Originally Published on Press TV, October 30, 2012
In many respects, much if not all of the economic gains made in the United States from the past decade have been wiped out due to Wall Street malfeasance. Looking forward, I expect America to lose at least another decade.
While some of the economic turmoil is certainly due to the biggest real estate collapse in U.S. history, a much larger portion is the result of the weak job market which is likely to persist for a number of years.
Although the real estate market appears to have bottomed, you should not expect anything other than a very gradual rise from here. In the absence of bubble conditions, the rate of real estate appreciation generally tracks that of inflation.
The biggest lift to the real estate market would come from lasting improvements in the job market. Thus, it’s important to identify the real reasons for the persistently high unemployment rate so that adequate solutions can be designed. If the factors accounting for the continued weakness in the labor market are not addressed, America stands a good chance to lose much more than a decade.
Establishment economists have offered some ridiculous explanations when trying to account for the high unemployment rate. The purpose of this propaganda is to distract attention away from misguided economic policies put in place by America’s fascist government.
Before we discuss the establishment’s explanation of the high jobless rate, let’s examine some facts about the U.S. labor market.
• Since mid-2009, there have been between 3.5 and 6 unemployed Americans for every job opening. This means jobs have been in short supply. This ratio is roughly double what it was in the last recession in 2001. This data reflects, in large part, that job openings are one-fourth lower now than they were in the last recovery.
• In the first 12 months of the so-called “recovery” there were 32 million job openings. While this may sound like a large number, it was 10 million fewer openings than the first 12 months of the prior recovery, which was known for being a so-called jobless recovery.
• The shortfall in job openings during the current “recovery” compared to the previous one is widespread. Job openings continue to be small in number in nearly every sector including labor intensive service industries such as hospitality, entertainment, and accommodation.
• Layoffs during the early stages of this “recovery” are comparable to those in the prior recovery, and thus cannot explain the lasting high unemployment rate.
Arguments Used by the Establishment
Two arguments are being debated by America’s establishment economists as the cause of the persistently high unemployment rate. Each argument has been offered in order to hide the real cause from the American people. It turns out that both arguments are supportive of America’s fascist agendas which go hand in hand with the economic mandates of globalization. Let’s take a look at each of these viewpoints.
Establishment economists working for the left-wing contingency of America’s fascist government claim that the high unemployment rate is a consequence of what is known as cyclical unemployment. This theory argues that unemployment is related to changes in demand that occur through business and economic cycles. In other words, the unemployment rate remains high due to low economic demand. This is a viewpoint that is utilized in order to justify government spending during economic contractions. During the first two years of the Obama presidency, the cyclical unemployment argument was unanimously accepted.
Establishment economists working for the right-wing contingency of America’s fascist government claim that the stubbornly high unemployment rate is due to structural factors. This is known as the structural unemployment argument. This argument essentially places the blame on unemployed workers.
The Republican Party has embraced the structural unemployment argument when stating its case against additional economic stimulus, all while maintaining favorable tax treatment for corporations and wealthy individuals. More recently, this argument has also gained acceptance by the Obama administration after various economic programs have failed to bring the unemployment rate down to more reasonable levels.
Overall, the structural unemployment argument is more widely accepted by the nation’s establishment economists. So in other words, politicians and economists are once again placing blame on Main Street for something caused by Wall Street and corporate America; truly amazing.
The Weak Demand Argument
Superficially, the high unemployment rate points to lack of demand; the argument posed by left-wing establishment economists, otherwise referred to as cyclical unemployment.
During the early stages of the economic collapse, Washington sided with this argument. In order to resolve the cyclical unemployment issue, Obama passed numerous stimulus packages (the American Recovery and Reinvestment Act of 2009, car allowance rebates, homebuyers tax credits, payroll tax cuts, etc.) in order to stimulate demand. But once the money was spent, demand disappeared. Thus, these stimulus programs were ineffective.
Throughout Obama’s tenure, the Federal Reserve has also been trying to stimulate job growth, or so it claims, through quantitative easing. But the reality points to a much different outcome. This program has actually provided a hidden bailout to the financial industry at the expense of the nation’s private and public pension system. This is an issue that I will address in the future.
Despite the massive amount of government spending due to various types of economic stimulus, establishment economists from the left, such as Paul Krugman insist on the need for more spending to add a boost to the economy. These are the same economists who now criticize the greed, ignorance and incompetence that led to the previous real estate-credit bubble, yet are trying their best to reflate it again; simply amazing.
So what is Krugman saying?
Is he admitting that the economy is incapable of generating demand on its own after receiving numerous stimulus packages, in addition to several rounds of quantitative easing?
He most certainly is. I have no doubt that Krugman realizes that the fundamental issue preventing job growth is not being addressed. And he isn’t talking about it because after all, he does work for the establishment. This is why his hot air continues to be published throughout America’s tightly controlled propaganda machine.
It is important to keep in mind that Krugman did not predict the financial crisis or economic collapse, which he now calls a depression. None of the economists or investment “pros” positioned as experts in the media made these predictions, despite claims made by the media. This is a statement of fact.
You will also recall that every mainstream economist claimed there was no recession for nearly one year after it began in December 2007. Many of these hacks also claimed that the effects of the real estate correction would not extend into the overall economy. Finally, these are the same shills that insisted that the recession ended in June 2009 and a recovery has since been under way.
In contrast, I was the only person who predicted the financial crisis in detail and the resulting economic collapse in America’s Financial Apocalypse (2006). And I was the only person in the world to lay out a detailed case for a depression in the U.S. just before the problems began to surface. Thus, who are you going to believe, me or hacks in the media like Krugman?
As previously mentioned, the cyclical unemployment argument has served as impetus for excessive economic stimulus packages over the past several years. However, the creation of currency out of thin will not in itself stimulate real or lasting demand.
The economic response from Washington and the monetary policy of the Federal Reserve have failed to reinvigorate economic demand because they have not addressed the fundamental economic problems. These “solutions” have been ineffective and very costly to tax payers.
The Structural Unemployment Myth
Structural unemployment is thought to occur due to mismatches between the skills held by the labor force and those required by employers. For instance, economists supportive of the structural unemployment theory explain the high jobless rate by arguing that displaced workers lack adequate skills, their skills have deteriorated or are no longer useful to industries which are expanding.
In contrast to the cyclical unemployment argument, which has a limited role in accounting for the high unemployment rate, there is no evidence that structural unemployment has been even somewhat responsible for the persistently high unemployment rate. In fact, data from employer job openings, layoffs and hires actually contradict claims of unemployment due to structural issues.
If we are to accept the premise of structural factors as a primary cause of the high jobless rate, it is important to explain how it was possible for millions of previously well-qualified workers to suddenly have lost the skills necessary for employment in such a short period of time. In other words, we must ask how these workers were able to fulfill employer demands just months before losing their job, but no longer possess the skills required to function in the same job. Maybe the corporate world advanced at the speed of light in just a few months, leaving workers’ skills obsolete. Neither of these possibilities is plausible.
The real reason accounting for the sudden loss of jobs is due to the fact that these jobs were created by the real estate-credit bubble. And when the bubble popped, the jobs disappeared. It’s as simple as that.
Now that the economy is no longer being propped up by bubble conditions (although the need to deleverage remains), the corporate world is much more competitive. So instead of hiring in the U.S. along with outsourcing, corporate America is doing a lot more outsourcing and a lot less hiring in the U.S.
Establishment economists representing the right have attempted to stray away from the realities of the real estate collapse by pointing to yet another misguided view supportive of the structural unemployment argument. These are typically the economists you see on investment-related shows or those from Wall Street. According to this view, the depressed real estate market has prevented the jobless from relocating to regions where their skills are in demand.
This is another ridiculous ascertain. Individuals who are tied down to their homes are generally able to pay their mortgage and are therefore gainfully employed.
Perhaps the most ludicrous explanation offered to support the structural unemployment argument rests with the premise that the unemployed do not live in places where there are job openings. This argument ties into the previous one. In other words, the unemployed are immobile because they are unable to sell their home.
Let’s assume that this large group of unemployed workers had greater mobility. Certainly we can identify several million unemployed Americans who have suffered a foreclosure and are therefore no longer tied down to their place of residence. These jobless individuals would naturally relocate to states with lower unemployment, right?
The question is, would there be an adequate number of jobs for them once they relocated to states with lower rates of unemployment?
The answer is no. To confirm this, simply match the pool of some 16 million unemployed workers (official government numbers which are understated) with the job openings in the small handful of states with a low unemployment rate.
According to left-wing economists, the structural unemployment problem can be resolved if workers go back to school and learn new skills. They argue that this would help justify the delays in lowering the unemployment rate due to the time it takes to become reeducated and receive a job offer. But I can guarantee you that this approach would not resolve the labor issues in the U.S.
These same economists have stated that much of the mismatch in skills can be seen in the construction industry. According to the logic offered by the structural unemployment argument, many of these construction jobs will never return. While this is certainly true, the main factor accounting for this reality is that these jobs never should have existed in the first place. The real estate-credit bubble created false demand, which temporarily supported the creation of millions of jobs in the construction, real estate and financial sectors.
If these jobs were created based on real demand, they would not disappear forever. Instead, they would disappear according to cyclical adjustments and reappear during an economic expansion. In other words, they would have reappeared by now since, according to Washington, the U.S. economy has been in recovery mode since June 2009.
The Solution to the Jobless Rate
While a small portion of the labor force remains unemployed due to structural changes, this percentage is not appreciably higher than that seen during recent recessions. In contrast, some of the lost jobs are due to cyclical factors stemming from reduced demand.
The main reason for the persistently high jobless rate in the U.S. is due to poorly structured trade policies which have reduced the incentives for domestic job creation. Thus, the solution to the high unemployment rate is the same as it has been for many years. Free trade must be restructured to make it fair trade.
The effects of America’s misguided trade policy have kept demand low during the current recession, but real demand has been in decline for over two decades. The real estate-credit bubble hid this reality and created artificial demand. Now that this bubble has imploded, Americans are exposed to the real face of the U.S. economy.
Suppression of the Truth by the Media
The critical need to restructure trade policy was one of the main themes behind America’s Financial Apocalypse. I concluded that U.S. trade policy has been the number one factor most responsible for America’s decline. I also stated that free trade was the primary factor responsible for the wealth and income disparity in the U.S.
Criticism of the destructive effects of U.S. trade policy would upset those who control politicians; banks and corporations. Thus, as you can imagine, the book was not well-received by the publishing world or the media. As a result, shortly after America’s Financial Apocalypse was released in late 2006, I was black-listed by the U.S. media, both mainstream and so-called alternative.
You will never hear the trade issue accurately portrayed by economists, politicians and Wall Street fund managers and analysts who have been inducted into the media club. Instead, the media embraces those who make false claims about or distract from free trade, healthcare and other critical issues; Paul Krugman, Ben Stein, Peter Schiff, Nouriel Roubini, Robert Reich and several others, most of which are Jewish. Meanwhile, others who are not part of the tribe are left out of the debate. This is all being done intentionally.
America’s media monopoly is controlled by corporate America and Washington. The purpose of this monopoly is not to report news, as most people assume. Its only purpose is to control public perception. It achieves this control over the masses through selling ads to corporations, which in turn receive favorable propaganda in the media-entertainment complex. This business relationship also helps fulfill the objectives of Washington because Washington and corporate America are one in the same.
Washington does not want Americans to understand the real economic problems facing their nation because it’s all about maximizing corporate profits at any expense, as one would expect from a fascist nation. This is specifically why profits have remained near record-highs throughout the current recession, now entering its 59th month.
Meanwhile, U.S. jobs continue to be shipped overseas. This explains why there has been no increase in real median wages since 1999. Why raise salaries when you can hire workers overseas for lower wages?
In conclusion, the persistently high jobless rate seen in the U.S. is not due to structural factors. At the same time, it cannot be explained fully by economic cycle theory. America continues to suffer from its longest and most severe economic recession in over 130 years. This recession is the first of what will surely be more to come over the next decade.
Once historians and economists figure out what has happened and find the courage to document it accurately, this period will eventually be referred to as America’s Second Great Depression. Unfortunately, by that time it will be too late for those who stand to lose the most.
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