THIS IS NOT THE 1930’S

This is not the 1930’s.  It’s not even the early 80’s.  Heck, it’s not even the 70’s.  All of these economic downturns were characterized by one glaring similarity – the jobs came back.  As The Economist recently noted the 30’s actually had a relatively robust job’s recovery and similar trends were apparent in the 70’s and 80’s:

“FEARS that the recovery of America’s economy after the financial crisis would fail to spur an increase in employment are being realised. In July, 52,000 fewer people were employed on non-farm payrolls than in July 2009, the month in which it is estimated the American economy climbed out of recession. Comparing the latest recession with previous ones is unflattering. The American economy has seen downturns this severe and recoveries this jobless, but never one on top of the other.”

The largest single barrier to sustained recovery remains the labor market.   Unfortunately, aggregate demand remains subdued as the private sector remains mired in a debt de-leveraging cycle.  The problem here is like some sort of sick death spiral – the problem of debt has reduced private sector spending and investment as households and corporations continue to pay down debt.  This has resulted in below trend revenue growth at corporations.  Below trend revenue growth results in poor visibility and a hesitancy to hire – margin expansion via cost cutting is only sustainable up to a certain level and we’re already seeing corporate margins reach high historical levels.

So, the problem with the US economy is quite simple really – the labor market is unlikely to recover until the problem of debt is alleviated.  Based on my research I think it’s safe to say that the de-leveraging cycle is likely to last at least into 2012 and that means tepid job’s growth is likely to persist.  And that ultimately means tepid economic growth.   David Rosenberg is certainly right about one thing – this recession never ended.  Unfortunately, most people (specifically, those in government) fail to understand that this is not your typical recession – this is a balance sheet recession and debt remains the largest impediment to sustained economic recovery.

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Foppe

    http://www.independent.co.uk/arts-entertainment/books/reviews/the-enigma-of-capital-and-the-crises-of-capitalism-by-david-harvey-1958010.html
    After a time many of these past investments no longer yield a high return and sometimes no return at all. This is what precipitates the crisis. It may take the form of a profits squeeze, caused by militant labour wresting gains from capital, or by factors depressing the rate of profit, or by too little demand. Harvey argues that the present crisis is particularly hard to resolve because it comes after a long period in which real incomes in the US have stagnated, while the wealth of the property-owning elite has soared.
    David Harvey, The Enigma of Capital:
    But for all of the conspicuousness of its consumption habits, there is still a physical limit to the number of yachts, MacMansions or/pairs of shoes that the billionaire class can consume. Capitalist personal consumption, it turns out, is a very weak source of effective demand. The more that the centralisation of capital concentrates wealth in the hands of a very small group in the population (such as the 300 or so families that the UN development report of 1996 showed controlled 40 per cent of the world’s wealth) the less effective is their consumption in bolstering demand. … What this story line misses is that capitalists, as we earlier saw, have a choice as to what they reinvest in: they can reinvest in the expansion of production or they can use their wealth to buy up assets, such as stocks and shares, property, art objects or shares in some speculative enterprise such as a private equity company, a hedge fund or some other financial instrument from which they can realise capital gains. In this case their reinvestments pIay no role in bolstering effective demand.
    If we conclude that it is the further expansion of production that creates the demand for yesterday’s surplus product and that credit is needed to bridge the temporal gap, then it also follows that credit-fuelled capital accumulation at a compound rate is also a condition of capitalism’s survival. Only then can the expansion of today mop up yesterday’s surplus.
    Capitalism, in effect, must generate and internalise its own effective demand if it is to survive under conditions where external possibilities are exhausted. If it fails to do so, as is currently the case, because of barriers to the continued expansion of production, a crisis ensues.

  • buckstar

    Likely the problem for US employment is much worse than deleveraging. It’s that China/India have joined the global wage arbitrage in a big way over the last couple of decades, with an abundance of increasingly skilled labor at rates way less of US counterparts. If demand for goods/services in the US increases, many (if not most) corporations in many industries can meet this demand without hiring US workers.

  • TPC

    Adding fuel to the fire is the lost jobs in the FIRE industries. Many of these real estate and finance jobs are lost for years and perhaps permanently as these industries shrink as the bubble implodes.

  • silly things

    While “margin _expansion_ via cost cutting is only sustainable up to a certain level” is true. Maintaining profit margin at fix level doesn’t require revenue growth. Just maintain the current s&p500 p/e of 14.29 implies investors will get e/p=1/14.29=7% return in retain earning and dividend in the long run.

    Note that historical nominal stock return is 7%+inflation. Therefore, the market is already generating historical real return since inflation is near zero.

    Another way to see this market is already generating good return is to compare it with Treasury yield. 1 year treasury yield is only 0.28%! How often does the spread between stock and treasury exceeds 6.5%?!

    I am perfectly happy with businesses maintaining the high profit margin of the last 5 quarters! Gradual increase in revenue is the icing on the “cheap stocks” cake.

  • TPC

    Margins are cyclical. They are rarely “maintained”. But the good news here is we’re in a period of margin expansion. We’ll see how long it lasts before the mean reverting tendencies kick in….

  • Frederick

    Why anyone would expect anything we’re going through now to resemble anything that has ever happened before in this country is a bit of a mystery.

    Look at what Bernanke and the Fed have done to interest rates. Nothing like this has ever been attempted in this country. Every pundit and technical analyst seems hell bent on fitting our current situation into some sort of “box of the the known” from the past. It won’t fit anywhere. Stop trying.

    ZIRP accomplishes the same thing as millions of lost jobs. Every saver has demonstrably less money than they normally would have. They may still have their job, but their money has lost its job. That has consequences of less spending. Our system needs a workable short rate to exist properly. Fed Funds need to go to 2%.

  • Patrick

    The simple act of employing some one is a much more complicated, regulated and ultimately costly enterprise than it has ever been. Slowly but surely we are approaching the French/European dilemma. The end result is that small business has to be booming before they will commit to new hires. I don’t think it is a coincidence that 1991, 2001 and now are running with similar patterns. If true that would suggest that old time tested methods of improving employment willl not work.

  • Angry MBA

    If demand for goods/services in the US increases, many (if not most) corporations in many industries can meet this demand without hiring US workers.

    +1. Unemployment is a lagging indicator, and this offshoring effect increases the degree of that lag. Lower foreign wages + Improved educational systems abroad + Improved technology = Greater offshoring

    The chart above also doesn’t tell the entire story. During the Great Depression, the equivalent to the U-3 unemployment rate peaked at about 25%, so the job build began from a deeper low point. Ditto 1981 — unemployment hit a high of 10.8% (higher than our peak) before needing almost five years for the unemployment rate to decline from a high of 10.8% to 6%. The 1930’s were, on the whole, much worse, while the 80’s recovery occurred while unemployment was still high.

  • Jon

    The high profit margins of the last five quarters will come back to haunt us. The myopic focus on margins and stock price will be the primary cause of the length of the recession (not the severity mind you – for that we can blame ninja and home equity loans). The fifty year assault on labor is finally bearing fruit. If CEO’s think they can get by without the worker….well, were about to see.

  • Jon

    A Fed Funds rate at 2% would result in 25% of homes in the country entering foreclosure (ok, ok, I’m guesstimating here, but the number is very large – studies show that the #1 cause of foreclosure is rising interest rates – and many, many, many people are on the brink). Certainly this is one solution, but likely to cause more pain than necessary. Not a protracted solution however! 2% rates is medicine that will kick in right quick.

  • Jon

    Or the German dilemma…of 2.2% growth last quarter. Sure sucks to be German.

    Employing people in the US is a nightmare because our health care system is a nightmare. Unfortunately the people who are the loudest in support of small business are the quietest when it comes to health care policy. Sure, one can be against Obama’s policies. That’s easy. But what is small business for? The status quo? That’s just as bad!

  • SteveS

    The US in the 1930s was also a completely different country

    1 – we were the world’s low cost manufacturer and largest exporter – the equivalent to China today

    2 – we were the worlds largest oil producer – the equivalent to Saudia Arabia today – its hard to believe we even had a depression

    Britain in the 1930s was much more like the US today and they only recovered because they were bailed out by US. Do you really think China would bailout US today?

    The US today reminds me of a race in the scifi classic Farscape called the PeaceKeepers. I always wondered where they got the financing to be the universes police force. Maybe it was from having the reserve currency.

  • Anonymous

    Reduce Unemployment/Restore Demand == Reduce the Minimum Wage

    The minimum wage was re-established in the United States in 1938 (pursuant to the Fair Labor Standards Act), once again at $0.25 per hour ($3.77 in 2009 dollars).

    It had its highest purchasing value ever in 1968, when it was $1.60 per hour ($9.76 in 2009 dollars). From January 1981 to April 1990, the minimum wage was frozen at $3.35 per hour, then a record-setting wage freeze. From September 1, 1997 through July 23, 2007 – a period of nearly ten years – the federal minimum wage remained constant at $5.15 per hour, breaking the old record.

    Congress then gave states the power to set their minimum wages above the federal level. As of July 1, 2010 (2010 -07-01)[update], fourteen states had done so.[4]

    Community organizing efforts initiated by ACORN were responsible for the increases in some states such as Florida, Nevada, and Ohio.

    Curious : Florida,Nevada,Ohio are leaders in the UNEMPLOYMENT parade

  • http://wallstreetexaminer.com Lee Adler

    Sadly, this isn’t even the whole story of how bad things are. Total workers employed under unemployment insurance and the total size of the covered labor force are in entrenched downtrends. The unemployment rate is a red herring, manipulated by the Ministry of Information to make things look better than they are. The picture of the trend of total employment as revealed in the weekly claims data is far worse than the government cares to admit. TPC is absolutely right. The recession never ended. You cannot grow an economy based on a shrinking labor force.

    http://wallstreetexaminer.com/uploads/image400.png

    Yes, corporations can temporarily grow their profits by firing workers, downsizing, and closing facilities. You can temporarily sustain yourself and have a nice meal by cutting off your arm, grilling it, and eating it with some fava beans and a nice chianti too.

  • MadeMyMillion

    The average American worker is broke, thanks to decades of union-busting and out-sourcing of jobs. It is ironic that it is that same working class that bought anything and everything that the Chinese could make for them, accumulating massive debt loads in the process. The American elite doesn’t give a crap about the American worker and that is why the American economy is going to continue it’s long and painful decline into irrelevance.

  • MadeMyMillion

    You have hit the nail on the head Lee. The healthy labour force is crucial to any sustainable recovery and the American worker is not in good shape right now.

  • first

    TPC is right. The recession never ended

    but lets face the media and the government did a great job at masking this.

    “Since 2008 the Federal debt has increased by 25 times the GDP increase.”
    It takes $25 of Federal deficits to produce $1 of GDP growth.
    Source (David Stockman)

    After all this pumping of about $3.7 trillions from Washington and the fed we have 654,000 net jobs that equates to $5,657,492 per jobs.
    Can we really look at it this way? Perhaps not but that is the result.

    Corporate-sector cash assets have increased sure but “debt net of cash” has actually increased by $200 billion during the Recession.

    Is a borrowed recovery a real recovery or a bigger credit problem down the road?

  • Sigli

    The US labor participation rate has been shrinking for several years. We had 50 years of growth fueled by women entering the labor force. That trend reversed around 2001. It’s hard to improve a growth-based economy with a shrinking participation rate. Jobs feed on jobs. Those who quit for the simple life will continue shrinking aggregate demand. It’s no wonder this has been a jobless recovery. More want to have less, which shrinks demand, which shrinks jobs, which feeds back on itself. I don’t know how you change this from Washington.

  • ES

    Very twisted view. You think people are leaving jobs because they want to? Even with two incomes it is hard these days. I can see women leavin the workforce if they make less than they pay for daycare. But it doesn’t mean they do it because they don’t want to work.

  • Sigli

    “Very twisted view. You think people are leaving jobs because they want to?”

    Yeah, that’s exactly what I said, and gave an explanation for every possible scenario out there, for every single year.

    I don’t make the data up, I just read it:

    We had about 50 years of increasing participation rate. That is a trend that could not go on forever (limit 100 %). It starting shrinking in 2001, a trend that continued through the bubbly boom. Make what you want out of it. Either way it is headed south, and that is going to be a drag on AG.

    And yes, some are trading in knick knacks for a simpler life. I can only guess how many. Others are forced out of a poor labor market. There’s not a blanket that will fit over every situation out there, but there is a trend line–down since 2001.

  • http://www.pragcap.com TPC

    Let me just add that I don’t think it’s all doom and gloom like so many believe. It wasn’t too long ago that the unemployment rate was hovering around 4% and certain leaders wouldn’t stop talking about how great the economy was. Now just a few years later everyone thinks the US jobs engine is dead in the water. That’s just not true. We were in a bubble. Even a job’s bubble. The UE rate has averaged about 6% over the last 40 years. I haven’t run the numbers, but my guess is that the bubble in FIRE added that extra 2%. Now we’ve overshot on the downside as the debt bubble implodes. It will take time to get back to 6%, but I have no doubt that it will happen with time. At the end of the day the USA is still a highly productive and competitive country. When the revenues come back the jobs will largely come back. Unfortunately, this is going to be a tougher road than usual. But that’s the price you pay for excesses.

  • silly things

    Let me clarify my point on maintaining vs. expanding revenue.

    The key here is consumption can only be suppressed so far. In other words, there is a natural floor to how far consumptions can be depressed. Here are just a few examples to illustrate this key idea.

    Today’s unemployment is 9.5%. Most estimates do not see it going much higher above 10% in the worst case. In other words, 9 out 10 people will have a job and will consume at a level they feel comfortable with. The bulk of the compression in consumption from unemployment is already behind us.

    Another example is today’s saving rate is around 6.2%. Most estimates do not expect this to go much higher above 7-8%. The bulk of the compression in consumption from increase in savings rate is already behind us.

    When unemployment rate and savings rate are stabilized, consumption will necessary also stabilize. This natural floor in consumption implies stabilization in revenue.

    Margin will not fall if companies merely maintain the current level of revenue and current level of cost (i.e. same revenue, no inflation, no new investments, no new hires). Same volume of business and same level of cost necessary imply same profit margin.

    Mean reversion of profit margin will happen, but what will drive it?

    At the current point, margin will fall if and only if when businesses costs increase because:
    1) business investment – since investment cost is an upfront cost and return on investment takes time to show up as profit
    2) inflation

    Profit margin as a percentage of revenue will undoubtedly mean revert. The forces that push it in that direction are positive for the economy and equity. Right now even inflation in moderation is positive when we are currently near deflation.

    The floor in consumption means limited downside for equity. The forces that will drive the mean reversion in profit margin implies growing revenue, lower unemployment, and higher net profit even as profit margin as percentage of revenue falls.

  • http://thecynicaleconomist.com The Cynical Economist

    This certainly is not your granddad’s depression.
    The jobs continue to go overseas
    Not just the blue collar, but now America is exporting lawyers and accountants to India.
    Do you know that you can hire a CPA in India for $5 000 to $ 10 000 a year? What is a CPA costing for a company here $ 60 000 and up…

    Read this – Outsourcing to India Draws Western Lawyers -“There is an increasing pressure by clients to reduce costs and increase efficiency, and with companies already familiar with outsourcing tasks like information technology work to India, legal services is a natural next step

    It seems to me that America is self destroying its economy by pursuing higher pay for the workers and lower costs for the products and services?
    The wage inflation is pushed by the unions and by the generous federal and state workers compensations.

    Read this – Take This Job and Shove It – “A front-page Wall Street Journal article documented the plight of employers who were simply shocked that people weren’t interested in the jobs they were offering. The aggrieved included a company in Illinois that wanted to pay skilled machinists a below-market $13 per hour (about $26,000 per year) and an airline based in Dubai that simply couldn’t grasp why hordes of Americans weren’t rushing to move halfway around the world and take up residence in a non-democratic emirate for the irresistible annual wage of … $30,000.”

    Why would someone work for $30 000 if they can aim at the comparable federal position paying $60 000 for the same work?

    Do not believe what a bunch of bankers tell you with a graph! They live in their own bubble, disconnected from the reality around them. They put some data in a computer model and think, voila!.. that is how the world works…Spare me

    Now days the only growing industry in America is health care and personal care services
    But…for how long can we continue to sell equities and health insurance among ourselves?
    And it is not only the jobs that go overseas – the capital is leaving too

  • http://thecynicaleconomist.com The Cynical Economist

    Oh yeah,
    TPC notice that after 1929-33 depression the percent changes in employment is becoming smaller and smaller value and is even a negative in 2001
    What jobs are coming back?
    Considering the trend It has to be a wonder if 2007 -2009 line end up above 2001

  • 3421138532110

    I don’t share your optimism, I wish I did.

    I work for a fortune 100 and have friends who hold senior positions at other fortune 100’s and 500’s. Let me say, these firms have all tasted the “honey of Off-Shoring” and there is NO TURNING BACK! I’m not talking manufacturing jobs, it’s the $60k-120k block of highly leveraged McMansion owners who are being cut and off-shored at a very alarming rate. As revenue growth is not existent and the comps get harder (Q3-FY10 for example) the more the focus on cost.

    It started with low end help-desk roles, then IT, developers, QA and has moved to Account Representatives, Service Delivery Managers, Middle Management, Finance and Accounting, and now you’re seeing in house corporate counsel being moved!

    Basically the general word from ALL of these firms is that the off-shoring will not stop (or can not) until a very large majority of employees have been transitioned off-shore. Trust me this is not an overstatement.

    So if you think we’re heading back closer to full employment, don’t expect to see Fortune 500 and many mid sized companies contribute. How are those small businesses doing lately?

  • http://earthtiger.info/bearsbookblog Tim Singleton

    Anyone with a brain knows what the problems are. You have a government that thinks it can mandate they everyone has a right to a home, to healthcare, to an education, and a job. What horse$#!t. No one has a right to something that someone has to pay for. Such benefits are the byproducts of a prosperous capitalistic society, never a basic right in ANY society including a Marxist/Progressive Utopia.

    Instead of raising taxes to the point where outgo was equaled by tax revenues, they borrowed money. The outgo was not spent on capital improvements but instead went to feed those who would not work because of everything from true need to a false sense of entitlement fostered in them by those who would use government money to buy votes.

    Then comes the banks who, told by the government they HAD to loan money to those who could not repay, decided to say F@#$ it, let’s ride it all the way down; we can cook the books for a while because the Federal government said it was OTAY.

    I don’t know but I would not have done the same thing myself and set me a nice nest egg in some third world country where when it came time to abandon the states to the kind care and attention of the timebombs called cities would justly and rightly deliver to Washington, D.C.’s doorstep, I would be growing mangoes and watching for stormy weather with no TVs in the house.

  • http://www.pragcap.com TPC

    The jobs will largely come back from the same places they were lost (with the exception of the FIRE industries). All of these huge companies that fired people to make up for their lost revenues will be forced to hire people back over the coming decade. Aside from the housing bubble and the collapse in finance not a whole lot has changed in the job’s market since 2006 when we were near record levels of employment. All that occurred was a dramatic shift in agg demand as the debt imploded. Once the debt is paid off the US economy will return to business as usual (assuming we don’t reinflate the debt bubble).

    Don’t get me wrong, I am not expecting some robust job’s recovery, but these 8MM jobs are not permanently lost.

  • Sigli

    My calculations say we built 6mm residential units in excess of family unit additions between 1990 and 2009. At the current build rate of roughly 330,000, we’re looking at over 4 more years of a depression in the construction industry. I’ve read it takes 3 full time, 1 year jobs to build 1 housing unit. That’s 3.6 million jobs that will come back after the excess is removed (assuming 1.5 family unit additions – 300,000 current rate = 1.2 million more homes/year build rate in the future). How many municipal jobs, grocers, deli’s, dry cleaners, rug doctors, police, firemen, etc. will spur from construction returning? That’d be monster bull if it hit all at once in 2014-2015, but of course it probably won’t play out that way.

    We’ll heal if the debt nipping at our heals doesn’t overcome us.

  • 3421138532110

    “whole lot has changed in the job’s market since 2006 ”

    Totally disagree, there have been profound and permanent shifts in the job market in these 4 short years. Until wages of global skilled employees begin to approach those of US equivalents, I see no reason to expect why these jobs (in droves at least) would come back to the US. Ask any Fortune 500 employee when was the last time they had any pay increase!

    I don’t doubt that the economy will come back and hiring by US firms will increase, it just wont be US based at the rate you describe.

  • Nowherebeach

    It looks to me as if the work is slowly coming back to the US but not the jobs. That’s not a contradiction. Technology and other efficiencies are making it possible to once again manufacture many products within the US. But the work requires few if any new people to be hired. With labor costs largely out of the picture, China and other manufacturing centers have no advantage. In fact, quite the opposite is true. China is still a communist country with many gross inefficiencies that were hidden by the country’s ultra-low labor costs. Additionally, China is a very long way from its primary customers.

  • Angry MBA

    Very twisted view.

    I didn’t quite agree with all of Sigli’s post, but it was a reasonable demographics-based argument — nothing “twisted” about it.

    Some of you folks need to read and think about what is being posted. I haven’t looked at US median age data, but I would suspect that our population is aging and the participation will fall as more workers hit retirement age. Surely we should be able to consider these points without being considered deviant…

  • Angry MBA

    This was a good comment, very thoughtful. But I would expect margins to decline as the burn off in inventory and work force cuts that we have experienced over the last couple of years is converted into hiring and spending as inventories are rebuilt and the limits of offshoring are exceeded. I would expect cost growth to exceed revenue growth over the next few quarters, not just match it.

    Also, you can’t count on static valuation multiples. Investors can be fickle, and we can see greater volatility in markets as more options become available, ranging from mortgage securities to commodities to emerging markets and the rest. At this point, we seem capable of even generating bubbles in Treasuries, so it’s hard to say exactly where long-term equity values end up going. (I’m mildly bullish on the whole, but I would hedge for the possibility of things going sideways for quite awhile.)

  • http://wallstreetexaminer.com Lee Adler

    It’s true that the labor force participation rate peaked in 2001, but the labor force continued to grow and the total employed continued to grow until 2007-2008. The shrinkage of the labor force and total employed began in October 2008, and it has continued until now. We’ve never seen anything like this since the government started keeping track of this number in 1948.

    http://wallstreetexaminer.com/uploads/image401.png

    The establishment survey goes back even earlier, to 1939, and the only period of sustained decline prior to the present was during WWII when employment declined by 10% between late 1943 and mid 1946, a year after the War ended. The current decline, using the claims data, not the Bureau of Liar Statistics survey data, is now around 8%.

    I dare say that an economy can’t grow when the number of folks working and earning a paycheck is shrinking by 4% a year. Good for corporate profits in the short run, as we’ve pointed out, but self cannibalization will soon result in the death of the body.

  • silly things

    What I am saying is this:

    Given consumption has trough-ed and inflation is near zero necessary implied there is a floor on corporate revenue and corporate net income.

    In general, in a stable inflationary environment, a growth component isn’t necessary for an investment with a stable income to have a stable price (a price floor). Treasury bonds are a perfect example of such investments. Another is a rental property in a popular but tightly rent controlled city (i.e. stable rent income).

    Having said the above, you are right that stock price do have a future growth expectation component baked in. This is true even in today’s very pessimistic environment.

    The key question is how big is the growth expectation component given the current market environment?

    The magnitude of this growth expectation determines how far the stock price can fall. Anything beyond is firmly supported by corporate net income and ultimately the trough in consumption.

    I’d argue the growth expectation component is small given today’s extremely pessimistic environment. This is self evident in the 1 year forward P/E for S&P of only 12.79.

    On economic growth rate:

    I agree with you the economy will go through a period of low growth because of deleveraging. Slow growth is definitely painful for those without a job.

    On the other hand,
    1. Slow growth (no bubbles)
    2. large and dependable net profit (consumption trough and deep cost cutting)
    3. deep market pessimism (cheap prices)
    4. low probability of big stock market crash (again cheap and large net profit)

    These are all reasons why now is the best time for investors. When the whole world deleverages, the right thing to do is to leverage up!

  • Tech

    First this is way different than previous downturns. Most people work for the “government” and when you add up the Pentagon budget that no-one cares about plus the black budget then figure the “missing” trillions that Rumsfeld didn’t know about, Lockheed, Northrup, Raytheon, L-3, Boeing, etc. etc. the overbilled huge contracts and there’s no accounting!!! Universities funded by government grants, teachers, CIA,DIA, NSA, TSA, FBI, Naval Intelligence, etc. plus the big money into the private contractors like Dyncorp, Kroll, Veritas, XE, and now the endless “war on terror” and people wonder why we are broke? It’s global, huge, and corporate while our domestic comsumer economy was outsourced. Trouble is war and military spending is always a net drain on a nation which is what the real rulers I imagine want-they are globalists! The dollar will continue it’s slide as will the country first sacrificing all domestic programs like social security, Medicare, anything for the people. One theory I have is the Korean War never ended and David Rockefeller and the other ghouls saw a potential market ten times that of the USA and made a deal with Mao offering to have GM build fancier Buicks in China than in America. Whatever it was Chase opened up there and they took out unions, pensions, the middle class, “nuked” whole cities like Detroit, Flint, Buffalo, Lowell, Youngstown, etc. and had our boys and girls enforcing the new “order” and handing China the best oil pool in Iraq with all our money. They get rid of pesky American notions of freedom by busting the country economically but slowly and not before using the military to bust the world into their “order”. Today automation has replaced the need for humans to produce goods on the factory floor, global oil production hit peak and the human population is headed for ten billion and I don’t see new land to move to. Since the Club of Rome days the Bilderbugers, CFR crowd, Bohemian Grove owl worshippers-the elite bankers, CEO’s CIA chiefs, top Generals, and Western leaders meet and decide things anyway and have for the last 120 years or so. Oil plays a key role and backs the dollar but once things are set it will be a different world the way they see things. Highly controlled is the way I’ve heard it and yes we are all just serfs. Big question is will they just get rid of several billion? They think a sustainable planet can support no more than about 2 billion with 500 million the goal. Have a nice day folks and God bless.

  • GR

    The recession did not end and the easiest thing to say is “debt.” However, the problem is not debt it is derivatives. Derivatives are investments of mass destruction, do you recall that statement? We entered a destructive period when
    investors had no idea what they owned, business and government had no idea where there money was invested, and
    banks were deregulated to deal with derivatives and they had no idea what they were. Now do any of us today. We
    just do not know what these investments of mass destruction are, where they are, whose holding them, what value
    they have and when they will pop up.

  • wildbair

    interesting to note that china/india have joined in the “global wage arbitrage” in a big way and that there is an abundance of skilled labor willing to work for less that their US counterparts. since it has been recently reported that the average “government” employee makes twice what a private sector employee makes, why don’t we outsource our government to these guys. certainly there are several hundred employees inside the beltway in Washington, DC who are costing tax payers everything they have along with whatever their children and their children’s children, etc will ever hope to have. imagine the enormous savings by just sending a few hundred jobs in the government over there. not to mention the savings to all the special interest who spend vulgar sums to get these employees their jobs in Washington to begin with. why hasn’t our government thought to do this before and SAVE THE TAXPAYERS PERIOD!

  • http://wallstreetexaminer.com Lee Adler

    Household formation is negative. I spoke to a demographer at the census bureau last year, and he admitted to me that they really would have no clue how many households there are until this year’s count is complete. But common sense tells you that as the number employed shrinks, households combine.

  • wally

    The difficulty is trying to relate jobs and the ‘recession’. What we have today is two different things we have a structural change of permanent job loss simultaneous with a credit collapse. Looking at past recessions means nothing.

  • guitargeorge

    very interesting reading, the large corps. will not pull us out of this mess we do need small business and new innovations but as a former small business owner i can say i would never do a start up right now. also,the middle class worker (with their higher wages) has been eliminated by the viscious destruction of the unions and without people able to afford $1,000 tvs and $40,000 autos there will be no prosperity. henry ford new this and was castigated by his fellow auto magnates but he was right if a man makes a high enough wage he will spend money.

  • rumplesnitz

    That’s all well and good until the food runs out. Nobody gives a damn about back-to-school supplies when they can feed their kids in the first place.

  • rumplesnitz

    Ahem, that is, “…can’t feed their kids in the first place”.

  • Sailor Jo

    Pragmatism is an important state of mind. However, I miss that pragmatism all over the place. Here a little example: I have a mortgage that is 20% paid off. If I would refinance that mortgage at a lower rate, saving at least 1%, and having a new base of 20% less than the old mortgage, my payments would be about 20% less than what they are now. The bank is asking for an additional $2,000 a month income for a “new” loan. I never missed a payment, in fact I pay more than I need to. My income is pension and SS and therefor very safe, no job to lose. Those morons go “by the book” instead of using the brain. If I pay less I am even better protected against a default. That would be pragmatic. No luck here.

    What it comes down to is that besides all the crisises there is a lack of management. Everything is fear and the “American spirit” is history. If management of corporations hoarding money would decide to share some profits that would work better than stimulus. Money needs to work and not sit idle. The people receiving some extra cash would pay taxes and either pay off debt or consume more. Even if they pay off debt they would sooner be able to get back to “normal” business behaviour. The shared profits would come back as new revenue to the companies and the spent money would be replenished.

    I know, that would take a shift in thinking. As the chart shows businesses average 8% profit. How about they would do with half of that? Sure, jobs have been exported and will not come back. But how about some smart inventions and the pride of “Made in USA”? Apple and HP could and should manufacture world wide and not just in China. HP once had products that were so good that I was willing to pay a premium. Not any more.

    I agree with guitargeorge. People need a decent income to be customers. See how unions work in Germany. Yes, they work for the workers and make mistakes like business owners do, but they are not public enemy #1.

  • http://henrik-unne.blogspot.com Henrik Unné

    I disagree with the leftists above. The reason that unemployment in the USA remains high is that too little savings, not too little consumption. If Americans saved more, and if the Federal government refrained from consuming so much of the country´s meagre savings for unproductive welfare expenditures and if the American workers adjusted their wage demands to the market, then sorely needed private investment would increase. Which would generate more employment – and the jobs would be in productive activities, such as rebuilding America´s delapidated infrastructure.

  • Ray Newton

    This is not macroeconomic crisis. It is a planned seismic shift that has been long in the planned stage awaiting the timing.

    This has taken NO ONE at the ‘TOP’, and I do not refer to those naive puppets, (we think) we elect who dance to the tunes,and/or read the scripts prepared for them.

    So what is the real ‘problem’? It is one that keeps growing along with technological advances, which are now accelerating apace. There are many piling up in the wings. They are held back because too much at once would create uncontrollable social upheaval(and endanger the ‘Top’)

    Here it is folks, and it is not going to go away, The worst is yet to come,

    There are too many people in the world. Population growth and technology making physical labour redundant just do not gel for social harmony and well being

    So what is the answer? I am not going to spell it out for you. And I do not believe that
    we will have to wait for a ‘natural’ disaster to provide the cause for the effect.

    The signs are everywhere..

    Of course, YOU don’t believe this. That is OK. Believing won’t really help, except that it will save you time from focusing on silly trivial, false excuses for what is happening.

    There is no other answer, not to the real problem. There will be continuing social deprivation for the masses, little by little and that includes those who consider themselves ‘middle class – especially those.

    Have a nice day