landslide.

The government controlled public education system has flourished beyond all expectations of your owners. We’ve become a nation of techno-narcissistic, math challenged, reality TV distracted, welfare entitled, materialistic, gluttonous, indebted consumers of Chinese slave labor produced crap. There are more Americans who know the name of Kanye West and Kim Kardashian’s bastard child (North West) than know the name of our Secretary of State (Ketchup Kerry). Americans can generate a text or tweet with blinding speed but couldn’t give you change from a dollar bill if their life depended upon it. They are whizzes at buying crap on Amazon or Ebay with a credit card, but have never balanced their checkbook or figured out the concept of deferred gratification and saving for the future. While the ignorant masses are worked into a frenzy by the media propaganda machine over gay marriage, diversity, abortion, climate change, and never ending wars on poverty, drugs and terror, our owners use their complete capture of the financial, regulatory, political, judicial and economic systems to pillage the remaining national wealth they haven’t already extracted.

The financial illiteracy of the uneducated lower classes and the willful ignorance of the supposedly highly educated classes has never been more evident than when examining the concept of Federal Reserve created currency debasement – also known as inflation. The insidious central banker created monetary inflation is the cause of all the ills in our warped, deformed, rigged financialized economic system. The outright manipulation and falsity of government reported economic data is designed to obscure the truth and keep the populace unaware of the deception being executed by the owners of this country. They have utilized deceit, falsification, propaganda and outright lies to mislead the public about the true picture of the disastrous financial condition in this country. Since most people are already trapped in the mental state of normalcy bias, it is easy for those in control to reinforce that normalcy bias by manipulating economic data to appear normal and using their media mouthpieces to perpetuate the false storyline of recovery and a return to normalcy.

This is how feckless politicians and government apparatchiks are able to add $2.8 billion per day to the national debt; a central bank owned by Too Big To Trust Wall Street banks has been able to create $3.3 trillion out of thin air and pump it into the veins of its owners; and government controlled agencies report a declining unemployment rate, no inflation and a growing economy, without creating an iota of dissent or skepticism from the public. Americans want to be lied to because it allows them to continue living lives of delusion, where spending more than you make, consuming rather than saving, and believing stock market speculation and home price appreciation will make them rich are viable life strategies. Even though 90% of the population owns virtually no stocks, they are convinced record stock market highs are somehow beneficial to their lives. They actually believe Bernanke/Yellen when they bloviate about the dangers of deflation. Who would want to pay less for gasoline, food, rent, or tuition?

Unless you are beholden to the oligarchs, that sense of stress, discomfort, feeling that all in not well, and disturbing everyday visual observations is part of the cognitive dissonance engulfing the nation. Anyone who opens their eyes and honestly assesses their own financial condition, along with the obvious deterioration of our suburban sprawl retail paradise infrastructure, is confronted with information that is inconsistent with what they hear from their bought off politician leaders, highly compensated Ivy League trained economists, and millionaire talking heads in the corporate legacy media. Most people resolve this inconsistency by ignoring the facts, rejecting the obvious and refusing to use their common sense. To acknowledge the truth would require confronting your own part in this Ponzi debt charade disguised as an economic system. It is easier to believe a big lie than think critically and face up to decades of irrational behavior and reckless conduct.

What’s In Your GDP                          

“The Gross Domestic Product (GDP) is one of the broader measures of economic activity and is the most widely followed business indicator reported by the U.S. government. Upward growth biases built into GDP modeling since the early 1980s, however, have rendered this important series nearly worthless as an indicator of economic activity.  The popularly followed number in each release is the seasonally adjusted, annualized quarterly growth rate of real (inflation-adjusted) GDP, where the current-dollar number is deflated by the BEA’s estimates of appropriate price changes. It is important to keep in mind that the lower the inflation rate used in the deflation process, the higher will be the resulting inflation-adjusted GDP growth.”John Williams – Shadowstats

GDP is the economic statistic bankers, politicians and media pundits use to convince the masses the economy is growing and their lives are improving. Therefore, it is the statistic most likely to be manipulated, twisted and engineered in order to portray the storyline required by the oligarchs. Two consecutive quarters of negative GDP growth usually marks a recession. Those in power do not like to report recessions, so data “massaging” has been required over the last few decades to generate the required result. Prior to 1991 the government reported the broader GNP, which includes the GDP plus the balance of international flows of interest and dividend payments. Once we became a debtor nation, with massive interest payments to foreigners, reporting GNP became inconvenient. It is not reported because it is approximately $900 billion lower than GDP. The creativity of our keepers knows no bounds. In July of 2013 the government decided they had found a more “accurate” method for measuring GDP and simply retroactively increased GDP by $500 billion out of thin air. It’s amazing how every “more accurate” accounting adjustment improves the reported data. The economic growth didn’t change, but GDP was boosted by 3%. These adjustments pale in comparison to the decades long under-reporting of inflation baked into the GDP calculation.

As John Williams pointed out, GDP is adjusted for inflation. The higher inflation factored into the calculation, the lower reported GDP. The deflator used by the BEA in their GDP calculation is even lower than the already bastardized CPI. According to the BEA, there has only been 32% inflation since the year 2000. They have only found 1.4% inflation in the last year and only 7.1% in the last five years. You’d have to be a zombie from the Walking Dead or an Ivy League economist to believe those lies. Anyone living in the real world knows their cost of living has risen at a far greater rate. According to the government, and unquestioningly reported by the compliant co-conspirators in the the corporate media, GDP has grown from $10 trillion in 2000 to $17 trillion today. Even using the ridiculously low inflation BEA adjustment yields an increase from $12.4 trillion to only $15.9 trillion in real terms. That pitiful 28% growth over the last fourteen years is dramatically overstated, as revealed in the graph below. Using a true rate of inflation exposes the grand fraud being committed by those in power. The country has been in a never ending recession since 2000.

Your normalcy bias is telling you this is impossible. Your government tells you we have only experienced a recession from the third quarter of 2008 through the third quarter of 2009. So despite experiencing two stock market crashes, the greatest housing crash in history, and a worldwide financial system implosion the authorities insist  we’ve had a growing economy 93% of the time over the last fourteen years. That mental anguish you are feeling is the cognitive dissonance of wanting to believe your government, but knowing they are lying. It is a known fact the government, in conspiracy with Greenspan, Congress and academia, have systematically reduced the reported CPI based upon hedonistic quality adjustments, geometric weighting alterations, substitution modifications, and the creation of incomprehensible owner’s equivalent rent calculations. Since the 1700s consumer inflation had been estimated by measuring price changes in a fixed-weight basket of goods, effectively measuring the cost of maintaining a constant standard of living. This began to change in the early 1980s with the Greenspan Commission to “save” Social Security and came to a head with the Boskin Commission in 1995.

Simply stated, the Greenspan/Boskin Commissions’ task was to reduce future Social Security payments to senior citizens by deceitfully reducing CPI and allowing politicians the easy way out. Politicians would lose votes if they ever had to directly address the unsustainability of Social Security. Therefore, they allowed academics to work their magic by understating the CPI and stealing $700 billion from retirees in the ten years ending in 2006. With 10,000 baby boomers per day turning 65 for the next eighteen years, understating CPI will rob them of trillions in payments. This is a cowardly dishonest method of extending the life of Social Security.

If CPI was calculated exactly as it was computed prior to 1983, it would have averaged between 5% and 10% over the last fourteen years. Even computing it based on the 1990 calculation prior to the Boskin Commission adjustments, would have produced annual inflation of 4% to 7%. A glance at an inflation chart from 1872 through today reveals the complete and utter failure of the Federal Reserve in achieving their stated mandate of price stability. They have managed to reduce the purchasing power of your dollar by 95% over the last 100 years. You may also notice the net deflation from 1872 until 1913, when the American economy was growing rapidly. It is almost as if the Federal Reserve’s true mandate has been to create inflation, finance wars, perpetuate the proliferation of debt, artificially create booms and busts, enrich their Wall Street owners, and impoverish the masses. Happy Birthday Federal Reserve!!!

Click to View

When you connect the dots you realize the under-reporting of inflation benefits the corporate fascist surveillance state. If the government was reporting the true rate of inflation, mega-corporations would be forced to pay their workers higher wages, reducing profits, reducing corporate bonuses, and sticking a pin in their stock prices. The toady economists at the Federal Reserve would be unable to sustain their ludicrous ZIRP and absurd QEfinity stock market levitation policies. Reporting a true rate of inflation would force long-term interest rates higher. These higher rates, along with higher COLA increases to government entitlements, would blow a hole in the deficit and force our spineless politicians to address our unsustainable economic system. There would be no stock market or debt bubble. If the clueless dupes watching CNBC bimbos and shills on a daily basis were told the economy has been in fourteen year downturn, they might just wake up and demand accountability from their leaders and an overhaul of this corrupt system.

Mother Should I Trust the Government?

We know the BEA has deflated GDP by only 32% since 2000. We know the BLS reports the CPI has only risen by 37% since 2000. Should I trust the government or trust the facts and my own eyes? The data is available to see if the government figures pass the smell test. If you are reading this, you can remember your life in 2000. Americans know what it cost for food, energy, shelter, healthcare, transportation and entertainment in 2000, but they unquestioningly accept the falsified inflation figures produced by the propaganda machine known as our government. The chart below is a fairly comprehensive list of items most people might need to live in this world. A critical thinking individual might wonder how the government can proclaim inflation of 32% to 37% over the last fourteen years, when the true cost of living has grown by 50% to 100% for most daily living expenses. The huge increases in property taxes, sales taxes, government fees, tolls and income taxes aren’t even factored in the chart. It seems gold has smelled out the currency debasement and the lies of our leaders. This explains the concerted effort by the powers that be to suppress the price of gold by any means necessary.

 

Living Expense

Jan-00

Mar-14

% Increase

Gallon of gas

$1.27

$3.51

176.4%

Barrel of oil

$24.11

$100.00

314.8%

Fuel oil per gallon

$1.19

$4.07

242.0%

Electricity per Kwh

$0.084

$0.134

59.5%

Gas per therm

$0.712

$1.078

51.4%

Dozen eggs

$0.97

$2.00

106.2%

Coffee per lb

$3.40

$5.20

52.9%

Ground Beef per lb.

$1.90

$3.73

96.3%

Postage stamp

$0.33

$0.49

48.5%

Movie ticket

$5.25

$10.25

95.2%

New car

$20,300.00

$31,500.00

55.2%

Annual healthcare spending per capita

$4,550.00

$9,300.00

104.4%

Average private college tuition

$22,000.00

$37,000.00

68.2%

Avg home price (Case Shiller)

$161,000.00

$242,000.00

50.3%

Avg monthly rent (Case Shiller)

$635.00

$890.00

40.2%

Ounce of gold

$279.00

$1,334.00

378.1%

Mother, you should not trust the government. There is no doubt they have systematically under-reported inflation based on any impartial assessment of the facts. The reality that we remain stuck in a fourteen year recession is borne out by the continued decline in vehicle miles driven (at 1995 levels) due to declining commercial activity, the millions of shuttered small businesses, and the proliferation of Space Available signs in strip malls and office parks across the land. The fact there are only 8 million more people employed today than were employed in 2000, despite the working age population growing by 35 million, might be a clue that we remain in recession. If that isn’t enough proof for you, than maybe a glimpse at real median household income, retail sales and housing will put the final nail in the coffin of your cognitive dissonance.

The government and their media mouthpieces expect the ignorant masses to believe they have advanced their standard of living, with median household income growing from $40,800 to $52,500 since 2000. But, even using the badly flawed CPI to adjust these figures into real terms reveals real median household income to be 7.3% below the level of 2000. Using a true inflation figure would cause a CNBC talking head to have an epileptic seizure.

Click to View

The picture is even bleaker when broken down into the age of households, with younger households suffering devastating real declines in household income since 2000. I guess all those retail clerk, cashier, waitress, waiter, food prep, and housekeeper jobs created over the last few years aren’t cutting the mustard. Maybe that explains the 30 million increase (175% increase) in food stamp recipients since 2000, encompassing 19% of all households in the U.S. Luckily the banking oligarchs were able to convince the pliable masses to increase their credit card, auto and student loan debt from $1.5 trillion to $3.1 trillion over the fourteen year descent into delusion.

When you get your head around this unprecedented decline in household income over the last fourteen years, along with the 50% to 100% rise in costs to live in the real world, as opposed to the theoretical world of the Federal Reserve and BLS, you will understand the long term decline in retail sales reflected in the following chart. When you adjust monthly retail sales for gasoline (an additional tax), inflation (understated), and population growth, you understand why retailers are closing thousands of stores and hurdling towards inevitable bankruptcy. Retail sales are 6.9% below the June 2005 peak and 4% below levels reached in 2000. And this is with millions of retail square feet added over this time frame. We know the dramatic surge from the 2009 lows was not prompted by an increase in household income. So how did the 11% proliferation of spending happen?

Click to View

The up swell in retail spending began to accelerate in late 2010. Considering credit card debt outstanding is at exactly where it was in October 2010, it seems consumers playing with their own money turned off the spigot of speculation. It has been non-revolving debt that has skyrocketed from $1.63 trillion in February 2010 to $2.26 trillion today. This unprecedented 39% rise in four years has been engineered by the government, using your tax dollars and the tax dollars of unborn generations. The Federal government has complete control of the student loan market and with their 85% ownership of Ally Financial, the largest auto financing company, a dominant position in the auto loan market. The peddling of $400 billion of subprime student loan debt and $200 billion of subprime auto loan debt has created the illusion of a retail recovery. The student loan debt has been utilized by University of Phoenix MBA wannabes  to buy iGadgets, the latest PS3 version of Grand Theft Auto and the latest glazed donut breakfast sandwich on the market. It’s nothing but another debt financed bubble that will end in tears for the American taxpayer, as hundreds of billions will be written off.

The fake retail recovery pales in comparison to the wolves of Wall Street produced housing recovery sham. They deserve an Academy Award for best fantasy production. The Federal Reserve fed Wall Street hedge fund purchase of millions of foreclosed shanties across the nation has produced media proclaimed home price increases of 10% to 30% in cities across the country. Withholding foreclosures from the market and creating artificial demand with free money provided by the Federal Reserve has temporarily added $4 trillion of housing net worth and reduced the number of underwater mortgages on the books of the Too Big To Trust Wall Street banks. The percentage of investor purchases and cash purchases is at all-time highs, while the percentage of first time buyers is at all-time lows. Anyone with an ounce of common sense can look at the long-term chart of mortgage applications and realize we are still in a recession. Applications are 35% below levels at the depths of the 2008/2009 recession. Applications are 65% below levels at the housing market peak in 2005. They are even 35% below 2000 levels. There is no real housing recovery, despite the propaganda peddled by the NAR, CNBC, and Wall Street. It’s a fraud.

It is the pinnacle of arrogance and hubris that a few Ivy League educated economists sitting in the Marriner Eccles Building in the swamps of Washington D.C., who have never worked a day in their lives at a real job, think they can create wealth and pull the levers of money creation to control the American and global financial systems. All they have done is perfect the art of bubble finance in order to enrich their owners at the expense of the rest of us. Their policies have induced unwarranted hope and speculation on a grand scale. Greenspan and Bernanke have provoked multiple bouts of extreme speculation in stocks and housing over the last 15 years, with the subsequent inevitable collapses. Fed encouraged gambling does not create wealth it just redistributes it from the peasants to the aristocracy. The Fed has again produced an epic bubble in stock and bond valuations which will result in another collapse. Normalcy bias keeps the majority from seeing the cliff straight ahead. Federal Reserve monetary policies have distorted financial markets, created extreme imbalances, encouraged excessive risk taking, and ruined the lives of working class people. Take a long hard look at the chart below and answer one question. Was QE designed to benefit Main Street or Wall Street?

The average American has experienced a fourteen year recession caused by the monetary policies of the Federal Reserve. Our leaders could have learned the lesson of two Fed induced collapses in the space of eight years and voluntarily abandoned the policies of reckless credit expansion, instead embracing policies encouraging saving, capital investment and balanced budgets. They have chosen the same cure as the disease, which will lead to crisis, catastrophe and collapse.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises

 

JOBS

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Published on the Doomstead Diner on January 19, 2014

Discuss this article at the Economics Table inside the Diner

The Big Newz last week on the Economic Front was the Jobs Report from the Bureau of Lies & Statistics, which now has the FSoA UE Rate down to a remarkable 6.7%!  We are doing FANTASTIC!  This is down from Double Digit UE Rates around 11% following the Financial Crack-Up of 2008.  Happy Daze are HERE AGAIN!

From Zero Hedge

Curious why despite the huge miss in payrolls the unemployment rate tumbled from 7.0% to 6.7%? The reason is because in December the civilian labor force did what it usually does in the New Normal: it dropped from 155.3 million to 154.9 million, which means the labor participation rate just dropped to a fresh 35 year low, hitting levels not seen since 1978, at 62.8% down from 63.0%.

And the piece de resistance: Americans not in the labor force exploded higher by 535,000 to a new all time high 91.8 million.

The jobless, laborless recovery continues to steam on.

ZH of course highlights the OBVIOUS canard being pitched out here, which goes to the Denominator in the Equation, who the BLS counts as UE and Looking for Work.  The UE measured rate by the BLS obviously went down tremendously as soon as Da Federal Goobermint dropped millions off from Extended UE bennies that were running 99 Weeks.  Once you have used up your Bennies, you no longer are counted as looking for a job, whether you found one or not by the time the bennies ran out.

At the same time, the “Labor Participation Rate”, the percentage of the population who actually has a Job continues to drop here off the map.  Are we expected to believe all these folks no longer need or want a job?

Part of the reason for this is Demographics.  Overall the population is aging, and more of the Boomers Retire each year, and at least for now can collect SS and whatever Pension is due them, at least if they were not working for the City of Detroit for the last 30 years.  However, we still do have Immigration going on, and we still do have homegrown young folks graduating from High School and College.  The percentage of either class of people able to find “Jobs” in our current economy continues to drop here, and their hopes for the Future drop with them.

Of course this is NOTHING compared to what is ongoing in Greece, Spain, Portugal and Italy these days, where Youth

Unemployment is reaching into the +50% category.  In a society where having a JOB to earn MONEY is essential if you expect to stay out of Prison or not live in a cardboard box on the street, I can’t think of any better recipe for Social Unrest than these kind of UE numbers.

http://hrackova.veronika.sweb.cz/in-spain-the-epicenter-of-europes-youth-unemployment-crisis-the-rate-has-soared-to-565.png

If you are older here and go UE, even if you are not QUITE yet eligible for SS, decent chance you have some savings to live off, or maybe a paid off McMansion you can sell and live off the proceeds in a trailer park while you wait for SS to kick in.  Or you can try and get SSDI a bit earlier than 62 for regular SS retirement FRNs.

http://nomoneynoworries.files.wordpress.com/2012/05/ss-disability.jpg

So there is still some Safety Net here for Job losses, which goes a long way toward explaining why we do not yet see the kind of social unrest already ongoing in Greece and Spain.  How long this can continue to play here remains an open question of course.

jobless_unemploymentSo, the bottom line here on all of this ongoing collapse nonsense revolves around the JOBS, which have been since the Industrial Revolution the means by which MOST people get some MONEY to then be able to buy food, pay Rent to the Rentier Class and buy energy with which to run the carz they need to get to work and participate in said Industrial Economy.  Jobs disappear, the ability to participate disappears with it.

What ARE the jobs of the Industrial Economy though?  Well, for a while during the early Growth Phase here in the FSoA, those jobs were Industrial Factory type work, as we provided hardware to run both WWI and WWII.  We had copious sources of local Cheap Energy to run the Factories back then, and besides that after destroying much of the Infrastructure in Europe in both wars, it needed to be rebuilt, providing a lot of work for Factory workers here in the FSoA, where nothing got Bombed.

During the Post WWII period also, the FSoA Industrialists began the largest Public Works project in the History of Mankind, the Eisenhower Interstate.  The reason was not to develop Commerce, although that came out of it as a means to Finance the project, it came from the realization by the Military arm of the Military-Industrial Complex that in order to move their Tanks and Hardware around this vast continent, they needed ROADS upon which to roll that hardware.

As a Young Lieutenant in the Army back in 1919, Dwight D Eisenhower had to move a Convoy across the old “Lincoln Highway”, which was really a Hodgepodge of paved and dirt roads, and the equipment they had got bogged down all the time.  Fuel stops were vitually nonexistent, so they had to have their own Fuel trucks travelling with them to stock up at the few fuel depots that existed at the time in the more majore motros connected toa Rail line.  It took WEEKS to make it across the country.

From the Illinois Dept. of Transportation website:

In late June 2006, a caravan of vehicles organized by the American Association of State Highway and Transportation Officials (AASHTO) will travel across the United States from San Francisco, California to Washington, D. C. to commemorate the 50th Anniversary of the Interstate Highway System.

The AASHTO Anniversary Caravan of 2006 will follow Interstate 80 much of the way. It will be retracing, in reverse, the approximate route of a famous previous expedition, the Transcontinental Army Motor Convoy, which followed the Lincoln Highway across the country from Washington to San Francisco in 1919. PHOTO (ABOVE): Soldiers pushing a disabled truck during the 1919 Army Transcontinental Motor Convoy, Eisenhower Library Audiovisual Department, photo 86-19-190

The remainder of this section will describe the 1919 Army Convoy; report on its three-day trip across Illinois and relate what the 1919 Army Convoy meant for the future of American Roads.

ORIGINS AND PURPOSES OF THE 1919 ARMY CONVOY

World War I (1914-1918) was the first large scale military conflict that employed vehicles powered by the relatively new internal combustion engine. Airplanes, trucks, motorcars, and tanks were used on both sides. However, they lacked the reliability, flexibility, and capacity for moving large masses of troops or equipment over long distances on inferior European roads. The vast majority of WWI military transportation on land was done by horses and railroad trains; nevertheless, by the end of the war, most military leaders saw the potential for increased use of motorized troops and equipment in military campaigns of the future.

The end of the war also inspired the leaders of the Good Roads Movement to resume their public relations (PR) campaign to convince the public to demand better roads from state and local governments. The PR campaign had been put on hold during the 1917-1918 period while America was engaged in WWI. Early in 1919, Lincoln Highway Association leader Harry Ostermann had persuaded the War Department to conduct a transcontinental motor convoy trip from the East Coast to San Francisco on the marked route of the Lincoln Highway.

The purpose of the convoy was two fold: 1) it was to be a training exercise and 2) a test of the feasibility of the long distance movement of military men and supplies by auto and truck.

From the Good Roads Movement’s viewpoint, the convoy was meant to produce positive PR by demonstrating that long distance motor travel was possible. It was also meant to heighten awareness of existing poor roads that comprised much of the Lincoln Highway and other roads in the Unites States. Return to Top

AN EPIC JOURNEY FULL OF CHALLENGES AND OPPORTUNITIES

Amid much hoopla, speeches and fanfare, a 76-vehicle combined “public-private” convoy, including 56 military vehicles, 209 officers and enlisted men, and dozens of private citizens took off from the White House on July 7, 1919. (LH/MAIN STREET, p. 83).

Later that evening, the convoy was joined by two, last minute volunteer Army officers. They were Lieutenant Colonel Dwight D. Eisenhower and Major Sereno Brett, who were to serve as observers for the Army Tank Corps. PHOTO: Major Sereno Brett, Harvey Firestone, Jr., and Lt. Colonel Dwight Eisenhower at 1919 Army Convoy stopover at the Firestone Homestead, Columbania, Ohio, July 13, 1919. Eisenhower Library Audiovisual Department, photo 70-520-3.

The convoy was to operate as if the country was at war and that an Asiatic enemy had destroyed railroad lines, bridges, and tunnels. They were also to act as if they would be traveling through enemy territory and thus, had to be self-contained and self-sustaining over the 3,250-mile route. Maintaining the illusion of being at war or being truly self-sustaining proved to be very difficult, as was the trip itself.

Among some of the military personnel, there was even doubt whether or not the convoy could actually make it across the continent. The vehicles were untested over long distances. Many sections of the Lincoln Highway were unimproved dirt roads. Finally, few military personnel; especially enlisted men, had much experience with motor vehicle driving or maintenance. Eisenhower later wrote that the trek was a genuine adventure. “We were not sure it could be accomplished at all. Nothing of the sort had ever been attempted.”

At first, in the East from Washington through Indiana, the roads were generally good but mechanical problems with the various vehicles and logistical problems slowed the convoy’s progress. Military discipline among the men also was “conspicuous by its absence,” according to one observer. About the familiarity of the men with operating trucks, Eisenhower wrote:

All drivers had claimed lengthy experience in driving trucks; some of them, it turned out, had never handled anything more advanced than a Model T. Most colored the air with expression in starting and stopping that indicated a longer association with teams of horses than with internal combustion engines. (EISENHOWER REPORT)

As the convoy (also referred to as the “train” by some) headed into Illinois and the West, road conditions along the Lincoln Highway presented serious challenges that often delayed and sometimes halted the convoy. The Highway ran on dirt roads through most of Illinois, but the weather was dry, so it was possible to cross the state in a few days. Of the roads between Illinois and California, Eisenhower, in his post-trip report wrote:

The dirt roads of Iowa are well graded and are good in dry weather; but would be impossible in wet weather. In Nebraska, the first real sand was encountered, and two days were lost in western part of this state due to bad, sandy roads. Wyoming roads west of Cheyenne are poor dirt ones, with weak culverts and bridges. In one day, 14 of these were counted, broken through by the train. The desert roads in the southwest portion of this state are very poor. In western Utah, on the Salt Lake Desert, the road becomes almost impossible to heavy vehicles. From Orr’s Ranch, Utah, to Carson City, Nevada, road is one succession of dust, ruts, pits and holes. This stretch was not improved in any way, and consisted only of a track across the desert. At many points on the road water is twenty miles distant, and parts of the road are ninety miles from the nearest railroad. (EISENHOWER REPORT)

In fact, one of the biggest problems was the poor state of the bridges along the Lincoln Highway. PHOTO: Army Truck testing the holding power of one of many small bridges crossed during the Army Transcontinental Motor Convoy, 1919. Eisenhower Library Audiovisual Department, photo 81-17-25.

Advance notice of the convoy spread and its arrival in towns along the Lincoln Highway were occasions for celebrations and plenty of speeches imploring listeners to demand more public funding for “Good Roads.” The convoy passed through 350 communities, and it was estimated that more than 3,000,000 people witnessed it along the route. Millions more followed the trek in newspapers and early motion picture “newsreels.” PHOTO: 1919 Army Transcontinental Motor Convoy on Review, Salt Lake City, Utah, 1919. Eisenhower Library Audiovisual Department, photo 81-17-55.

The convoy did make it. Battered, but unbowed, the caravan arrived at the gates of Lincoln Park in San Francisco. However, it had taken until September 6, 1919 for it to reach its destination, a grueling sixty-two (62) days!

In November 1919, Lieutenant Colonel Eisenhower wrote a seven-page report relaying the observations he made during the Army Convoy to the Chief of the Army’s Motor Transport Corps (M.T.C.). He summarized the results as follows:

The truck train was well received at all points along the route. It seemed that there was a great deal of sentiment for the improving of highways, and, from the standpoint of promoting this sentiment, the trip was an undoubted success. As stated before in this paper, it is believed that the M. T. C. should pay more attention to disciplinary drills for officers and men, and that all should be intelligent, snappy soldiers before giving them the responsibility of operating trucks. Extended trips by trucks through the middle western part of the United States are impracticable until roads are improved, and then only a light truck should be used on long hauls. Through the eastern part of the United States, the truck can be efficiently used in the Military Service, especially in problems involving a haul of approximately 100 miles, which could be negotiated by light trucks in one day. (EISENHOWER REPORT.)

Return to Top

THE 1919 ARMY MOTOR CONVOY IN ILLINOIS

The 1919 Army Transcontinental Army Convoy crossed into Illinois on the afternoon of Saturday, July 19, 1919. It stopped the next day for a Sunday rest period in Chicago Heights. The trip was resumed on Monday July 21, 1919, and the convoy camped over that night in DeKalb. On Tuesday July 22, 1919, the convoy left DeKalb and crossed over the Mississippi River Bridge at Fulton, Illinois and entered into Iowa that evening.

During the two full days it spent on the road in Illinois, the convoy covered about 172 miles in a little over 21 hours on the road. It was fairly lucky with the weather and thus the roads, but as the following account from the convoy’s daily log reveals, it had its share of problems with the vehicles, drivers, and equipment in its journey across the Land of Lincoln.

(Read the official Army account of the convoy’s journey thru Illinois).

So basically from the 1950s right up until around 2008 when the Sub-Prime Mortgage Bubble popped, as the Industrial Jobs began to leave the country in the 1970s to go to Cheaper Labor Markets in places like Mexico, India and China, fairly decently paid work in the Construction Industry took their place.  Many jobs even for highly paid well educated folks like Civil Engineers, Architects, Electrical Engineers, Plumbers et al, as every new Mall and every new Suburban Subdivision needed to be Wired Up and Plumbed to keep the Sanitation Decent.  As the communities sprouted like mushrooms across the once Pristine Wilderness of the FSoA, Civil Service Goobermint workers in every field from Police Work to Sanitation workers to Teachers were necessary.  Where did the MONEY come from to PAY all these people for these new JOBS in these new communities?

As with ALL money since the beginning of the Industrial Era (and really long before that, btu expanding exponentially through this period), the MONEY came from the Issuance of New Credit done by the folks who have controlled this since the beginning of the Colonial Era at the LATEST, the TBTF Banks and the small number of people who control them, often referred to here on the pages of the Diner as the “Illuminati”.  In 1692 the Bank of England was Chartered, and despite a real lack of Precious Metals in England at that time, these folks issued CREDIT on what basically was all the resources of the New World they were set to exploit.  They did not HAVE the “money” to issue out, they CREATED the money to issue out.  Long as everyone under their Political Control HAD to use this money (“Legal Tender”) they could LOAN it to others, who then owed them Interest.  Anyone on the Inside of this Scheme never really could go Broke, as they could always issue themselves newer and bigger Loans to further buy out the Resources, and the Flow Begins of this money through the economy.  EVERYTGHING comes to depend on this flow of money, and constant INCREASE in the money supply otherwise the interest being charged cannot be paid up on.  whenever a Contraction or even just a slowdown occurs, Depressions ensue, Deleveraging occurs and most of the population gets hung out to dry.  this was the narrative pretty much from 1700 right through to the Great Depression of the 1930s.

Throughout the period of the post-Revolutionary War here in the FSoA, Credit was issued by Industrialists in Europe to first off exploit the Coal Resources here and ship them back to Europe to power their Factories, and then to further build out Industrial Infrastructure here.  The Railroads were the essential component of this, because without them there was no moving the Coal from the mines of West Virginia to the Ports on the East Coast.  So the Jobs of those days came in the form of Coal Mining and Railroad construction, and as the railroads expanded across the continent, new communities based on this new type of Industrial living popped up like Buboes across the landscape.

Still, it was basically an Agrarian Paradigm, with most people in the country engaged in local Agriculture, right up until the Great Depression.  Reason for this is that it really was not until the  1920’s or so that the first ICE Tractors became available, and Ag was still very Human Labor intensive through the 1800s.  Even going into the Great Depression in the 1930s, most estimates I have read put 90% of the population here living and working locally in the Ag paradigm.

For those who did not Own Land, up until the Civil War you had explicit Slavery for the imported African Labor force, so I don’t think you can really call what they did as a “Job”.  During the Reconstruction period, you had Sharecroppers, and not sure this form of exploiting labor can be called a Job either.

Where what we think of now as Jobs being paid with Money emerged here was first in the Coal Mines and along the Railroad Tracks, work which was uniformly low paid and very dangerous also.  Workers who performed these jobs were recruited from places like China and Ireland, where conditions for their populations were so bad at the time that just the CHANCE to come over here and work in one of these jobs was a step up, though for many it proved a disappointment for sure as they died in dangerous working conditions, and often had wages so low surviving on what you could buy from the Company Store was pretty difficult

The upshot of this period as the Factories began to pop up as well was a workforce that became increasingly Organized, with Labor making it’s first Battles here against the Capitalist class in control of Credit Creation, money, and by this time virtually all the worthwhile Property across the country.

In fact this battle started in Europe where the whole Industrial paradigm began, and Jobs (or lack of them) and ridiculously low pay and bad working conditions developed alternative ideas to the Capital Exploitation model.  Specifically, Karl Marx and Friederich Engels developed the Communist model, which the Bolsheviks in Russia tried to implement, becoming increasingly bastardized over time.  In fact that model was probably corrupt right from the get go, as Trotsky and Lenin likely got most of their funding for that Revolution from Industrialists in Germany and England.

Over here, as the Great Depression took hold, similar Movements towards Communism and Socialism began to gain traction, the Wobblies were a growing force, and everything possible was done to keep that movement from gaining traction.  Labor Union was pitted against Labor Union, Union Bosses were paid off, the Pinkertons were brought in to disrupt Organization and physically threaten anyone organizing, and overall the Capitalist class was successful in destroying the Labor Movement in the FSoA as we moved into and past the Great Depression.

The Industrial Workers of the World (IWW or the Wobblies) is an international industrial union that was formed in 1905. The origin of the nickname “Wobblies” is uncertain.[3]

The IWW promotes the concept of “One Big Union“, contends that all workers should be united as a social class and that capitalism and wage labor should be abolished.[4] They are known for the Wobbly Shop model of workplace democracy, in which workers elect their managers[5] and other forms of grassroots democracy (self-management) are implemented. IWW membership does not require that one work in a represented workplace,[6] nor does it exclude membership in another labor union.[7]

In the 1910s and early ’20s, the IWW achieved many of their short-term goals, particularly in the American west, and cut across traditional guild and union lines to organize workers in a variety of trades and industries. At their peak in 1923, IWW membership has been estimated at about 40,000.[8] However, the extremely high rate of IWW membership turnover during this era (estimated at 133% per decade) makes it difficult to state membership totals with any certainty, as workers tended to join the IWW in large numbers for relatively short periods (e.g., during labor strikes and periods of generalized economic distress).[9]

Nonetheless, membership declined dramatically in the 1920s due to several factors. There were conflicts with other labor groups, particularly the American Federation of Labor (AFL) which regarded the IWW as too radical while the IWW regarded the AFL as too staid and conservative.[8] Membership also declined in the wake of government crackdowns on radical, anarchist and socialist groups during the First Red Scare after WWI. The most decisive factor in the decline in IWW membership and influence, however, was a 1924 schism due to internal conflict, from which the IWW never fully recovered.[8][10]

Compromises were made however, and the New Deal of Franklin Deleanor Roosevelt incorporated numerous salves to buy off the Working Class, primary among them the creation of the Social Security system.  Unions also still retained decent power in the post WWII period as the Automotive Industry ramped up in the FSoA, and for a short while the Working Class Heros of Industrialization did OK here, from say 1950 to maybe 1970 or so, though you did have to usually have “Connections” to get inside any of the powerful Trade Unions of the Era.

Over time of course the Unions and their ability to negotiate a better wage for their workers has been systematically diminished, and on a Media level the whole IDEA of Unions and Collective bargaining has been subject to non-stop Bernays style propagandizing against, to the point through the 90s-00s that even the Blue Collar workers such collectives work best for were convinced they were bad.  Go to any Kneejerk Conservatard Website like the one Mike “Mish” Shedlock runs on Global Economic Analysis, and you will find non-stop BLAME being placed on Unions as the Cause of all our problems.  See folks, if we just got rid of those nasty Teacher’s Unions and Auto Unions and all those “Big” Pensions they negotiated over the years, we would have PROSPERITY again!  LOL.

Prosperity for WHO?  Certainly not Prosperity for the Pensioners who have their pensions ripped out from under them, that is for sure.  Certainly not Prosperity for the next Generation of Workers either, who in order to keep our products “competitive” on the Global Market need to drop their Wages down to whatever it is the Chinese of Mexicans or Egyptians are getting these  days, like $2/day there.  the folks who PROSPER from reneging on Pensions are the Rentier Class, aka the Illuminati.  See, they are the “Secured Bondholders”.  gotta pay them off before you pay the pension of anyone who worked for the City of Detroit for the last 30 years.  As the economic system which Industrialists used to build out their system falls apart here, they hang out to dry everyone who ever worked in the system in ANY capacity, from an Industrial Factory Worker to a Coal Miner to the Police Force of Detroit, who for near 100 years protected the “Property” these folks claimed to own, thoroughly polluted and then abandoned.

Same Bizness occurring over in China now, just at a vastly Accelerated Pace as first the Hot Money drops in there to “Create Jobs” in Industry, profit is sucked out on the back of cheap labor, the resource landscape of the country is destroyed and then when no more Profit can be pulled from this mess, they “Unwind the Carry Trade”, Newzpeak for the Rentier Class packing their bags and Private Jets with whatever they can and GTFO of Dodge, leaving the rest of the Chinese Population to die in the stinking sewer they made of that land mass.

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Today, as we speak, this whole paradigm is coming to a close, for numerous reasons.

First off, there really is no NEW place to go to either exploit Resources or Exploit Labor to gain “Profit” for the individual or corporation that has not already been thoroughly sucked dry.  Though there is still some fossil fuel energy left in the ground to extract, the energy cost for pulling it up comes ever closer each day to the cost the consumer of this energy can afford to pay.  Without continuing expansion of Credit, there is no ‘money” flow to the end consumer, and while the Central Banks provide endless Quantitative Easing FREE CREDIT a ZIRP to their member TBTF Banks, said Banks do not pass this money on in the form of new loans to anybody further than one tier below their line.  Do you think a lot of Individuals line up to buy a Facepalm IPO?  Who are the “Investors” in Facepalm, and where do they get the money to invest in that piece of shit Social Media White Elephant?  Faceplam has NEVER turned a Profit since the day Mark Suckerbug and the Winkletwins dreamed it up.  Regardless, “investors” subscribed to the IPO to the tune of like $100B, least that is around where the Market Cap is here I think.  Where did they GET $100B to “invest” in Facepalm?  They BORROWED it from the Federal Reserve, rehypothecating worthless MBS as collateral to invest here.  This is the circle jerk of money creation, and folks on the inside get fabulously wealthy off of it, but everybody else gets screwed to beat the band here.  Constant investment in ultimately non-productive and worthless enterprise that simply burns energy faster all the time, until there is nothing left to burn, which we are not at yet but getting closer to all the time.  Ongoing here really since the very first Railroad Tracks were laid here in the FSoA in the early 1800s.

So, in the final analysis, this is where all the “JOBS” came from.  Money created as Debt to exploit the resources of the New World, accessing a fabulous wealth of stored energy, first from Coal, then following that from Oil.  Every last “Job” that has been created through the era all comes from the downhill flow of this energy as it is burned, and with less and less available to burn all the time, there are fewere and fewer Jobs to be had that depend on the burning of this energy.  Politicos calls for a “Return to Growth” are a chimera, there is no growth, really there has not been for 30 years here or so.  The “growth” you see is Numerical Smoke & Mirrors, pretty arbitrary numbers overall that get bigger all the time, while the population at large gets poorer all the time.  The FSoA population has been getting steadily poorer under this paradigm, but not until now has it really been evident, masked well by Financialism and control over the Global Reserve Currency of the Dollar.

Besides the fact there is no new place to GO to exploit resource and labor, the result of 200 years of this shit is that we are now Neck Deep in our own sewage, with far too many people on the planet who have opportunity for truly productive things to do with their lives and who are pretty much 100% Dependent on the system continuing onward for their own survival.  Willfully trying to exit the system while it continues to function is close to impossible in most places, really you have to go way out into the bush to even try something like this, and few people are prepared to do that these days.

Those of us who are engaged in building the SUN Project see all of these things quite clearly.  There are no easy answers, no simple ways to exit, and a “Crash on Demand” by a large percentage of the population walking away from Industrialization simultaneously is unlikely to occur as a willfull thing, though it may happen organically quite rapidly if the current systems fail rapidly in cascade fashion.

For those of us involved in SUN, we seek to redefine the ideas of Jobs, Work & Money.  Jobs as we have known them through the Industrial Era are already going the way of the Dinosaur, and as Bruce Springstein write in “My Hometown”, they ain’t ever coming back.

We don’t NEED no Stinkin’ JOBs, and we don’t NEED the Debt Money pitched out here by the Illuminati for the last 200 years of Industrialization either.  Like the “Assets” this money created, it is all going quite Worthless now.  What we NEED is to work together, to build our communities, to work for the common good of our Species and the Planet we live on.  We are rapidly running short on time here to make such changes in anything but the most Painful Way conceivable, and Heliopaths seek to avoid such a nasty endgame, if not for everyone, at least for those who see what is coming and wish to do the best they can to avoid it with us.

Perhaps you think this is all useless, it is too late already and the End is Written in Stone.  If so, I wish you well and I will see you in the Great Beyond when we all get there.  I personally am not concerned with whether the End is Written in Stone or not, because that does not materially affect the way I approach this End Game.  Maybe I will go down, maybe my friends will go down too.  However, if that is how it plays out, we will GO DOWN SWINGING.

IT AIN’T OVAH TILL THE FAT LADY SINGS!

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SEE YOU ON THE OTHER SIDE

RE

Europe: Canary in the Coal Mine

Off the keyboard of Michael Snyder

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Published on Economic Collapse on January 8, 2014

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If You Are Waiting For An “Economic Collapse”, Just Look At What Is Happening To Europe

European UnionIf you are anxiously awaiting the arrival of the “economic collapse”, just open up your eyes and look at what is happening in Europe.  The entire continent is a giant economic mess right now.  Unemployment and poverty levels are setting record highs, car sales are setting record lows, and there is an ocean of bad loans and red ink everywhere you look.  Over the past several years, most of the attention has been on the economic struggles of Greece, Spain and Portugal and without a doubt things continue to get even worse in those nations.  But in 2014 and 2015, Italy and France will start to take center stage.  France has the 5th largest economy on the planet, and Italy has the 9th largest economy on the planet, and at this point both of those economies are rapidly falling to pieces.  Expect both France and Italy to make major headlines throughout the rest of 2014.  I have always maintained that the next major wave of the economic collapse would begin in Europe, and that is exactly what is happening.  The following are just a few of the statistics that show that an “economic collapse” is happening in Europe right now…

-The unemployment rate in the eurozone as a whole is still sitting at an all-time record high of 12.1 percent.

-It Italy, the unemployment rate has soared to a brand new all-time record high of 12.7 percent.

-The youth unemployment rate in Italy has jumped up to 41.6 percent.

-The level of poverty in Italy is now the highest that has ever been recorded.

-Many analysts expect major economic trouble in Italy over the next couple of years.  The President of Italy is openly warning of “widespread social tension and unrest” in his nation in 2014.

-Citigroup is projecting that Italy’s debt to GDP ratio will surpass 140 percent by the year 2016.

-Citigroup is projecting that Greece’s debt to GDP ratio will surpass 200 percent by the year 2016.

-Citigroup is projecting that the unemployment rate in Greece will reach 32 percent in 2015.

-The unemployment rate in Spain is still sitting at an all-time record high of 26.7 percent.

-The youth unemployment rate in Spain is now up to 57.7 percent – even higher than in Greece.

-The percentage of bad loans in Spain has risen for eight straight months and recently hit a brand new all-time record high of 13 percent.

-The number of mortgage applications in Spain has fallen by 90 percent since the peak of the housing boom.

-The unemployment rate in France has risen for 9 quarters in a row and recently soared to a new 16 year high.

-For 2013, car sales in Europe were on pace to hit the lowest yearly level ever recorded.

-Deutsche Bank, probably the most important bank in Germany, is the most highly leveraged bank in Europe (60 to 1) and it has approximately 70 trillion dollars worth of exposure to derivatives.

Europe truly is experiencing an economic nightmare, and it is only going to get worse.

It would be hard to put into words the extreme desperation that unemployed workers throughout Europe are feeling right now.  When you can’t feed your family and you can’t find work no matter how hard you try, it can be absolutely soul crushing.

To get an idea of the level of desperation in Spain, check out the following anecdote from a recent NPR article

Having trouble wrapping your head around southern Europe’s staggering unemployment problem?

Look no further than a single Ikea furniture store on Spain’s Mediterranean coast.

The plans to open a new megastore next summer near Valencia. On Monday, Ikea’s started taking applications for 400 jobs at the new store.

The company wasn’t prepared for what came next.

Within 48 hours, more than 20,000 people had applied online for those 400 jobs. The volume crashed Ikea’s computer servers in Spain.

Of course that should kind of remind you of what I wrote about yesterday.  We are starting to see this kind of intense competition for low paying jobs in the United States as well.

As global economic conditions continue to deteriorate, things are going to get even tougher for those on the low end of the economic food chain.  Poverty rates are going to soar, even in areas where you might not expect it to happen.  In fact, one new report discovered that poverty has already been rising steadily in Germany, which is supposed to be the strongest economy in the entire eurozone…

A few days before the Christmas holidays, the Joint Welfare Association published a report on the regional development of poverty in Germany in 2013 titled “Between prosperity and poverty—a test to breaking point”. The report refutes the official propaganda that Germany has remained largely unaffected by the crisis and is a haven of prosperity in Europe.

According to the report, poverty in Germany has “reached a sad record high”. Entire cities and regions have been plunged into ever deeper economic and social crisis. “The social and regional centrifugal forces, as measured by the spread of incomes, have increased dramatically in Germany since 2006,” it says. Germany faces “a test to breaking point.”

Of course poverty continues to explode on this side of the Atlantic Ocean as well.  In the United States, the poverty rate has been at 15 percent or above for three years in a row.  That is the first time that this has happened since the 1960s.

And this is just the beginning.  The extreme recklessness of European banks such as Deutsche Bank and U.S. banks such as JPMorgan Chase, Citibank and Goldman Sachs is eventually going to cause a financial catastrophe far worse than what we experienced back in 2008.

When that crisis arrives, the flow of credit is going to freeze up dramatically and economic activity will grind to a standstill.  Unemployment, poverty and all of our current economic problems will become much, much worse.

So as bad as things are right now, the truth is that this is nothing compared to what is coming.

I hope that you are getting prepared for the coming storm while you still can.

What’s Ahead? Lower Oil Prices, Despite Higher Extraction Costs

Off the keyboard of Gail Tverberg

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Published on Our Finite World on November 15, 2013

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Nearly everyone believes that oil prices will trend higher and higher, allowing increasing amounts of oil to be extracted. This belief is based on the observation that the cost of extraction is trending higher and higher. If we are to continue to have oil, we will need to pay the ever-higher cost of extraction. Either that, or we will have to pay the high cost of some type of substitute, if one can be found. Perhaps such a substitute will be a bit less expensive than oil, but costs are still likely to be high, since substitutes to date are higher-priced than oil.

Even though this is conventional reasoning based on experience with many substances, it doesn’t work with oil. Part of the reasoning is right, though. It is indeed true that the cost of extracting oil is trending upward. We extracted the easy to extract oil, and thus “cheap” to extract oil, first and have been forced to move on to extracting oil that is much more expensive to extract. For example, extracting oil using fracking is expensive. So is extracting Brazil’s off-shore oil from under the salt layer.

There are also rising indirect costs of production. Middle Eastern oil exporting nations need high tax revenue in order to keep their populations pacified with programs that provide desalinated water, food, housing and other benefits. This can only be done though high taxes on oil exports. The need for these high taxes acts to increase the sales prices required by these countries–often over $100 barrel (Arab Petroleum Investment House 2013).

Even though the cost of extracting oil is increasing, the feedback loops that occur when oil prices actually do rise are such that oil prices tend to quickly fall back, if they actually do rise. We know this intuitively–in oil importing nations, deep recessions have been associated with big oil price spikes, such as occurred in the 1970s and in 2008. Economist James Hamilton has shown that 10 out of 11 US recessions since World War II were associated with oil price spikes (Hamilton 2011). Hamilton also showed that the effects of the oil price spike were sufficient to cause the recession of that began in late 2007 (Hamilton 2009).

In this post, I will explore the reasons for these adverse feedback loops. I have discussed many of these issues previously in an academic paper I wrote that was published in the journal Energy, called “Oil Supply Limits and the Continuing Financial Crisis” (available here or here).

If I am indeed right about the path of oil prices being down, rather than up, the long-term direction of the economy is quite different from what most are imagining. Oil companies will find new production increasingly unprofitable, and will distribute funds back to shareholders, rather than invest them in unprofitable operations. In fact, some oil companies are already reporting lower profits (Straus and Reed 2013).  Some oil companies will go bankrupt. As an example, the number two oil company in Brazil, OGX, recently filed for bankruptcy, because it could not profitably find and extract Brazil’s off-shore oil (Lorenzi and Blout 2013).

Oil companies will increasingly find that the huge amount of debt that they must amass in the hope of producing profits sometime in the future is not really sustainable. The Houston Chronicle reports that an E&Y survey of Oil and Gas Companies indicates that the percentage of companies that expect to decrease debt to capital ratios jumped to 48% in October 2013 from 31% a year ago (Eaton 2013). If companies with huge debt loads cut back production to the amount that their cash flow will sustain, oil extraction can be expected to fall–just as it can be expected to fall if oil and gas companies go bankrupt or give back investment funds to shareholders.

The downward path in oil production is likely to be steep, if oil prices do indeed drop. The economy depends on oil for many major functions, including most transportation, agriculture, and construction. Increasingly expensive to extract oil is a sign of diminishing returns. As we utilize more resources for extracting oil (oil, steel, water, human labor, capital, etc.), there will be fewer resources to invest in the rest of the economy, reducing its ability to grow. This lack of economic growth feeds back as low demand, bringing down the prices of commodities, including oil. It is because of this feedback loop that I believe that the path of oil prices is generally lower. This path is the opposite of what a naive reading of “supply and demand” curves from economics textbooks would suggest, and the opposite of what we need if the economy is to continue on its current path.

Adverse Feedback 1: Wages stagnate as oil prices rise, tending to slow economic growth.

Suppose we calculate average US wages over time, by dividing “Total Wages” by “Total Population,” (everyone, not just those working) and bring this amount to the current cost level using the CPI-Urban inflation adjustment. On this basis, US wages flattened as oil prices rose, both in the 1970s and in the 2000s. The average inflation-adjusted wage is 2% lower in 2012 ($22,040) than it was in 2004 ($22,475), even though labor productivity rose by an average of 1.7% per year during 2005-2012, according to the US Bureau of Labor Statistics. Between 1973 and 1982, average inflation-adjusted wages decreased from $17,294 to $16,265 (or 6%), even though productivity reportedly grew by an average of 1.1% per year during this period.

Figure 1. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP's 2013 Statistical Review of World Energy.

Figure 1. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP’s 2013 Statistical Review of World Energy.

To see one reason why wages might flatten, consider the situation of a manufacturer or other company shipping goods. The cost of goods, with shipping, would rise simply because of the cost of oil used in transport. Companies using oil more extensively in producing their products would need to raise prices even more, if their profits are to remain unchanged. If these companies simply pass the higher cost of oil on to consumers, they likely will sell fewer of their products, since some consumers will not be able to afford the products at the new higher price. To “fix” the problem of selling fewer goods, companies would likely lay off workers, to reflect the smaller quantity of goods sold–one reason for the drop in wages paid to workers shown on Figure 1. (Note that Figure 1 will reflect reduced wages, whether it results from fewer people working or lower wages of those working.)

Another approach businesses might use to deal with the problem of rising costs due to higher oil prices would be to reduce costs other than oil, to try to keep the total cost of the product from rising. Wages are a big piece of a business’s total costs, so finding a way to keep wages down would be helpful. One such approach would be a wage freeze, or a cut in wages. Another would be to outsource production to a lower cost country. A third way would be to use increased automation. Any of these approaches would reduce wages paid in the United States. The latter two approaches would tend to have the greatest impact on the lowest paid workers. Thus, we would expect increasing wage disparity, together with the flattening or falling wages, as companies try to hold the cost of goods and services down, despite rising oil prices.

The revenue received by businesses and governments ultimately comes from consumers. If the wages of lower-paid consumers flattens, these lower wages can be expected to reduce economic growth, because with lower wages, these workers will have less income to buy discretionary goods and services. The higher-paid workers may have more income, but this won’t necessarily feed back into the economy well–it may inflate stock market prices, but not feed back as spending on goods and services, necessary for growth.

There is even a feedback with respect to debt. The portion of the population with falling inflation-adjusted wages will find it harder to borrow, making it more difficult to buy big-ticket items such as cars and houses.

Adverse Feedback 2: Consumers cut back on discretionary spending because of the higher cost of food and oil, leading to more layoffs and recession.

Clearly, based on Figure 1, consumers cannot expect wage increases to match oil price increases. Even workers who work in the oil industry cannot expect wage increases equal to the increase in the price of oil, because part of the increase in cost comes from the need for more workers per barrel of oil. For example, it is more labor-intensive to extract oil from a large number of small wells, each of which require fracking, than it is to extract oil from a few larger wells, none of which require fracking.

One cost that tends to increase with the cost of oil is the cost of food (Figure 2). The cost of food and the cost of commuting are necessities for most workers. They will cut down on discretionary expenditures, if necessary, to make certain these costs are covered.

Figure 2. FAO Food Price Index versus Brent spot oil price, based on US Energy Information Agency.

Figure 2. FAO Food Price Index versus Brent spot oil price, based on US Energy Information Agency. *2013 is partial year.

If wages are inadequate, workers will cut back in such area as restaurant meals, vacation travel, and charitable contributions, leading to even more problems with a lack of jobs in these and other discretionary sectors.

It might be noted that even countries that export oil can encounter difficulties as oil prices rise. These countries need a way to get the extra revenue from selling high-priced oil over to the many residents who must buy higher-priced food, but do not benefit from the wages paid to oil workers. It is not a coincidence that the Arab Spring uprisings took place in several oil exporting nations in early 2011, when food prices peaked on Figure 2.

Adverse Feedback 3: Higher oil and food prices together with stagnating wages lead to cutbacks in spending for new cars and new homes, falling prices for new homes, defaults on home and car loans, and banks in need of bailouts.

Purchasing more-expensive homes and new cars are types of discretionary spending. If consumers find their incomes are squeezed by high oil prices, they will cut back on  expenditures such as these as well, leading to layoffs in the home construction and auto manufacturing industries.  Such cutbacks can also result in bankruptcies of auto and home builders.

If people buy fewer move-up homes, the price of resale homes will tend to fall. This in turn makes defaults on mortgages more likely. Layoffs will also tend to make defaults on mortgages more likely, as well as missed payments on auto loans.

Figure 3. S&P Case-Shiller 20-City Home Price Index, using seasonally adjusted three month average data. April 2006 is the peak month.

Figure 3. S&P Case-Shiller 20-City Home Price Index, using seasonally adjusted three month average data. April 2006 is the peak month. Data is latest shown on website as of November 2013.

Most people do not associate the drop in US home prices with the rise in oil prices, but the latest rise in oil prices began as early as 2003 and 2004 (see Figure 2), and the drop in home prices began in 2006. Some of the earliest drops in home prices occurred in the most distant suburbs, where oil prices played the biggest role.

Banks increasingly found themselves in financial trouble, as defaults on mortgages and other loans grew. These defaults are often blamed on bad underwriting. While bad underwriting may have played a role (and may also have helped prevent the US from falling into recession even earlier, when oil prices began rising), the falling prices of homes created part of the default problem, as did job layoffs associated with higher oil prices.

All of these feedbacks led to a need for more government involvement–lower interest rates to try to hold the economy together, get spending back up, and raise home prices.

Adverse Feedback 4: Cutbacks in consumer debt combined with flat wages appear to have led to the decline in spending that precipitated the July 2008 drop in oil prices. Consumer debt still remains depressed.

Oil prices started falling in July 2008, and did not hit bottom until the winter of 2008 (Figure 4).

Figure 4. West Texas Intermediate Monthly Average Spot Price, based on us Energy Information Administration data.

Figure 4. West Texas Intermediate Monthly Average Spot Price, based on us Energy Information Administration data.

What could have precipitated such a fall? Many people consider the bankruptcy of Lehman Brothers on September 15, 2008 to be pivotal in the financial crisis of 2008, but the drop in oil prices started months earlier. What could have precipitated such a steep drop in oil prices?

It seems to me that the real underlying cause was a mismatch between what goods cost (such as high food and oil prices) and the amount consumers had available for spending. There are two basic sources of consumer spending–wages and increases in debt. If consumer debt suddenly starts decreasing, rather than increasing, consumer spending can be expected to fall (especially if wages are not rising).

In fact, consumer debt did start falling at precisely the time that oil prices crashed. Mortgage debt started falling in the third quarter of 2008, reflecting a combination of falling home prices and mortgage defaults. As noted previously, both of these were indirectly related to high oil prices.

Figure 5. Us Home Mortgage Debt, based on Federal Reserve Z.1 data.

Figure 5. US Home Mortgage Debt, based on Federal Reserve Z.1 data.

Other consumer debt fell at the same time. Revolving credit (primarily credit card debt) hit a peak in July 2008, and began to fall (Figure 6).

Figure 6. US Revolving Credit outstanding (primarily credit card debt), based on Federal Reserve G.19 Report.

Figure 6. US Revolving Credit outstanding (primarily credit card debt), based on Federal Reserve G.19 Report.

Adverse Feedback 5: Even after high oil prices have been in place for several years, many governments find themselves trapped by the need for deficit spending and ultra-low interest rates to cover up problems with stagnant wages and inadequate demand for homes and cars at “normal” interest rates. 

With the slack in consumer debt, US government debt soared (Figure 7). Governments in Europe and Japan found themselves in a similar bind.

Figure 7. US government publicly held debt, based on Federal Reserve Z.1 data.

Figure 7. US government publicly held debt, based on Federal Reserve Z.1 data.

Even as US Federal Government debt soared, it was not enough to fully make up for the cutback in debt elsewhere in the economy (Figure 8).

Figure 8. US Debt based on Federal Reserve Z.1 data.

Figure 8. US Debt based on Federal Reserve Z.1 data.

How do governments get themselves caught in such a bind? Businesses can to a significant extent overcome their problems with high oil prices by laying off workers and finding lower cost methods of production. Individuals, however, find that the wage problems persist as long as oil prices remain high and businesses have the option of replacing their services with lower cost workers elsewhere. Globalization definitely makes this problem worse.

When workers have job problems, governments find themselves in the unfortunate position of trying to fix the situation by providing more unemployment benefits, food stamps, and disability benefits. Governments also find themselves with lagging tax revenue, because businesses increasingly are located in offshore tax havens, and workers’ incomes are lagging.

Adverse Feedback 6: Rising prices of oil have contributed to long term inflation. If oil prices start falling, this tends to create the opposite problem–deflation. Once oil price deflation starts, it may lead to a self-reinforcing debt default cycle.

Not all inflation is related to higher energy prices, but some of it is. This is one reason the US government sometimes gives an inflation estimate “excluding volatile food and energy prices.” Inflation over the years appears to be one way that a small amount of diminishing returns has fed into the economy.

The concern a person has is that deflation will tend to lead to debt defaults. Clearly lower oil and gas prices mean that oil and gas businesses will become less profitable, and loans in this area will tend to default. But loans related to other types of commodities may tend to default as well. There will also tend to be layoffs in these industries, and in surrounding communities.

Also, with deflation, the low interest rate policies of governments no longer have the stimulating impact that they would have without deflation. So governments will have to concoct negative interest rate plans, and see if they can make these work, to take the place of current plans.

One question is how effective today’s Quantitative Easing and ultra-low interest rate programs have been. We know that they have tended to blow bubbles in asset prices, such as stock market prices. But are ultra-low interest rates part of what allowed oil prices to re-inflate after the July 2008 drop? Certainly, they have helped hold up auto and home sales, and have supported oil drilling operations that rely heavily on debt.

To some extent, the current system appears to be held together with duct tape. It looks like it could fall apart on its own, or it could fall apart as governments try to reduce their deficits by higher taxes and lower spending (See Figure 7). Adding deflation to the combination would seem to be another way of making the current approach for covering up our problems even more vulnerable to collapse.

The frightening thing is that there is already some evidence that oil prices (and commodity prices in general) are starting to trend downward. The chart I showed in Figure 4 showed West Texas Intermediate (WTI) oil prices–a price that is often quoted in the US. On Figure 9, I show WTI oil prices alongside Brent, another oil benchmark. Brent reflects world oil prices to a greater extent than WTI price does. It seems to be showing a recent downward trend in world oil prices. To the extent that this downward trend in prices feeds back into inflation rates and makes Quantitative Easing work less well, this downward trend becomes a potential problem. Its effect would tend to offset the stimulating effect on economies that lower oil prices would normally have.

Figure 9. Brent oil price compared to West Texas Intermediate oil price, based on EIA monthly average spot prices.

Figure 9. Brent oil price compared to West Texas Intermediate oil price, based on EIA monthly average spot prices.

Conclusion

Oil and other fossil fuels are unusual materials. Historically, their value to society has been far higher than their cost of extraction. It is the difference between the value to society and their cost of extraction that has helped economies around the world grow. Now, as the cost of oil extraction rises, we see this difference shrinking. As this difference shrinks, the ability of economies to grow is eroding, especially for those countries that depend most heavily on oil–Japan, Europe, and the United States. It should not be surprising if the growth of these countries slows as oil prices rise. The trend toward globalization can only make this trend worse, because it gives businesses an opportunity to lower wage costs by outsourcing part of their production to lower-cost countries (that use less oil!). When costs are reduced in this manner, businesses are also able get the “benefit” of more lax pollution laws overseas.

We saw in Figure 9 that global oil prices seem already to be trending downward, as growth in countries such as China, Brazil, and India is faltering. At the same time, oil from easy to extract locations is depleting, and oil companies have no choice but move on locations where more resources of all kinds are required, leading to diminishing returns and ever-higher cost of extraction. The way I view our predicament is shown in Figure 10.

Figure 10. Our Oil Price Predicament. Over time, the amount affordable by consumers at a given price falls, while the price required by producers to earn a profit rises.

Figure 10. Our Oil Price Predicament. Over time, if we want to maintain constant oil consumption, the price consumers can afford tends to fall, while the price required by oil producers in order to earn a profit tends to rise.

Over time, in order to maintain constant oil production, the price consumers can afford tends to fall, because governments need to “take back” the huge deficit spending they are using now to prop up the system. At the same time, prices required by producers tend to rise, as the mix of oil production moves to more difficult locations.

While in theory oil prices could spike again because of rising demand of the less developed countries, it is hard to see how this price spike could be sustained. We would likely run into the same problems we had before, with more layoffs and plus credit contraction leading to a cutback in demand in the US, the European Union, and Japan. These users represent a big enough share of the total that their drop in demand would tend to bring world prices back down.

The problem this time, though, is that governments seem to be getting close to being “out of ammunition,” in trying to fight what is really diminishing returns of one of the major drivers of our economy. I don’t know exactly how things might play out, but experience with prior civilizations suggests that “collapse” might be a reasonable description of the outcome.

Unemployment Reality in Amerika

Off the keyboard of Michael Snyder

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Published on Economic Collapse on November 10, 2013

10 Facts About The Growing Unemployment Crisis In America That Will Blow Your Mind

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UnemploymentDid you know that there are more than 102 million working age Americans that do not have a job?  Yes, I know that number sounds absolutely crazy, but it is true.  Right now, there are more than 11 million Americans that are considered to be “officially unemployed”, and there are more than 91 million Americans that are not employed and that are considered to be “not in the labor force”.  When you add those two numbers together, the total is more than 102 million.  Overall, the number of working age Americans that do not have a job has increased by about 27 million since the year 2000.  But aren’t things getting better?  After all, the mainstream media is full of headlines about how “good” the jobs numbers for October were.  Sadly, the truth is that the mainstream media is not being straight with the American people.  As you will see below, we are in the midst of a long-term unemployment crisis in America, and things got even worse last month.

In this day and age, it is absolutely imperative that people start thinking for themselves.  Just because the media tells you that something is true does not mean that it actually is.  If unemployment was actually going down, the percentage of the working age population that has a job should actually be going up.  As you are about to see, that is simply not the case.  The following are 10 facts about the growing unemployment crisis in America that will blow your mind…

#1 The percentage of working age Americans with a job fell to 58.3 percent in October.  The lowest that number has been at any point since the year 2000 is 58.2 percent.  In other words, there has been absolutely no “jobs recovery”.  During the last recession, the civilian employment-population ratio dropped from about 63 percent to below 59 percent and it has stayed there for 50 months in a row.  Will the percentage of working age Americans with a job soon drop below the 58 percent mark?…

Employment-Population Ratio November 2013

#2 The U.S. economy lost 623,000 full-time jobs last month.  But we are being told to believe that the economy is actually getting “better”.

#3 The number of American women with a job fell by 357,000 during the month of October.

#4 The average duration of unemployment in October 2013 was nearly three times as long as it was in October 2000.

#5 The number of Americans “not in the labor force” increased by an astounding 932,000 during October.  In other words, the Obama administration would have us believe that nearly a million people “disappeared” from the U.S. labor force in a single month.

#6 The number of Americans “not in the labor force” has grown by more than 11 million since Barack Obama first entered the White House.

#7 In October, the U.S. labor force participation rate fell from 63.2 percent to 62.8 percent.  It is now the lowest that it has been since 1978.  Below is a chart which shows how the labor force participation rate has been steadily declining since the year 2000.  How can the economy be “healthy” if the percentage of Americans that are participating in the labor force is continually declining?…

Labor Force Participation Rate

#8 If the labor force participation rate was still at the same level it was at when Barack Obama was elected in 2008, the official unemployment rate would be about 11 percent right now.

#9 Even if you are working, that does not mean that you are able to take care of yourself and your family without any help.  In fact, approximately one out of every four part-time workers in America is living below the poverty line.

#10 In January 2000, there were 75 million working age Americans that did not have a job.  Today, there are 102 million working age Americans that do not have a job.

So what are our politicians doing to fix this?

Shouldn’t they be working night and day to solve this crisis?

After all, Barack Obama once made the following promise to the American people…

“But I want you all to know, I will not rest until anybody who’s looking for a job can find one — and I’m not talking about just any job, but good jobs that give every American decent wages and decent benefits and a fair shot at the American Dream.”

Unfortunately, things have not improved since Obama made that promise, but he has found the time to play 150 rounds of golf since he has been president.

Meanwhile, because there aren’t enough jobs, the number of Americans living in poverty continues to grow.

As I wrote about the other day, according to new numbers that were just released an all-time high 49.7 million Americans are living in poverty.

And right now 1.2 million public school students in the United States are homeless.  For many more statistics like this, please see my previous article entitled “29 Incredible Facts Which Prove That Poverty In America Is Absolutely Exploding“.

The only thing that most Americans have to offer in the marketplace is their labor.  If they can’t find a job, they don’t have any other way to take care of themselves and their families.

The future of the middle class in America depends upon the creation of good jobs.  It really doesn’t matter how far the quantitative easing that the Federal Reserve has been doing pumps up the current stock market bubble.  The American people were told that “economic stimulus” was the reason for doing all of this reckless money printing, but the percentage of working age Americans with a job is now actually lower than it was four years ago.  Quantitative easing has been a complete and total failure in the job creation department, and it is doing a tremendous amount of long-term damage to our financial system.

The really frightening thing is that the Federal Reserve and the federal government have supposedly been doing all they can to try to “create jobs” and they have utterly failed.  In fact, this is the first time in the post-World War II era that we have not seen an employment recovery following a recession.

And now the next wave of the economic collapse is rapidly approaching.  What that hits us, millions more Americans will lose their jobs.

So the truth is that this is just the beginning of the unemployment crisis in America.

Yes, things are bad now, but soon they will get much worse.

Rat Kidneys, Science and the Promethean

Off the keyboard of Lucid Dreams

Published on Epiphany Now on May 5, 2013

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I recently finished a semester at our local community college where I took prerequisites for their nursing program. I was 33 taking 13 hours of classes in this bastion of hopium, wishful thinking, and just plan reality distorting dysplagia that is American higher education…or whatever the hell it’s called these days. My classes were Anatomy and Physiology 2, Medical Terminology, Probability and Statistics, and Compter Science 101, and each class had it’s own brand of incompetence, egomegaly superhero professors, and creative academic bullshit as required reading. I’ll be taking you on a quick tour of what economically accessible higher education looks like in America in 2013 in the following expose.
I’ll start with CPT 101 (computer science) since it represented the absolute pinnacle of what a pointless waste of brain cells college has become. The first class our instructor told us that she was only going to be our instructor for a couple of classes. Apparently she was going to be teaching at the community college in the next town and couldn’t be bothered with us. The first three classes involved a pre-digital literacy test followed by me spending time online at the doomsteaddiner due to the fact that there was nothing for me to pay attention to. When our next instructor arrived it got interesting. She had the worse case of ADD I’ve ever seen, and we got to be subjected to it on the overhead whenever she could be bothered with actually showing up to class. 10 minutes late was early for this magnificent specimen of a 21st century college professor. A month goes by and there hasn’t been so much as one powerpoint presentation about what the internet is, or what a computer is, or what Microsoft is…nothing. Just more doomsteaddiner surfing.
One day, the entire class and I were still sitting on the floor in the hall, 15 minutes after class had started, with no instructor. Usually this wasn’t a problem because we’d all just go in the room and get online to do what we no doubt would all probably be doing anyways if we were at home…only not getting college credit for it, except this day the class room door was locked. At any rate, I decided, all at once, that I didn’t go to war and drop bombs on Afghanistan so that I could sit on the floor in a hallway waiting on some incompetent twit to get her drunk ass out of bed to come spread her ADD around in an academic setting. I got up, walked to the next classroom, opened the door, and grabbed a random professor by the neck and said “hey bub, how bout opening our classroom door so that we can get up off the damn hallway floor?” That set a chain of events in motion that I was sure would get the ball rolling in our classroom. The head of the department ended up in our classroom that day. Our instructor rolled in 20 minutes late and then disappeared with the head of the department. The next class…there our Miss Incompetent was, on time and in class ready to spread her ADD around on the overhead in the name of computer science. I was thrilled that the head of the department apparently found it reasonable to put her back into position as the professor seeing as how she had taught nothing and been on time once all semester.
She was on time for the next two classes before she got back to her usual ways. One day, 18 minutes after class had started, still instructorless, I decided to check my school email. That’s when I noticed that she had just sent us an email stating that she was still in court and class had been canceled for the day. WTF I thought to myself. A couple of weeks later and she decides to assign us a project for Microsoft Access after we had already taken the Access chapter exam (having not been taught anything about it in class mind you). I got pissed off about the fact, as did others, and we began making a general consensus ruckus about what an outrage it all was. This resulted in the head of the department getting involved again.
This time she decided to shit can Miss Incompetent. We had three classes left of the semester at this point. Our replacement professor, and apparently second in command of the department, took over at this point. The first class was a powerpoint presentation on how awesome her 21 year old son was. He was a black homosexual who had moved from the Upstate of SC to Hollywood where he was pursuing a career as an actor. We got to see his facebook page and a bunch of head shots of him. Apparently he is a great and sweet man who bagged a roll as the local retard who throws rocks at Van Diesel who’s babysitting the neighbors kids or some stupid shit. He got about a minute on screen and shouted some retard slogan. Captain second in command of the computer department assured us that her son was destined for great things on the silver screen and then dismissed us from class. This was the best the school could cough up for the last couple of classes.
Next I’ll cover the only online class I took, Medical Terminology. This was the only class that I took that wasn’t a requirement. Of course, I was taking it because I was told by my guidance counselor that it was a mandatory prereq. As an aside, my overly competent guidance counselor had a degree in business administration. Apparently the days of guidance counselors having some psychology back ground are over. Let there be no mistake about it, this is a business and nothing more. My Medical Terminology proctor was a successful black lady in her late 30’s. She was a doctor, of chiropractics, and had an ego that was full of dead air, but full of itself nonetheless. I found myself in her office, for a scheduled meet and greet, to help me figure out the schools online class software. There were glitches that I couldn’t figure out. She hemmed and hawed and ultimately produced no help for me because she simply did not know the answer to my questions. She didn’t have time to deal with an “online” student. She also had no idea that her head was full of hot air that had just been blown up her ass by some other academic credential dispensing goon.
At one point I had a project due that involved reading a professional medical journal entry of my choosing, writing a 250 word synopsis of it, and defining ten medical terms. The instructions on how to submit this intolerably difficult academic exercise set a new precedence in vaguery. We were supposed to submit a “copy of the professional journal entry used,” and it couldn’t be the same article that any of the other students used in the class. How we were to know what articles the other students were using was never disclosed. At any rate, I sent her a copy of the url to the article as well as documented it in the appropriate MLA format in the bibliography and called it good. A couple of weeks later I noticed that I had been given a zero on the project because I did not submit a copy of the article, only a link as well as MLA citation (which tells you everything you could possibly want to know about the god damned article’s location and point of origin). I emailed her a kind WTF, and how do I submit a copy of the article so that I can get credit for the work that I did? She emailed me back with a one liner that said “go to the schools tech department to get help” if I couldn’t figure it out. She didn’t have time to deal with it, and at any rate she didn’t give two shits about my grade.
This was the only class where an “A” was a 94, and so it was the only class that was keeping my GPA below a 4.0. The one class that wasn’t mandatory for me to take. The other three classes an “A” was a 90 or above. The other gripe I had with the class is that we were required to pay 50 bucks for online software that we never used. The good and learn-ed doctor explained to me that the company responsible for the online material stated that we would be required to enter an access code for the class at some point. Doctor Learn-ed couldn’t tell me when that day would be, but she assured me that one day I would log onto the site and be required to insert that 50 dollar line of random numbers. I never had to insert that magic number.
Anatomy and Physiology 2 was ruled over by another Doctor who believed that the schools standard for Anatomy should be the same as Harvards, or any other Ivy league school for that matter. He liked pointing out how our required text book was wrong on every occasion where it was wrong. I learned quickly that studying the required text book was a waste of my time. After the first test I threw my 300 dollar text book aside and never opened it again (of course I’m not a sucker, so I bought it for 120 off ebay rather than at the schools usury store). Doctor Anatomy was at least competent and very knowledgeable, albeit under the delusion that we were here to learn. His class was the most difficult college class I’ve had in my life. I had to study about 20 hours to make an “A” on any of his exams and even then it wasn’t guaranteed that I would make an “A”. His anatomy exams were over 100 questions of him pointing to various foramens, notches, orifices, and meatuses while we recalled the overly descriptive Latin and Greek words. I made five “A’s” two “B’s” and one “F” and made an “A” on the final. My final letter grade was a “B.” The only “B” I made for the semester. I thought it was bullshit that one bad test, weighted the same as all the rest, brought my grade down to a “B.”
After class one day I got into a conversation with Dr. Ivy League about the foundations of science. Back in the 70’s and 80’s he was involved in doing research on kidney function for a large study that was being done at a large university. His particular study was about a specific symporter in the loop of Henle, which is a feature of the kidney that allows us to make concentrated urine. It’s impossible to see the loop of Henle under a slide because it’s too long. You can only see sections of it. However, there is a specific rat who’s Loop of Henle can be seen microscopically, and this rat is responsible for the majority of what we know about the Loop of Henle (as well as other kidney physiology). Dr. Ivy League was actually studying human kidney tissue in the lab, and he discovered a reaction that was different from the rat’s in the human kidney tissue. It was repeatable, and he could prove that the function was different. The dude responsible for the research at the university told Dr. Ivy league, when presented with this new information that had come to light, that it mattered not what the microscope was repeatedly saying about human kidney physiology. What mattered was what the official line said.
Now, Dr. Ivy League could prove that what the official line was saying was now wrong. He was told that he would remove this from his report and replace it with the rat physiology. He refused. This put an end to his research in histology and therefore an end to his membership in academia. No research, no books, no tenure for you. 20 year’s later, after billing pharmaceutical companies 500 dollars an hour to look at shit under a microscope as an independent contractor, and he was teaching at a local community college to pay the bills. Academia chewed him up and spit him out because he was concerned about what the microscope had to say about reality. He was concerned about the stated goals of science that feature illuminating mankind about reality. Science on the other hand, is not really concerned with reality, it’s concerned with the same thing the rest of BAU is concerned with…money. So the official line is that rat kidneys are mamallian, just like ours, and so they are close enough. And since they are close enough we can assume that they are indeed the same, and so base our allopathic treatment of human kidneys on the physiology of rats. Pharmaceuticals anyone?
Finally there was Probability and Statistics. I was actually impressed with this classes professor. She was an astute, competent, and beautiful teacher of math. She made the concepts accessible and easy to manage. The class featured a Promethean, which is a huge screen on the wall that she could write on. I didn’t have to take notes because her notes were saved and made available to us online. This allowed me to pay complete attention to her as she taught. I found it interesting to learn how the man manipulates numbers to make reality say whatever he wants it to. That is essentially what “Probability and Statistics” is about. I had questions about the theoretical aspects of the class because they seemed to be a bit presumptuous at times. I smelled bull shit with the official theories that we were to take for granted were true. However, I’m not mathematically inclined, and being 33 I no longer give a shit. I understand that it’s not about learning, or higher education, it’s about jumping through hoops to arrive as a Registered Nurse so that I can make money.
The Promethean
Now I have Microbiology left to take during the summer session. After Microbiology I’ll have met all of the requirements and will be applying to nursing school this fall. I fully expect nursing school to be about the same bullshit that I just spent the last semester sifting through. Just a bunch of shit that I’m to commit to memory so that I can promptly forget it once I’m in the clinical setting. After all, how much shit do I need to know to do what a doctor tells me to do? I’ve already been a medic for eight years. I’ve been in tough medical situations with lives depending on my actions and no doctor to tell me what to do. You can’t teach competence. All that I’m doing in college is plugging a hole that’s in place to help with the business of college. I’m required to learn about how science doesn’t give a shit about reality, and how to sit in a computer class surfing the net, and how to manipulate reality with numbers; and all of this is somehow going to make me a better murse. I’m pretty sure I can do what a doctor tells me to do now…without all of the required bullshit and time wasted. Actually, I’m pretty sure that’s what I did in high school, when the doctor cradled my balls in his hand and asked me to turn my head and cough.

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