No Green Shoots
PIM of SPAIN | July 4, 2009 at 01:11 amby
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Then, was said the numbers were getting better each month, inevitably leading to a recovery by the end of the year. It was predicted a loss of 365,000 jobs in June, which is considerably less than in May. Instead, the numbers, even after correcting them down, it was reported 467,000 jobs had gone, which was significantly more than May's figure. The importance is that the trend the economists thought they were watching and was leading to a recovery, has been broken. Instead of fewer job losses, there are more lost.
There aren’t green shoots. Where is this economy heading?
For starters: this crisis is a depression and not a recession. In a recession, an economy takes a rest, but in a depression an economy drops dead. Businesses go broke. The whole structure of the economy changes because of the inevitable creative destruction, as corpses are dragged away and new enterprises take their places.
Economists were 100,000 off on their jobless predictions because they still don't understand what is going on, they still don’t realize there is no recovery at all, because this is a depression implicating a mayor shift of direction and not a pause in an otherwise healthy economy. After more than half a century of debt expansion, debt is contracting. Businesses, households, investors and the government need to adjust. And that takes time much more than the 20 odd months of recession that already has passed.
The whole process of recovery would have occurred much faster, if the central banks weren't injecting the flood of money.
"Rise of the Zombies," is a headline in the Financial Times. It tells a familiar story: “the feds have propped up businesses coast-to-coast. Instead of being allowed to fail, they are kept alive by the government, and continue to take resources that could be redirected to more promising competitors.”
Don't make an effort telling this to the authorities, they don't care. The old, worn out zombie businesses still make campaign contributions and employ voters. The businesses of tomorrow don't. The present votes do count not the future ones.
And then poor Arnold Schwarzenegger is begging the banks to take his state's IOUs. He says they are "rock solid." California is the world's 6th largest economy. But it also was world’s record holder in debt-based bubble illusions. Now its economy is falling apart. Economists can lie about the rate of inflation. They can manipulate the GDP and unemployment numbers. But once the revenues come in, all they can do is counting them. But when tax revenues are falling, the governments are losing income. When businesses lose revenue they cut back expenses. But governments, at least those that are modern popular democracies, find that they need to increase spending. They have more people asking for help, such as unemployment benefits.
The math is simple: Expenses down + income up = happiness. Contrary: Expenses up + income down = misery.
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