FedUpUSA

Archive for February, 2010

Our Educational System’s Primary Failure

Posted by Karl Denninger

No, it’s not that they don’t teach history – even though the rendition of “history” given in government (and private) schools is questionable at best (how many, for example are taught the underlying truths of Thanksgiving, and how all the colonists almost died under a nearly-pure socialist structure?)

No, it’s not that many of our schools start kindergarten with an exercise in socialism, even though they do – by asking the parents to buy all manner of supplies which are then, either in whole or part, aggregated – that is, “from each according to his ability, to each according to his need” – in the first hour of class.  Isn’t that sweet – straight out of Karl Marx’s mouth to your five-year old’s ears.

It’s not even that these same government schools in many cases will hand out “awards” at the end of the year, or the end of a student’s time there, in which literally everyone is considered “outstanding”, destroying the value of the word – and the motivation to excel.  After all, not everyone can be “outstanding”, right?  If everyone is, then nobody is – whatever that level of performance is, it’s “normal”.

No, it is that we fail mathematically.

To succeed a young person needs to be able to do three things – read, write, and understand mathematics.  The fourth ingredient is that the innate desire to learn must not be destroyed in their first few years of school.

All children start life wanting to learn.  Ever watch a baby?  It’s a curious being, is it not?  It reaches, it fondles, it touches, it experiments.  We put plastic caps in our electrical outlets because one of the experiments a significant number of babies and toddlers will perform is inserting a kitchen fork into said outlet, with bad results.

So how do we go from that to a surly vegetative kid at the age of 9, 10 or 12?

We do it by failing in the essential purpose of education – giving our children the foundational understanding they need, and then getting the hell out of their way!

We want to mold educational experience.  To teach “as we want them to learn”, instead of “as they wish to synthesize.”

We’re fools.  You, I, our school systems.  All of us.

But in the midst of our mind-numbing and creativity-destroying “education system” we do something worse – we ignore, for the most part, the single most-important concept that our children must learn in order to be citizens.

I speak of the function shown in this graph:

This is our friend the lowly (and so-often forgotten) exponent.

It is not that we do not teach our children about this basic function of mathematics – we do.  Ask your kid in sixth or seventh grade if he or she understands exponents, square’s, etc – they do.

No, it is that we fail to teach the fact that any time two or more exponents are in play, one of them always “runs away” from the other.

Always.

We fail to teach the fundamental truth that you can never let this happen.

Anywhere.

Because if you do, it is simply a matter of time before wherever you let that happen with comes to ruin.

And yet these functions are literally everywhere.  Think about it.

They govern population growth.

They govern energy consumption.

They govern monetary growth and inflation.

They govern economic growth.

They govern growth in the production of food.

They govern growth in housing.

They govern growth in earnings by corporations.

Literally everything around us in our daily lives has a compound function associated with it.

Everything.

And yet wherever two or more inter-related compound functions are in play, if one of them has a larger exponent than the other, it is inevitable that they will “run away” from one another and lead to a ruinous crash of some sort, whether it be by overpopulation, by inability to produce that which is necessary to sustain the other, or in the form of an economic depression.

In each and every case where this interrelationship exists if you allow this situation to develop you create a circumstance where something dies – either economically or literally.

We can argue over when such a calamity will occur, but not if it will, because under the laws of mathematics, IT MUST.

We do not teach our children this.  We do not drill this as the essence of what they must understand.  We do not make clear that the above must never be allowed to occur and continue, and that in each and every case where it is detected, it must be stopped immediately.

Jimmy Carter lost his job because he went on national television and spoke the truth above.  That red line represents a 7% compound growth rate.  It was what he was speaking of in his famous address in which he said that if we continue to grow our energy consumption by 7% annually in ten years we will consume more than has been consumed in the entire history of the United States.

“The world has not prepared for the future. During the 1950s, people used twice as much oil as during the 1940s. During the 1960s, we used twice as much as during the 1950s. And in each of those decades, more oil was consumed than in all of mankind’s previous history.” - President Carter

He was right, by the way.

The American People fired him for uttering a fundamental mathematical truth.

Our school boards, administrators and teachers, including math teachers, willingly and knowingly put together school budgets, including salaries, that have “percentage growth rates” in them.  Those salary growth rates exceed both GDP growth and the growth of incomes in their district.

They willingly and knowingly pass and support the above double-exponent graph – a graph that they know (at least the math teachers do) will lead to ruin.

They do it anyway.

These same people do not teach our children that such a pattern in the growth of government, in the growth of money, in the growth of energy consumption, in the growth of population – all will eventually lead to the same ruin and for the same reason.

Why do they fail in this regard?

I’ll tell you why.

Because if they didn’t our teens – our high school graduates – might literally be rioting in the streets, burning those school board offices and government buildings to the ground.

They might do so because our young people would have the tools to recognize that these very same teachers, administrators and government officials have intentionally and with full knowledge of the consequences destroyed their futures.

That it is mathematically impossible for them to receive Social Security and Medicare as promised.

That Medicare Part “D” was passed by their parents and grandparents howling even though it would inevitably lead to the destruction of The Federal Budget and their future.

That “health insurance” premiums growing at 10% or more annually while economic output grows at 4% will inevitably collapse the economy, and that providing “free all you can eat” care to both illegal alien invaders and senior citizens (including those retired teachers) is mathematically impossible over the long run.

That it is mathematically impossible for us to continue to grow energy consumption at 3, 4, 5, 7% annually while we grow production at effective zero due to refusing to build nuclear plants and exploiting the energy resources we have in this nation.  Indeed, our schools teach that growth in the production of energy is evil.

That it is mathematically impossible to grow earnings, production or both at 4, 5, 6, 7, 10% annually while the population consuming your output grows 1%, and thus the stock markets must eventually crash to bring earnings and production into accord with population.  We simply argue over when that will occur, not if.

That it is mathematically impossible to grow credit – that is, debt – at 8% annually (and we have on average since the 1950s) while GDP grows at 5% annually and population at 1%.  Pursuing such a policy, which our leaders have and our educators espouse as “healthy” and “their goal”, inevitably leads to either a massive debt-default episode (e.g. a deflationary depression ala the 1930s) or collapse of the currency.   Not coincidentally, that’s close to the above graph – and is why our “economic problems” are not over.

That it is impossible to grow population forever at any compound rate since the rock we live on is fixed in size and resources.  Since one must inevitably have more people to consume more “stuff” (e.g. GDP) over a sufficiently long period of time all compound growth fantasies have a “use by” date at which they must end. Again, we argue only when, not if.

Our youth would recognize that none of what has happened – our energy dependence, our abuse of the land by “big farming”, the abusive and outrageous conduct of Wall Street, the bogus and fraudulent promises made, and ridiculous growth in spending beyond our means by our Local, State and Federal Governments – is an accident.

Rather, all of it has been by design and intent and the consequences of that design and intent will fall on THEM.

They would be pissed that “we the people” – their parents, their teachers, their school administrators, their governments from the city council on up to Congress and The President - have intentionally and willfully screwed the world in which they must live for their own puerile fantasies, and that they have done so with both knowledge and malice aforethought as to what the inevitable consequences would be – consequences those very same youth will have to pay.

They would raise hell, and in doing so would be both justified and appropriate in their actions.

But for our youth to do so, they’d have to understand how the power function – the lowly exponent – rules almost literally everything in their daily life, in the life of this rock we call “Earth” and in their future, both economic and otherwise.

To prevent that from happening so we can loot the future of our children and grandchildren, we intentionally refuse to teach them these fundamental mathematical relationships and in fact gloss over and obfuscate any such discussion, debate, or path toward understanding how this basic concept intertwines with and in fact controls virtually everything in our – and their – daily lives.

Indeed, it is obvious on its face that so-called “education” is not the goal of our government schools – or the private educators either – at all.

Those who claim that “private education is better” need to think long and hard about this.  Parochial and other private school environments – how many taught this fundamental truth?  The school I attended – a high-brow college-prep private academy (at the time) – didn’t.  A local religiously-oriented (and well-respected) private Christian school does not – I know this for a fact, as I know several students both past and present who attend there.  Our local government school system does not.

Let’s cut the crap America.

The above is the central understanding that every citizen must have in order for any society to have a chance at stable, long-term prosperity rather than a bogus and fraudulent existence predicated on one bubble after another, intentionally blown for the purpose of stepping on the people’s necks through the stripping of their prosperity in all of its forms.

Wake up while there is still coffee to smell.

By Nate Martin

For 15 Million Unemployed any Job is a Good Job; Questions for Pollyannas; Wishes Aren’t Fishes

Let’s take a look at the employment situation and prospects for jobs starting with the cold hard numbers as they exist today. Please consider the following grim unemployment statistics.

• 14.8 million unemployed
• 3.8 million want a job but are not considered unemployed because they have not looked in the past four weeks
• 8.3 million have a part-time job, but want a full time job

Total that up and you will see there are 26.9 million people who are unemployed or underemployed.

Bear in mind the above numbers do not count self-employed real estate agents without a sale for months, salesmen on commission only, those selling trinkets on Ebay and many other ventures where income has precipitously plunged, sometimes to zero.

Also note that part-time job workers for even a few hours a week, are still considered employed.

Of the unemployed, 6.3 million have been out of work 27 weeks or longer. The average duration of unemployment is 30.2 weeks.

Those mind-numbing statistics are straight from the BLS Employment Situation Report For January 2010.

Unemployment Projections

Bernanke is only fooling himself if he thinks this situation will turn around soon.I believe we are going to see the unemployment rate above 9% all the way out to 2015 even if there is no double-dip recession.

I made those projections in Mish Unemployment Projections Through 2020 and covered it again in Mapping Unemployment – You Make The Call – Downloadable Spreadsheet.

The Fed has given new unemployment projections that I believe are from Mars, and when I get a chance I will try and map them to show just what it will take to reach the Fed’s targets.

Millions of Unemployed Face Years Without Jobs

26.9 million is such a huge number that it is hard to equate to. Yet those are real people, many whose lives are permanently destroyed. Moreover, If my projections are correct, many of those jobs are not coming back for years, and most likely ever.

The New York Times puts some names and faces of the “New Poor” in an gut-wrenching four page article Millions of Unemployed Face Years Without Jobs.

Even as the American economy shows tentative signs of a rebound, the human toll of the recession continues to mount, with millions of Americans remaining out of work, out of savings and nearing the end of their unemployment benefits.

Call them the new poor: people long accustomed to the comforts of middle-class life who are now relying on public assistance for the first time in their lives — potentially for years to come.

Yet the social safety net is already showing severe strains. Roughly 2.7 million jobless people will lose their unemployment check before the end of April unless Congress approves the Obama administration’s proposal to extend the payments, according to the Labor Department.

“American business is about maximizing shareholder value,” said Allen Sinai, chief global economist at the research firm Decision Economics. “You basically don’t want workers. You hire less, and you try to find capital equipment to replace them.”

During periods of American economic expansion in the 1950s, ’60s and ’70s, the number of private-sector jobs increased about 3.5 percent a year, according to an analysis of Labor Department data by Lakshman Achuthan, managing director of the Economic Cycle Research Institute, a research firm. During expansions in the 1980s and ’90s, jobs grew just 2.4 percent annually. And during the last decade, job growth fell to 0.9 percent annually.

“The pace of job growth has been getting weaker in each expansion,” Mr. Achuthan said. “There is no indication that this pattern is about to change.”

On average, only two-thirds of unemployed people received state-provided unemployment checks last year, according to the Labor Department. The rest either exhausted their benefits, fell short of requirements or did not apply.

“You have very large sets of people who have no social protections,” said Randy Albelda, an economist at the University of Massachusetts in Boston. “They are landing in this netherworld.”

“We have a work-based safety net without any work,” said Timothy M. Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin, Madison. “People with more education and skills will probably figure something out once the economy picks up. It’s the ones with less education and skills: that’s the new poor.”

Until she was laid off two years ago, Janine Booth, 41, brought home roughly $10,000 a month in commissions from her job selling electronics to retailers. A single mother of three, she has been living lately on $2,000 a month in child support and about $450 a week in unemployment insurance — a stream of checks that ran out last week.

She sends out dozens of résumés a week and rarely hears back. She responds to online ads, only to learn they are seeking operators for telephone sex lines or people willing to send mysterious packages from their homes.

On a recent weekend, she was running errands with her 18-year-old son when they stopped at an A.T.M. and he saw her checking account balance: $50.

“He says, ‘Is that all you have?’ ” she recalled. “ ‘Are we going to be O.K.?’ ”

Last week, she made up fliers advertising her eagerness to clean houses — the same activity that provided her with spending money in high school, and now the only way she sees fit to provide for her kids. She plans to place the fliers on porches in some other neighborhood.

“I don’t want to clean my neighbors’ houses,” she said. “I know I’m going to come out of this. There’s no way I’m going to be homeless and poverty-stricken. But I am scared. I have a lot of sleepless nights.”

There are many more stories like that in the article. Please take a look. More importantly, play that story out 20 million times because that is what is happening in the real world.

Job Growth

Here is a key snip about job growth from the article “During expansion in the 1950s, ’60s and ’70s, the number of private-sector jobs increased about 3.5 percent a year. During expansions in the 1980s and ’90s, jobs grew just 2.4 percent annually. And during the last decade, job growth fell to 0.9 percent annually.”

There are 138 million employed. If the economy added 1% a year, that would be 1.38 million workers a year. Yet, it takes 100,000 to 125,000 jobs a month to keep up with birth rate plus immigration.

Thus it takes 1.2 million to 1.5 million jobs a year just to hold the unemployment rate steady!

Questions For Pollyannas

• Think the unemployment rate is going to drop rapidly?
• Is another housing boom coming?
• Is commercial real estate going to be the savior?
• Think we can sustainably create 200,000 jobs a month?
• Is this a faith based economy where wishes are fishes?

Wishes Aren’t Fishes

I do not think the economy will create 200,000 jobs a month given the sorry backdrop of debt, deleveraging, and poor housing fundamentals, but even if wishes were fishes and that many jobs magically appeared, the unemployment rate would only drop by 1% or so a year.

That backdrop should help put union whining over not getting an 8% raise into perspective.

In case you missed it, please consider San Francisco Infested with Union Parasites and Pestilence; Outrage Over Transit Worker Pay.

It is hard to have anything but contempt for transit workers moaning about not getting an 8% raise when there are 26.9 million unemployed or underemployed people who would gladly do anything on the premise “Any job is a good job”.

Mike “Mish” Shedlock

http://globaleconomicanalysis.blogspot.com 
Click Here To Scroll Thru My Recent Post List

Pictures of a Market Crash: Beware the Ides of March, And What Follows After

There are a fair number of private and public forecasters with whom I speak that anticipate a significant market decline in March. As you know I tend to agree, but with the important caveat that we are in a very different monetary landscape than the last time the Fed engaged in quantitative easing, the early 1930′s.

The biggest difference is the lack of external standards. This introduces an element of policy decision that has been discussed here on several occasions. In other words, the Fed retains the option, albeit with increasing difficulty, to create another bubble, and levitate stock market prices in the face of deteriorating economic fundamentals.

The dollar was formally devalued by around 40% in 1933. We may yet see that done this time, but more gradually and informally. This is what makes gold controversial today; it exposes the financial engineering. So they feel the need to manage it, to denigrate it as an alternative to their paper. They want to have their cake, and eat it too.

Let’s review where we are today.

The Bear Market of 2007-2009, marked by the Crash of 2008, has been a massive decline in equity prices precipitated by the bursting of the credit bubble centered around housing prices and packaged debt obligations of highly questionable valuations. The cause of the bubble was easy Fed monetary policy and the loosened regulation of the financial sector, which reopened the door to old frauds with new names.

Even today, I think most people do not appreciate the sheer magnitude of the decline, and the damage it has done to the real economy. This is the result, I believe, of three factors:

1. An extraordinary expansion of the Monetary Base by the Federal Reserve not seen since the aftermath of the Crash of 1929, and a swath of financial sector support programs from the Fed and the Treasury, resulting in a spectacular fifty percent retracement rally from the stock market bottom. This is the narcotic that permits the country to not notice that a leg is missing.

2. A comprehensive program of perception management by the government in conjunction with the financial sector to sustain consumer confidence and reduce the chance of further panic. In other words, a web of well-intentioned deceit, subject to abuse.

3. An understandable preoccupation by the individual with the details of breaking news, and a short term focus on particular events, diversions, and controversies, bread and circuses, without a true appreciation of the ‘big picture,’ in part because of some very effective public relations campaigns and a natural human reluctance to face hard problems.

This is resulting in a remarkable case of cognitive dissonance in which some of the victims of a spectacular man-made calamity are opposing remedies and aid as too costly and impractical, even as they walk around amongst the bleeding carnage.

For those who read the contemporary literature in the early Thirties, this is nothing new. In the early Thirties there was no sense, except for a few notable exceptions, of the magnitude of what had so recently happened. There was the sense of life goes on which seems almost eerie now to a modern reader. Indeed, Herbert Hoover could dismiss a delegation of concerned citizens with the advice that they were too late, the crisis was past, and all was well. Sound familiar?

The parallels with the Thirties and the Teens (today) are many, and uncanny.

There is the reformer President, elected to redress the extremely pro-business policies of his Republican predecessor. In the Thirties they had FDR who was a decisive and experienced leader. In the Teens the US has a relatively inexperienced community organizer, more influenced by the Wall Street monied interests, and a past history of ‘playing safe,’ who is trying to manage through indirection and persuasion.

There is a Republican minority in the Congress which opposes all new programs and actions despite giving lip service in order to delay and debilitate. In the Thirties the Republicans were over-ridden by a powerful, activist President, who created a “New Deal” set of legislation, much of which was later overturned by a Supreme Court which had been largely seated by the previous Republican Administrations.

Indeed, the remaining New Deal programs that were successful, the reforms of Glass-Steagall and the safety net of Social Security, are being overturned or are under attack in an almost bucket list fashion.

So what next?

Another leg down in the economy and the financial markets is a high probability.

Although one cannot see it just yet in the fog of corrupted government statistics, the economy is not improving and the US Consumers are flat on their back, scraping by for the most part, except for the upper percentiles who were made fat by the credit bubble, and are still extracting rents from it through officially sanctioned subsidies.

This was no accident; there is a consciousness behind it.

There are far too many otherwise responsible people who are not taking the situation with the high seriousness it deserves. Some would even like to see the US economy collapse, inflicting serious pain and deprivation because it may:

1.suit their investment positions and feed their egos because they think themselves above it all,
2. satisfy their ideological and emotional needs to see punishment administered, almost always to others, for the excesses of the credit bubble, especially if they are relatively weak, unwitting victims, and
3. the sheer nastiness and immaturity of a portion of the population which wallows in stereotypes, childish behaviour, and disappointment with their own lives. They tend to find and follow demagogues that feed their bitter hatreds.

They know not what they do, until they do it, and see the results. It is often a good bet to assume that people will be irrational, almost to the point of idiocy and self-destruction. And some of them never wake up until they are overrun, and then will not admit their error out of a stubborn sense of pride and embarrassment.

It seems likely that there will be a new leg down in financial asset valuations, as reality overcomes often not-so-subtle propaganda and disinformation. It may start in March, or it may be a ‘market break’ that provides a subtle warning for a large decline that begins in September 2010, with multi year progression to lows that are, as of now, almost unimaginable, at least in real terms. I cannot stress this issue of nominal versus real enough. As inflation comes, it will initially be in a ‘stealth’ manner, with the backing of the currency eroding slowly but steadily, and largely unrecognized for some time. It is not enough to try and count the dollars; one also has to consider the value behind them, the quality of the wealth, and its vitality. This is the case for stagflation.

The Fed is acting to mask quite a bit of this. One would hope that they would also not re-enact the policy error of their predecessors and raise rates prematurely out of fear of inflation before the structural healing can occur.

The debt incurred during the credit bubble cannot be paid and must be liquidated. So far we have largely seen transference of debt obligations from insiders to the public. Ironically these same insiders are lobbying to maintain these subsidies and transfers, and also to take a hard line against any further remediation of the consequences of the collapse, which they caused, on the public, to have more for themselves. Their greed and hypocrisy know no bounds.

But the policy error might not be caused by the Fed’s direct action, but replicated by a governmental failure to stimulate the economy effectively AND to reform the highly inefficient and impractical financial system. The purpose of stimulus is to provide a cushion for structural reform and healing to occur, after an external shock, or even a period of reckless excess and lawlessness. The natural cycle can be disrupted beyond its ability to repair itself. But stimulus without reform is the road to further deterioration and addiction.

As it stands today the global trade system is a farcical construct that favors national elites and multinational corporations. Public policy discussion has been trumped by a handful of economic myths and legends that, even though disproved every day, nevertheless remain resilient in public discussions and reactions. This is because they have become familiar, and because they are the instruments of deception for certain groups of disreputable economists and policy influencers.

A more serious market crash might cause people to recognize the severity of their problems, and the thinness of the arguments of the monied interests for the status quo which is most clearly unsustainable. But a sizable minority of the population is always highly suggestible; demagogues rely on this.

The eventual outcome for the US is difficult to forecast with any precision now because there are multiple paths that events might take at several key decision points. Some of them might be rather disruptive and upsetting to civil tranquility. Game changers.

But as the dust continues to settle, the probabilities will continue to clarify.

“Suffering can strengthen our endurance. Endurance encourages strength of character. Character supports hope and confidence even during hard times and trials. And hope does not disappoint us in the end, because God has given us the Spirit and filled our hearts with His love.” Romans 5:3-5

It is right to be cautious, and it is human to be afraid. But let us not allow our fears and trials to turn us from our genuine humanity in God’s grace no matter how dire the day, even if it may drive some of the world once again into the jaws of desperation and madness. And if you stumble, gather yourself up and go forward again without turning from the way. For what is the profit to gain some small and temporary advantage in this world, but to lose your self, forever.

The Financial Battle for the Middle Class – Underemployment at 20 Percent, 38 Million Americans on Food Stamps and Little Hiring. Can it be a Recovery with no Jobs for this Long?

Posted by mybudget360

For most Americans a jobless recovery is an oxymoron.  After all, the vast majority of Americans who pump money into the economy through consuming what they earn, typically find it harder to spend if they don’t have a job to draw an income from.  It is understandable that there is a lag between a recession and when companies start to hire.  But over the last four decades each subsequent recession seems to add more and more months of so-called jobless recovery.  Part of this has to do with the amount of exports we bring in.  When spending goes down in the U.S. the actual contraction goes beyond our country and hits many of our trading partners.  Yet the middle class in the U.S. has fallen behind both in nominal and inflation adjusted terms for over 40 years.  Part of this has to do with the structure of our banking system and our heavy reliance on debt spending.  Today, as talk of a recovery permeates the media outlets we have 38,000,000 Americans on food assistance and nearly 20 percent of Americans are registering as underemployed.

Let us first look at a Gallup poll registering underemployment:

Source:  Gallup

Now the Bureau of Labor and Statistics usually measures the above through their U-6 rate.  This rate measures those that are working part-time but would like to have a full-time job.  There is something psychological about this that makes it seem a lot better than full unemployment but the repercussions on the working class is deep and profound nearly as deep as full unemployment.  First, if you are working part-time you have less money to spend and this showed up in the survey clearly:

Source:  Gallup

This is important in understanding that even with a 6 percent growth rate in GDP last quarter that many people still feel this recession deep in their pocketbooks.  In addition, that latest GDP number is based on companies cutting their top line item, employees and also inventory restocking.  But these are usually one time measures.  What we want to be seeing is GDP growth because of additional consumption and growth through hiring.  That is the real nature of a healthy expanding economy.  Cutting and firing middle class workers isn’t exactly the recipe for a longer-term recovery.

Americans are having to do more with less and are facing new measures of austerity.  Many are adapting and many are simply unable to cope with the radical changes taking place.  Even in the past decade, many Americans came to rely on credit cards and home equity as some kind of embedded ATM for most households.  For over a decade this seemed to be the case.  Even many that relied on this deep down realized that something just wasn’t right when home prices kept going up by double-digits while their salaries remained stagnant.  Any lack of wage growth was made up by additional borrowing.  Banks were willing to lend out this money.  But now that the bubble has burst, Americans are filing for bankruptcies in record numbers, losing jobs, and losing their homes through foreclosure.  At the same time, the banking industry has kept their practices going thanks to taxpayer bailouts.  The middle class is bailing out the same industry that was largely at the center of this financial crisis and their practices still largely remain the same.

This struggle to maintain the middle class is going to be the story of the next decade.  But beyond that headline, we now have over 38,000,000 Americans receiving food assistance in this country:

Source:  SNAP

The most prosperous nation in this world has over 12 percent of its population receiving food assistance.  It is tough to see fellow Americans in such difficult times.  You can see on the chart above how quickly the rate has risen in this recession.  Clearly in every recession the rate will go up but in this recession the number has struck many more Americans.  In fact, the length of unemployment is a large reason for this as people eat into emergency funds.  Beyond that, we now have the largest percentage and number of Americans working part-time in history:

Source:  Itulip

In fact, the large number of underemployed has been a shadow to how deep this crisis really is.  For example, the headline unemployment rate nationwide is 9.7 percent.  That seems bad but nothing historical.  But just look above and add in that underemployment rate.  In reality, we can understand why middle class Americans are struggling so much with daily financial life.  Think of someone that lost their job and is now working at Wal-Mart as a greeter.  Sure they aren’t part of that 9.7 percent but they probably would think so:

“(The Atlantic) Over lunch I spoke with one attendee, Gus Poulos, a Vietnam-era veteran who had begun his career as a refrigeration mechanic before going to night school and becoming an accountant. He is trim and powerfully built, and looks much younger than his 59 years. For seven years, until he was laid off in December 2008, he was a senior financial analyst for a local hospital.

Poulos said that his frustration had built and built over the past year. “You apply for so many jobs and just never hear anything,” he told me. “You’re one of my few interviews. I’m just glad to have an interview with anybody, even a magazine.” Poulos said he was an optimist by nature, and had always believed that with preparation and hard work, he could overcome whatever life threw at him. But sometime in the past year, he’d lost that sense, and at times he felt aimless and adrift. “That’s never been who I am,” he said. “But now, it’s who I am.”

Recently he’d gotten a part-time job as a cashier at Walmart, for $8.50 an hour. “They say, ‘Do you want it?’ And in my head, I thought, ‘No.’ And I raised my hand and said, ‘Yes.’” Poulos and his wife met when they were both working as supermarket cashiers, four decades earlier—it had been one of his first jobs. “Now, here I am again.”

We are in a deep struggle and fight to preserve the middle class of this country.  What has made this country strong has been a compact between the government and the citizenship between work and some semblance of financial protection.  Yet right now with the banking system in power, it is all about that bottom line and they have no idea what is happening in Main Street USA.  They are happy with GDP going up by 6 percent even though this was based on restocking lost supply and firing workers.  But how is this really good for the middle class?

Bank of America Gaming Government Loan Guarantees

Submitted by bmoreland

I have long suspected that it was only a matter of time before banks began to adjust their Collection efforts to reflect Government Guarantees on their loan portfolios.

Simply put, imagine you are a bank with $100 billion in loans. Of this, $20 Billion is guaranteed by the government, $80 billion is your own money. If you managed the collection organization responsible for servicing this debt wouldn’t you be just a wee bit tempted to make sure that your $80 billion was getting the priority?

The table below details the past 12 quarters of Total Loans for Bank of America along with the portion that is Noncurrent:

The Noncurrent percentage has jumped from 5.30% in Q3 to 6.75% in Q4. Quarter on Quarter there is another $12.44 Billion in Noncurrent loans.

The next table details the same 12 quarters and reviews what portion of the Noncurrent loans are guaranteed by the Government (er, you and me the taxpayer):

Bank of America has had a massive jump in the Noncurrent loans that are Governement Guaranteed. The Quarter on Quarter jump is… wait for it… $11.40 Billion.

So, magically, the incremental $12.44 Billion that has become Noncurrent Quarter on Quarter at Bank of America has a guarantee on $11.40 Billion. Nearly 92% of the jump in their Noncurrent loans are covered by us, the taxpayer.

This is no consipiracy theory discussion – these are cold hard facts supporting what any reasonable actor would do in the situtation. If the government is going to cover my losses on a portion of my loan portfolio I can damn well guarantee you I’d be moving my best collectors to the portfolio I’m responsible for. The government can have my new hires, my undesirables, my slow workers, etc…

I highly doubt that we’ll ever hear about this, but this is yet another massive shift from the taxpayer to the banks.