FedUpUSA

Archive for March, 2011

Any economy that constantly consumes far more wealth than it produces is eventually going to be in for a very hard fall.  Many point to relatively stable GDP numbers as evidence that the U.S. economy is doing okay, but the truth is that we have had to borrow increasingly massive amounts of money to keep GDP numbers up at that level.  The U.S. government is going to run an all-time record deficit of about 1.65 trillion dollars this year and average household debt in the United States has now reached a level of 136% of average household income.  But borrowing endless amounts of money and consuming massive amounts of wealth with that borrowed money is a road that leads to economic oblivion.  The only way to have a healthy economy in the long run is to create wealth.  But how can America create wealth if our industrial base is being absolutely destroyed?  According to Forbes, the United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.  Hundreds of formerly thriving industries in the United States are being totally wiped out.  China uses every trick in the book to win trade battles.  They deeply subsidize their domestic industries, they openly steal technology, they blatantly manipulate currency rates and they allow their citizens to be paid slave labor wages.  So yes, the products coming from China are cheaper, but in the process tens of thousands of factories in the U.S. are shutting down, millions of jobs are being lost and the ability of America to create wealth is being compromised.

In 2010, the U.S. trade deficit was just a whisker under $500 billion.  Much of that trade deficit was with China.

During 2010, we spent $365 billion on goods from China while they only spent $92 billion on goods from us.

Does a 4 to 1 ratio sound like a “fair and balanced” trade relationship to anyone out there?

Our trade deficit with China in 2010 was the largest trade deficit that one country has ever had with another country in the history of the world.

In fact, the U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.

Needless to say, that is not a good trend.

Our industrial base and our ability to create wealth is being wiped out so rapidly that it has now become a very serious threat to our national security.

According to Forbes, there is only one steel plant inside the United States that is still capable of producing steel of high enough quality to meet the needs of the U.S. military, and even that plant has been bought by a European company.

Meanwhile, China produced 11 times as much steel as America did last year.

Not only that, China is now the number one supplier of components that are critical to the operation of U.S. defense systems.

How in the world did we let that happen?

So what happens if we have a conflict with China someday?

But of more immediate concern is the loss of jobs that the destruction of our industrial base is causing.

For example, the Ivex Packaging Paper plant in Joliet, Illinois just announced that it is shutting down for good after 97 years in business.  79 good jobs will be lost.  Meanwhile, China has become the number one producer of paper products in the entire world.

But China is not just wiping the floor with us when it comes to things like steel and paper.

The truth is that China has now become the world’s largest exporter of high technology products.  Back in 1998, the United States had 25 percent of the world’s high tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China’s share had soared to 20 percent.

So how is China doing it?  Well, as noted above, they are pulling every trick that they can think of.

Most Americans think that we have “free trade” with nations such as China.  That is a complete and total lie and anyone that believes that we have “free trade” with China does not know what they are talking about.

China subsidizes their domestic industries to such an extreme extent that many global industries no longer even come close to resembling “free markets” as a recent story in Forbes noted….

According to a story in the January 20, 2009 New York Times, government subsidies so thoroughly disrupted pricing in the global market for antibiotics that many western producers had to either move facilities to Asia or exit the business entirely. The reason this might matter to intelligence analysts is that the last U.S. source of key ingredients for antibiotics — a Bristol-Myers Squibb plant in East Syracuse, New York — has now closed, leaving the U.S. dependent on foreign sources in a future conflict.

Our politicians and our business leaders have pursued economic policies that are so self-destructive that it defies explanation.

How in the world could anyone be so stupid?

Since 2001, over 42,000 U.S. factories have closed down for good.  Millions of jobs have been lost.  The ability of the once great American economic machine to create wealth has been neutered.

The business environment in America is completely and totally pathetic at this point.  The number of small businesses that are being created is also way, way down.

According to the U.S. Census Bureau, only 403,765 small businesses were created in the 12 months that ended in March 2009.  That was down 17.3% from the previous year, and it was the smallest number of small businesses created since records began being kept in 1977.

The truth is that the U.S. economy is dying.

We continue to consume about the same amount of wealth that we always have, but our net worth is declining.

According to the Federal Reserve, more than two-thirds of Americans have seen their net worth decline during this economic downturn.  In fact, the Fed says that between 2007 and 2009, the wealth of the average American family declined by 23%.

So if it seems like your family and everyone around you is getting poorer, that is because it really is happening.

We really are becoming poorer as a nation.

We can see evidence of this all around us.  Just consider a few of the examples that have been in the news in recent days….

*One school district in the Chicago area is laying off 363 teachers.

*The U.S. Postal Service is offering $20,000 buyouts to thousands of workers as they attempt to slash 7,500 good paying jobs.

*The city of Detroit, once a shining example of middle class America, is now a rotting cesspool of economic decline and it saw its population decline by 25 percent over the decade that recently ended.

Americans are not feeling the full impact of America’s industrial decline yet because we have been filling the gap in wealth creation with massive amounts of debt.

In the years since 1975, the United States had run a total trade deficit of 7.5 trillion dollars with the rest of the world.  That 7.5 trillion dollars could have gone to support U.S. businesses and U.S. workers, but instead it left the country and went into the hands of foreigners that do not pay taxes.

Therefore, the U.S. government, state governments and our local governments have had to borrow massive amounts of money to make up the difference.

Most people do not realize it, but the destruction of America’s industrial base has played a very significant role in the government debt crisis we are facing today.

In addition, the millions upon millions of workers that have lost their jobs as America’s industrial base has been destroyed are now a drain on the system.  Instead of creating wealth and being involved in economically productive activity, millions of American workers are now totally dependent on the U.S. government for survival.

Do you think that it is just some sort of accident that we have 44 million Americans on food stamps?

Don’t you think that a large percentage of those people would actually like to have good jobs that would enable them to sufficiently feed their families?

If we continue on the path that we are currently on we are not going to have much of an economy left.

Not that all trade is bad.  Certainly not.  For example, trade with Canada is generally a very good thing.

However, the horribly unbalanced and unfair trade relationships that we have with nations such as China are ripping our industrial base apart.  Our politicians have not been telling us the truth about what the “global economy” will mean for American workers.  Most U.S. workers never realized that globalism would mean that they would be competing for jobs with workers willing to work for one-tenth the pay on the other side of the globe.

Those people that believe that we can indefinitely maintain an economy where we consume far more wealth than we create are completely and totally delusional.

Until the American people wake up and start demanding change from our politicians on these issues, 50,000 (or more) manufacturing jobs will continue to fly out the doors every single month and even more Americans will become dependent on government welfare.

Is that what you want?

The Economic Collapse

From The New York Times today:

A few weeks ago, when the Justice Department decided not to prosecute Angelo Mozilo, the former chief executive of Countrywide, I wrote a column lamenting the fact that none of the big fish were likely to go to prison for their roles in the financial crisis.

Soon after that column ran, I received an e-mail from a man named Richard Engle, who informed me that I was wrong. There was, in fact, someone behind bars for what he’d supposedly done during the subprime bubble. It was his 48-year-old son, Charlie.

On Valentine’s Day, the elder Mr. Engle said, his son had entered a minimum-security prison in Beaver, W.Va., to begin serving a 21-month sentence for mortgage fraud. He then proceeded to tell me the tale of how federal agents nabbed his son — a tale he backed up with reams of documents and records that suggest, if nothing else, that when the federal government is truly motivated, there is no mountain it won’t move to prosecute someone it wants to nail. And it was definitely motivated to nail Charlie Engle.

Mr. Engle’s is a tale worth telling for a number of reasons, not the least of which is its punch line. Was Mr. Engle convicted of running a crooked subprime company? Was he a mortgage broker who trafficked in predatory loans? A Wall Street huckster who sold toxic assets?

Read the rest here.

I think it’s pretty obvious at this point, we no longer have a Republic form of government, but instead of a kleptocracy/oligarchy.  Anyone who doesn’t understand that by now needs to wake up and face reality.

Part of the discontent roaming across America is that the economic recovery is targeted to a small portion of the population.  This part of the population controls most of the mainstream media channels so the working and middle class are wondering why isn’t the fact that food, college, health care, or many other day to day items with price increases fails to grace the media agenda?  Have you ever heard the words “median household income” or “average income” grace the daily news tube?  The problem of course is that some are doing extremely well in our economy.  In fact the number of millionaires in the United States soared once again last year.  The number of millionaire households jumped to 8.4 million in 2010 increasing by 600,000 last year.  Now to contrast this rise in millionaires in 2010 we added 5,000,000 Americans to the national food stamp program.  The income inequality gap is only getting more pronounced here.  A rising sea is not lifting all ships because many of the reasons for wealth building (i.e., corporations cutting costs to boost profits) directly impacts the working and middle class who own very little in stock.  Yet the stock market going up over 100 percent from the March 2009 lows has helped the top 1 percent that control 42 percent of all financial wealth.

Millionaires grow with stock market

Source:  Wall Street Journal

This is an interesting chart.  The number of U.S. millionaires is back near its 2007 peak.  At the same time we have an underemployment rate near 20 percent according to Gallup and 45,000,000 Americans on food assistance.  You will also notice that the above chart excludes the primary residence for the household.  Why is that?  Well most middle class Americans derive their household wealth from real estate, and not the stock market.  The real estate market continues to be crushed and prices continue to move lower:

Source:  Federal Reserve

While the primary source of wealth for the top 1 percent is stocks and this sector continues to improve thanks to bailouts and the Federal Reserve pumping easy money into investment banks, millions of other Americans are being kicked out of their homes that are losing value.  Americans have lost $6.3 trillion in household real estate wealth.  If your primary asset for your net worth is collapsing is it any wonder why the majority of the population does not feel this as any sort of economic recovery even though the stock market is now up over 100 percent in a relatively short timeframe?

Growing inequality

Source:  Marginal Revolution

There is nothing wrong with having a system that rewards wealth building.  In fact this is encouraged and should be supported.   Yet the system in place actually encourages short term graft at the expensive of long term growth.  Many investment banks knew and helped create the housing bubble by setting up a system that took a stable investment in homes and turned it into another commodity for global speculation.  Since investment banks knew this would go bust, many lobbied politicians early on for a preparation in bailouts to save them from their massive graft once it imploded.  Many investors including giant investment banks made money on the misery of millions of Americans.  How is this a good system?  In the end the Federal Reserve and U.S. Treasury rolled out trillions of dollars of bailouts to the financial sector.  This is why one tiny part of our economy is booming at the expense of others.

The chart above shows the growing income inequality in the country.  A strong middle class can only thrive when productivity is rewarded and graft is punished.  You cannot have a CEO making 500 times what the average worker makes especially when that CEO was instrumental in the financial products that crushed our nation.  Yet that is the current system we are in.  The media tries to brainwash the public that these captains of industry are somehow doing a good deed for the country.  They are not.  They are selling out the economy via plutocracy and not even capitalism.  If this were truly capitalism most of the investment banks on Wall Street would be gone only to be replaced by other banks that actually take a fiduciary responsibility of their clients.

Incomes stagnant

Source:  Social Security

The average working American pulls in $25,000 for the year.  Given the rise of two income households this coincides with Census data that shows the median household income of $50,000.  Yet the cost of many items is eating away at their incomes; food, health care, college costs, and energy keep going up while income remains stagnant or declines.  Public college systems, the typical route toward a middle class lifestyle are becoming more and more expensive as states lose revenues.  The wealthy class in this country does not care since this can create a system where the public is uneducated about their methods of robbing from the productive class.

Does this look like a recovery to you?

More and more Americans keep getting added to the food stamp program.  All the while those in the millionaire ranks continue to grow.  With an abundance of labor, companies can keep wages low or threaten to take companies overseas (which they are doing anyway).  Ironically many of the bailed out investment banks are funneling money to emerging markets because of better gains.  These same investment banks were on bended knee in Congress asking for trillions of dollars for the American people.  That was a lie and a Trojan Horse.  It was the swindle of the century.
The rise of alternative media is merely a reflection of how disconnected our country has become.  People don’t need a doctorate in finance to figure out their incomes are declining and the quality of life for the middle class is shrinking.  All they need to do is look at their bank account.  Much of the last decade of income losses was plastered over with massive debt growth:

Source:  Calculated Risk

The only reason many in the middle class felt richer in the last decade is because of the housing bubble.  But that was all a giant lie built by Wall Street investment banks with products like CDOs, CDSs, and the entire mortgage backed securities industry.  When the entire casino went bust, Wall Street received their government welfare handout while the public is now confronted with higher taxes, less public goods, and is now being asked to live with austerity to pay for their graft.  We don’t want to stop that millionaire train while more and more Americans depend on food assistance.  What about the investment banks?  What austerity measures are they taking?  To the contrary their profits are even higher since they have unlimited access to the Federal Reserve at virtually zero percent interest rates.  Expect income disparity to continue since we have a Wall Street run government and much of this will not be broadcast on national television.

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