Dear Readers: I was reviewing some words of wisdom from my dearest, wisest blog compatriot, Professor Athena. I wanted to share them with you, especially as it ties into my hero’s recent trip to New York.
As part of her tour, Alaska Governor Sarah Palin chatted with Fox New Channel’s Sean Hannity and said:
PALIN: Well, when you consider that the federal government is about eleven trillion dollars in debt, and we’re borrowing more to spend more.. it defies any sensible economic policy that any of us ever learned through college. It defies economy practices and principles that tell ya ‘you gotta quit digging that hole when you are in that financial hole’
“America is digging a deeper hole and how are we paying for this government largesse. We’re borrowing. We’re borrowing from China and we consider that now we own sixty percent of GENERAL MOTORS – or the U.S. government does… But who is the U.S. government becoming more indebted to? It’s China. So that leads you to have to ask who is really going to own our car industry than in America.”
We join our friends at HillBuzz who say: Given ’em Hell Sarah. The Goddess of Capitalism appreciates the wit of our savvy Hillbuzz Buddies and now will include them in our blogroll.
Ed Morrissey of Hot Air has some tasty news, related to this topic today. Apparently, Gallup indicates support for Obama is plummeting in the polls.
Below are the thoughts of Professor Athena (who is highly placed in the world of banking and finance and is kind enough to share her wisdom with us regularly).
Recent unemployment data released from the BLS * masks the real story of both the job situation and its relevance to deflationary pressures within the economy.
A bit of economics background. For several decades you were either a ‘Keynesian’ or a ‘Monetarist’. Both are broken in today’s globally-based system, where in one case cost inflation may be measured only insofar as it is local, a paradigm which doesn’t work once an economy is no longer local, and in the other does not measure the credit and savings creation in the shadow banking system. So the question, “How do we determine the rate of inflation?” becomes that much more difficult to answer.
Throughout the past twenty-five years, we have had an abundant pool of cheaper labor to offset a rise in production cost, especially among minimum and lower wage jobs coming in from Mexico. With every benefit accrued there is a cost (Nanny would say, “Nothin’ in this world comes for free, child”), and the cost has come through various service sectors within our economy, most particularly since many of the labor force do not pay any income tax while using the services and infrastructure paid for by American workers. Still, this trend kept our economy competitive with emerging economies in China and India where labor was cheap. In addition, capital was fairly abundant and leverage was even more so. With the decrease in taxes instituted in the 1980’s, expansion of IPO’s and venture capital exploded especially in California. Americans saw their home values climb higher, and took out HELOC’s (home equity line of credit). Everything appeared so profitable and so much wealth was created it was fairly-tale stuff. Like most fairly tales it has a villain who has cast an evil spell and is holding the castle hostage. Though the villain is not Obama, he is the willing stooge who believes deficit spending will wake the sleeping beauty that is the U.S. economy. He is wrong, and the damage he is doing will wreck years of future growth for the U.S. economy.
Let’s look at the numbers the Obama administration won’t be talking about in press conferences, and digest what they mean as far as U.S. jobs. The distribution of the losses are different than in past recessions. Several areas are under-surveyed or missed entirely by the BLS. But, what we can interpret is that the services sector especially in real estate and financial services are losing a large percentage of higher-paid workers. The BLS only surveys workers on payrolls, missing commissioned employees, and does not even survey hourly wages in most service industries. But the massive budget shortfalls in New York and other states heavily domiciled in the financial services jobs give us a clue that the numbers are huge. Furthermore, the dislocation of jobs is very different than in the 2001 recession, where people working part-time for economic reasons rose about 35% (from about 3.3 million to 4.4 million). In this recession, we are up 50% in that category, doubling from 4.5 million to now 9.0 million working part-time.
Why is this important? Because it measures the panic factor, where people are working not only shorter hours but likely working for less pay. The pool of available labor measures the difference between the working-age population and the workforce, and it is therefore a measure of economic slack. The pool of available labor is now encroaching upon 20 million, over 12% of the labor force. There is no cogent argument for inflation this year, or in future years, until this slack is reabsorbed.
The global economy is now on pace to shrink in 2009 for the first time since the end of World War II (evidenced by the large drop in the U.S. trade deficit posted last week). Imports have fallen so much that they are down almost 60% for the past 3-mos. period annualized. The majority of the decline is in energy, YOY (Year-over-year) 56% down in petroleum imports. With American good orders already in decline and with the global economy declining as well, we cannot reasonably expect the improvement in the U.S. economy the Obama administration has forecast. If you think things are frustrating at this point, remember that the definition of a recession is when your neighbor loses his job, and the definition of a depression is when you lose yours. While I sincerely hope this does not happen to our dear readers, we are in for worse job losses to come if corporate taxes and capital gains are targeted for tax increase by this administration who remains frenetic in their orchestrated plan to redistribute income in order to buy votes.
Reading this, and reviewing current events, I long for the days when the President would feel my pain instead of cause it.
The Anchoress also recalls President Clinton favorably today: California may do away with welfare? I don’t believe it, but it’s as good a time as any to applaud Bill Clinton for his own policies here.