Posts tagged wages
By Peter Schiff
Friday, April 4, 2014
Meet “Lowflation”: Deflation’s Scary Pal
In recent years a good part of the monetary debate has become a simple war of words, with much of the conflict focused on the definition for the word “inflation.” Whereas economists up until the 1960′s or 1970′s mostly defined inflation as an expansion of the money supply, the vast majority now see it as simply rising prices. Since then the “experts” have gone further and devised variations on the word “inflation” (such as “deflation,” “disinflation,” and “stagflation”). And while past central banking policy usually focused on “inflation fighting,” now bankers talk about “inflation ceilings” and more recently “inflation targets”. The latest front in this campaign came this week when Bloomberg News unveiled a brand new word: “lowflation” which it defines as a situation where prices are rising, but not fast enough to offer the economic benefits that are apparently delivered by higher inflation. Although the article was printed on April Fool’s Day, sadly I do not believe it was meant as a joke.
Up until now, the inflation advocates have focused their arguments almost exclusively on the apparent dangers of “deflation,” which they define as falling prices. Despite reams of evidence that show how an economy can thrive when prices fall, there is now a nearly universal belief that deflation is an economic poison that works its mischief by convincing consumers to delay purchases. For example, in a scenario of 1% deflation, a consumer who wants a $1,000 refrigerator will postpone her purchase if she expects it will cost only $990 in a year. Presumably she will just make do with her old fridge, or simply refrain from buying perishable items for a year to lock in that $10 savings. If she expects the cost of the refrigerator to decline another 1% in the following year, the purchase will be again put off. If deflation persists indefinitely they argue that she will put off the purchase indefinitely, perhaps living exclusively on dried foods while waiting for refrigerator prices to hit zero.
Economists extrapolate this to conclude that deflation will destroy aggregate demand and force the economy into recession. Despite the absurdity of this argument (people actually tend to buy more when prices fall), at least there is a phantom bogeyman for which to conjure phony terror. Low inflation (below 2%) is even harder to demonize. Few have argued that it has the same demand killing dynamics as deflation, but many say that it should be avoided simply because it is too close to deflation. Given their feeling that even a brief bout of minor deflation could lead to a catastrophic negative spiral, they argue for a prudent buffer of 2% inflation or more. But the writer of the Bloomberg piece, the London-based Simon Kennedy, quotes people in high positions in the financial establishment who offer new arguments as to why “lowflation” (as he calls it) is a “threat” in and of itself. And although the article was primarily concerned with Europe, you can be sure that these arguments will be applied soon to the situation in the United States.
The piece correctly notes that those struggling with high debt tend to welcome high rates of inflation. The math is simple. By diminishing the value of money, inflation benefits borrowers at the expense of lenders. By repaying with money of lesser value, the borrowers partially default, even when paying in full. The biggest borrowers in Europe (and the United States for that matter) are heavily indebted governments and the overly leveraged financial sector. Should it come as a surprise that they are the leading advocates for inflation? The writer admits that higher inflation will help these interests manage their debt burdens and in the case of the financial sector, profit from the increased lending that low interest rates and quantitative easing encourage.
On the other side of the ledger are the consumers, the savers, and the retirees. These groups want lower prices and higher rates of interest on their accumulated capital. Such a combination will lead to higher living standards for those who have worked and saved for many years in order to enjoy the fruits of their efforts. But these types of people are simply not on the “must call” list for our best and brightest economic journalists. As a result, we only get one side of the story.
The article also points out that higher inflation gives businesses more flexibility to retain workers in periods of weak growth. The argument is that if sales revenue falls, companies will not be able to lower wages, and will instead resort to layoffs to maintain their profitability. However, this is only true in cases involving labor union contracts or minimum wage workers. In all other cases, business could reduce wages in lieu of layoffs. Plus, if prices for consumer goods are also falling, real wages may not even decline as a result of the cuts.
In circumstances where wages cannot be legally reduced, as is the case for unionized or minimum wage workers, layoffs are often the employer’s only option for keeping costs in line with revenue. However, inflation allows employers to do an end run around these obstacles. In an inflationary environment, rising prices compensate for falling sales. The added revenue allows employers to hold nominal wage costs steady, even when the raw amount of goods or services they sell declines. When inflation rages, higher skilled workers will often demand, and receive, pay raises. But low-skilled workers, who lack such leverage, are usually left holding the bag.
In other words, politicians can impose a high minimum wage to pander to voters, but then count on inflation to lower real labor costs, thereby limiting the unemployment that would otherwise result. So what the government openly gives with one hand, it secretly takes away with the other. Workers vote for politicians who promise higher wages, but those same politicians also create the inflation that negates the real value of the increase. But while government takes the credit for the former, it never assumes responsibility for the latter. The same analysis applies to labor unions. Based upon political protection offered by friendly officials, unions can secure unrealistic pay hikes for their members. But the same governments then work to reduce the real value of those increases to keep their employers in business.
Of course, what the Bloomberg writer was really arguing is that governments need inflation to bail themselves out of the policy mistakes they make to secure votes. But two wrongs never make a right. The correct policy would be to run balanced budgets rather than incur debts that can only be repaid with the help of inflation. On the labor front, the better policy would be to abolish the minimum wage and the special legal protections offered to labor unions, rather than papering over the adverse consequences of bad policies with inflation.
So be on the lookout for any more hand-wringing over the supposed dangers of lowflation. The noise will simply be an effort to convince you that what’s bad for you is actually good. And although it’s an audacious piece of propaganda to even attempt, the lack of critical awareness in the media gives it a fighting chance for success.
Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital, best-selling author and host of syndicated Peter Schiff Show.
Order your copy of Peter Schiff’s latest book, How an Economy Grows and Why It Crashes.
DRAMA Fry Cook Shifted to Part-Time Work Confronts Obama
During a Google Hangout session last week Friday, fry cook Darnell Summers told President Obama that his hours were cut due to the Affordable Care Act. “We were broken down to part time to avoid paying health insurance,” he said. Summers explained that he makes $7.25 an hour and has been on strike four times seeking a wage increase. “We can’t survive, it’s not livin’,” he said.
Obama responded by babbling that states should increase the minimum wage. “I am working to encourage states, governors, mayors, state legislators to raise their own minimum wage,” Obama said. “Obviously, the way to reach millions of people would be for Congress to pass a new federal minimum wage law. So far, at least, we have not seen support from Republicans for such a move.”
Got that? Summers got his hours cut from full time to part time because of the increased costs of Obamacare that his employer faced and Obama’s solution is to call for a higher minimum wage, which would even add greater cost to the employer.
(Via National Review)
By Hunter Lewis
Obama Doubles Down On Destroying The Economy
Is the president really this ignorant of business and economics?
Telling American employers to raise their wages sounds innocent enough. But it ceases to be innocent when people lose their jobs as a result of it.
In his State of the Union address, the president called for higher minimum state and federal wages and added: “ I ask… America’s business leaders to…raise your employees’s wages.”
This is not the first time a president has made this “request” of employers.
After the stock market crash of 1929, President Hoover began talking about wages. They needed to be protected from cuts, he said, and preferably increased, so that consumer demand would increase. More consumer demand would supposedly get the economy through the storm.
As the economy sputtered and prices began to fall, the president acted on his pet theory. He began lobbying businesses not to reduce wages. He did more than lobby. He sent a clear signal that if his directive was ignored, the government might step in and legislate wages.
Businesses listened. But they also had their backs against a wall. With consumer prices falling, wage reductions were needed to protect profits. Without profits, a business fails and everyone loses their job.
Faced with this reality, but afraid to make any reduction in wages, businesses did the only thing they could do to try to stay afloat: they cut jobs. Millions were thrown out of work who might have kept their jobs at reduced pay but for Hoover’s intervention.
When the new Roosevelt administration came in, it embraced the same bogus economic theory. Both prices and wages were tightly controlled by the National Recovery Act. In a famous incident, a New Jersey immigrant worker, Jacob Maged, was sentenced to jail for three months on a charge of pressing a suit for 35 cents instead of the legislatively required 40 cents.
These policies had the paradoxical effect of making some Americans newly affluent even while throwing millions out of work. Since prices had fallen sharply, those who kept their jobs at the old wages could in many cases buy twice as much with the same money.
The Hoover/Roosevelt/ Obama policy meant that some got a windfall; others got destitution. Economic inequality sharply worsened. In general, the Roosevelt administration’s most powerful supporters, labor unions, saw to it that their members did not lose jobs, while those without unions were the ones laid off.
It is noteworthy that the same thing happened when the Obama administration bailed out General Motors. The non-unionized workers, even those in the most efficient plants, lost everything: jobs and retirement benefits. Unionized workers allied with the president kept both.
In the same State of the Union speech, the president did not just ask employers to raise wages. He also required them to pay a higher minimum wage if they had a federal contract. Hearing this, employers can only wonder what further wage controls will be proposed next.
If more federal wage controls do come, it is not even clear that lay-offs could be used as they were in the 1930’s to save businesses from closing. Economist Paul Krugman has proposed federal controls on the right to lay-off or fire workers. The president himself has proposed giving workers the right to sue if they apply for a job and are turned down.
The economy itself provides sufficent reason to be cautious about hiring. The Federal Reserve’s low interest rate policy and regulatory rules make it very difficult to persuade a bank to finance expansion. And Obamacare creates a strong disincentive to hire the 50th employee.
With all this in the background, why would any employer in 2014 hire a new worker if not absolutely necessary? This is especially true for small businesses, and small businesses have always been the chief source of new jobs.
This is all part of a larger picture. To thrive, an economy needs free prices. Free prices not only provide the truthful signals that producers and consumers need in order to make good decisions. They also provide the discipline that any economic system requires.
The Soviet Union’s collapse was an object lesson for the world. No system can survive in the long run without free prices, and wages are among the most important prices.
The Obama administration’s whole approach is to try to substitute government regulation for the private price system. As a result, we only have “engineered” prices left on Wall Street and in medicine, and both finance and medicine are in grave jeopardy as a direct result.
Fixing the economy is not all that difficult. All we have to do is let producers and consumers sort out prices together and the engine of job growth will start up. Meanwhile the present administration offers one initiative after another guaranteed to keep the middle class and especially the poor in a state of economic hopelessness.
Image credit: http://www.againstcronycapitalism.org
About Hunter Lewis
Hunter Lewis is co-founder of AgainstCronyCapitalism.org. He is co-founder and former CEO of global investment firm Cambridge Associates, LLC and author of 8 books on moral philosophy, psychology, and economics, including the widely acclaimed Are the Rich Necessary? (“Highly provocative and highly pleasurable.”—New York Times) He has contributed to the New York Times, the Times of London, the Washington Post, and the Atlantic Monthly, as well as numerous websites such as Breitbart.com, Forbes.com, Fox.com, and RealClearMarkets.com. His most recent books are Crony Capitalism in America: 2008–2012, Free Prices Now! Fixing the Economy by Abolishing the Fed, and Where Keynes Went Wrong: And Why Governments Keep Creating Inflation, Bubbles, and Busts. He has served on boards and committees of fifteen leading not-for-profit organizations, including environmental, teaching, research, and cultural and global development organizations, as well as the World Bank.
By Ron Paul
Government Policies Hurt Low-Wage Workers
Fast-food workers across the county have recently held a number of high profile protests to agitate for higher wages. These protests have been accompanied by efforts to increase the wages mandated by state and local minimum wage laws, as well as a renewed push in some states and localities to pass “living wage” laws. President Obama has proposed raising the federal minimum wage to ten dollars an hour.
Raising minimum wages by government decree appeals to those who do not understand economics. This appeal is especially strong during times of stagnant wages and increased economic inequality. But raising the minimum wage actually harms those at the bottom of the income ladder. Basic economic theory teaches that when the price of a good increases, demand for that good decreases. Raising the minimum wage increases the price of labor, thus decreasing the demand for labor. So an increased minimum wage will lead to hiring freezes and layoffs. Unskilled and inexperienced workers are the ones most often deprived of employment opportunities by increases in the minimum wage.
Minimum wage laws are not the only example of government policies that hurt those at the bottom of the income scale. Many regulations that are promoted as necessary to “rein in” large corporations actually hurt small businesses. Because these small businesses operate on a much narrower profit margin, they cannot as easily absorb the costs of complying with the regulations as large corporations. These regulations can also inhibit lower income individuals from starting their own businesses. Thus, government regulations can reduce the demand for wage-labor, while increasing the supply of labor, which further reduces wages.
Perhaps the most significant harm to low-wage earners is caused by the inflationist polices of the Federal Reserve. Since its creation one hundred years ago this month, the Federal Reserve’s policies have caused the dollar to lose over 95 percent of its purchasing power—that’s right, today you need $23.70 to buy what one dollar bought in 1913! Who do you think suffers the most from this loss of purchasing power—Warren Buffet or his secretary?
It is not just that higher incomes can afford the higher prices caused by Federal Reserve. The system is set up in a way that disadvantages those at the bottom of the income scale. When the Federal Reserve creates money, those well-connected with the political and financial elites receive the newly-created money first, before general price increases have spread through the economy. And most fast-food employees do not number among the well-connected.
It is not a coincidence that economic inequality has increased in recent years, as the Federal Reserve has engaged in unprecedented money creation and bailouts of big banks and Wall Street financial firms. As billionaire investor Donald Trump has said, the Federal Reserve’s quantitative easing policies are a great deal for “people like me.” And former Federal Reserve official Andrew Huszar has called QE “the greatest backdoor Wall Street bailout of all time.”
Many so-called champions of economic equality and fairness for the working class are preparing to confirm Janet Yellen as next Chairman of the Federal Reserve. Yet Yellen is committed to continuing and even expanding, the upward redistributionist polices of her predecessors. Washington could use more sound economic thinking and less demagoguery.
By increasing unemployment, government policies like minimum wage laws only worsen inequality. Those who are genuinely concerned about increasing the well-being of all Americans should support repeal of all laws, regulations, and taxes that inhibit job creation and economic mobility. Congress should also end the most regressive of all taxes, the inflation tax, by ending the Federal Reserve.
The State Causes the Poverty It Later Claims to Solve
If one looks at the current paper money system and its negative social and social-political effects, the question must arise: where are the protests by the supporters and protectors of social justice? Why don’t we hear calls to protest from politicians and social commentators, from the heads of social welfare agencies and leading religious leaders, who all promote the general welfare as their mission?
Presumably, the answer is that many have only a weak understanding of the role of money in an economy with a division of labor, and for that reason, the consequences of today’s paper money system are being widely overlooked.
The current system of fractional reserve banking and central banking stands in stark opposition to a market economy monetary regime in which the market participants could decide themselves, without state pressure or coercion, what money they want to use, and in which it would not be possible for anyone to expand the money supply because they simply choose to do so.
The expansion of the money supply, made possible through central banks and fractional reserve banking, is in reality what allows inflation, and thus, declining income in real terms. In The Theory of Money and Credit Ludwig von Mises wrote:
The most important of the causes of a diminution in the value of money of which we have to take account is an increase in the stock of money while the demand for it remains the same, or falls off, or, if it increases, at least increases less than the stock. … A lower subjective valuation of money is then passed on from person to person because those who come into possession of an additional quantity of money are inclined to consent to pay higher prices than before.
When there are price increases caused by an expansion of the money supply, the prices of various goods and services do not rise to the same degree, and do not rise at the same time. Mises explains the effects:
While the process is under way, some people enjoy the benefit of higher prices for the goods or services they sell, while the prices of the things they buy have not yet risen or have not risen to the same extent. On the other hand, there are people who are in the unhappy situation of selling commodities and services whose prices have not yet risen or not in the same degree as the prices of the goods they must buy for their daily consumption.
Indeed, in the case of the price of a worker’s labor (i.e., his or her wages) increasing at a slower rate than the price of bread or rent, we see how this shift in the relationship between income and assets can impoverish many workers and consumers.
An inflationary money supply can cause impoverishment and income inequality in a variety of ways:
1. The Cantillon Effect
The uneven distribution of price inflation is known as the Cantillon effect. Those who receive the newly created money first (primarily the state and the banks, but also some large companies) are the beneficiaries of easy money. They can make purchases with the new money at goods prices that are still unchanged. Those who obtain the newly created money only later, or do not receive any of it, are harmed (wage-earners and salaried employees, retirees). They can only buy goods at prices which have, in the meantime, risen.
2. Asset Price Inflation
Investors with greater assets can better spread their investments and assets and are thus in a position to invest in tangible assets such as stocks, real estate, and precious metals. When the prices of those assets rise due to an expansion of the money supply, the holders of those assets may benefit as their assets gain in value. Those holding assets become more wealthy while people with fewer assets or no assets either profit little or cannot profit at all from the price increases.
3. The Credit Market Amplifies the Effects
The effects of asset price inflation can be amplified by the credit market. Those who have a higher income can carry higher credit in contrast to those with lower income, by acquiring real estate, for example, or other assets. If real estate prices rise due to an expansion of the money supply, they may profit from those price increases and the gap between rich and poor grows even faster.
4. Boom and Bust Cycles Create Unemployment
The direct cause of unemployment is the inflexibility of the labor market, caused by state interference and labor union pressures. An indirect cause of unemployment is the expansion of the paper money supply, which can lead to illusory economic booms that in turn lead to malinvestment. Especially in inflexible labor markets, when these malinvestments become evident in a down economy, it ultimately leads to higher and more lasting unemployment that is often most severely felt among the lowest-income households.
The State Continues to Expand
Once the gap in income distribution and asset distribution has been opened, the supporters and protectors of social justice will more and more speak out, not knowing (or not saying) that it is the state itself with its monopolistic monetary system that is responsible for the conditions described.
It’s a perfidious “business model” in which the state creates social inequality through its monopolistic monetary system, splits society into poor and rich, and makes people dependent on welfare. It then intervenes in a regulatory and distributive manner, in order to justify its existence. The economist Roland Baader observed:
The political caste must prove its right to exist, by doing something. However, because everything it does, it does much worse, it has to constantly carry out reforms, i.e., it has to do something, because it did something already. It would not have to do something, had it not already done something. If only one knew what one could do to stop it from doing things.
The state even exploits the uncertainty in the population about the true reasons for the growing gap in income and asset distribution. For example, The Fourth Poverty and Wealth Report of the German Federal Government states that since 2002, there has been a clear majority among the German people in favor of carrying out measures to reduce differences in income.
The reigning paper money system is at the center of the growing income inequality and expanding poverty rates we find in many countries today. Nevertheless, states continue to grow in power in the name of taming the market system that has supposedly caused the impoverishment actually caused by the state and its allies.
If those who claim to speak for social justice do nothing to protest this, their silence can only have two possible reasons. They either don’t understand how our monetary system functions, in which case, they should do their research and learn about it; or they do understand it and are cynically ignoring a major source of poverty because they may in fact be benefiting from the paper money system themselves.
About the Author
Andreas Marquart is executive director of the Ludwig von Mises Institute Germany. He has been an independent financial consultant for more than 15 years and is a proponent of the Austrian School of economics. See Andreas Marquart’s article archives.
Image credit: https://mises.org
37 Reasons Why “The Economic Recovery Of 2013″ Is A Giant Lie
“If you repeat a lie often enough, people will believe it.” Sadly, that appears to be the approach that the Obama administration and the mainstream media are taking with the U.S. economy. They seem to believe that if they just keep telling the American people over and over that things are getting better, eventually the American people will believe that it is actually true. On Friday, it was announced that the unemployment rate had fallen to “7 percent”, and the mainstream media responded with a mix of euphoria and jubilation. For example, one USA Today article declared that “with today’s jobs report, one really can say that our long national post-financial crisis nightmare is over.” But is that actually the truth? As you will see below, if you assume that the labor force participation rate in the U.S. is at the long-term average, the unemployment rate in the United States would actually be 11.5 percent instead of 7 percent. There has been absolutely no employment recovery. The percentage of Americans that are actually working has stayed between 58 and 59 percent for 51 months in a row. But most Americans don’t understand these things and they just take whatever the mainstream media tells them as the truth.
And of course the reality of the matter is that we should have seen some sort of an economic recovery by now. Those running our system have literally been mortgaging the future in a desperate attempt to try to pump up our economic numbers. The federal government has been on the greatest debt binge in U.S. history and the Federal Reserve has been printing money like crazed lunatics. All of that “stimulus” should have had some positive short-term effects on the economy.
Sadly, all of those “emergency measures” do not appear to have done much at all. The percentage of Americans that have a job has stayed remarkably flat since the end of 2009, median household income has fallen for five years in a row, and the rate of homeownership in the United States has fallen for eight years in a row. Anyone that claims that the U.S. economy is experiencing a “recovery” is simply not telling the truth. The following are 37 reasons why “the economic recovery of 2013″ is a giant lie…
#1 The only reason that the official unemployment rate has been declining over the past couple of years is that the federal government has been pretending that millions upon millions of unemployed Americans no longer want a job and have “left the labor force”. As Zero Hedge recently demonstrated, if the labor force participation rate returned to the long-term average of 65.8 percent, the official unemployment rate in the United States would actually be 11.5 percent instead of 7 percent.
#2 The percentage of Americans that are actually working is much lower than it used to be. In November 2000, 64.3 percent of all working age Americans had a job. When Barack Obama first entered the White House, 60.6 percent of all working age Americans had a job. Today, only 58.6 percent of all working age Americans have a job. In fact, as you can see from the chart posted below, there has been absolutely no “employment recovery” since the depths of the last recession…
#3 The employment-population ratio has now been under 59 percent for 51 months in a row.
#4 There are 1,148,000 fewer Americans working today than there was in November 2006. Meanwhile, our population has grown by more than 16 million people during that time frame.
#5 The “inactivity rate” for men in their prime working years (25 to 54) has just hit a brand new all-time record high. Does this look like an “economic recovery” to you?…
#6 The number of working age Americans without a job has increased by a total of 27 million since the year 2000.
#9 Only about 47 percent of all adults in America have a full-time job at this point.
#10 The ratio of wages to corporate profits in the United States just hit a brand new all-time low.
#11 It is hard to believe, but in America today one out of every ten jobs is now filled by a temp agency.
#12 Approximately one out of every four part-time workers in America is living below the poverty line.
#13 In this economic environment, there is intense competition even for the lowest paying jobs. Wal-Mart recently opened up two new stores in Washington D.C., and more than 23,000 people applied for just 600 positions. That means that only about 2.6 percent of the applicants were ultimately hired. In comparison, Harvard offers admission to 6.1 percent of their applicants.
#14 According to the Social Security Administration, 40 percent of all U.S. workers make less than $20,000 a year.
#15 When Barack Obama took office, the average duration of unemployment in this country was 19.8 weeks. Today, it is 37.2 weeks.
#16 According to the New York Times, long-term unemployment in America is up by 213 percent since 2007.
#17 Thanks to Obama administration policies which are systematically killing off small businesses in the United States, the percentage of self-employed Americans is at an all-time low today.
Bush Sr.: 11.3
Bush Jr.: 10.8
#19 According to the U.S. Census Bureau, median household income in the United States has fallen for five years in a row.
#20 The rate of homeownership in the United States has fallen for eight years in a row.
#21 Back in 1999, 64.1 percent of all Americans were covered by employment-based health insurance. Today, only 54.9 percent of all Americans are covered by employment-based health insurance, and thanks to Obamacare millions more Americans are now losing their health insurance plans.
#23 Total consumer credit has risen by a whopping 22 percent over the past three years.
#24 In 2008, the total amount of student loan debt in this country was sitting at about 440 billion dollars. Today, it has shot up to approximately a trillion dollars.
#25 Under Barack Obama, the velocity of money (a very important indicator of economic health) has plunged to a post-World War II low.
#26 Back in the year 2000, our trade deficit with China was 83 billion dollars. In 2008, our trade deficit with China was 268 billion dollars. Last year, it was 315 billion dollars. That was the largest trade deficit that one nation has had with another nation in world history.
#27 The gap between the rich and the poor in the United States is at an all-time record high.
#28 Right now, 1.2 million students that attend public schools in the United States are homeless. That is a brand new all-time record high, and that number has risen by 72 percent since the start of the last recession.
#29 When Barack Obama first entered the White House, there were about 32 million Americans on food stamps. Today, there are more than 47 million Americans on food stamps.
#30 Right now, approximately one out of every five households in the United States is on food stamps.
#31 According to the Survey of Income and Program Participation conducted by the U.S. Census, well over 100 million Americans are enrolled in at least one welfare program run by the federal government.
#32 In 2000, the U.S. government spent 199 billion dollars on Medicaid. In 2008, the U.S. government spent 338 billion dollars on Medicaid. In 2012, the U.S. government spent 417 billion dollars on Medicaid, and now Obamacare is going to add tens of millions more Americans to the Medicaid rolls.
#33 In 2000, the U.S. government spent 219 billion dollars on Medicare. In 2008, the U.S. government spent 462 billion dollars on Medicare. In 2012, the U.S. government spent 560 billion dollars on Medicare, and that number is expected to absolutely skyrocket in the years ahead as the Baby Boomers retire.
#34 According to the most recent numbers from the U.S. Census Bureau, an all-time record high 49.2 percent of all Americans are receiving benefits from at least one government program.
#35 The U.S. government has spent an astounding 3.7 trillion dollars on welfare programs over the past five years.
#37 The U.S. national debt is on pace to more than double during the eight years of the Obama administration. In other words, under Barack Obama the U.S. government will accumulate more debt than it did under all of the other presidents in U.S. history combined.
Fortunately, it appears that most Americans are not buying into the propaganda. According to a new CNN survey, the percentage of Americans that believe that the economy is getting worse far exceeds the percentage of Americans that believe that the economy is improving…
Americans views on the state of the nation are turning increasingly sour, according to a new national poll.
And a CNN/ORC International survey released Friday also indicates that less than a quarter of the public says that economic conditions are improving, while nearly four in ten say the nation’s economy is getting worse.
Forty-one percent of those questioned in the poll say things are going well in the country today, down nine percentage points from April, and the lowest that number has been in CNN polling since February 2012. Fifty-nine percent say things are going badly, up nine points from April.
So what do you think?
Do you believe that the U.S. economy is getting better or getting worse?
This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.
Image credit: http://theeconomiccollapseblog.com
Wow – The Holiday Shopping Season Is Off To A Horrible Start
According to the National Retail Federation, Americans spent an average of 4 percent less over the four day Thanksgiving weekend than they did last year. Overall, that means that approximately $1.7 billion less was spent at U.S. retailers compared to last year. It had already been projected that this holiday shopping season would be the worst for retailers since 2009, but if these numbers are any indication it may be even worse than expected. So why is this happening? Well, basically the American consumer is tapped out. The unemployment crisis in this country is actually getting worse, poverty is absolutely exploding and the middle class is being systematically eviscerated. In other words, you can’t get blood out of a stone. Many retailers are offering extreme discounts in a desperate attempt to lure more shoppers, but the money simply isn’t there.
According to Yahoo News, the decline in shopping over the four day Thanksgiving weekend was the first decline that we have seen since the last recession…
Shoppers, on average, were expected to spend $407.02 during the four days, down 3.9 percent from last year. That would be the first decline since the 2009 holiday shopping season when the economy was just coming out of the recession.
The survey underscores the challenges stores have faced since the recession began in late 2007. Retailers had to offer deeper discounts to get people to shop during the downturn, but Americans still expect those “70 percent off” signs now during the recovery.
And according to the New York Times, Americans spent a total of 1.7 billion dollars less than they did last year…
Over the course of the weekend, consumers spent about $1.7 billion less on holiday shopping than they did the year before, according to the National Retail Federation, a retail trade organization.
“There are some economic challenges that many Americans still face,” said Matthew Shay, the chief executive of the retail federation. “So in general terms, many are intending to be a little bit more conservative with their budgets.”
But this downturn for retailers did not just begin this past weekend. There have been signs of trouble for quite a while now.
For example, posted below is a photo that one of my readers sent to me. This is a photo of the Beverly Center Mall in Beverly Hills, California that was taken in the middle of the day on Tuesday, November 19th. She said that there “wasn’t a soul in that mall and the employees were all standing, staring into space with nothing to do”…
So where are all of the shoppers?
Why aren’t people out buying stuff?
Sadly, this is just the continuation of a trend that has been developing for more than a decade. The truth is that Americans are simply not spending money as rapidly as they used to.
Posted below is a chart that shows that the velocity of M2 in the United States is at an all-time low. In other words, the rate at which money circulates through our economy is frighteningly low and it continues to drop…
As you can see from the chart above, this decline in the velocity of money has been going on since the late 1990s. This is a sign of a very unhealthy economy.
Most Americans know that the U.S. economy is very heavily dependent on consumer spending. But consumers have to make money first in order to spend it. And right now we have a major employment crisis in this country.
Meanwhile, the quality of our jobs continues to decline as well. According to the U.S. Census Bureau, median household income in the United States has fallen for five years in a row, and right now the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.
So should it really be such a surprise that consumers are totally tapped out?
The money simply is not there.
After accounting for inflation, 40 percent of all U.S. workers are currently making less than what a full-time minimum wage worker made back in 1968.
A recent CNN article profiled one of these workers. Carman Iverson is a 28-year-old mother of four that makes minimum wage at McDonald’s. If it was not for government assistance, her and her four children would not be able to survive…
Iverson said she started working in 2012 at $7.25 an hour, and makes $7.35 an hour now after Missouri adjusted the minimum wage. She makes between $400 and $600 a month. Her rent is $650 a month.
When asked how she could pay her rent on those wages, she said she had a landlord who works with her. “I’m kind of on my last little leg, because I’ve been late on rent. I’m actually behind three months in rent.
“Sometimes I can pay it, sometimes I can’t. I get paid twice a month, and both checks go to rent and the rest of it goes to utilities to the point where I don’t have any money left to buy anything for my kids — to buy them clothes, shoes or anything they need.”
She said she manages to feed her four children on $543 worth of food stamps a month.
But instead of fixing things, Barack Obama continues to pursue policies that will kill millions more good jobs. It is absolutely amazing that there are any Americans that still support this guy. For a long list of statistics that show how badly the economy has tanked since Obama entered the White House, please see this article.
You know that things are bad when increasing the number of Americans on food stamps by 15 million is regarded as an “economic accomplishment”. In fact, a message recently posted on the official White House website says that “SNAP is boosting the economy right now” and that high food stamp enrollment is creating lots of jobs…
“SNAP’s effect extends beyond the food on a family’s table–to the grocery stores, truck drivers, warehouses, processing plants and farmers that helped get it there.”
So why don’t we just enroll all Americans in every welfare program?
Wouldn’t that produce an extreme economic boom?
And actually under Obama we are already well on our way. According to the U.S. Census Bureau, 49.2 percent of all Americans are currently receiving benefits from at least one government program, and the federal government has spent an astounding 3.7 trillion dollars on welfare programs over the past five years.
Yes, there will always be poor people that cannot help themselves that will need our assistance.
But most Americans are capable of working if they could just find jobs.
Unfortunately, our jobs are being killed off and wages are going down. The middle class is being systematically destroyed and U.S. consumer spending is drying up.
The horrible start to this holiday shopping season is just the beginning.
Things are going to get much worse than this.
This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.
Image credit: http://theeconomiccollapseblog.com
40 Percent Of U.S. Workers Make Less Than What A Full-Time Minimum Wage Worker Made In 1968
Are American workers paid enough? That is a topic that is endlessly debated all across this great land of ours. Unfortunately, what pretty much everyone can agree on is that American workers are not making as much as they used to after you account for inflation. Back in 1968, the minimum wage in the United States was $1.60 an hour. That sounds very small, but after you account for inflation a very different picture emerges. Using the inflation calculator that the Bureau of Labor Statistics provides, $1.60 in 1968 is equivalent to $10.74 today. And of course the official government inflation numbers have been heavily manipulated to make inflation look much lower than it actually is, so the number for today should actually be substantially higher than $10.74, but for purposes of this article we will use $10.74. If you were to work a full-time job at $10.74 an hour for a full year (with two weeks off for vacation), you would make about $21,480 for the year. That isn’t a lot of money, but according to the Social Security Administration, 40.28% of all workers make less than $20,000 a year in America today. So that means that more than 40 percent of all U.S. workers actually make less than what a full-time minimum wage worker made back in 1968. That is how far we have fallen.
The other day I wrote an article which discussed the transition that we are witnessing in our economy right now. Good paying full-time jobs are disappearing, and they are being replaced by low paying part-time jobs. So far this year, 76.7 percent of the jobs that have been “created” in the U.S. economy have been part-time jobs.
That would be depressing enough, but what makes it worse is that wages for many of these low paying jobs have actually been declining over the past decade even as the cost of living keeps going up. The following is from a recent USA Today article…
In the years between 2002 and 2012, real median wages dropped by at least 5% in five of the top 10 low-wage jobs, including food preparers and housekeepers.
So where have the good jobs gone?
Well, there are three long-term trends that are absolutely crushing American workers right now.
First of all, thanks to our very foolish politicians American workers have been merged into a global labor pool where they must directly compete for jobs with workers on the other side of the planet that live in countries where it is legal to pay slave labor wages. This has resulted in millions upon millions of good jobs leaving this country. Big corporations can pad their profits by taking a job from an American worker making $15 an hour with benefits and giving it to a worker on the other side of the globe that is willing to work for less than a dollar an hour with no benefits. Our politicians could do something about this, but they refuse to do so. Most of them are absolutely married to the idea of a one world economic system that will unite the globe. Unfortunately, the U.S. economy is going to continue to lose tens of thousands of businesses and millions upon millions of jobs to this one world economic system.
Secondly, big corporations are replacing as many expensive workers with machines, computers and robots as they possibly can. As technology continues to advance at a blistering pace, the need for workers (especially low-skilled workers) will continue to decrease. Unfortunately, the jobs that are being lost to technology are not coming back any time soon.
Thirdly, the overall U.S. economy has been steadily declining for more than a decade. If you doubt this, just read this article. As our economy continues to get weaker, the lack of jobs is going to become a bigger and bigger problem.
And as our economy systematically loses good jobs, more Americans are forced to become dependent on the government.
Back in 1979, there was about one American on food stamps for every manufacturing job. Today, there are about four Americans on food stamps for every manufacturing job.
When I first found that statistic I was absolutely stunned. How in the world can anyone out there deny that the U.S. economy is collapsing?
But as I mentioned above, it isn’t just that the number of jobs is not what it should be. The quality of our jobs is declining as well. For example, one study found that between 1969 and 2009 the wages earned by American men between the ages of 30 and 50 declined by 27 percent after you account for inflation.
That is a pretty stunning decline. And it has only accelerated in recent years. Median household income (adjusted for inflation) has fallen by 7.8 percent since the year 2000, and the ratio of wages and salaries to GDP in the United States is near an all-time record low.
Most Americans are finding that their bills just keep going up but their paychecks are not. This is causing the middle class to wither away, and most families are just trying to survive from month to month at this point. In fact, according to one recent survey 76 percent of all Americans are living paycheck to paycheck.
So where do we go from here?
Image credit: http://theeconomiccollapseblog.com
Posted by Robert Wenzel
The BIG Squeeze of the American Wage Earner
(Charts via ZeroHedge)
Posted by Judy Morris
Meet the Big Banks’ Latest Slave Product: “Payroll Debit Cards”
I firmly believe that the biggest domestic policy error over the past generation has been the no-strings-attached bail out of the mega banks in these United States, and their subsequent designation as “too big to fail” and “too big to jail.” This has given the sociopaths that run these crony organizations a license to steal, and they are doing a great job of it.
So in the latest bank theft product, employers of low income workers are being persuaded to pay their employees via “prepaid payroll cards.” Not only are these cards typically associated with high fees, but they also discourage employees from using credit unions for their banking needs.
While companies try to defend themselves by saying they are providing a cheaper method for employees that do not have bank accounts to gain access to their funds, in many cases using these “prepaid cards” isn’t simply an option, but a requirement. Oh, and take a guess why the mega banks are pushing into this line of business? Prepaid cards are essentially exempt from financial regulation. Serfs up boy and girls. From the New York Times:
A growing number of American workers are confronting a frustrating predicament on payday: to get their wages, they must first pay a fee.
For these largely hourly workers, paper paychecks and even direct deposit have been replaced by prepaid cards issued by their employers.
These fees can take such a big bite out of paychecks that some employees end up making less than the minimum wage once the charges are taken into account, according to interviews with consumer lawyers, employees, and state and federal regulators.
Devonte Yates, 21, who earns $7.25 an hour working a drive-through station at a McDonald’s in Milwaukee, says he spends $40 to $50 a month on fees associated with his JPMorgan Chase payroll card.
Anyone surprised that “the morgue” is at the center of this?
Read the rest at A Lightning War for Liberty, here.