Posted by Michael A. Kamperman on August 31, 2010
The minutes from the Fed meeting show that no one on the Fed is worried that deflation is a significant near-term risk. No one. Some see disinflation while others still see inflation as the mostly likely outcome, but no one is forecasting deflation. In fact they are forecasting moderate growth for 2011, despite the fact the stimulus will run off in 2011 and there doesn’t appear to be a replacement stimulus bill on the horizon. The Fed is way way way behind the curve again, ala summer 2007. Deflation has already taken hold in the U.S. Deflation is a function of either over-supply or declining demand. Demand has withered for most items, most notably housing. With the expiration of the homebuyers tax credits sales of homes have plunged. How hard is it to foresee housing will remain a drag on the economy? Wages are falling substantially for those fortunate enough to replace lost jobs. What has held up the incomes of many households up until now are unemployment benefits and 401(k) plan withdrawls. Congress is not likely to extend unemployment benefits for individuals beyond 99 weeks. The large scale shedding of workers began roughly 99 weeks ago right after Lehman Brothers was turned away by the Treasury and forced to file for an unprepared bankruptcy. How hard is it to foresee household personal incomes are in trouble going forward?
The question the Fed should be concerned with is not whether the economy will fall into deflation, the question they should be debating is how soon and how forcefully do they need to act to prevent it. Like cancer, it may be too late to cure it if you wait for it to be obvious to see. Look at how Japan has struggled to shake off deflation despite near zero interest rates. Look at how the U.S. failed to shake off deflation prior to the onset of World War II. Frankly, the Fed simply doesn’t know how soon they should act, nor how forcefully. Shocking considering Bernanke is supposed to be the world’s deflation expert.
The Fed knows its only remaining weopon is printing money, which puts a bad taste in the mouths of most avowed inflation hawks. But as inflation hawk St. Louis Fed President Bullard has said, the data is coming in on the low side for inflation, not the high side. And, while he doesn’t see deflation as a probability he wants an orderly framework for how the Fed will decide when to print and how much to print. Shouldn’t this conversation have occurred under Greenspan or Volcker and shouldn’t the Fed have a manual on just what to do in this situation? The reason they don’t is the concept of deflation has seemed inconceivable to smug modern day economists who grew up in the post World War II era. This is the reason all of our econometric models only contain post World War II data. With fiscal policy frozen in Washington the only operational weopon left is monetary policy. I’m know we have waited too long to pull the trigger. So do all the 99ers. There is no doubt the Fed will print more money. The open question is do they have the guts necessary to print the trillions needed?
Posted by Michael A. Kamperman on August 10, 2010
Well that was quick. The Fed looked for an exit strategy in April and returned to printing money by August. Make no mistake the Fed just adopted St. Louis Fed President James Bullard’s strategy of targeting the balance sheet and rasing or lowering the quantity of quantitative easing based on the forthcoming data. Bullard is an economic hero. He provided a plan. Like a lion willing to lay down with a lamb he walked to the other side of the aisle and and said I am a self-avowed inflation hawk , but I see deflation as the risk and I am willing to do the un-thinkable and monetize the debt. Now, the ball is in the politicians court. How many Democrats are willing to step up and say we should not only not raise taxes, but during a major economic downturn we should lower them. How many Republicans are willing to stand up and say we should not only not cut spending, but during a major economic downturn we should raise spending to create jobs. It is time for President Obama to step forward and lead. We need another stimulus plan and the progressive liberals need to back off letting the Bush tax cuts expire.
The Fed effectively has said the TARP wasn’t enough. The Stimulus Plan wasn’t enough. Our previous quantitative easing program of $1.5 trillion wasn’t enough. The tax credit for homes and clunkers wasn’t enough. The economy remains in the ditch and it will take heavy lifting to get it out. The Fed has signalled they have the will. But the Fed cannot do it alone. We must have permanent fiscal stimulus to create an environment of confidence. The best ideas are to lower the eligibility for Social Security and Medicare to 60 and to have the Federal Government take over all Medicaid spending from the states.
What the Fed has done is they have said don’t worry about the deficit or the debt, because we can monetize it and control it. That is the advantage of owing all of your debt in your own currency. Japan owes its debt in yen. Will the Bank of Japan follow the Fed? Probably not until the policy proves successful. Great Britain owes its debt in pounds. Will the Bank of England follow the Fed. Yes, in a heart beat. The countries in the euro owe all of their debts in euros. Will the ECB follow the Fed. Eventually, once there is a massive mutiny against the austerity crowd and they run Trichet out of town on a rail. We have a global problem and we need a global solution. The Bullard led Fed is showing the way.
Posted by Michael A. Kamperman on June 12, 2010
The federal government of the United States does not owe $13 Trillion. It owes $8.5 Trillion. The other $4.5 Trillion is owed primarily to the Social Security and Medicare Trust Funds, along with some smaller Trust Funds. The Trust Funds are compromised of U.S. Treasury Bonds. Basically, the U.S. Government has printed an I.O.U. to itself. The higher than necessary payroll taxes collected all of these years to fund Social Security and Medicare have been spent. In truth, both of these programs are line items of the federal budget and the taxes collected specifically for these programs have been thrown into the general operating revenues of the federal government since they started collecting them. We are suffering from the unintended consequences of rhetorically establishing the Social Security and Medicare Trust Funds. It is time to officially end them. Those Trust Funds are nothing more than a smoke and mirrors sham and they were established for the express purpose of providing political cover for politicians who voted to establish the programs. Now that rhetoric is leading to new rhetoric that the U.S. government owes $13 Trillion and the debt burden is the biggest threat the country faces. This in and of itself is odd considering the U.S. Government owes everyone dollars, which it has the legal power to print.
It is also leading to rhetoric, depending on who does the counting, that the federal government also has unfunded Trust Fund liabilities of anywhere from $45 Trillion to $99 Trillion. This is based on calculations of assumed growth in Social Security and primarily Medicare spending for the next 75 years over and above the payroll taxes designated to fund the programs. These calculations are not worth the paper they are printed on. Either health care expenditures will slow down or we will raise the taxes to fund them. The world will not stay static for the next 75 years. The real danger is the concept the U.S. Government should have assets set aside to pay all future expenditures. We have exactly zero dollars set aside and no Trust Fund established for defense. The defense budget is more than $200 billion greater than the current Medicare budget. I don’t here anyone saying we have an unfunded defense liability and the U.S. will be unable to defend itself in the future. The reason is we have never had a defense Trust Fund. We simply expect to pay as we go and borrow if necessary. The same should hold true for Social Security and Medicare.
This anti-debt/anti deficit rhetoric has risen to a fever pitch. Hence, our already all but lame duck President is unable to get large majorities of Democrats in either chamber of Congress to pass an extension of health subsidies for the unemployed until the end of this election year. I never have believed this would be true, but it is. Without increased deficit spending the economy will stay mired in a deflationary depression. The logic that a nurse working for the VA, a public sector job, is not as valuable to the economy as a nurse working for a private non-profit hospital treating Medicare patients is simply another myth. Public sector jobs help the economy just as much as private sector jobs. The key is to have a way to make sure public sector programs are run efficiently and effectively. The spreading belief in these myths are killing any chance we have of escaping the depression we are in. The only solution is to end the Trust Funds and end the illusion that Social Security and Medicare have a future funding source other than federal taxes, borrowings, and if necessary money printing. Sadly, we have met the enemy and he is us. No wonder Rome fell from within.
Posted by Michael A. Kamperman on June 5, 2010
The supposed V-Shaped recovery the U.S. economy had entered has been shown by the recent unemployment report to be non-existent. Just because business is better than it was 12 months ago coming out of the depths of the financial crisis doesn’t mean the economy is on strong footing. We only created 20,000 non-census jobs and once again people are being pushed out of the labor force to keep our unemployment rate at a phony 9.7%. This is the best we can do after we threw a TARP Too-Big-To-Fail life-line to the Zombie Banks, spent 75% of the stimulus money, and juiced the housing market a second time with an $8,000 first time home buyers tax credit combined with an open spigot of FHA mortgage credit. Now the tax credit is over and the states are assembling 2011 budget plans without the stimulus funds used to smooth over the depression of the last couple of years. And the unexpected BP blowout is rapidly shredding the economies of the people of the Gulf. The recent unemployment report does not include any of the aftershocks of these events. The next one will. The seeds of the poorly named double dip recession (what recovery?) that have been sown the last few weeks have sprouted. Europe is in disarray. Geithner’s message to stress test their banks and continue stimulus spending has fallen on deaf ears. The Summer/Volcker/Geithner strategy to have America consume less, save more, produce more, and export more has found no takers. We need a new plan. Yet I fear none is coming.
What I also fear is the Obama Presidency is imploding right before our eyes. Regardless of one’s political persuasion this is very bad news. At the very moment our country desperately needs visionary leadership we are on the verge of going rudderless. The failed BP blowout preventer has apparently blown apart the Obama Presidency. Night after night of images of oil soaked marshes with no sign of the cavalry charging to the rescue have exposed the President to be out of touch with the people and unable to get on top of the situation. For some odd reason the President continues to allow BP to stay in charge of the cleanup efforts of our Gulf rather than turning the effort over to our all-hands-on-deck military. The people get it that BP has to find a way to seal their well one mile under the ocean. The people don’t get why BP is dictating the pace and the effort of the clean-up of our Gulf. Neither do I. The ramifications of this are best explained by liberal talk show host Chris Mathews who stated “if the oil keeps flowing into the Fall the Democrats could lose 100 seats in the House.”
The economy desperately needs a much bigger dose of stimulus than it has received so far. It’s not going to get one. The President is already weakened to the point that he was unable to get the Senate to extend unemployment benefits to the end of this election year. Normally a no brainer for a Democratically controlled Senate. They will try again this week. The deficit hawks have gained control of the debate. After this election cycle many more of them will swarm the Halls of Congress. It was especially disheartening to hear President Obama praise the unemployment report yesterday as good news and continuing signs of progress. He is clinging to hope and a prayer that his economic programs will work eventually. Importantly, he has failed to articulate the case for more stimulus spending. Now it is too late. We’re “Slip slidin’ away-slip slidin’ away-you know the nearer our destination-the more we’re slip slidin’ away.” It’s now all up to Ben Bernanke and the Fed to lead us to the economic promised land. The number of people pleading for quantitative easing from the ECB has grown exponentially in the last few weeks. Soon the chorus of those calling on the Fed to print money will grow exponentially as well. There is no other way out.
Posted by Michael A. Kamperman on May 19, 2010
Germany befuddled markets yesterday by acting unilaterally to ban naked short selling of all European Government Bonds and in the stocks and bonds of its 10 largest financial institutions. Angela Merkel has been behind the curve and wrong on most of the decisions she has made so far regarding the credit crisis. Finally, she shocked me and a lot of other people and did something right. Many hedge funds are screaming bloody murder this morning claiming banning naked short selling will solve nothing. They are only talking their book and their wallet. Banning naked short selling prevents people betting against something in quantities greater than the underlying asset itself. If their are 200 billion euros of Greek bonds, then the market can still short 200 billion euros of Greek debt. But it cannot short 500 billion euros of Greek debt creating an artificial market that overwhelms the long side of the traded and pressures it to the downside. Hedge funds will claim banning naked short selling hurts liquidity and increases risk. Then perhaps they should practice diversification and fundamental research if they want less risk in an asset. The bottom line is our societies need our governments to be able to access the bond markets on reasonable terms. Allowing speculators to raise champagne glasses in triumph while riots run wild in the streets is insanity. The German ban should become permanent and it should extend to all asset classes. And it should extend to all markets outside of Germany. The Germans acted unilaterally on their own for two reasons; the French refused to go along, and the Germans have the power to act without getting someone elses permission. This message will not be lost on the rest of Europe. Merkel has made the current crisis much worse than it should have been. It is about time she did something right.
Protecting the debts markets is one thing. Coming up with a strategy to repay the debts in a deflationary world is quite another. The April U.S. CPI just printed a negative .1% overall and a core rate of zero. Since the end of April oil prices have collapsed by 20%. The negative CPI was in spite of higher oil prices. Additionally, the mortgage purchase applications fell by 27% last week. The expiration of the first time home buyers tax credit will lead the housing market down once again. In other words, inflation was negative in April before the impact of these two very deflationary trends in May.
The ultimate solution to solving the sovereign solvency crisis and deflation is the same. The central banks of the world need to start printing money and start buying up their own government bonds in very large quantities. The deflationary environment is giving all of these governments a chance to hit the reset button. Yes, monetizing the debt is the solution to our credit problems and our deflation problem. To really defeat deflation we still may have to mail out money allowing the private sector to reduce its debt levels as well. While Germany has been right about naked short selling, they have been wrong that inflation is a near-term threat and that austerity is the solution to the crisis. As events over the last few weeks have shown the Euro is an ungovernable entity. Therefore, it is up to the Fed to step up in the midst of this new credit crisis and resume its quantitative easing program. Everyday they wait allows confidence to whither further away.
Posted by Michael A. Kamperman on May 12, 2010
As predicted the ECB caved and has started to print money to buy up European Government bonds (Greek, etc.). They never really had a choice and should have acted much sooner to the avert the crisis. However, quantitative easing should be pared with a long term glide path to fiscal sanity. Instead, the Europeans in their clear lack of wisdom have embraced a combination of buying just enough government debt to keep the “Wolves” at bay. Meanwhile, they are trying to combine this strategy with demands for fiscal discipline requiring significant short term cuts in budget deficits. On the surface it sounds great to require people to retire later in life and to cut wages and to cut jobs. In reality this will only deepen the debt-induced depression and delay the inevitable. The Fed, the ECB, the Bank of Japan, and the Bank of England need to coordinate an all out monetization of government debts. This will hit the reset button and buy time for nations and economies to adjust holding societies together. By both cutting jobs and requiring people to work longer we are killing job opportunities for people in their 20’s. Is this what we really want? Younger workers without seniority will take the brunt of the axe to be swung. And, they will be out of luck a long time as retirements are delayed keeping existing jobs closed to newcomers for a long time. The austerity religion sweeping the globe is utter madness. The riots in Greece could be a harbinger of all of our futures. Today Spain announced it will cut another 6 billion euro form its current budget to show solidarity with the austerity mania. This in a country with official unemployment rates already over 20%.
The U.S. shares in the austerity mania as exemplified by the Tea Party. These well intentioned but misguided people believe they are saving society. In fact, they are most likely causing the fabric of our society to disintegrate. In my state of Texas the legislature is facing a projected $11 billion budget shortfall. One solution gaining popularity is to raise the student teacher ration in elementary schools. The current cap is 22 pupils per teacher. They want to save money by cutting teachers and forcing more kids into the classroom. They also are considering shortening the school week from 5 days to 4. Young teachers will be cut loose and elementary education graduates will find no room at the inn. Texas is in the best shape of all the large states in the U.S.
What the peddlers of austerity fail to grasp is many innocent hard working individuals will find themselves out in the cold through no fault of their own. Why? So those who were irresponsible will be punished? So those who are afraid of hyper-inflation will be pacified? Inflation occurs when too much money is chasing too few goods. There is no shortage of almost anything in the world. Furthermore, with global unemployment well above 10% it is doubtful demand will overtake supply even if all federal debt is monetized globally. Yes gold will go up in the short term. Probably a few other commodities too. But it will not lead to shortages. It will however push capital further out on the risk curve which could perhaps lead to global unemployment falling back below 10%. What most people miss is a large portion of global government debt is held by banks and hedge funds. The real money, capital, backing these bonds is not nearly as high as the outstanding amount of the bonds. Most banks and hedge funds are allowed to mark government debt at par and are allowed to leverage this debt with little capital. When they move out on the risk curve the leverage will greatly diminish. In the meantime young teachers could teach and young children could learn.
Posted by Michael A. Kamperman on May 4, 2010
The Chancellor of Germany has misplayed her hand. In a deference to domestic politics she has allowed Greece to twist in the wind demanding tougher and tougher concessions. The markets have figured out under the microscope of daily careful observation that Greece cannot repay its euro denominated debts if it falls into a deflationary depression. Neither can Portugal. Neither ultimately can Italy, Ireland, or Spain. Neither can most other debtor nations that lack the ability to print money. The grand scheme to bring Greece to its knees begging for mercy has back-fired. At this point the European Central Bank (ECB) either starts a quantitative easing program focused on printing money and purchasing the government debt of all member nations, including Greece, or the euro will implode as an unworkable currency. The risks go far beyond economics. A withdrawal from union will push Europe back to nationalism. That hasn’t worked out so well over the last millennium. It will be highly ironic if the ECB is pushed into quantitative easing when they have resisted kicking and screaming up until now. Hopefully we have all learned never say never.
Make no mistake there is no other way out of the global debt-induced deflationary depression but to print money. Tonight the head of the ECB Trichet is staring at the cold hard facts. But we in America should not be smug. Our states are imploding over the same forced austerity that Greece and the other too deep into debt nations are facing. We need to stop worrying about the deficit and we need to start worrying about our children who are being crammed into classrooms where budgets take precedence over learning.
We have reached the point globally where the rubber meets the road. There is no more opportunity to sweep the dust under the rug. The Maginot Line the Europeans set up to stop the Greek debt crisis from advancing has been breached. The only question is does the ECB have the guts to stand up to the failed policy of austerity? I don’t know the answer. But we will find out on Thursday when the ECB meets. When the Fed stopped quantitative easing it was inevitable the dike would spring a leak from the weakest points. It turns out the weakest point is Greece. But once a dike springs a leak the next weakest point usually pops due to enhanced pressure. That point has been Portugal. Unless the leaks are plugged soon the whole dam could burst causing a Lehman style credit crisis. President Bush was forced to back away from his free market ideology when Lehman imploded. The ECB is now faced with the same Faustian bargain. Hopefully President Obama is paying attention and will back away from his ill conceived and contrived Deficit Commission.
Posted by Michael A. Kamperman on April 25, 2010
Former Sen. Alan Simpson, R-Wyo., and Erskine Bowles, former Clinton White House Chief of Staff are leading President Obama’s deficit cutting effort known as The National Commission of Fiscal Responsibility and Reform. This Commission is nothing but a Trojan Horse that offers the allusion of one thing but will deliver another. In a noble attempt to save American finances the Commission is going to prolong the current depression for decades and kill any hope of growing our way out of troubles. The Commission will try to sell us on the virtues of paying as we go, balancing the budget, and reducing our debts. They will argue this makes us safer in the long run and will be best for our grandchildren. Balderdash! Our children and our grandchildren will suffer disproportionately from such a fools errand. They are suffering now. New York City is looking to lay-off 8,500 teachers next year. Current state law requires them to honor union seniority rules. This means almost all of the Teachers let go will be in their 20’s. It also further dims the already bleak job prospects for soon to graduate and recent still unemployed college graduates. Not to mention the children in New York City Schools will be pushed into classrooms with higher student/teacher ratios despite all of the best research showing the single biggest factor in improving student performance is lower student/teacher ratios. New York Cities plans are being repeated all around the country. It is estimated that hundreds of thousands of teachers could get pink slipped this summer. Education is the most important way to make America safer, more prosperous, and more democratic in the future, not deficit reduction. And let’s face it, in the end the Commission will call for cutting future entitlement benefits while sticking our children and grandchildren with the bill for current benefits. Count me as one who already considers anything the Commission recommends as dead-on-arrival.
The U.S. is currently spending less than 2% of GDP on debt service. To achieve a balanced budget in the current debt-induced deflationary depression would require a combination of draconian spending cuts and tax increases that would cut GDP by 10%, or more. After we balance the budget we will still have the debt and we will still be spending 2% of GDP on debt service. Communities like New York would have to cut a lot more than just 8,500 teachers to achieve these goals. We need the national dialogue to go in the opposite direction it is now heading.
President Obama should be commended for showing leadership and appointing two well meaning leaders to tackle a difficult issue. But sheep are easily led over a cliff. Having the guts to lead and the vision to lead in the right direction are two different things. The country should be going in the opposite direction. We should be lowering the retirement age for Social Security and Medicare to 60 to open up jobs for those in their 20’s with so much to give who are left to sit at home with mom and dad. We should be lowering student/teacher ratios and setting a goal for America to have the number one primary education system in the world. We should not be worrying about paying off a 30 year mortgage in 3 years when one spouse in the house in unemployed. Especially when we have a trust fund know as the Fed that can print us a check anytime we need one. Austerity is wrong for Greece and it is definitely wrong for America.
Posted by Michael A. Kamperman on April 15, 2010
The news reported by the Daily Telegraph is “A draft by 130 lawmakers from premier Yukio Hatoyama’s Democratic Party of Japan said the country needs a radical shift towards growth policies, calling for an inflation target above 2pc. The exchange rate should be steered to ¥120 against the dollar, from the current ¥90.” To achieve this lawmakers are directly calling on the Bank of Japan to monetize the debt to help steer the country out of persistent deflation. However, the Bank of Japan has cited the post World War II inflationary period as reason enough not to risk monetizing the debt. What the Bank of Japan is missing is the world today is awash with idle factories as almost everything except I-Pad’s and 3-D movies are over-supplied. After the war there were shortages of goods to meet massively pent up demand. There is simply no comparison between then and now. Yet the aged institutional memory of those who serve on the Bank of Japan is currently blocking the single best solution to Japan’s Two Lost Decades of debt-induced deflationary economic depression, namely massive quantitative easing known as printing money. The ruling coalition will win in time as they get the chance to replace the members of the Central Bank. This is the most important economic story in the world. The Democratic Party of Japan wants to encourage consumption. They do not believe a society that consumes less, saves more, produces more, and exports more is the key to prosperity. They have been traveling down that hard road for 20 years and now they want off.
Japan’s government debt is already over 200% of GDP, the highest in the developed world. There is really no way Japan can work hard and pay the debt back in a deflationary world. There is no other realistic way out but to print money. It will happen sooner or later. So why not let it happen sooner and save everyone several more years of unnecessary hardship?
In the U.S. we have only been in a debt induced deflationary depression for a little over two years, as opposed to 20 years in Japan. Hence our leaders have yet to move to the best solution to solve the economic crisis. Japan has moved and now looks poised to lead the way. In the U.S. our leaders are all excited about the false dawn of economic recovery. Japan’s ruling coalition has seen multiple false dawns and realizes they need to use drastic shock and awe to push the economy back into a long term growth mode. We will need to wait for an official government statistic double dip recession for our leaders to get their heads out of the sand. In Florida one in five mortgages are 90 days or more past due. One in five. The weekly jobless continue to signal no employment growth. And, the small business survey shows the most pessimism in 10 months as sales have simply not returned. Large companies have had access to the capital markets and have been able to take market share from smaller companies who have had a very difficult time accessing credit. In February consumer credit sank another $11 billion. We should not mistake an end to the Lehman Brothers financial panic and an Easter holiday a week sooner on the calendar as a sign of renewed economic prosperity. Unfortunately, no major political figure is calling for us to follow Japan’s lead. So like the Japanese we will sit and wait and wind up disappointed.
Posted by Michael A. Kamperman on April 3, 2010
It is great news that more Americans found a job in March than lost one. That is the end of the great news. That is unless of course your a quantity-over-quality kind of guy or gal. Of the 162,000 jobs created in March, over half were temporary jobs split between the private sector and U.S. Census Bureau. The ADP report showed a loss of 24,000 private sector jobs, while the Labor Department reported a gain of 123,000 private sector jobs. Last year the Labor Department was consistenelty more optimistic than ADP. Then a couple of months ago the Labor Department revised down the number of jobs for 2009 by almost one million workers. More disturbingly average earnings declined by .1%. When coupled with the recent .1% decline in the Core CPI rate the risks of entering a deflationary spiral are rising. What has come to be known as the underemployment rate or real unemployment rate (U-6) rose to 16.9%, even though the official unemployment rate (U-3) held steady at 9.7%. The recent Gallup poll reported the underemployment rate rose to 20.3% in March, up from 19.9% in January. The difference between Gallup and the U-6 rate is probably related to questions surrounding how often you looked for work in the last 12 months and seasonal adjustments. Gallup is not anxious to find technical loopholes to exclude people from the labor force. Additionally, the number of people out of work 6 months or longer rose again and now stands at over 6 1/2 million. But the number that jumped out at me is the number of people who were forced to work part-time for economic reasons rose by 263,000 in the household survey. When the last 5 months are taken together as a whole it appears the labor force has stabilized. However, the wage declines are an indication that the quality of jobs are going down as much as it is an indication of deflation.
What appears to be happening is that as people’s unemployment benefits run out they settle for any job. It makes no sense to take a job for less than half the pay of your old job while you are collecting unemployment benefits. It makes a lot of sense to take whatever you can get when the checks stop coming in the mail and you need to find a way to put food on the table. The problem is it is not enough for our society to simply have people working. We need to have them working in good paying value added jobs. We are a society deeply in debt. As such we need rising incomes to service the debts. If incomes are declining it is much more difficult to pay our debts. If incomes are declining it is much more difficult for tax revenues to stabilize. And finally, if incomes are declining it is much more difficult to grow our economy. For despite the .1% drop in average earnings we have a long way to fall if our wages are to reach par with China where the average worker in Shanghai makes $5,000 per year. Most of these workers have no benefits, such as pensions or health care. The Chinese society also doesn’t have the percentage debts to service that the American society does.
Rather than high-fiving at the Whitehouse while strategizing with Census hiring how to have the lowest top-line unemployment number possible for the November 2010 election, the Whitehouse should take a serious look at this supposed economic miracle. President Obama should ask is the March Unemployment Report the best we can do after-all? After we spent a bunch of our $787 billion economic stimulus money? After the Federal Reserve printed over $1.5 trillion? What will happen now that the printing has ended? What will happen now that taxes will rise due to the health care bill, due to the states need for revenue, and due to the pending expiration of the so called Bush tax cuts in 2011? What will happen in 2011 when the states don’t have stimulus dollars to plug some of the shortfalls in their budgets? Where do we go from here? The President’s strategy of having the U.S. double exports within 5 years is a joke when one considers we are competing against global workers who make $5,000 per year without benefits and that have free and open access to our markets while we don’t have free and open access to theirs. The next big joke is the oppositions plan that the way to improve the economy is to reduce the federal deficit primarily through spending cuts. Why don’t we ask Latvia, Ireland and Greece how that’s working out. Our country needs to have a real long look in the economic mirror and quit spinning every economic statistic in a way to make it benefit either the Republican Party or the Democratic Party. Otherwise, like Japan we are staring at two lost decades, not one.
