HAVE YOU EVER STUCK YOUR FINGER DOWN YOUR THROAT?

Have you ever felt so incredibly ill, that you finally just stick your finger down your throat? Our global economy is beyond that point.

Today, ADP (a private business and payroll services firm) released a highly anticipated National Employment Report. It was highly anticipated because the markets expected to see signs of substantial job growth for the month of June. The markets did not get what they had hoped for. Job growth for the month of June came in at a net level of 18,000 nationally. That is 57,000 private sector jobs, offset by the loss of 39,000 government jobs nationally.

To understand what that really means, you need to know a couple more facts. First, new job entrants average between 125,000 and 150,000 monthly. Those are kids and others (like moms returning to the job market from taking care of the kiddos) who are able and willing to work, and want jobs. So that 125,000 (say) people are competing for 18,000 new jobs. It doesn’t quite stretch. But here is the second thing you need to know: That job-creation number has nothing to do with private sector job losses. In June, 449,000 people lost their jobs. They don’t say much about that number in the MSM (Mainstream Media). But I will, and I will include that number because it gives us a better picture as to where we really are. Which is, there were 556,000 more people looking for work in June 2011 who can’t find work than there was in May 2011.

I saw one “analyst” for Reuters who suggested this might be a “whiff of recession.” That “analyst” was interviewing a “currency strategist” for his article. Ludicrous. But what really piqued my interest was the statement issued by House Majority Leader John Boehner, after release of the report. I found that statement through a piece written by Reuters blogger Felix Salmon, who wrote:

It’s incredibly difficult to work out what is the most depressing part of today’s truly gruesome jobs report. The shrinking number of people in the labor force? The rise in U-6, broad underemployment, to 16.2%? The sharp spike in the newly unemployed? The downward revisions to April and May? The downtick in total hours worked? Maybe it’s the way that people leaving government jobs, for whatever reason, are finding it impossible to find new jobs in the private sector.

For me, it’s none of these things — it’s not, in fact, anything inside the report at all. Instead, it’s the reaction to the report from John Boehner:

“The American people are still asking the question: where are the jobs? Today’s report is more evidence that the misguided ‘stimulus’ spending binge, excessive regulations, and an overwhelming national debt continue to hold back private-sector job creation in our country. Legislation that raises taxes on small business job creators, fails to cut spending by a larger amount than a debt limit hike, or fails to restrain future spending will only make things worse – and won’t pass the House. Republicans are focused on jobs, and are ready to stop Washington from spending money it doesn’t have and make serious changes to the way we spend taxpayer dollars. We hope our Democratic counterparts will join us and seize this opportunity to do something big for our economy and our future, and help get Americans back to work.”

(For the rest of Salmon’s piece and the commentary, click this link: http://blogs.reuters.com/felix-salmon/2011/07/08/does-john-boehner-know-what-paychecks-are-made-of/)

Boehner isn’t ignorant, he is owned. As is every other legislative representative in Washington and in the states, the POTUS, and the federal judiciary. Their power and their position depends upon balancing between two competing constituencies: the neo-liberal capitalist elites (read “Keynsians”), and the dependent segment of the population that depends on government largesse. Managing the latter is fairly simple, or has been historically. It is getting more difficult. The former constituency is not managed, but rather does the managing. It is those elites from whom Boehner and Obama get their marching orders.

The elites have manipulated the government to their benefit since they were re-set by the First Great Depression. The regulations, the judicial holdings, the legislation, all are constructed so as to create an economy in which the “wealth” of the nation flows one way; into the pockets of those elites. Sure, there is a kickback in the form of entitlements to keep the dependents from raising a ruckus, but that is just a cost of doing business.

The middle class — the productive segment of the population — is where the real “wealth” comes from. The problem we face now stems from the fact that the elites have over-exploited that source of “wealth.” The reason “wealth” is highlighted here is because it is distinct from “production.” See, ideally, no economy should “spend” more than is produced — ever. But when you conceptualize real production as the abstraction “wealth,” then you can justify using various economic tricks and subterfuges to “create” wealth that is divorced from a true underpinning in production and real assets.

Thus, they could take 100 risky mortgages and package them into a securitized debt instrument. (Risky mortgages are more “profitable” because they carry a higher interest rate, and the risk of default gets thrown out.) But they’re not stupid, so the new instrument is insured against default (a credit default swap). JP Morgan thus pays AIG a premium, and AIG, based upon its reputation alone (and no adequate reserves) promises to reimburse the insured party if the asset goes south (which they did in ’08). Now they have an insured instrument that Moody’s will rate AAA, and it can be resold (and resold) at a premium to any number of other market players.

Because this scheme is so profitable, it becomes desirable to enable large numbers of the populace to borrow easily, and so the elites worked to ensure easy credit policies and lax regulation at the point of attack, through their control of government. That easy money (actually debt) created a huge (and unsupported) demand for housing, and we all know what happens when demand outstrips supply: prices rise. Thus, the real collateral (housing) was inflated across the board, which served only to further fuel this machine.

The problem now is that this scheme was never sustainable, and in its collapse, we find vast quantities of illusory “wealth” floating around in the system, and no one wants to be under roof when it collapses. The Fed’s (which is really the club for the really really wealthy elites) response is to create additional liquidity in the markets. (There is an entire discussion here on how that liquidity has been re-directed into commodities; another day.) TARP I and II, and QE I and II, were all about ensuring that there was coverage for the losses that AIG, et al, could never actually insure. Those funds went straight into the capital accounts of the banks and hedge funds that had been betting on these bogus instruments.

And who pays for that coverage? We do. It is our “money,” fresh off the presses. Or rather, our “national debt.” And none of the “wealth” thus created went to build an automobile, television, road or tractor.

So now we have a colossal debt, busted consumers, and no jobs. And the propaganda in the MSM and the gaming in Washington that supports the system will continue until the merry-go-round stops, because they really have no other options, unless JP Morgan wants to give back all of the wealth it helped create. Yah, right.  Boehner is just doing what he’s told.

We won’t have to stick our finger down our collective throat. Better run to the bathroom right now. This is all coming down. Or back up, however you want to look at it.

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Posted on July 8, 2011, in Economics. Bookmark the permalink. Leave a comment.

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