Forum Post: Naked Capitalism: Ian Welsh on Economy

September 4, 2012

Ian Welsh: Some basics on the economy By Ian Welsh, cross posted from IanWelsh.net.

1) the majority of new jobs are bad.

2) the economy has still not recovered all lost jobs, either in absolute #s or as a percentage of the population

3) so there are fewer jobs, and what new jobs have been created are worse. They pay worse.

4) The upper middle class job market has recovered, which is why those folks are no longer panicking and are telling you that the economy isn’t so bad as all that.

5) the failure to force the rich to take their losses and to break up the banks means that the same people who caused the 2007/8 financial crisis still control the economy and the government.

6) failure to restructure the economy to get off oil and over to an electrical economy means that the US (and the world) are caught in the oil price dilemna: any real recovery increases oil price and will be derailed by those high oil prices.

7) Europe, ex. Germany, is in recession.

8 ) the developed world is in depression, it never left depression.  During depressions there are recoveries (such as they are) and recessions, but the overall economy is in depression.

9) China’s economy is slowing down.  Since China is the main engine of the world economy, followed by the US, this is really bad.  If it goes into an actual recession, bend over and kiss your butt goodbye.

10) Austerity is a means by which the rich can buy up assets which are not normally on the market for cheap.

11) the wealth of the rich and major corporations has recovered and in many countries exceeded its prior highs.  They are doing fine. Austerity is not hurting them. They control your politicians.  The depression will not end until it is in their interest for it to do so, or their wealth and power is broken.

12) The US play is as follows: frack. Frack some more.  Frack even more.  They are trying the Reagan play, temporize while new supplies of hydrocarbons come on line.  Their bet is that they’ll get another boom out of that.  If they’re right, it’ll be a lousy boom.  If they’re wrong (and the Saudis think they are, and the Saudis have been eating their lunch since 2001) then you won’t even get that.  Either way, though, they’ll devastate the environment, by which I mean the water you drink and grow crops with.

13) For people earning less than about 80K, the economy never really recovered.

14) If you’re out of work more than 2 months your odds of getting another job drop through the floor.  If you do get one, odds are it will pay much less than your previous job.

15) Canada is undergoing austerity madness at all levels of government, and the corporations, with historically low tax rates, are not going to spend either. With Chinese demand for commodities dropping, expect a nasty recession.

16) Australia, having tied itself completely to China is about to reap the downside of that decision.

17) Wages are being systematically broken in the developed world.  The rich do not believe they need you, except as wage-slave labor.  You will all be company store slaves, paying rental streams to everyone to be allowed to continued to eke out a miserable existence.

18) Since the US sells protected works (so called “intellectual property”) you will continue to see a massive attempt to break anyone who doesn’t pay IP rent to the US.  Some countries (Sweden, Germany, among others) are going along.  But there are signs of rebellion.  Apple may have won against Samsung in their ridiculous attempt to enforce patents on obvious solutions, but both Japanese and Korean courts threw the cases out.  Paying rent to America, the hegemon, when the world system is working is one thing, paying rent when the world isn’t working is another.

19) Stirling Newberry says, and I agree, that none of this is stable, but it will last as long as the majority of the baby boom, the silents and a good chunk of the Xers still think they can hang on to their little piece of the pie, and screw everyone else.  It will most likely break down in 2020/24, which is when the demographics turn.  Young people today are completely screwed, they have astronomical student loans, no or shitty jobs, can’t afford a house and can’t afford to start a family.  Note that the places where revolutions, peaceful or otherwise, are happening, are places where the majority of the population is young.  Latin America, the Middle East.

Addendum

20) The economic numbers you hear don’t mean squat. Headline inflation does not matter, ask yourself instead “what are my fixed expenses?”  Start with food.  Jobless claims #s cannot be compared to prior numbers because less people have the sorts of jobs that let you make those claims.  For the #s to make sense you’d have to adjust them for the reduced # of jobs which allow claims.  The unemployment rate has dropped even though there are, in absolute terms, less jobs, because people have given up looking.

21) The money the Fed floods into the financial markets (quantitative easing, among others) is mostly NOT getting to ordinary people, and whatever Bernanke and his apologists say, it was never intended to.  It is intended to prop up financial actors, and keep the rich richer.  It has done what it is supposed to do.

Read more at http://www.nakedcapitalism.com/2012/09/some-basics-on-the-economy.html

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