Green Shoots,Red Ink.....Black Hole The Real State Of The US Economy?

MarineReconDad — Fri, 05 Jun 2009 19:05:06 GMT

I have an unfortunate sense that the "green shoots" in the economy that everyone is talking about are nothing but dandelions. Sure, forcing $1 trillion of taxpayer money—in direct capital, guarantees, and diminished cost of borrowing—into the banking sector has permitted the major banks to claim solvency for the moment. Yet we should not forget that this solvency has come not through a much needed deleveraging of the banking sector but rather from a massive transfer of the obligations of private banks to the public, with the debt accruing to future generations. And overall loan quality at U.S. banks is still the worst in 25 years and deteriorating at the fastest pace ever.

It's a terrible mistake to confuse the momentary solvency of the financial sector and the long-term health of our economy.

While we have addressed the credit collapse, we have not begun to tackle the far more daunting, and more significant, structural problems in the economy. Instead of focusing on the green shoots, let's examine the macro data that will determine our national prosperity in the next generation. These data are terrifying.

Start with the job front. Long term, nothing is more fundamental than good jobs to creating the middle-class wealth that must drive the economy. The creation of true middle-class jobs was the great success of our economy from 1950s through the mid-1990s. Consider the job data, in aggregate and by sector, from the past decade. (All data are from the U.S. Department of Labor, Bureau of Labor Statistics.)

One-third of our manufacturing jobs have disappeared in a decade! And while population grew 12.1 percent over the decade, jobs grew by only 6.4 percent. The unemployment number, moreover, doesn't count those who are "marginally attached to the labor force," because even though they want to work and are available to do so, they have not sought a job in the past four weeks. In raw numbers, the total number of individuals counted as currently unemployed and those who are marginally attached is a staggering 15.8 million. That is an enormous mountain of job creation to climb.

This transition away from actual goods production is not merely a consequence of the current economic cataclysm. The trend line has been clear for years and is reflected in the overall escalation in the trade deficits we have incurred:

The actual deficit in goods has multiplied fivefold in 15 years. The notion that service exports will somehow balance our increasing goods deficit has not been borne out and is increasingly less likely to be in the future, given that certain service sectors, such as financial services, are in sharp decline domestically. Moreover, the services we had expected to export are increasingly becoming sources of growth overseas. It is hard to believe that China will want or need to import U.S. investment banking services a decade (or a month) from now.

Even more dramatic than the growth of the trade deficit, of course, is the escalation of the federal budget deficit.

One thing is clear. The Federal Government can never spend its way out of debt. It can only cause wider series of issues, which in turn will cause a longer recovery time. This will be decades not years!

RE: Green Shoots,Red Ink.....Black Hole The Real State Of The US Economy?

A Brown — Sat, 06 Jun 2009 12:03:37 GMT

I agree 100% with you. Our great-grandchildren will still be paying for a debt they will inherit because of Mr. Fixit, our president. The lies about the economy cant't be covered up because all the figures don't match the real truths about lay-offs and closures because of government buy outs. One thing about it, we never know what surprises each day will bring because of the"Almighty Changer".

RE: Green Shoots,Red Ink.....Black Hole The Real State Of The US Economy?

Alive — Thu, 11 Jun 2009 20:35:00 GMT

MarineReconDad you are spot on, however as I peruse through Yedda and other blog sites it appears we, who agree with you, are preaching to the choir. I have never seen any real substantive answers which would refute what you have said. All we the people can do at this point is write to those in politics and let them know we are unhappy with the way they are heading and join with others of the same mind.

What is happening today in the US is unprecedented in our history and I believe it started almost 100 years ago with the eating away of our constitution, which today, in my opinion, is no longer being adhered too. When the government starts to control major companies and not adhering to the rule of law we are truly in trouble as a free country. I believe we have a lot of greedy individuals running companies and stealing money from folks, be we also have government folks associated with them. Government should have been providing transparency and oversight in these areas for years.

All I can finish with is we the people better wake soon, or there will be nothing recognizable to wake up too.

RE: Green Shoots,Red Ink.....Black Hole The Real State Of The US Economy?

MarineReconDad — Fri, 12 Jun 2009 22:11:49 GMT

What we can do is, each one pressure our representatives NOT to act on these spending programs, especially the Health Care bill, this year. And, do everything we can to aide in the 2010 midterm elections, to get some checks and balances on Obama and the Democrats before it is too late. Obama knows this, and therein the reason for getting all this bills passed NOW it has to be NOW, it can't wait! Why? When 70%,70% of the American people are HAPPY with their health care as it now stands! So why the rush into something that will TRIPLE the already staggering debt? TRIPLE the debt!

That is what we as Americans who are concerned about the direction of this country can do. Waiting 4 years will be TOO LATE! America will be irreversibly damaged by that point, beyond all help! 2010 is the key!

MRD