Posted on 06/09/2009 7:52:11 AM PDT by FromLori
Edited on 06/09/2009 7:59:24 AM PDT by Admin Moderator. [history]
Today’s essay is part two of our three part series detailing the ongoing collapse of the US economy with a focus on why this coming fall will prove the “worst is over” crowd wrong yet again.
On Friday we detailed three major developments. They were:
The US’s economic shift from manufacturing to services The massive drop in US incomes The beginning of the debt bubble If you missed that essay, you can read it here. Today, we’re addressing how the debt bubble encapsulated the US government as well as why Obama’s Stimulus Plan won’t fix anything.
To revisit the above three points, the US began outsourcing jobs in earnest soon after we re-opened trade with China in 1971. As outsourcing spread to higher and higher skilled jobs, this meant fewer jobs in the US market. This resulted in US consumers having to use credit to maintain their standard of living. It also meant more than one parent working to make ends meet.
On a national level, the US government began living beyond its means as well. Adjusted for inflation, gross tax receipts have only risen 40% in the last 39 years. However, over the same time period, total government spending increased 2,600%!!!
To fund this insanity, the US issued debt in the form of Treasuries. Foreign governments (most notably China) which were generally getting richer selling us stuff loaded up. The whole scheme is similar to buying a toy from the store, then having the store lend you money to buy another toy… ad infinitum: hardly a sensible long-term plan for financial solvency.
Now, everyone knows we run deficits. But not everyone knows that the deficits we publish are unbelievably understated. Corporations, in order to qualify for generally accepted accounting principles (GAAP) have to count their pension and healthcare expenses for retirees.
Uncle Sam doesn’t.
John Williams of www.shadowstats.com notes that official US deficit statistics do NOT include net present value of unfunded social security OR Medicare expenses. A lot of folks have made a big deal about the US running a $1 trillion deficit this year. Well, if you included the net value of those unfunded Social Security and Medicare expenses we cleared a $1 trillion deficit in 2007, a $5 TRILLION deficit in 2008 and are on course to clear a $9 TRILLION deficit this year.
To give you an idea of how big a problem these deficits are, consider that the US government could tax its citizens 100% of their earnings and NOT have a balanced budget.
In light of these issues, the Government’s $787 billion stimulus package doesn’t exactly breed confidence in an economic turnaround. Incomes have lagged inflation in this country for 30+ years. Creating a bunch of temporary positions related to construction and the like is NOT going to alter this in any significant way.
Moreover, most of the job growth in the last 10 years has come from Bubbles: two out of five jobs created between 2002 and 2007 came from the housing industry. The irony here, of course, is that the Stimulus Plan is merely following this trend, creating jobs from our latest (relatively unreported) Bubble: the Bubble in government spending and employment.
Bottom line: the US needs to create sustained job growth involving skilled professionals with high wage earning potential, NOT more guys laying concrete. We need fundamental structural changes to the US economy, NOT temporary positions resulting from one-time government projects.
And with a $9 trillion deficit in the works, $787 billion doesn’t really mean much in terms of increased tax receipts or job growth. Also, and this is bit of a personal aside, it’s hard to believe that throwing $787 billion towards creating jobs really shifts our economy away from financial services when we’ve thrown $2 trillion+ towards Wall Street and the banks (via direct loans and lending windows).
Tomorrow, I’ll address the likely outcome of today’s economic and financial woes. Until then…
Good Investing!
my thoughts
Now instead of the city dwellers being paid to work in factories and produce goods, they are simply handed money to produce illegitimate children, which grow up to fill the prisons.
America's cities are now virtually devoid of factories and overflowing with welfare scum. This cannot be fixed in a mere ten years.
Nobody is even identifying the problem, let alone addressing it. Nobody dares mention it. But there it is.
Thanks for the ping. Every day it seems more and more folks are warning about the free ride coming to an end. Despite all the warnings, Govt. wants to take over healthcare, to hasten our downfall. It gets worse every freakin day.
Self Reliant/Survivalist ping list
More good news. Every day it just rolls in, along with the shockingly bad decisions made by our President. It’s a train wreck that never ends.
“What are we supposed to do?”
Hang on and stockpile is the only thing I know to do. It may be paranoid, it may sound wacky, but at least I feel like I’m DOING something.
“Yahoo Finance reported (via AP) that during the month of May, the U.S. only lost 345,000 jobs”
Actually, the whole report was questionable. According to the actual Labor Report (a Freeper sent me the link, I’ll try to find it), the 345,000 was “non-farm” jobs, but WHOLE LOSS was 787,000.
You mean to tell me the country lost 400,000 plus FARM jobs?
Something isn’t right and the Propaganda Machine is doing it’s job of yelling ‘right’ information to make the Zero look good.
Just start a collection of names of people who want to be pinged whenever you find a thread that deals with this topic and ping them when you see one, or when you post the next in this series.
Which is why I pity anyone living in a city when TSHTF.
That factored in to out decision to purchase a house in a small town in the country years ago.
Probably. But they may have more trouble than they expect.
ping
I have a sneaking suspicion that in the USA, the "TSHTF" day is coming before this current mess is over.
Record ammunition and firearm sales reveal that others feel the same.
You’re correct about the non-farm jobs. I had forgotten about that. Oh it’s questionable all right! It’s the classic problem of trying to make a big lie believable until it simply isn’t possible anymore.
I would use fish traps for survival. More fish for less effort. You can sell your excess to the imprudent and improvident.
Ok thanks!
We also need real jobs for low skill workers. What else but restless anger if all the high school graduates and drop outs and immigrants with less education have NO work?
Then you have an employed caste and an unemployed caste. Bad idea.
...and if you begin a ping list, kindly add me to it!
ty!
I was talking to a doctor recently who made some comment about the way things were going these days and he said something about needing to exercise our Second Amendment rights.
I about fell over.
But it’s good to know that there are doctors out there like that. I’ll bet he’s no fan of socialized medicine either.
No worries I will have the winning lotto numbers by then .....
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.