Whoever republishes any of these papers, please do Marty justice by respecting his Civil Rights as an American, and hold our Government responsible for the mental torture this man had to endure for the 11 years he spent in Federal Prison. Martin A. Armstrong is America’s #1 Political Prisoner. We should never forget what our Government is responsible for when they could be receiving the help from Martin during our terrible Economic Crisis. He was urged to start writing again in September, 2008–otherwise, none of these papers would have ever been written, and I would not have been asked by him to help. I am eternally grateful for the opportunity to help Marty. Because of this endeavor, I was able to overcome serious, and almost fatal injuries obtained from the trauma of an accident. If it were not for the time spent, focus, mind exercises (given by a valued friend), effective intuition and encouragement from Marty himself and a few others, I have healed into a more vibrant, capable and tenacious individual. I am preparing to pass on what I have learned from Marty and others through this experience. My Strength, courage, compassion, honesty, and forbearance will continue, and I will happily turn the reins over to Marty next year when he is ready to run! Thanks to everyone who have helped me… you know who you are. with candor, grace, and moxie…
ShadowStats’ John Williams has done his math and believes his numbers tell the truth. He explains why the U.S. is in a depression and why a "Hyper-Inflationary Great Depression" is now unavoidable. John also shares why he selects gold as a metal for asset conversion in this exclusive interview with The Gold Report. The Gold Report: John, last December you stated, "The U.S. economic and systemic crisis of the past of the past two years are just precursors to a great collapse," or what you call a "hyper-inflationary great depression." Is this prediction unique to the U.S., or do you feel that other economies face the same fate? John Williams: The hyper-inflationary portion largely will be unique to the U.S. If the U.S. falls into a great depression, there’s no way the rest of the world cannot have some negative economic impact. TGR: How will the United States’ decreased economic power impact global economies? Will the rest of the world survive? JW: People will find to their happy surprise that they’ll be able to survive. Most businesses are pretty creative. The thing is, the U.S. economic activity accounts for roughly half that of the globe. There’s no way that the U.S. economy can turn down severely without there being an equivalent, at least a parallel downturn outside the U.S. with its major trading partners. When I talk about a great depression in the United States, it is coincident with a hyper-inflation. We’re already in the deepest and longest economic contraction seen since the Great Depression. If you look at the timing as set by the National Bureau of Economic Research, which is the arbiter of U.S. recessions, as to whether or not we have one, they’ve refused to call an end to this one, so far. But assuming you called an end to it back in the middle of 2009, it would still be the longest recession seen since the first down-leg of the Great Depression. In terms of depth, year-to-year decline in the gross domestic product, or GDP, as reported in the third quarter of 2009, was the steepest annual decline ever reported in that series, which goes back to the late ’40s on a quarterly basis. Other than for the shutdown of war production at the end of World War II, which usually is not counted as a normal business cycle, the full annual decline in 2009 GDP was the deepest since the Great Depression. There’s strong evidence that we’re going to see an intensified downturn ahead, but it won’t become a great depression until a hyper-inflation kicks in. That is because hyper-inflation will be very disruptive to the normal flow of commerce and will take you to really low levels of activity that we haven’t seen probably in the history of the Republic. Let me define what I mean by depression and great depression, because there’s no formal definition out there that matches the common expectation. Before World War II, economic downturns commonly were referred to as depressions. If you drew a graph of the level of activity in a depression over time, it would show a dip in the economy, and you’d go down and then up. The down part was referred to as recession and the up part as recovery. The Great Depression was one that was so severe that in the post-World War II era, those looking at economic cycles tried to come up with a euphemism for "depression." They didn’t want to create the image of or remind people of the 1930s. Basically, they called economic downturns recessions, and most people think of a depression now as a severe recession. I’ve talked with people in the Bureau of Economic Analysis and the National Bureau of Economic Research in terms of developing a formal depression definition. The traditional definition of recession – that of two consecutive quarters of inflation-adjusted contraction in GDP – still is a solid one, despite recent refinements. Although there’s no official consensus on this, generally, a depression would be considered a recession where peak-to-trough contraction in the economy was more than 10%; a great depression would be a recession where the peak-to-trough contraction was more than 25%. We’re borderline depression in terms of where we’re going to be here before I think the hyper-inflation kicks in. You’ve certainly seen depression-like numbers in things such as retail sales, industrial production and new orders for durable goods, where you’re down more than 10% from peak-to-trough. In terms of housing, you’re down more than 75%, and that certainly would be in the great depression category. With hyper-inflation, you have disruption to the normal flow of commerce and that will slow things down very remarkably from where we are now. TGR: After a period of recession, isn’t inflation considered a good sign? JW: There are a couple of things that drive inflation. The one that you’re describing is the relatively happy event where strong economic demand is exceeding production, and that’s pushing prices higher, as well as interest rates. That’s a relatively healthy circumstance. You can also have inflation, which is driven by factors other than strong economic activity. That’s what we’ve been seeing in the last couple of years. It’s been largely dominated by swings in oil prices. That hasn’t been due really to oil demand, as much as it has been due to the value of the U.S. dollar. Oil is denominated in U.S. dollars. Big swings in the U.S. dollar get reflected in oil pricing. If the dollar weakens, oil rises. That’s what you saw if you go back to the 1973-1975 recession, for example. That was an inflationary recession. Indeed, the counterpart to what you were suggesting earlier about the strong demand and higher inflation is that usually in a recession you see low inflation. The ’73 to ’75 experience, however, was an inflationary recession because of the problem with oil prices. That’s what we were seeing early in this cycle, where a weakening dollar rallied oil prices, and then the dollar reversed sharply and oil prices collapsed. We have passed through a brief period of shallow year-to-year deflation in the consumer price index, but, as oil prices bottomed out and headed higher since the end of 2009, we’re now seeing higher inflation, again. I’m looking at hyper-inflation, which is a rather drastic forecast. This has been in place as an ultimate fate for the system for a number of years. Back in the ’70s, the then Big 10 accounting firms got together and approached the government and said, "Hey guys, you know you need to keep your books the way a big corporation does. You’re the largest financial operator on earth." The government then, as well as today, operates on a cash basis with no accrual accounting and such. Yet, over a period of 30 years, the accountants and government put together generally accepted accounting principles, or GAAP, accounting for the federal government and introduced formal financial statements on that basis in 2002, which supplement the annual cash-based accounting. If you look at those GAAP-based statements and include in the deficit the year-to-year change in the net present value of the unfunded liabilities for Social Security and Medicare, what you’ll find is that the annual operating shortfall is running between $4 and $5 trillion; not $500 billion as we saw before the crisis or the $1.4 trillion that they announced for fiscal 2009. Now to put that into perspective, if the government wanted to balance its deficit on a GAAP basis for a year, and it seized all personal income and corporate profits, taxing everything 100%, it would still be in deficit. It can’t raise taxes enough to contain this. On the other side, if it cut all government spending except for Social Security and Medicare, it still would be in deficit. With no political will to contain the spending, eventually the government meets its obligations by revving up the currency printing press. TGR: With all this new paper money coming into the system, wouldn’t we see a bigger bubble than we’ve ever seen prior to a hyper-inflationary great depression? JW: No, in fact, it’s a very unusual circumstance that we have now. Put yourself in Mr. Bernanke’s situation – he had to prevent a collapse of the banking system. He was afraid of a severe deflation as was seen in the Great Depression, when a lot of banks went out of business. The depositors lost funds and the money supply just collapsed. He wanted to prevent a collapse of the money supply and keep the depository institutions afloat. Generally, that has happened. The FDIC expanded its coverage and everything that had to be done to keep the system from imploding was done. The effects eventually will be inflationary. In the process, what Mr. Bernanke did was to expand the monetary base extraordinarily, more than doubling it over a period of a year. The monetary base is money currently in circulation plus bank reserves. If you go back to before September 2008, the bank reserves were in the $50 to $60 billion range. Where the currency was maybe $800 billion, we’ve gone over $2 trillion in total reserves. Most of that is in excess reserves and not required reserves that banks have to keep to support their deposits. Normally banks would take their excess reserves and lend them out into the regular stream of commerce, and in doing so, that would create money supply. Instead they’re leaving the excess reserves on deposit with the Fed. Money supply and credit are now generally contracting. We’re going to see an intensified downturn in the near future. I specialize in looking at leading indicators that have very successful track records in terms of predicting economic or financial turns. One such indicator is the broad money supply. Whenever the broad money supply – adjusted for inflation – has turned negative year over year, the economy has gone into recession, or if it already was in a recession, the downturn intensified. It’s happened four times before now, in modern reporting. You saw it in the terrible downturn of ’73 to ’75, the early ’80s and again in the early ’90s. In December of 2009, annual growth in real M3 turned negative. It’s now at a record low in terms of decline, down more than 6% year over year. What that suggests is that in the immediate future you’re going to see renewed downturn in economic activity. In all the prior instances that I mentioned, this event led recessions, except for ’73 to ’75. That’s when you had the oil spike and a recession that came from that. When the money supply turned down in that recession, the economy accelerated in its decline. We’re going to see something along those lines, now, with about a six-month lead time. You’re going to have negative economic growth this year. The implications for that are extraordinary, because the projections on the federal budget deficit, a number of the state deficits, and the solvency and stress tests for the banking system all were structured assuming positive economic growth in the 2% to 3% range for 2010. Instead it’s going to be negative. Many states are going to be in greater difficulty than they thought. Most likely, you’re going to have federal bailouts there. The banks are going to have more troubles. All this means more government support, more government spending, greater deficits and greater funding needs for the U.S. Treasury. We have a global market that already is increasingly reluctant to hold the dollars and U.S. Treasuries. TGR: The U.S. dollar is still the reserve currency, and it’s holding its value while the euro struggles. Wouldn’t decoupling precede hyper-inflation? JW: I don’t know if it will decouple from being the reserve currency formally, but it will de facto. The reserve status is the reason the dollar didn’t collapse per se a year and a half ago during the September ’08 panic. The movement is already afoot, however, to try to relegate the dollar to some status other than a reserve currency. For example, OPEC purportedly is looking to price oil in something other than U.S. dollars. The pressure is there to change the status. Again, if you start to see a great depreciation of the U.S. currency or a tremendous increase in lack of confidence in the soundness of the government’s fiscal condition, there is a problem. You mentioned Greece, for example. The sovereign solvency issues there are minuscule compared to what we have with the United States, which is the elephant in the bathtub. The markets know it’s there. The central bankers know it’s there. Again, with the downturn in the economy, all the issues are going to be brought to a head. As they come to a head, there will be that effort to dump the dollar. I would expect that, indeed, it will be decoupled from its reserve status, although it could follow after the fact as opposed to before the fact. TGR: Major economic indicators suggest significant improvement; even the IMF has stated that we’ve averted a global depression. What are you seeing that these governing bodies are not? JW: What I’m using is a leading indicator of economic activity: year-to-year change in inflation-adjusted broad money supply. We’re now seeing a very sharp year-over-year decline, which has not been seen since the 1990 recession. This indicator does not work always in the upside; it doesn’t necessarily give you a signal for a rising economy. It is, however, basic. If you strangle liquidity you can always contract an economy. Deliberately or not, liquidity’s being strangled. You’re seeing very sharp declines in consumer credit, commercial and industrial loans and commercial paper outstanding. You are getting happy news from governments, central banks, financial markets, Wall Street analysts and the popular media, which does tend to cater to Wall Street. Such is standard practice. Happy news is what sells and you don’t want to discourage people. The Obama administration, interestingly, started talking-down the economy when it wanted to get its stimulus package in place. As soon as that was done, it started talking-up the economy. Everything was just fine and dandy again. This is the most extraordinary downturn most people living today have ever seen. In terms of modern economic reporting, which basically started after World War II, we’ve never had a downturn as long or as severe. Perversely, the extreme nature of the downturn actually has warped recent reporting of seasonally-adjusted data to the upside. TGR: Earlier you mentioned that business around the world will survive in the event of a depression. Aren’t there sustainable businesses in the U.S. as well? Won’t an influx of printed currency and green-tech job creation offer some value? At some point, doesn’t stimulus money become real cash producing real goods? Surely the economy would be viable at some level? JW: Not without income growth. There’s nothing there that you’ve described to me that is growing, aside from inflation. To have sustainable growth in the economy, you have to income growth, net of inflation. That is not happening, and there is nothing in existing government stimulus that will cause real income growth. Beyond income issues, the problem with the hyper-inflation is that very quickly the use of cash will cease. Let me contrast our circumstance here with a very popularly followed hyper-inflation case that’s now run its course in Zimbabwe. There you had probably the worst hyper-inflation that anyone’s ever seen. After devaluation upon devaluation, they successively lopped the zeros off the bills. If you took a $2 bill that they first issued back in the ’80s and then tried to come up with the equivalent of a $2 bill in the last form of the currency, it would be very difficult to do because it was so worthless. If you put a pile of those together to equal the original $2 bill, it would actually stretch from the earth to the Andromeda Galaxy. We’re talking light years. There are not enough trees on earth to print them. Yet the Zimbabwe economy survived and functioned. They had a lot of problems, but they operated. The reason they functioned was because they had a back-up system, which was a black market in U.S. dollars. People switched out of the Zimbabwe dollar to U.S. dollars. They could live with that. In the U.S., we don’t have a back-up system. TGR: You mentioned in a recent interview with CNN that you’re recommending individuals move into both cash and gold. With the euro and the dollar in jeopardy, where does that leave us? JW: I don’t like the euro. I don’t think that’s going to hold together, and I’ve thought so for some time. If it should break up and you have a new German currency, a new mark or something like that might be a strong one option. At the moment I like the Canadian dollar, the Australian dollar and the Swiss franc. For anyone living in the United States, rather than looking at the short-term volatility in the markets and trying to make money off of that, this is the time to batten down the hatches and to look to preserve your wealth and assets. In terms of preserving the purchasing power of your assets, the best thing I can think of is physical gold. That’s worked over the millennia. I’m not per se a gold bug. It just happens to be a circumstance in which it’s the cleanest asset around for that. You don’t need to put all your assets into gold, but hold some. Hold some silver. I’d look to get some assets out of the U.S. dollar and look to get some assets out of the U.S. When I say outside of the U.S. dollar, again, I look at the Canadian dollar, Australian dollar, Swiss franc in particular. I think they will tend to do particularly well, whereas the U.S. dollar is going to become effectively worthless. As the dollar breaks down, you’ll also likely see disruptions in supply chains, including shipments of food to grocery stores. People should consider maintaining stockpiles of basic goods needed for living, much as they would for a natural disaster. I sit on the Hayward fault in California. I have a supply of goods and basic necessities in case something terrible happens – natural or man-made – that will carry me for a couple of months. It may take that long for a barter system to evolve, which I think is what you’re going to end up with; at least until a new currency system is reorganized and you get a government that’s able to bring its fiscal house into order. No currency system in the U.S. is going to work unless the fiscal conditions that drove it into oblivion are also addressed. On a global basis, where the dollar is the world’s reserve currency, 80% of currency transactions involve the U.S. dollar. There’s going to have to be an overhaul of the global currency system. To gain credibility with the public, the powers that be likely will design a system that has some kind of a tie to gold, but that’s purely speculative. TGR: From a personal investment point of view, you emphasized that this is a time to conserve assets, including gold and other currencies. How else can investors protect themselves? JW: I like physical gold and silver. I look to gold as a primary hedge. If you can come out of this holding gold, you’ll be in a position where you’ll be able to take advantage of some extraordinary investment opportunities that will follow. With inflation, real estate is usually a pretty good bet. It tends to hold its value over time. There may be periods of illiquidity, though, and it’s not portable. Neither of those limitations is an issue with gold. Maybe gold will become the black market to support U.S. economic activity. It certainly would be the area that people will try to transfer their assets to as time goes along. You see people now as gold gets to a new high saying, "Oh my goodness, I bought at $200, and I can sell out at $1,100 making a good profit." What people don’t realize is that they haven’t made a real profit. What they’ve done is retained the purchasing power of the dollars that they invested in gold, and they’ve lost proportionately the purchasing power of the amounts left in dollar-denominated paper assets over the same time. Gold is a long-term wealth preserver. Again, where many people are used to an investment environment where they can buy a stock, make a quick profit and then sell, with gold you need to hold on for the long haul as an insurance policy, not as a quick investment. TGR: Thank you very much for your time.
A rash of new layoff announcements and government reports on job losses give the lie to the claims of the Obama administration and the media that the employment situation is “stabilizing.” Last Friday, the administration hailed the Labor Department’s report that US payrolls shrank by “only” 36,000 jobs in February and the official jobless rate remained at 9.7 percent as proof that its policies are working and the economy is recovering.
In fact, the so-called “recovery” is limited to the big banks and major corporations, which are profiting from trillions of dollars in taxpayer bailouts, virtually unlimited and cheap credit, and the use of mass unemployment to drive down wages and increase the exploitation of the working class. An unprecedented assault on the living standards of the vast majority of the American people is being carried out under the direction of the Obama administration, creating a social crisis without parallel since the Great Depression.
On Tuesday, the Labor Department reported that the official unemployment rate in January rose in 30 states. Sixteen states had jobless rates higher than the national average of 9.7 percent, including Michigan (14.3 percent), Nevada (13 percent), Rhode Island (12.7 percent), South Carolina (12.6 percent) and California (12.5 percent).
Unemployment in California, Florida, Georgia, North Carolina, South Carolina and Washington DC rose to the highest levels since records began in 1976.
A separate Labor Department report showed that mass layoffs (50 or more positions) increased nationally in January to 1,761, leading to at least 182,261 workers losing their jobs.
On Tuesday, Chevron, the second largest US oil company, announced it will cut 2,000 jobs, or more than 3 percent of its workforce. This follows a reduction of 2,000 jobs in 2009.
Exelixis, a company in South San Francisco, said it will lay off 270 workers—40 percent of its work force.
The Minnesota Department of Human Services announced a cut of 200 full-time mental health jobs.
These are only the latest in an ongoing wave of layoffs hitting every sector of the economy. Alongside job-cutting by private corporations, hospitals and state and local governments are shedding jobs at an accelerating pace in response to gaping budget deficits.
The American Medical News web site reported 13 mass layoffs at hospitals in January affecting 995 workers. Mass hospital layoffs announced in February included over 300 workers at St. Vincent’s Hospital in Manhattan, 268 full-time jobs at Forrest Park Hospital in St. Louis, and some 900 jobs at Jackson Medical System in Miami.
This week, the CEO of the Jackson system in Miami announced plans to close two hospitals and eliminate another 4,500 jobs—37 percent of the system’s workforce.
The overall workforce at US airlines shrank 3.2 percent in January compared to a year earlier, the US Department of Transportation announced Wednesday.
Across the US, in big cities, small towns and rural areas, schools are being closed and teachers laid off, college tuition is being raised and courses cancelled, bus routes—including school buses—are being eliminated, libraries are being closed, parks, swimming pools and other recreational and cultural facilities are being mothballed.
Utility shutoffs, with the inevitable consequence of deadly house fires, home foreclosures, hunger and poverty are rising.
The Obama administration and the Democratic-controlled Congress are doing nothing to provide serious relief for the unemployed or create new jobs to employ the jobless. They refuse to bail out cash-starved states and cities, having bailed out the banks to the tune of trillions of dollars, instead demanding that local governments carry out unprecedented attacks on basic social services.
The real attitude of Obama toward the working class was demonstrated in his public support for the mass firing of teachers in Rhode Island, after they resisted demands for longer work hours with no increase in pay. This goes hand in hand with a health care overhaul entirely focused on cutting Medicare and rationing health care for ordinary Americans, and the setting up of a bipartisan commission to prepare major and permanent cuts in entitlement programs—Medicare, Medicaid and Social Security—on which tens of millions of working people depend.
The administration and both parties reject out of hand any measures opposed by the banks and corporations—such as a public works program—to provide jobs for the unemployed. The so-called “jobs” bills working their way through Congress are nothing more than tax windfalls for business.
The assault on every aspect of life of working people is being carried out in the interests of a bankrupt system—capitalism—a system that subordinates social needs to the personal enrichment of a wealthy elite. In the US and around the world the corporate-financial elite is imposing brutal austerity measures to make the working class pay for the crisis of the profit system.
The trade unions function as adjuncts of the ruling class, devoting all their efforts to the suppression of popular opposition in return for a share in the spoils from the exploitation of the workers.
Anger and resistance are growing, not only in the US, but internationally. Over the past several weeks, strikes and mass protests have broken out across Europe in opposition to government austerity measures, dictated by the banks.
On March 4, tens of thousands of students and workers demonstrated in the US in opposition to education cuts. This was an initial expression of popular opposition that will grow in the coming months. If this opposition is not to be diverted and led into a blind alley, however, it requires a new perspective and program.
The basic needs of working people and youth are incompatible with the policies of the Obama administration and both political parties, and the capitalist system which they defend. The entire working class must be mobilized as an independent political force against Obama and the two-party system to reorganize society in accordance with social needs, not private profit.
On April 17 and 18, the Socialist Equality Party, its youth movement, the International Students for Social Equality, and the World Socialist Web Siteare holding an emergency conference on the social crisis and war. This conference will discuss a new socialist strategy to unify the working class against war and the assault on jobs and social programs.
We urge all workers and young people looking for a way to fight back to attend the conference. For more information and to register, click here.
New studies reveal that the social divide between rich and poor in the US has grown much starker in the current economic crisis, and that even before it hit the country was the most unequal of the advanced economies, with great wealth and extreme poverty having become virtually hereditary conditions.
President Barack Obama has done nothing to reverse decades of wage stagnation, mounting poverty, and attacks on the social welfare system. On the contrary, following George W. Bush, he has seized on the crisis to redistribute wealth to a tiny financial elite through the ongoing bailout of the finance industry.
This demonstrates a fundamental political reality: no reform that benefits the broad masses can come from a government and two-party system so openly in the clutches of Wall Street. The financial aristocracy’s grip over all the levers of state power must be broken by the working class, independently mobilized behind a socialist program.
The impoverishment of the working masses amidst the current economic crisis is documented by a recent report from Northeastern University analyzing unemployment in 2009, based on income data for the previous year.
Unemployment in the fourth quarter of 2009 for those in the bottom 10 percent of household earnings was at the Depression level of 31 percent. A broader measure of unemployment, the labor market underutilization rate—which combines unemployment, underemployment, and those who have fallen out of the workforce because they have ceased actively searching for work—was over 50 percent among the bottom decile of earners, for the second decile, 37.6 percent, and for the third and fourth lowest income deciles, 17.1 percent and 15 percent, respectively. For the top 10 percent of earners, the underutilization rate was 6.1 percent.
The data is indicative of “a true Great Depression,” according to the report, yet “there was no labor market recession for America’s affluent.”
The sharp polarization that reveals itself in fabulous wealth for a handful, on the one hand, and unemployment, wage cuts, homelessness and hunger for broad layers of working people on the other, marks an intensification of longer-term trends.
According to the Economic Policy Institute (EPI), “While many middle-income families have lost jobs, homes, and retirement savings during the latest recession, their economic woes date back much further.” In the 30 years before 2008—the onset of the current crisis—nearly 35 percent of total income growth in the US was cornered by the top one-tenth of 1 percent of income earners. The bottom 90 percent shared only 15.9 percent of income growth in the same period.
According to the United Nation’s Gini coefficient, which measures the national distribution of family income, the US had the highest level of inequality of the highly industrialized countries, based on the data available in 2008. It was ranked as slightly more unequal than Sri Lanka, and on a par with Ghana and Turkmenistan. In the Central Intelligence Agency World Fact Book’s Gini ranking for 2008, the US fell just behind Cameroon.
The apologists for US capitalism have long claimed that, though inequality may be great, America is a land where anyone can go “from rags to riches” by “pulling themselves up by their boot straps.”
Not so, according to a new report from the Organisation for Economic Co-operation and Development (OECD), which concludes that in the US “mobility in earnings, wages and education across generations” is at or near the lowest of the advanced economies. The US joined Italy and Britain as the countries where a worker’s father’s earnings are most determinant of his or her own wages. Moreover, in the US the role of parents’ educational level on the educational achievement of their children was more pronounced than any other country, the report reveals.
The vast polarization of wealth in the US will only intensify. According to the Obama administration’s rosy economic estimates, unemployment will not return to its pre-crash levels before the end of the decade. More realistic observers, however, acknowledge that mass unemployment will be a fixture of US life, and higher-paying jobs destroyed in the recession will never return. Combined with declining home values, skyrocketing health care and higher education costs, chronically high unemployment will result in steadily rising poverty.
But for the CEOs and bankers perched at the pinnacle of US society, the economic crisis has proven an out-and-out bonanza, a recent New York Times report reveals. John G. Stumpf, the head of the bank Wells Fargo, took home $18.7 million in 2009. Jamie Dimon of JPMorgan was number two in banker pay with $17.6 million in compensation. Lloyd Blankfein, whose Goldman Sachs has reaped windfall profits in the financial collapse, was awarded “only” $10 million.
These big name bankers are only the tip of the iceberg. “There are probably thousands of people that are in the Millionaire Club—or even the Ten Millionaire Club—that have gotten no heat,” Wall Street compensation expert Alan Johnson told the Times.
Obama defends these obscene pay packages. “I, like most of the American people, don’t begrudge people success or wealth,” he said of the eight-figure rewards for the same financial executives whose firms have benefited from trillions in taxpayer support. “That is part of the free-market system.”
In fact “most of the American people” not only begrudge these ill-gotten gains. They wonder why they have yet to see news footage of bankers and traders arrested and hauled from their plush offices. Now working class anger is becoming increasingly trained on the political system, which, as a year’s experience with the Obama administration has taught, does the bidding of Wall Street regardless of which party controls the White House and Congress.
The antidote to the plundering of society that has gone unchecked for decades is the nationalization of the banks and their transformation into public institutions, democratically controlled by working people. The ill-gotten gains of the lords of finance must be expropriated and used to put in place a program of full employment, free universal health care, free higher education, and infrastructure development.
The fight for this program requires the mobilization of the working class in the US and internationally, independent of the Democrats and Republicans and all the political formations that defend the existing capitalist set-up.
The official US unemployment rate fell to 9.7 percent in January, despite 20,000 jobs lost, according to monthly figures for December released Friday by the Labor Department.
The number of jobs, which the labor department called “essentially unchanged,” was affected by a number of contingent events, including the hiring of 9,000 temporary workers by the federal government to help with the 2010 census and the “inventory bounce” that took place in December.
The number of jobs lost comes on top of a sharply lower starting point than previously reported. On the basis of revised figures, the Labor Department now shows that a staggering 8.4 million jobs have been wiped out since December 2007, by far the worst downturn since the Great Depression.
The number of jobs lost in 2009 alone was revised upwards by about 600,000, including an increase in 11 out of 12 months. In particular, December’s figures were revised upward to show that the economy lost 150,000 jobs that month, instead of the 85,000 initially reported.
The unemployment rate, which is calculated on the basis of a separate survey, fell from 10 percent in December. One factor behind the discord between the jobs and unemployment numbers comes from the fact that the unemployment rate is very heavily adjusted for the fall-off in economic activity that usually happens in January. If one disregards this “seasonal adjustment,” there were 16.1 million unemployed people in January, up from 14.7 million in December. The non-seasonally adjusted unemployment rate actually rose sharply from 9.7 percent in December to 10.6 percent in January.
The improvement in the headline unemployment rate was nevertheless seized on by the media and Democratic Party to proclaim imminent recovery. “What a difference a year makes,” exclaimed Representative Carolyn Maloney, a Democrat from New York. “Today’s employment report … provides fresh evidence that the labor market has stabilized and our nation has turned a corner.”
Many economic commentators were decidedly less upbeat. When asked in a Bloomberg.com interview if investors will respond positively to claims of economic recovery, Anthony Crescenzi, a senior strategist at bond firm Pimco, replied simply: “No.” He said that such triumphalism is intended for political purposes, but Crescenzi’s peers did not “put a lot of weight” on claims of imminent recovery.
Crescenzi added, “We’ve seen Washington in high gear recently trying to paint a different picture of the economy,” but “the market understands that the underlying forces on the economy are still quite weak.”
Ethan Harris of Bank of America and Merrill Lynch, told Bloomberg.com, “The drop in the unemployment rate here is a bit of a fluke,” and that “this is a very choppy and somewhat disappointing report.”
The contradiction in the latest figures has also raised doubts about the impartiality of the official data. “The message is, you can’t believe what they tell you,” Joshua Shapiro, chief United States economist at MFR Inc, told theNew York Times. “Everyone goes crazy over today’s number, but history has been rewritten. Things are not comparable from month to month.”
In the longer term, the fall in the unemployment rate is related to workers dropping out of the labor force because they have given up looking for work. Since May of last year, the labor force has shrunk by about 1.8 million, amounting to over 1 percent of the previously working population.
In January, there were 2.5 million “marginally attached” workers, who would like to work but had not looked for a job in the previous four weeks. The number of such workers had grown by 409,000 from a year before. This figure is not seasonally adjusted.
Discouraged workers—a group within marginally attached workers—surged over 100,000 in January to 1.1 million, up from 734,000 a year earlier. These workers said that they stopped looking for work primarily because no jobs were available, instead of other reasons, like wanting to attend college.
The number of such workers topped one million for the first time in January, and last month’s increase was the sharpest since the start of the recession.
Young people were among the worst off, with the official unemployment rate for teenagers holding at 26.4 percent.
Long term unemployment also increased, with the number of people unemployed for over 27 weeks setting a new record, hitting 6.3 million, up from 6.1 million in December.
Retail trade posted an increase of 42,000 jobs, while manufacturing increased by 11,000. But this was outweighed by the elimination of 75,000 construction jobs. The government sector also showed a net loss of 8,000 jobs, as losses from state budget cuts outweigh temporary hiring for the census. Some 40,000 were eliminated in state and local government.
The loss of 20,000 jobs includes the growth of temporary jobs, about 52,000 of which were created in January. Since September 2009, 247,000 new temporary positions have been created, while the overall number of jobs has declined by 242,000.
Whatever jobs are created are not “going to be the type of high-paying jobs we like to see, it’s not going to full-time jobs; it’ll be part-time and contract labor,” said Ellen Zentner, senior US macro economist at the Bank of Tokyo.
Even as job losses mount, more work is being squeezed out of the workers who remain employed. Another recent report showed that, in the fourth quarter of last year, companies increased productivity, or the amount of work they can squeeze from each worker without paying more, by around 6 percent.
