The Crisis Ahead
Those magnificent "Wizards" on Wall Street are poised once again to reap humongous rewards courtesy of our illustrious most benevolent legislatures in Washington. It seems that today those wondrous leaders of states only ambition is creating more opportunities that just seems to widen the income gap. A gap that just keeps getting wider.
While many feel that the economy is rolling along especially those Wall Street analysts there remains substantial cracks in this flawed perception. Questions continue to surface. Are we on a collision course with another repeat of history? Does 1929, the Great Depression and 2008, the Great Recession, that by the way really never ended, send an ominous message of things to come? In fact, for millions all over the world citizens continue to languish in abject poverty, even right here in the good old USA. In places like Somali and other countries hundreds of thousands have perished in just the past couple of years alone because they lacked the bare necessities of life, like food and fresh clean water. Meanwhile, here in the United States we the 99% still face unprecedented harsh realities. There are several lingering internal problems with this flawed perception by the powers that be. Serious problems that are continually overlooked by that 1% but have real sobering consequences for our 99%.
One of the key reasons why the 1% continue to overlook the seriousness of the facts facing the rest of us, the 99%, is that the stock market continues to hover around near record highs. This is because of the aggressive actions taken by those "big" banks in collaboration with the Federal Reserve, The European Central Bank, the Bank of England and the Bank of Japan all are printing and injecting billions into the financial systems. With this massive influx of newly printed money without the means for the majority of people to capitalize on this so called stimulus is only a prelude to a ultimate crisis point. The which has been played out before with disastrous consequences. Consequently, all this new money is like giving the stock market a sugar rush. We all know what happens next when one consumes too much sugar in a short amount of time. Well, that is exactly what is going to happen.
Another crack in our economy even though the unemployment rate has eased off a bit it is mostly because of the rise of part-time employment and the shrinking number of Americans left in the workforce. Ever since 1993 when NAFTA was enacted the continued drain of the American workforce has only increased. This is one of the biggest reasons why Social Security is in such dire straits. Compounded to this scenario is wage stagnation on an unprecedented scale and the fact that America has not been producing the type of jobs that would enable the 99% to live within the cost of living index. So far the majority of those who are still finding work the wage scale does not even come close to matching the inflationary trend for the cost of living. All one has to do is look at what happened in past recent months. The economy added 236,000 jobs in February, pushing the unemployment rate down to 7.7%. That seems like good news, and the stock markets responded accordingly. Yet the number of good-quality, full-time, full-benefit positions actually dropped in February and has been flat since September. We actually lost over 77,000 such positions and the United States is still down by more than 6 million full-time jobs from November of 2007. Yet, over that period of time, the population of America has grown by more than 12.5 million. In March of this year the unemployment rate fell to 7.6%, but only 88,000 jobs were added. As a result, the percentage of the total population working at full-time jobs remains at all time lows. There is a way to add full time living wage jobs but so far our economic guru's in Washington have yet to realize it.
Now, we come to the real issue, that is the continued income disparity gap that has only gotten wider with each legislative bill that is passed. It really isn't that all surprising that if our job market is at one of the weakest points in history that corresponding wages are also. If we add the inflationary trend in the price of consumables over the past couple of years the picture looks and really is even worse for our 99%. When the United States has had a population growth that has been outpacing job growth and the fact that the average worker has not seen an increase that even comes close to matching inflation reflects the fact that so many are being forced into low paying part time positions. Over the past few years the number of people working multiple part time jobs has only risen. This is partly to blame to why wages have become so stagnated What all this reflects is the fact that population growth has been outpacing job growth, and that people just aren't getting salary increases. It also reflects the fact that now so many are being forced into low-paying, no-benefit, part-time positions. Over the past few years, the number of people working multiple part-time jobs has risen steadily which is on of the biggest reasons why overall wages have stagnated. And by all indications, it's about to get worse.
While jobs and wages have suffered severe damage there is a more sinister out look brewing underneath this new boom in housing that the United States has been experiencing these past few months. When Fed Chairman Ben Bernanke's stated goal of boosting the stock market as a way to increase wealth, it's not surprising that after falling nearly 24% from its pre-recession peak, household net worth has rallied to close the gap to just 2%. A lot of this is due to a drop in household liabilities, mainly by way of mortgage defaults, as people with negative equity in their homes either walk away or by negotiating short sales.
Another key issue is that after two Fed-fueled stimulus bills that failed to inject the capital where it really was needed the 99% couldn't, were hesitant, or unable to jump start the economy. Thus, the rise in wealth, driven mostly by financial assets, has benefited mainly wealthy Americans, who own the majority of stocks, bonds and other investments. As a result, we've once again widened the gap between rich and poor, increasing the wealth inequality that some economists believe contributed to the housing bubble in the first place. (Their theory is that the majority of the 99% borrowed against their homes to fuel consumption and compensate for stagnant wages.) Don't accept the idea that most Americans have benefited? Consider the way the measures of consumer confidence, both the University of Michigan's Consumer Sentiment Index and the Conference Board's Consumer Confidence Index, have tumbled over the past few months as stocks pushed to new highs.
The Williams Theory Of Economic Evolution, the fulfillment of, a real indicator of where our economy is headed, has continually eluded the population of the United States. When we factor in the overall retail sales that continue to shrink and personal savings have been eradicated to compensate for the cost of just trying to exist the 99% are in a perpetual state of economic limbo.
The primary reason the economy is in such bad shape is that the United States is drowning in debt, private and public. That limits an economy's ability to grow, mutes the impact of any stimulus spending from central banks and increases the risk of financial crisis. This is a problem throughout the developed world. Estimates from Credit Suisse in early 2012 put the total excess indebtedness at around $8 trillion, roughly 20% of the worlds gross domestic product. This figure is now that much higher because most of the industrialized nations keep running large budget deficits, like the United States. Although the specifics differ slightly, the overall theme across the world's economies is quite similar. What's happened is that after consumers and banks piled on debt from 2000-2008 and now again in just the last months of 2012 and into 2013, governments stepped into the breach again worsening the already poor fiscal trajectories. So while Americans have been cutting debt (mainly through mortgage defaults), Washington has tried to again stimulate the economy that included President George W. Bush's bank bailout and stimulus checks and President Barack Obama's American Recovery and Reinvestment Act.
Unfortunately, for a number of reasons, the economy still in crisis mode. All because the government insistence that by giving stimulus money to the 1%, "big" banks and the like, they in turn would gradually float funding down into the 99% where it would be used to procure the economic growth that so far has eluded practically every industrialized nation. The trickle down theory never has worked and never will. But try to tell that to our most proficient economic "Wizards" of state.
On top of everything else these "big" banks are sitting on trillions of dollars of liquid assets and with interest rates at all time lows is great for borrowing but not for savings. If these banks continue to sit on this much cash and not come to the aid of the 99% who need capital to invest, to expand their small business, obtain a mortgage, or any other expenditure that would greatly aid in stimulating the economy on a larger scale the growth of the economy won't happen.
Then there is this the initial cause of the 2008 financial crisis remains unresolved. These same too "big" banks which like a drug addict overdosed on risky mortgage derivatives and then literally force the federal government to bail them out really was a violation of America's free market principals. But, there again our leaders of state continue to come to the aid of the 1% leaving the rest of us to linger in economic and financial deprivation.