.comment-link {margin-left:.6em;}
Visit Freedom's Zone Donate To Project Valour

Friday, December 16, 2011

Yea, Verily, For I Wish We Had Not Done This

A picture is worth a thousand words in presidential nominee debate. I'd like them more if I thought they would be able to predict what this graph looks like.

It is of the percent changes in covered employment over different time frames. Covered employment stats are obtained by the Department of Labor directly from the states. The states report the active unemployment insurance accounts on file, so it is a way to count total employees. You can get these numbers at this page.

Yes, this time IS different - just not in a good way.

Those orange and yellow lines are yes, indeed, really reporting 2 & 3 year drops of over 5% in covered employment. I'm just sayin'. Currently the 1 year series low is -4.75%.

Technological advances combined with policies that
encourage the offshoring of jobs have crushed labor.
The result is falling asset prices. To counter falling asset
prices, the Fed prints, giving us higher commodity prices
further crushing labor. Savers punished at the expense
of creditors.
What choice does the Fed have, but to print? Our regulatory and tax structure (which has been wholeheartedly supported by the supposedly-blue-collar unions) is predicated on ever-rising prices and wages.

Can you imagine the unemployment that would ensue in a deflation as the minimum wage increased steadily in real terms? To where fast-food clerks are theoretically making welder's wages, let's say. Or, as another example, look at the chaos at the municipal level caused by the drop in property valuations and property tax revenue.

The "social safety net" and regulatory system is rigged against labor (meaning actual laborers, not union Labor leaders), entrepreneurs, and small capital. The Fed will have to print, because their job is to defend the system. This will probably crash the economy, but the regulatory system is crashing the economy anyway because it's not adapting to demographic and technological changes.
Neil - every time I look at that chart, my stomach flips over.

The Fed can print, but if Main Street can't use the money, it only results in inflation and further reduces employee real wages.

That's the whole problem with bubbles funded by credit (which they always are). Standard monetary easing does not redress the side effect of the bubble collapse, because lending must decline. Thus the other part of Keynesian economics - some method of structurally inserting the new money back into the real economy so it limits the collapse.
That's the problem, isn't it? The Establishment is at war with the "real" economy, so it has effectively lost all its Keynesian levers.
Do you know the difference between a smart drunk and a dumb drunk?

On the next morning, the smart drunk wakes up with a hangover and takes painkillers. The dumb drunk wakes up with an hangover and decides a few more nips from the bottle that bit him will numb his pain.

I guess we know which type of drunk the elites are, don't we?
Thus the other part of Keynesian economics - some method of structurally inserting the new money back into the real economy so it limits the collapse.

Bubble-blowing by any other name.

The collapse cannot be avoided. The only thing that can be avoided is taking down the solvent in order to save the bankrupt. Injecting cash at any level has the same effect as injecting credit at any level.

The biggest mistake continues to be can-kicking. Insolvent banks need to be closed and their investors need to take their deserved losses. Avoiding these losses forces the working classes to take more than their share.

The problem is strictly political. In large part the investors that need to take their losses are pension funds. With few exceptions there is no political will to do that by any present public job holder.

We're saving the banks to save political jobs - without a doubt the largest bubble of them all. This is the structural problem that will never be addressed in my lifetime.
The choice will be devaluation, because that's in our
government's interest. Neither the banks nor the government can survive if the dollar rises due to the
potential defaults. The only way out was to change the
Tax and trade policies but too many people have a vested
interest in the status quo.
Post a Comment

Links to this post:

Create a Link

<< Home

This page is powered by Blogger. Isn't yours?