FedUpUSA

Archive for the ‘Globalization’ Category

This guest essay by longtime correspondent Kevin Mercadante examines the costs to making short-term profits and government spending the metrics that guide the entire economy.

Political Myopia and America’s Manufacturing Decline
by Kevin Mercadante

For decades voices in the woods have been warning us of impending crises in the foundational systems that make the U.S. economy go. We’ve been advised of impending disasters in Social Security, Medicare, pension funding, the national debt, healthcare, energy and increasingly, employment. Charles and others sounded the alarm on the housing bubble years before it hit.

But as has become our happy little way, we ignore warnings, preferring to dismiss them as the staple fodder of the “gloom-and-doom” crowd.

We should have learned our lesson with the exploding of the real estate bubble, but perhaps we haven’t. It could be that we’re doomed to experience the falling of one domino after another until we come out of our media induced entertainment stupor fully prepared to face more than a few ugly realities.

While the fallout of the housing and mortgage collapse has proven to be a crisis worthy of capturing our attention, other dominos are indeed falling, but doing so with far less fanfare and concern.

A BIG sector where the battle is already lost

Earlier this year, the IMF reported that China has over taken the US as the world’s top manufacturing nation ( IMF Bombshell: Age of America Nears End ). Over the past few decades we’ve had abundant warning that such a transition would occur. Mostly we’ve ignored the signs, contenting ourselves that the service economy and more government spending would more than replace what ever would be lost, and that come what may, America is still No.1!

But manufacturing isn’t just another sector of the economy—it’s the economic foundation of all modern industrial societies. To one degree or another, all other economic sectors rest on the foundation of the nations manufacturing production. It’s preposterous to believe that services and government spending can carry real economic growth in an economy devoid of the production of real goods—certainly not a nation as large as the U.S.

Because manufacturing produces tangible goods, it is the key to exports. Exports, in turn, are the key to trade surpluses and trade surpluses are the source of large international reserves—the kind that produce coveted creditor nation status.

China, Japan and Germany are creditor nations. All have large international surpluses, because all have large manufacturing sectors contributing to outsized exports that produce regular trade surpluses. And while the experts tell us that our manufacturing decline is due to high wages, it’s worth noting that both Japan and Germany have wage levels that are at least as high as the U.S, yet both have thriving manufacturing and export sectors. What is it that they can do that we can’t? We even have far more natural resources than either country!

Is the decline of manufacturing and our status as the world’s biggest debtor nation coincidental? Hardly.

But it gets worse. Manufacturing is also the fulcrum of technology, an area in which the U.S. has long claimed dominance, almost as some sort of birthright. As manufacturing goes, so will military-, computer- and medical-technology—and the high paying jobs they provide. The implications of the manufacturing decline are far more ominous than the collapsing of the housing bubble.

Politics and the manufacturing decline

If manufacturing is so important, we should be asking a critical question: where has our leadership been in the face of our decline?

I’m not talking about the current leadership—but I’m not excluding it either—the blame on this goes back at least a couple of decades. Have we the citizenry been holding our leaders accountable? It appears not.

What’s worse is that there seems be no “good guy” political party on this issue. As much as we might love to believe that there’s a good guy vs. bad guy element behind every issue, alas there isn’t. Both the Republicans and the Democrats have made substantial contributions to the country’s manufacturing decline, albeit from different directions.

What are some of the things Republicans have supported that have had a material negative impact on the nations manufacturing base?

• Advancing favorable tax policies to conglomerates that move manufacturing production overseas.
• Championed brushfire suburban development (“any development is good development”), sucking the life out of urban areas—which once were the very centers of American manufacturing.
• Enthusiastically supported the FIRE economy for its ability to grow and create jobs much more rapidly than capital intensive manufacturing.
• Allowed their patriotism and unbridled optimism over “all things American” to cause them to underestimate the capabilities of foreign competition.
• Demanded balanced budgets when Democrats were in control—but when Republicans are in power they shift to “deficits don’t matter”. Deficit spending creates a false sense that money can be created out of thin air, rather than earned through the production and export of real goods.

And how about the Democrats—the one-time champions of union workers?

• They’re the purveyors of not in “my back yard” (NIMBY)—if it’s ugly, noisy or dirty, move it somewhere else. How does manufacturing grow or even survive in that environment?
• In growing suburban areas, they use “environmental concerns” to keep out manufacturing, businesses with physical inventories and even suburban agriculture (pesticides, animal habitat destruction, etc.)
• They tend to favor “gentrification”, which is code for the elimination of the working class. They want sanitized neighborhoods, clear of work vehicles, chicken coops and physical inventory.
• Though they claim to want to restrict growth in the suburban fringe, many seem to live there anyway.
• Though they tend to cry foul over the corruption of the FIRE economy, they nonetheless tolerate it willingly because it’s “clean”.
• They’re the party of tax-and-regulate. Any tax as a good tax—especially when it’s levied on businesses. That’s a difficult environment for any business to operate in, but more so for manufacturing concerns because they’re capital, inventory and labor intensive.

Not surprisingly, there are common platforms between the parties. For example, both are obsessed with maintaining the escalation of property values. But decades of relentless increases in real estate prices have done more than their share to degrade small business, agriculture and manufacturing. Property becomes so expensive that the land beneath a business enterprise is worth far more than the business itself. The land is then sold to make way for subdivisions, condominiums, office buildings and strip malls—the very nesting grounds of suburban development and the FIRE economy.

Neither party is concerned with true urban renewal or worker retraining—the kinds of efforts that could resuscitate a declining manufacturing base and provide jobs for millions of workers. Generous student loan programs are supported for elite university educations, but little emphasis is placed on community colleges and technical schools training workers for jobs closer to the ground.

What politicians of both stripes have been truly good at is keeping the issue out of public site. They’re as quick to bury the debate as they are to show up at ribbon cutting ceremonies at the opening of brand new (foreign owned) manufacturing plants in their home districts.

Is it at all hard to see why America’s manufacturing base has eroded to second class status?

Our favorite form of political participation: Blame the other party

There’s an article of faith in American politics: what ever is wrong with country is the fault of the other party. It’s not just the leadership of the two parties that engage in the practice either—it’s a common belief of the man on the street. That’s a simplistic belief that shows that we’re not emotionally prepared to face and deal with our problems.

Democrats tend to believe that the nation is in good shape as long as a Dem is in the White House. A March poll on President Obama’s approval rating found that while only 42% of the general population approve of the president’s job, fully 80% of Democrats do. What could explain such an enormous gap in perception?

The Republican faithful are no different. The very economic conditions contributing to Obama’s low approval rating were well in play during 2007-2008 when George W. Bush was at the helm. The economy was heading down the drain while Republicans were in denial—after all, their guy was in and all was well. Now they rail against Obama’s continuation of Bush’s policies as if the economic decline began in January of 2009.

Will that kind of partisanship fix anything?

Charles has written many times that the nation’s ills will not be fixed by tinkering at the fringes, policy adjustments and promises of reform. Yet this is what politicians in both parties promise—and what we choose to believe even as reality screams otherwise. No real sacrifice, no real change—just get rid of the other party and all will be as it should. Is that a solution? Has it saved American manufacturing? Even more important, will that be our strategy for dealing with other major problems?

The truly dark side of ignored problems is that by the time they become front page news, it’s already too late! The task will no longer be to fix a broken system, but to build a new one from the ground up. Will this be the course with deficits, pension funding, healthcare and energy? We can hope not, but the trend is very unsettling.

Kevin Mercadante is a regular reader of Of Two Minds, a professional blogger and the owner of OutOfYourRut.com, a website about careers, business ideas, money and more.

Of Two Minds

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

2011 has already been the most memorable year in ages and we haven’t even reached April yet.  Revolutions have swept the Middle East, an unprecedented earthquake and tsunami have hit Japan, civil war has erupted in Libya, the price of oil has been soaring and the entire globe is teetering on the brink of economic collapse.  It seems like almost everything that can be shaken is being shaken.  Unfortunately, it does not appear that things are going to settle down any time soon.  The Japanese economy has been dealt a critical blow, the European sovereign debt crisis could flare up again at any moment and the U.S. economy could potentially plunge into another recession by the end of the year.  The global economy and world financial markets were really struggling to recover even when things were relatively stable.  If all of this global instability gets even worse it could literally rip world financial markets apart.

Yes, things really are that bad.  The mainstream media has been really busy downplaying the economic impact of the disaster in Japan and the chaos in the Middle East, but the truth is that these events have huge implications for the global economy.  Today our world is more interconnected than ever, so economic pain in one area of the planet is going to have a significant effect on other areas of the globe.

The following are 10 economic disasters which could potentially rip world financial markets to shreds….

#1 War In Libya

Do you think that the “international community” would be intervening in Libya if they did not have a lot of oil?  If you actually believe that, you might want to review the last few decades of African history.  Millions upon millions of Africans have been slaughtered by incredibly repressive regimes and the “international community” did next to nothing about it.

But Libya is different.

Libya is the largest producer of oil in Africa.

Apparently the revolution in Libya was not going the way it was supposed to, so the U.S. and Europe are stepping in.

Moammar Gadhafi is vowing that this will be a “long war”, but the truth is that his forces don’t stand a chance against NATO.

Initially we were told that NATO would just be setting up a “no fly zone”, but there have already been reports of Libyan tank columns being assaulted and there has even been an air strike on Moammar Gadhafi’s personal compound in Tripoli.

So since when did a “no fly zone” include an attempt to kill a foreign head of state?

Let there be no mistake – the moment that the first Tomahawk cruise missiles were launched the United States declared war on Libya.

Already the Arab League, India, China and Russia have all objected to how this operation is being carried out and they are alarmed about the reports of civilian casualties.

Tensions around the globe are rising once again, and that is not a good thing for the world economy.

On a side note, does anyone recall anyone in the Obama administration even stopping for a moment to consider whether or not they should consult the U.S. Congress before starting another war?

The U.S. Constitution specifically requires the approval of the Congress before we go to war.

But very few people seem to care too much about what the U.S. Constitution says these days.

In any event, the flow of oil out of Libya is likely to be reduced for an extended period of time now, and that is not going to be good for a deeply struggling global economy.

#2 Revolutions In The Middle East

Protests just seem to keep spreading to more countries in the Middle East.  On Friday, five Syrian protesters were killed by government forces in the city of Daraa.  Subsequently, over the weekend thousands of protesters reportedly stormed government buildings in that city and set them on fire.

Things in the region just seem to get wilder and wilder.

Even in countries where the revolutions are supposed to be “over” there is still a lot of chaos.

Have you seen what has been going on in Egypt lately?

The truth is that all of North Africa and nearly the entire Middle East is aflame with revolutionary fervor.

About the only place where revolution has not broken out is in Saudi Arabia.  Of course it probably helps that the United States and Europe don’t really want a revolution in Saudi Arabia and the Saudis have a brutally effective secret police force.

In any event, as long as the chaos in the Middle East continues the price of oil is likely to remain very high, and that is not good news for the world economy.

#3 The Japanese Earthquake And Tsunami

Japan is the third largest economy in the world.  When a major disaster happens in that nation it has global implications.

The tsunami that just hit Japan was absolutely unprecedented.  Vast stretches of Japan have been more thoroughly destroyed than if they had been bombed by a foreign military power.  It really was a nation changing event.

The Japanese economy is going to be crippled for an extended period of time.  But it is not just Japan’s economy that has been deeply affected by this tragedy.

According to the Wall Street Journal, the recent disaster in Japan has caused supply chain disruptions all over the globe….

A shortage of Japanese-built electronic parts will force GM to close a plant in Zaragoza, Spain, on Monday and cancel shifts at a factory in Eisenach, Germany, on Monday and Tuesday, the company said Friday.

Not only that, GM has also suspended all “nonessential” spending globally as it evaluates the impact of this crisis.

The truth is that there are a whole host of industries that rely on parts from Japan.  Supply chains all over the world are going to have to be changed as a result of this crisis.  There are going to be some shortages of certain classes of products.

Japan is a nation that imports and exports tremendous quantities of goods.  At least for a while both imports and exports will be significantly down, and that is not good news for a world economy that was already having a really hard time recovering from the recent economic downturn.

#4 The Japan Nuclear Crisis

Even if the worst case scenario does not play out, the reality is that the crisis at the Fukushima Dai-ichi nuclear plant is going to have a long lasting impact on the global economy.

Already, nuclear power projects all over the world are being rethought.  The nuclear power industry was really starting to gain some momentum in many areas of the globe, but now that has totally changed.

But of much greater concern is the potential effect that all of this radiation will have on the Japanese people.  Radiation from the disaster at the Fukushima Dai-ichi nuclear plant is now showing up in food and tap water in Japan as an article on the website of USA Today recently described….

The government halted shipments of spinach from one area and raw milk from another near the nuclear plant after tests found iodine exceeded safety limits. But the contamination spread to spinach in three other prefectures and to more vegetables — canola and chrysanthemum greens. Tokyo’s tap water, where iodine turned up Friday, now has cesium.

Hopefully the authorities in Japan will be able to get this situation under control before Tokyo is affected too much.  The truth is that Tokyo is one of the most economically important cities on the planet.

But right now there is a lot of uncertainty surrounding Tokyo.  For example, one very large German real estate fund says that their holdings in Tokyo are now “impossible to value” and they have suspended all customer withdrawals from the fund.

Once again, let us hope that a worst case scenario does not happen.  But if we do get to the point where most of the population had to be evacuated from Tokyo for an extended period of time it would be absolutely devastating for the global economy.

#5 The Price Of Oil

Most people believe that the U.S. dollar is the currency of the world, but really it is oil.  Without oil, the global economy that we have constructed simply could not function.

That is why it was so alarming when the price of oil went above $100 a barrel earlier this year for the first time since 2008.  Virtually everyone agrees that if the price of oil stays high for an extended period of time it will have a highly negative impact on the world economy.

In particular, the U.S. economy is highly, highly dependent on cheap oil.  This country is really spread out and we transport goods and services over vast distances.  That is why the following facts are so alarming….

*The average price of a gallon of gasoline in the United States is now 75 cents higher than it was a year ago.

*In San Francisco, California, the average price of a gallon of gasoline is now $3.97.

*According to the Oil Price Information Service, U.S. drivers spent an average of $347 on gasoline during the month of February, which was 30 percent more than a year earlier.

*According to the U.S. Energy Department, the average U.S. household will spend approximately $700 more on gasoline in 2011 than it did during 2010.

#6 Food Inflation

Many people believe that the rapidly rising price of food has been a major factor in sparking the revolutions that we have seen in Africa and the Middle East.  When people cannot feed themselves or their families they tend to lose it.

According to the United Nations, the global price of food hit a new all-time high earlier this year, and the UN is expecting the price of food to continue to go up throughout the rest of this year.  Food supplies were already tight around the globe and this is certainly not going to help things.

The price of food has also been going up rapidly inside the United States.  Last month the price of food in the United States rose at the fastest rate in 36 years.

American families are really starting to feel their budgets stretched.  According to the U.S. Labor Department, the cost of living in the United States hit a brand new all-time record high in the month of February.

What this means is that U.S. families are going to have less discretionary income to spend at the stores and that is bad news for the world economy.

#7 The European Sovereign Debt Crisis

Several European governments have had their debt downgraded in the past several months.  Portugal, Spain, Greece and Ireland are all in big time trouble.  Several other European nations are not far behind them.

Right now Germany seems content to bail the “weak sisters” in Europe out, but if that changes at some point it is going to be an absolute nightmare for world financial markets.

#8 The Dying U.S. Dollar

Right now there is a lot of anxiety about the U.S. dollar.  Prior to the tsunami, Japan was one of the primary purchasers of U.S. government debt.  In fact, Japan was the second-largest foreign buyer of U.S. Treasuries last year.

But now as Japan rebuilds from this nightmare it is not going to have capital to invest overseas.  Someone else is going to have to step in and buy up all of the debt that the Japanese were buying.

Not only that, but big bond funds such as PIMCO have announced that they are stepping away from U.S. Treasuries at least for now.

So if Japan is not buying U.S. Treasuries and bond funds such as PIMCO are not buying U.S. Treasuries, then who is going to be buying them?

The U.S. government needs to borrow trillions of dollars this year alone to roll over existing debt and to finance new debt.  All of that borrowing has got to come from somewhere.

#9 The U.S. Housing Market

The U.S. housing market could potentially be on the verge of another major crisis.  Just consider the following facts….

*In February, U.S. housing starts experienced their largest decline in 27 years.

*Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.

*Two years ago, the average U.S. homeowner that was being foreclosed upon had not made a mortgage payment in 11 months.  Today, the average U.S. homeowner that is being foreclosed upon has not made a mortgage payment in 17 months.

*In September 2008, 33 percent of Americans knew someone who had been foreclosed upon or who was facing the threat of foreclosure.  Today that number has risen to 48 percent.

#10 The Derivatives Bubble

Most Americans do not even understand what derivatives are, but the truth is that they are one of the biggest threats to our financial system.  Some experts estimate that the worldwide derivatives bubble is somewhere in the neighborhood of a quadrillion dollars.  This bubble could burst at any time.  Right now we are watching the greatest financial casino in the history of the globe spin around and around and around and everyone is hoping that at some point it doesn’t stop.  Today, most money on Wall Street is not made by investing in good business ideas.  Rather, most money on Wall Street is now made by making shrewd bets.  Unfortunately, at some point the casino is going to come crashing down and the game will be over.

Most people simply do not realize how fragile the global economy is at this point.

The financial crash of 2008 was a devastating blow.  The next wave of the economic crisis could be even worse.

So what will the rest of 2011 bring?

Well, nobody knows for sure, but a lot of experts are not optimistic.

David Rosenberg, the chief economist at Gluskin Sheff and Associates, is warning that the second half of the year could be very rough for the global economy….

The Economic Collapse

The Market-Ticker

Not everyone has been doing badly during the economic turmoil of the last few years.  In fact, there are some Americans that are doing really, really well.  While the vast majority of us struggle, there is one small segment of society that is seemingly doing better than ever.  This was reflected in a recent article on CNBC in which it was noted that companies that cater to average Americans are doing rather poorly right now while companies that market luxury goods and services are generally performing exceptionally well.  So why aren’t all American consumers jumping on the spending bandwagon?  Well, it seems that there are a large number of Americans who either can’t spend a lot of money right now or who are very hesitant to.  A stunningly high number of Americans are still unemployed, and for many other Americans, there is a very real fear that hard economic times will return soon.  On the other hand, there is a significant percentage of Americans who are blowing money on luxury goods and services as if the economy has fully turned around and it is time to let the good times roll.  So exactly what in the world is going on here?

Well, in 2010 life is very, very different depending on whether you are a “have” or a “have not”.  The recent article on CNBC referenced above described it this way….

Consumer spending in the U.S. has turned into a tale of two cities in 2010, with an entire segment of consumers splurging confidently on the finer things in life, while another segment, concerned about unemployment and with little or no discretionary income, spends only on bare necessities.

So why is this happening?

It is happening because the rich are getting richer and they have plenty of money to buy stuff and the poor are getting poorer and have less money to spend than ever.

In case you haven’t been paying attention over the past couple of decades, what we have in America today is a system that is designed to funnel as much wealth into the hands of the elite as possible.

This isn’t capitalism that we have in America in 2010.  Instead, what we have created is a system where the laws are set up so that the power elite and their big, dominant corporations always win. 

Why do you think so many of America’s largest corporations pay so little in taxes? 

Why do you think so many of them are showered with government subsidies, tax breaks and bailouts?

It’s not about competition anymore.

It’s about rigging the game in your favor.

The power elite and the giant corporations they control spend millions and millions on lobbying and campaign contributions and they expect a big return on that investment.

Let’s take a look at one example.  Many people think that Barack Obama and the Democrats are supposed to be anti-business, right?

Well then why are some of Barack Obama’s biggest donors the very same corporations that are receiving giant bailouts, making record profits and paying their employees billions in bonuses?

Goldman Sachs was Barack Obama’s second biggest donor.  Microsoft was number four.  Citigroup was number six.  JPMorgan Chase was number seven.  Time Warner was number eight.

Are you starting to get the picture?

Every single year, the U.S. Congress passes law after law after law that makes it easier for big corporations to dominate and makes it easier for the rich to get even richer.

America’s economy is not about competition anymore.

It is about eliminating competition.

And unfortunately for middle class Americans, the giant predator corporations that now dominate our economy are realizing that they don’t really need nearly as many American workers anymore.

Instead, they are slowly but surely shipping our jobs off to the other side of the world where workers are willing to work for about a tenth as much.

And yet we still run out to the “big box” stores and fill up our carts with a bunch of plastic crap made on the other side of the world by these giant corporations.

Meanwhile, those giant corporations are taking the profits they make out of our communities and they are taking our jobs and are shipping them overseas.

So in the final analysis, is it any wonder why the income inequality gap is growing?

Without small businesses having a legitimate chance to compete and without good jobs for American workers, the middle class in America is going to continue to get chewed up and spit out.

The following are 30 statistics that prove that the elite are getting richer, the poor are getting poorer and the middle class is being destroyed in 2010….

The Rich Are Getting Richer

1 - As of 2007, the top 1 percent of all Americans was taking home 24 percent of the national income.  This was a level that had not been seen since the days of the Great Depression.

2 – Incomes have been growing in the United States, but those at the very top of the pyramid have been gobbling up almost all of the income growth.  According to Harvard Magazine, 66% of the income growth between 2001 and 2007 went to the top 1% of all Americans.

3 – Even official government figures bear out the fact that the rich are getting richer.  An analysis of income-tax data by the Congressional Budget Office a few years ago found that the top 1% of all American households own nearly twice as much of the corporate wealth as they did just 15 years ago.

4- Most Americans have suffered during the last few years, but not the boys and girls down on Wall Street.  New York state Comptroller Thomas DiNapoli says that Wall Street bonuses for 2009 were up 17 percent when compared with 2008.

5 – Even as the number of Americans living in poverty skyrockets, the number of millionaires just keeps growing.  In fact, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million during 2009.

6 – The amount of money some of these Wall Street hotshots are making is incredible.  Back in 2005, the top 25 hedge fund managers earned a total of 9 billion dollars.  That would be bad enough, but even in these hard economic times the rich just keep getting richer.  One year after the recent financial collapse the top 25 hedge fund managers earned a total of approximately $25 billion.  That breaks down to an average of $1 billion each.  The truth is that the United States has been experiencing uneven prosperity for quite some time and things just seem to get worse with each passing year.

The Poor Are Getting Poorer

7 – Government anti-poverty programs are exploding in size in response to the recent economic difficulties.  USA Today is reporting that a record one in six Americans are now being served by at least one government anti-poverty program.

8 – Over 50 million Americans are on now Medicaid.  That figure is up more than 17 percent since the beginning of the recession.

9 – The number of Americans in the food stamp program rose to a new all-time record of 40.8 million in May.  That number is up almost 50 percent since the beginning of the recession.

10 – The number of Americans who cannot afford even the basic necessities is absolutely staggering.  A whopping 50 million Americans could not afford to buy enough food in order to stay healthy at some point over the last year.

11 – Compared to other industrialized nations, the United States is doing very poorly.  The U.S. poverty rate is now the third worst among the developed nations tracked by the Organization for Economic Cooperation and Development.

12 – The saddest part of this is what we are doing to our children.  According to one recent study, approximately 21 percent of all children in the United States are living below the poverty line in 2010. 

13 – But the American people cannot provide for their families if they don’t have jobs.  Today there are not nearly enough jobs for everyone.  In 2010, it takes the average unemployed American worker over 8 months to find a job.

14 – Approximately 10 million Americans are currently receiving unemployment insurance, which is a number that is nearly four times higher than what it was at back in 2007.

15 – The truth is that we are creating a permanent underclass of Americans that cannot get jobs.  The number of Americans receiving long-term unemployment benefits has increased over 60 percent in just the past year.

16 – Increasingly, the wealth of the United States is being held in fewer and fewer hands.  One study found that as of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.

17 – It is not a good time to be living in “the bottom half” in America.  The size of “the pie” being divided up among those at the low end of the wage scale is becoming really, really small.  In fact, the bottom 40 percent of all income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

The Middle Class Is Being Destroyed

18 – Even those Americans that still do have decent jobs are seeing their wealth fade rapidly.  For example, U.S. families have $6 trillion less in housing wealth than they did just three years ago.

19 – Home ownership used to be a sign that one had arrived in the middle class, but in 2010 an increasing number of Americans are finding out that they simply can’t afford their homes anymore.  One out of every seven mortgages were either delinquent or in foreclosure during the first quarter of 2010.

20 – The reality is that incomes have just not kept up with housing costs.  This has put an incredible amount of pressure on the middle class.  Just how much pressure?  Well, only the top 5 percent of all U.S. households have earned enough additional income to match the rise in housing costs since 1975.

21 – The debt binge middle class Americans have been on over the past couple of decades has drained many of them completely dry, and now more Americans than ever have bad credit scores.  Over 25 percent of Americans now have a credit score below 599, which means that they are a very bad credit risk.

22 – A rapidly rising number of Americans are actually choosing bankruptcy as a way out of their financial problems.  Nationwide, bankruptcy filings rose 20 percent in the 12 month period ending this past June 30th.

23 – The middle class manufacturing jobs that once defined so many American cities are rapidly disappearing.  Despite the fact that the U.S. population has dramatically increased, less Americans are employed in manufacturing today than in 1950.

24 – These days it seems like almost everyone is looking for a good job, but very few people are finding them.  According to one recent survey, 28% of all U.S. households have at least one member that is looking for a full-time job.

25 – Even many of those Americans that still have decent jobs have been hit hard by this economic downturn.  A recent Pew Research survey found that 55 percent of the U.S. labor force has experienced either unemployment, a pay decrease, a reduction in hours or an involuntary move to part-time work since the recession began.

26 – The number of jobs that are evaporating is absolutely stunning.  According to one analysis, the United States has lost a total of 10.5 million jobs since 2007.

27 – So where are the jobs going?  It doesn’t take a genius to figure it out.  China’s trade surplus (much of it with the United States) climbed 140 percent in June compared to a year earlier.

28 – The truth is that “globalism” and “free trade” have put middle class American workers in direct competition with the cheapest labor in the world.  This is what middle class American workers must now compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.

29 – Due to these difficult economic conditions, the middle class is being squeezed as never before.  According to a poll taken in 2009, 61 percent of Americans ”always or usually” live paycheck to paycheck.  That was up significantly from 49 percent in 2008 and 43 percent in 2007.

30 – So what kind of future do our young people have in front of them?  Unfortunately, things don’t look pretty.  Many fresh college graduates can’t even get a job that will allow them to be independent.  One recent survey of last year’s college graduates discovered that 80 percent moved right back home with their parents after graduation.  That was up significantly from 63 percent in 2006.

The Economic Collapse

For middle class Americans, the new global economy has provided mountains of cheap products made in China, India and dozens of other nations, but it has also killed the goose that laid the golden egg.  Millions of American workers have been discovering that the price for all of those inexpensive foreign-made goodies is their jobs.  Now we have so many long-term unemployed workers in the United States that we are inventing new terms (such as “the 99ers”) to describe them.  Unemployment is on the rise again (we’ll get to the figures in a minute) and everyone seems perplexed at the continuing inability of the “greatest economy in the world” to provide jobs for everyone.  But the truth is that this has been coming for a long time.  The debt-fueled prosperity of the past couple of decades allowed us to live far beyond our means and provide very high levels of employment for a while, but now economic reality is setting in.  The millions of middle class jobs that have been shipped overseas are never coming back.  Unfortunately, the existence of a large class of chronically unemployed Americans that are struggling just to survive is going to quickly become “the new normal”.

This week the U.S. Labor Deparment announced that for the week ending August 14th, new applications for unemployment insurance benefits reached the half-million mark.  That was the first time since last November that the psychologically important 500,000 threshold had been hit.  Most economists had predicted that unemployment claims would actually decline, but instead they experienced their fourth increase in the past five weeks.

But the increase in new applications for unemployment benefits is only part of the story.  It is not such a bad thing to be unemployed if you can find another job in a couple of weeks or a couple of months.  But in 2010, there are millions of Americans that cannot seem to find a job no matter what they do month after month after month.

In fact, the number of Americans that have exhausted their state unemployment benefits and that are collecting long-term federal unemployment benefits has increased 60 percent over the past year.  The following is how a recent article on CNBC recently described the situation….

“Claimants under the Emergency Unemployment Compensation provision—who have exhausted their state benefits—surged 260,105 to 4,753,456 for the week ended July 31 (the data lags the weekly claims by two weeks). While that represents a weekly increase of 0.5 percent, the total is 60.5 percent higher than the 2009 figure of 2,961,457.”

So what will the figure be at this time next year?

6 million?

7 million?

And what happens if the U.S. Congress finally decides to cut off the long-term unemployment benefits at some point?

The truth is that things are getting really frightening out there.

“There’s a red flag being waved right now that says ‘Danger,’” Bloomberg quoted Mark Vitner, a senior economist at Wells Fargo Securities LLC as saying recently. “Growth is going to slow in the second half and we might face something a little more ominous than that.”

The reality is that there are not nearly enough jobs out there for everyone.  According to one recent survey, 28% of U.S. households have at least one member that is looking for a full-time job.

Just think about that.

Almost 30 percent of all U.S. homes have someone who is looking for a full-time job.

That is not just a problem.

That is a national crisis.

But it is not just those who are unemployed who are suffering.  The reality is that this economic downturn has hurt most of us in one way or another.  A recent Pew Research survey found that 55 percent of the U.S. labor force has experienced either unemployment, a pay decrease, a reduction in hours or an involuntary move to part-time work since the recession began.

Millions of Americans are putting up with increased workloads, pay decreases and benefit cuts right now because the alternative is joining the hordes of jobless Americans that are fighting tooth and nail over the few jobs that are actually available. 

Once you lose your job in this economy there is no telling when you are going to be able to get another one.  In America today, the average time needed to find a job has risen to a record 35.2 weeks.

Could you imagine being unemployed for 35 weeks?

The truth is that in 2010, it is employers that have all the power and all the leverage.

In fact, when you really analyze it, it is a wonder that companies are hiring new workers at all.  It is a massive pain in the rear end to hire a new worker in America today.  The thousands upon thousands of regulations that must be complied with, the big pile of forms that need to be filled out and the elaborate bookkeeping that must be maintained make hiring someone a major headache.  One top of that, tax contributions, benefit packages and health insurance premiums make each worker a very expensive proposition.

There is a reason why so many companies are trying to squeeze more out of the employees that they already have or are only hiring temporary employees right now.

But the biggest reason why there is such a lack of jobs is because millions upon millions of good jobs have been shipped overseas.  Globalism and “free trade” have put middle class American workers into a situation where they are in direct competition for jobs against the cheapest labor in the world.

Why in the world should U.S. companies hire American workers when they can hire very willing workers on the other side of the world who will do the same job for less than one-tenth the cost?

Those who once warned us about “the great sucking sound” that globalism would create were right, and the truth is that the U.S. has already been bleeding good jobs for years.  According to one analysis, the United States has lost 10.5 million jobs since 2007, and the truth is that unless something is done things are going to get even worse.

But what can get lost in all of these statistics is the very real pain that so many millions of Americans are now experiencing.

Losing a job and watching everything that you have worked for crumble can be extremely soul crushing.  In fact, this economy is pushing some Americans completely over the edge.

The following is an excerpt from an actual letter to U.S. Representative Anthony Weiner….

“My dad, S, killed himself March 16, 2009 because he ran out of money and could not find work. My whole family had been devastated by the economy. He was 61 years old and could not take it anymore. He could not figure out how to keep the electric on, buy food, or keep a roof over his head. A day before his electric was to be shut off, and 2 weeks away from eviction, my dad took the hardest walk of his life. He left a note on the dining room table for my sister and I. His suicide letter said ‘I love you. I had to do this. I ran out of money. I wish you both luck in your lives’. He left the door unlocked with the door key left in the lock. He carefully laid out two suits for us to pick from to bury him in.”

Could you imagine if that was your father?

As the economy continues to deteriorate, many more Americans are going to be pushed to the edge of despair.

Life is not about paying our bills or about the things that we own, but there is no denying the pain that comes when you run completely out of money and you feel totally helpless.

But nobody should ever give up.  There is always hope.  Things can always be turned around.

Unfortunately, we have entered a time when there are always going to be a large number of unemployed Americans because there are just not nearly enough jobs to go around.

Anyone who thought that we could merge American workers into a massive global labor pool and still be able to maintain our middle class lifestyles was living in fantasy land. 

No, the truth is that globalism has killed the goose that laid the golden egg and now tens of millions of Americans are going to pay the price.

The Economic Collapse