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Posts Tagged ‘Great Depression’

U.S. Unemployment Rate Continues To Fall-As Discouraged Workers “Disappear”

May 5th, 2012 Comments off

he latest numbers from the Bureau of Labor Statistics indicate that the United States supposedly “created” 115,00 jobs in April. Not even President Obama’s supporters are cheering loudly over this figure, as it indicates a slowing down of job creation-and that is if the number is accurate. As many know, BLS jobs numbers are usually a mathematical abstraction based  on assumptions and inferences, not hard numbers. In any event, if there were 115,000 jobs created in April, that is below the approximately 200,000 new jobs that must be created in the U.S each month in order to keep up with population growth. In other words, 115,000 new jobs in April would mean that the American unemployment rate would increase.

But in April, again according to the BLS, the U.S. unemployment rate did not increase; in fact it “declined” to 8.1 percent. If job creation is lagging behind the expected entry of new workers into the U.S. labor market, how did the magicians at the Bureau of Labor Statistics construct a reduction in unemployment?  Very simple. There are so many discouraged unemployed workers in the United States, they are simply giving up and “leaving” the labor force. In many cases, actually, the BLS is exercising initiative and assuming that a certain proportion of the unemployed simply drop out of the workforce each month.

The real meaning of the April jobs number is that the participation of age-eligible Americans in the labor force -both working and unemployed-is at a 30 year low. How is that synonymous with an economic recovery?

In point of fact, a staggeringly high rate of unemployment, made artificially lower by not counting those long-term unemployed workers as being part of the active labor force, is by no means characteristic of a post-recessionary economic recovery. What has recovered since the onset of the global financial and economic crisis in 2008 are equity prices, which have regained almost all of their losses. However, that recovery is not due to increased consumer demand stemming from the reentry into the workforce of formerly unemployed workers. Rather, stock prices regained most of their losses and have enjoyed a recovery due almost entirely to the loose monetary policies of the Federal Reserve under the tutelage of its chairman, Ben Bernanke.

In contrast with the policies of President Franklin Roosevelt during America’s Great Depression of the 1930s, which focused on facilitating job creation, the policymakers in the U.S. have focused their efforts on reinflating equity prices through quantitative easing (money printing) and offering banks (including investment banks) historically low interest rates, in effect free money. Perhaps sooner than we can imagine, history will render its verdict on this policy of neglecting a recovery in the labor market in favor of reinflating the stock market.

                 

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Global Economic Crisis Is Now A Depression: Paul Krugman

December 12th, 2011 Comments off

Nobel Prize winning economist Paul Krugman, in his recent column, has declared that the crisis in the global economy is now a depression.  Since the onset of the global economic crisis, policymakers and media pundits have resisted using the “D” word, instead preferring terms such as the “Great Recession.” However, this is what Paul Krugman wrote in his  December 11, 2011 New York Times column:

It’s time to start calling the current situation what it is: a depression. True, it’s not a full replay of the Great Depression, but that’s cold comfort. Unemployment in both America and Europe remains disastrously high. Leaders and institutions are increasingly discredited. And democratic values are under siege. .. Specifically, demands for ever-harsher austerity, with no offsetting effort to foster growth, have done double damage. They have failed as economic policy, worsening unemployment without restoring confidence; a Europe-wide recession now looks likely even if the immediate threat of financial crisis is contained.”

Krugman points out in his piece that the economic disaster now unfolding in Europe threatens a resurgence of anti-democratic, populist authoritarianism of the type that infected European civilization during the Great Depression of the 1930s.Of course, the same dangers also lurk in the United States.

In my book, “Global Economic Forecast 2010-2015: Recession Into Depression,” I predicted in 2009 that the policy responses following the collapse of Lehman Brothers in 2008 would not only fail to resolve the global financial and economic crisis; they would create a sovereign debt contagion that would transform the recession into a depression.  Paul Krugman has confirmed the validity of my forecast made in 2009.

In his closing observation, Paul Krugman offers an ominous warning. After describing how Hungary, one of the new democracies in Eastern Europe, is receding into authoritarian rule as its politics become more extremist, all due to the economic crisis in Europe, Krugman writes about the Eurozone political leaders,  they also need to rethink their failing economic policies. If they don’t, there will be more backsliding on democracy — and the breakup of the euro may be the least of their worries.”

It appears that the global economic crisis, and Eurozone debt crisis, are increasingly becoming a political crisis.

 

                 

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Officer Larry of the NYPD is on his way to Zuccotti Park in lower Manhattan to arrest peaceful protesters involved with the Occupy Wall Street movement. Being a public spirited member of the New York Police Department, Officer Larry does remind us that there is a global economic crisis underway that rivals the Great Depression of the 1930s.

U.S. Banking Crisis Accelerates: FDIC Bank Closures Well Ahead of Last Year

August 2nd, 2010 Comments off

The FDIC once again did its Friday Night below-the-radar exercise; shutting down insolvent banks while Americans and their news media were in low gear or distracted. This time, five more banks were shuttered, while the U.S. media overdosed on coverage of the wedding of the daughter of former president Bill Clinton.

With the FDIC closing of 5 banks in Oregon, Washington,  Florida and Georgia, the total for the first 7 months of 2010 stands at 108 failed institutions. This compares with a mere 69 at the same point last year. And 2009 was supposedly one of the worst years ever for bank closings in the United States since the Great Depression of the 1930s.

Despite claims by U.S. economic policymakers that the American banking crisis was “cured” by the U.S. Treasury and Federal Reserve bailouts of the nation’s financial industry, there is no doubt that FDIC bank closings will set a record in 2010, eclipsing the already dismal figures for 2009.

In my book, “Global Economic Forecast 2010-2015: Recession Into Depression,”  I project a severe deterioration in the U.S. banking sector during the latter part of 2011. The accelerating pace of FDIC bank closings, combined with the  continuing global economic crisis and  indications of a double dip recession, would seem to provide growing validation of my prediction.

U.S. Housing Market Remains in Deep Slump

June 17th, 2010 Comments off

The U.S. Commerce Department released figures for housing starts for May 2010, and they were far worse than projected by economists. They plunged 10%, representing a seasonally adjusted annual rate of 593,000 housing starts, versus  659,000 for April. The decline in single family dwelling starts was 17%, the worst contraction since 1991.

The minor uplift in housing starts over the past several months was due entirely to government funded tax credits, paid for with borrowed money. With these short-term gimmicks now being phased out, the organic weakness in the American housing market can no longer be obscured. It must be recalled that the trigger for the current global economic crisis was the collapse of the sub-prime residential housing market in the United States. With worsening public deficits forcing governments to phase out artificial props for a fractured housing industry, we are now seeing adjustable rate, near prime and prime mortgages going into default, not only in the U.S. but throughout the world. This will all serve to undermine what has thus far passed for an anaemic recovery from the worst economic downturn since the Great Depression of the 1930s.

George Soros: Global Financial System Has Disintegrated!

February 23rd, 2009 Comments off
At a recent private dinner held at Columbia University, two of the most high profile players on the global financial scene expressed opinions that are certain to arouse the most spine-tingling of chills. Currency speculator and billionaire investor George Soros said to his no doubt discomforted dinner colleagues that the world financial system has, in effect, “disintegrated.” He went on to relay his view that the resulting financial and economic turbulence was more severe than the levels experienced during the Great Depression.

“We witnessed the collapse of the financial system…it was placed on life support, and it’s still on life support. There’s no sign that we are anywhere near a bottom,” stated Mr. Soros with emphasis. Not to be outdone, fellow participant at this nifty dinner pow-wow at Columbia University, former Fed Chairman and current senior advisor to President Barack Obama, the illustrious Paul Volcker, added the morose observation that, “I don’t remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world.”

When men as astute and intimately connected to global finance as Paul Volcker and George Soros are openly talking about the Global Economic Crisis as being “worse than the Great Depression” and having brought about the “disintegration” of the global financial architecture, it is clear that the most dire forecasts for the global economy can no longer be treated as uninformed hyperbole. The most knowledgeable and well-connected financiers on the planet are already preaching the gospel of economic and financial Armageddon.

Soros has also written in the Huffington Post a reflection based on simple math that outlines why the Global Economic Crisis, at least in the United States, will have an economically destructive impact that eclipses the Great Depression. He points out that at the time of the stock market crash on Wall Street in 1929, outstanding credit represented 160% of the U.S. GDP; this figure grew to 260% in 1932 as GDP contracted. Soros, however, writes that America “…entered into the Crash of 2008 at 365 percent, which is bound to rise to 500 percent or more by the time the full effect is felt.”

How should we interpret the musings of Soros and Volcker? In my view, we ignore their informed observations at our peril. Their stated views are not uninformed speculation, but rather a reflection from those in the eye of the storm of this global economic tsunami. Furthermore, despite continued happy talk from the inept political actors across the globe, those who inhabit the rarefied world of high finance, observing the Global Economic Crisis unfold from the pinnacle of power, do not harbor in the least a hint of optimism-or illusion.

 

 

Global Depression Train Has Left The Station: Next Stop Worldwide Economic Catastrophe

February 8th, 2009 Comments off
At first, many politicians and key economists and financial “experts” refused to use the “R” for recession word, as the housing price collapse in the United States unleashed the eruption of the sub-prime mortgage asset bubble. One could look back at the utterances of former U.S. Treasury Secretary Hank Paulson and his collaborator, Fed Chairman Bernanke, of less than a year ago. Amid mounting indicators of impending systemic financial failure, they were still boasting that their “aggressive” tactics were containing the economic fallout resulting from the sub-prime implosion, ensuring not only the avoidance of a recession but the continuation of economic growth, albeit on a more modest scale. The Global Economic Crisis was the furthest thing from their collective minds. That was then. But this is now.
No longer is the recession terminology hidden; it is conceded in the highest circles as a global disaster, requiring unimagined sums of money to save the financial system while also saving jobs being eliminated by the global recession. However, as with the earlier denial on use of the recession terminology, there is an unwillingness to employ the “D” word for depression, as in a replication of the Great Depression of the 1930s.

It is not only those who were myopic a year ago that want to avoid talk of a depression, at all costs. Even the most prescient analysts and experts have held back on their vocabulary in defining the Global Economic Crisis. However, more and more credible economists and experts have begun describing our current economic catastrophe as a depression. The Economist magazine was one such authority, as was the most recent recipient for the Nobel Prize for economics, Paul Krugman.

Perhaps the most astute observer of the unfolding disaster resulting from the implosion of the U.S. housing bubble has been NYU economics professor Nouriel Roubini. A year ago, amid the happy talk being proffered by Hank Paulson and Ben Bernanke, he accurately warned of the systemic financial collapse that would ensue in short order, unless urgent, coordinated steps of global intervention were swiftly undertaken. History vindicated the judgement of Roubini, while also applying to him the moniker of “Dr. Doom.”

As clear-cut as Nouriel Roubini has been in assessing the Global Economic Crisis, even he has been reluctant to use the “D” word. Now, however, he is warning that the worldwide economic crisis will get much worse, and in the absence of effective global intervention that is coherent and synchronized, a “near depression” was a serious possibility. His most recent warning comes in conjunction with his current assessment of the losses he projects for the global financial system due to “toxic assets,” in the range of $3.6 trillion. His conclusion is chilling in the extreme: the banking system in the U.S. is effectively insolvent.

Added to the mounting evidence of banking insolvency, not only in the United States but other major economies, in particular the U.K., are the horrendous unemployment numbers. The U.S. Labor Department has released its statistics on job losses for January of this year, indicating that another 600,000 Americans joined the ranks of the unemployed. This translates into an official unemployment rate of 7.6%. However, in reality, the situation is far worse than those numbers indicate. In the first place, the Labor Department’s monthly reports are never complete, owing to lagging tabulations from small firms and businesses. This is reflected in that the current report revised substantially higher the unemployment numbers for November and December of 2008. In all probability, more than 700,000 Americans were terminated in January, with every indication that this trend will continue far into 2009. In addition, the official unemployment rate, since the 1960s, subtracts “discouraged” workers, meaning the permanently unemployed, as well as part-time workers unable to find full-time employment. If these numbers are added into the unemployment figure, it exceeds 14%.

At its worst level, the unemployment rate in the U.S. during the Great Depression stood at 25%. After the advent of the New Deal of President Franklin Roosevelt, it temporally declined to near 10%, but then rose to a much higher level, reaching the range of 16-17% prior World War II. Accordingly, a true current unemployment rate of 14% is within the levels experienced by the United States during the 1930s. Factor in the structural insolvency of the American banking sector, the rampant demand destruction infecting the global economy and other catastrophic asset bubbles set to burst during the next several months, and it becomes clear that the United States and the rest of the world have now entered a dark economic territory that can no longer be defined as merely a recession.

The Global Economic Crisis has now achieved levels of economic contraction in all major indices that can only be described as a depression of worldwide dimensions. The global depression train has left the station, and will bring a level of economic and financial carnage to every corner of our world on a scale so staggering, it would have been unimaginable to even the most sober pessimists-until recently.

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com 

 

 

 

 

Why The Global Economic Crisis Will Be Worse Than The Great Depression

January 15th, 2009 Comments off
Eight decades ago the stock market crash of 1929 sparked the Great Depression, an economic crisis without parallel-until now. The 1930s were dark times of economic contraction, only alleviated to a modest degree in the United States by the New Deal of President Franklin D. Roosevelt. It would take the massive public works project known as World War II to bring the Great Depression to a close in the United States. The postwar economic boom in the U.S. ultimately revived the economies of Western Europe and Japan.
Now that the world is engulfed in a global economic crisis of staggering ferocity, does it mean another Great Depression is underway, and will it match the 1930s in its incessant demand destruction? The very bad news is that the Global Economic Crisis will ultimately prove far more devastating that the Great Depression. That is my projection, and I base it on a number of assumptions that appear to be supported by rapidly emerging macroeconomic data.

The American consumer has been the driver of the global economic expansion that impacted the Eurozone, the BRIC countries (Brazil, Russia, India and China), Southeast Asia and Japan and emerging markets. The capacity of Americans to consume was not based on intrinsic productivity but rather on debt from overseas creditors, further lubricated by irrationally loose monetary policies enacted by the U.S. Federal Reserve. The American consumer has been leveraged to a level that is unsustainable, and that bubble has burst.

The first symptoms were manifested in the sub-prime mortgage meltdown. A complex architecture of financial engineering exported toxic securitized paper investments based on these non-performing sub-prime loans. The result has been the virtual destruction of the financial world as we knew it, with the extinction of many of the largest American investment houses, some of which had been in existence for more than a century, having weathered the Great Depression.

While the financial world and now sovereign governments are currently inundated with the consequences inflicted by the sub-prime meltdown, which have cost trillions of dollars, much worse is about to be set loose on the global house of financial cards. There are other asset bubbles that will be popping with lethal force.

While sub-prime mortgages continue to devastate the American housing market, near-prime and prime mortgages are about to get hammered, as the over-leveraged American consumer becomes financially debilitated by rapidly rising unemployment rates, restricted access to credit and collapsing value of their retirement funds and household equity. Car loan delinquencies and credit card defaults will also accelerate, while consumer spending in the United States plummets, leading to the next asset bubble: commercial real estate. Retail trade declines will bring about a horde of commercial bankruptcies and foreclosures, creating vast square footage of vacant offices and storefronts. Shopping malls will become deserted, leading to unpaid commercial mortgages that will rival the sub-prime disaster in intensity.

An American Government that is already consumed with mountains of debt may promise to bail out every American consumer and business, however this is just not possible in the real world. Yet, this is the course the incoming Obama administration seems determined to follow. And leading the charge will be Tim Geithner, Barack Obama’s nominee to succeed Hank Paulson as Treasury Secretary.

Paulson of the $700 billion TARP debacle, preceded by his numerous wrong assumptions about the direction of the U.S. and global economy, was clearly a disastrous Treasury Secretary for coping with the onset of the Global Economic Crisis. However, will Geithner be an improvement? A revelation just released raises disturbing doubts. It has now been disclosed that the man President-elect Obama wants to entrust the Treasury Department to, at a time of the gravest economic crisis, failed to pay $34,000 in back taxes. Failure to pay $34,000 in back taxes? This is the genius supposed to run the Treasury Department, which supervises the IRS, and strategize our way out the current global economic disaster? This leads to another signpost on the road to global economic catastrophe. When excellence in leadership is essential for coping with the Global Economic Crisis, throughout the world the political establishment is represented by mediocrities. Mister Thirty-Four-Thousand in back taxes is a metaphor for this failure by the global political elites to identify and select the most competent professionals to confront the world’s most chronic economic disaster.

When one aggregates the cumulative affects of the asset bubbles about to burst with incendiary destructiveness, factoring in mediocre decision makers, the case for a crisis as bad as the Great Depression is solidified. There remains another element that will make it much worse.

In the 1930s the world was not as financially interconnected as it is today. Globalization has massively increased the vulnerability of the world’s financial and economic system. To take one example, a corrupt stock or bond trader in Singapore or Paris can, by manipulating his computer, gamble away billions of dollars of his company’s assets, undiscovered until calamity has struck. Every day trillions of dollars is transacted at the speed of light, much of it unregulated, particularly with those mysterious entities known as hedge funds. The derivative products they have engineered have accrued to the stratospheric level of hundreds of trillions of dollars, unmonitored by any governmental authority. In essence, a vast global financial superstructure has been erected on a foundation of quicksand as fragile as the worst of the sub-prime securities. As the global economy sinks, hedge funds will begin to deleverage and liquidate, in effect multiplying the already catastrophic global economic downturn. The result: global economic Armageddon.

The Great Depression led to the most destructive war in the history of human civilization. Will the Global Economic Crisis so disrupt social stability and international relations that an even more terrible global conflict erupts? It may be that however calamitous the financial impact of the Global Economic Crisis becomes, it will be the inevitable geopolitical consequences that will exceed our worst nightmares.

 

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com 

 

 

 

 

 

 

Economic Crisis And Disintegration Of The American Empire

January 14th, 2009 Comments off
What we of this generation are witnessing is one of those rare epochal events that occur perhaps once in a millenium: the disintegration of an empire. The Global Economic Crisis will claim as its ultimate casualty the American Empire. How ironic that the neoconservative clique that advocated “American exceptionalism” based on wars of imperial expediency without end, financed by borrowing from foreign creditors, have ended up being the eventual gravediggers of the United States as the hyper-power of the planet.

For over a year, while the U.S. economy was mired in recession and exporting its economic disasters globally, the senior political and business leaders of the American establishment proclaimed to the American people that all was well, that the fundamentals of the economy were “strong,” while they threw taxpayers money at corporations and financial institutions “too big to fail” in a vain and desperate attempt to keep the floodtide of financial failure from inundating the whole economy. The collapse of Lehman Brothers exposed the fragility and rot for all to see and now the entire world is mired in a Global Economic Crisis that more and more economists are labeling as a second Great Depression.

While no one can predict with exactitude what the ultimate outcome will be after the world’s economies have completed their march through Calvary, it is likely that the denouement of this economic and financial apocalypse will see the end of American power as the hegemony-driven master of the planet.

America’s superiority was based on its military infrastructure, and the capability to project power thousands of miles from its shores, inflicting “shock and awe” on any foreign entity that inspired its ire. However, that military industrial complex required a massively productive and successful economy to maintain itself. During the last eight years, while America replaced its ability to create goods that the world needed with complex financial instruments and securitized mortgages as its primary export product, it relied on foreign creditors to subsidize the American military establishment and the cost of the foreign wars it was engaged in. That bubble is now in the process of bursting with tectonic force.

The U.S. government managed to double its national debt during the last 8 years, even before the onset of the Global Economic Crisis. Since then, the government has borrowed $700 billion for the TARP Wall Street Bailout, and is projecting a budget deficit of over one trillion dollars in 2009. That is before the Obama administration passes its own stimulus package after it takes office, possibly boosting the deficit to the stratospheric level of over two trillion dollars! With foreign countries America relies on to finance its deficit now about to embark on their own massive stimulus spending based on deficits, that source of credit will either dry up or become costly beyond tolerance. A few years more of multi-trillion dollar deficits and the single largest item in the federal budget will be the servicing of the national debt. When that happens, it will be fiscally impossible for the United States to maintain its current military outlay, which equals if not exceeds the rest of the world combined.

At present the U.S. pours roughly a trillion dollars into its military industrial complex. What must be understood about the U.S. defense budget is the depth of its deceptive architecture. While the official Pentagon budget is in the range of $600 billion, it excludes other expenditures scattered throughout the line items of the federal budget that properly belong under the category of military allocations. For example, the official defense budget excludes nearly two hundred billion dollars of unfunded (meaning borrowed) spending on the wars in Iraq and Afghanistan. It excludes military benefits for veterans, intelligence gathering and other national security activity. Most deceptively excluded is most spending on nuclear weapons, measured in the tens of billions of dollars, which is clearly a military allocation, but is budgeted under the Department of Energy.

The smoke and mirrors is about to be shattered, as the Global Economic Crisis gathers momentum. The U.S. will lose its capacity to finance its military establishment, unless it replicates the example of the once-mighty Soviet Union, which placed its military first and civilian economy last, ultimately leading to the implosion of both.

We are truly witnessing a global economic trauma that will also radically reorder the geopolitical configuration of our planet. What is uncertain is if America will emerge as a constitutional, democratic republic at peace with the world, or as a desperate actor that will grasp at retaining its once invincible economic and military power no matter the cost to its future generations.

 

 

 

 

Global Economic Crisis

November 28th, 2008 Comments off

What began as a global financial crisis has truly become a virulent global economic crisis. The credit crunch that has clogged the arteries of the world financial system has now caused an economic meltdown of global proportions. No economy, big or small, developed or undeveloped is being spread.

The danger confronting policy makers and citizens as the international community and individual sovereign nations are passing through uncharted but stormy waters. Parallels are already being drawn to the Great Depression of the 1930s. More dire, several very learned financial experts and economists have warned that what the world confronts is a mega-economic crisis that may even dwarf the Great Depression.

Recently, even China’s high growth rate has receded. It was hoped at one time that the Chinese economy could rescue the planet from a worldwide recession. scenario is no longer operative. The Eurozone, the U.K. and the U.S. are now experiencing negative growth in their GDP. A terrifying global economic crisis is about to inflict staggering pain throughout the globalized, interconnected planet.