Tuesday, November 17, 2009

The worst is yet to come!

Greetings good citizen,

The ‘Stupidity Index’ managed to finish in positive territory today so, by extension, everything should be just ducky! The markets are going up so people are working, happy and preparing for the Holidays…except that they’re not.

As most of you are well aware, this variety of misleading ‘eyewash’ leaves us unprepared to deal with the coming crisis...

What crisis is coming? The crisis is over, there’s no crisis coming…except that there is.

Wait a minute! Everything is just fine, hell the markets have just posted new highs for the year!

Uh, you don’t have to take my word for it…have a gander at tonight’s offering straight from the website of ‘Dr. Doom’.

The Worst is yet to Come: Unemployed Americans Should Hunker Down for More Job Losses

by Nouriel Roubini

Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%. [And most think even that figure is low…]

While losing 200,000 jobs per month is better than the 700,000 jobs lost in January, current job losses still average more than the per month rate of 150,000 during the last recession. Also, remember: The last recession ended in November 2001, but job losses continued for more than a year and half until June of 2003; ditto for the 1990-91 recession. So we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back.

There's really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers. Helping the unemployed just by extending unemployment benefits is necessary not sufficient; it leads to persistent unemployment rather than job creation. [Um, sadly, none of that will work, the best place to start is a halving of the workweek, instantly doubling the workforce. Couple that with making the ‘stack of lumber’ free and prosperity returns pretty much instantly.]

The long-term picture for workers and families is even worse than current job loss numbers alone would suggest. Now as a way of sharing the pain, many firms are telling their workers to cut hours, take furloughs and accept lower wages. Specifically, that fall in hours worked is equivalent to another 3 million full time jobs lost on top of the 7.5 million jobs formally lost. This is very bad news but we must face facts. Many of the lost jobs are gone forever, including construction jobs, finance jobs and manufacturing jobs. Recent studies suggest that a quarter of U.S. jobs are fully out-sourceable over time to other countries. [And as long as the cretin bankers continue to manipulate the value of our currency, the situation isn’t going to improve.]

Other measures tell the same ugly story: The average length of unemployment is at an all time high; the ratio of job applicants to vacancies is 6 to 1; initial claims are down but continued claims are very high and now millions of unemployed are resorting to the exceptional extended unemployment benefits programs and are staying in them longer. Based on my best judgment, it is most likely that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more. [What we should all be asking ourselves is why we will stop bleeding jobs two years from now? Nobody is saying that in two years our labor force will be so beaten down that we will finally be ‘competitive’…why will this suddenly change in two years and not two decades, like it’s been for Japan?]

The weakness in labor markets and the sharp fall in labor income ensure a weak recovery of private consumption and an anemic recovery of the economy, and increases the risk of a double dip recession. As a result of these terribly weak labor markets, we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures. [What slays me good citizen is how economists can follow the trail that far and stop short of the next step…why do they think civil order will remain intact under such arduous conditions? Worse, they totally miss why money supplies become so bloated and prices so unwieldy, it is because of the massive drain in value caused by ‘debasing’ the money…that’s why you suddenly need a wheelbarrow full of cash to buy a loaf of bread. Understand that even when money is virtually worthless, they still won’t be ‘giving it away’, you’ll either have it or you won’t.]

The damage will be extensive and severe unless bold policy action is undertaken now.


What do you suppose the odds are that you’ll live to see a proposal like the one I make above have of being put into action?

Are the chances roughly the same as a snowball’s chance in Hell or do you think you stand a better chance of having face time with your (alleged) maker?

Worse, how many of you think like Dr. Doom (and pretty much every other economist) that society will remain civil while a vast majority of the people starves to death?

The current unemployment/foreclosure crisis already presents a serious threat to social stability. Perhaps more disturbing is that there is no ‘end’ to the current crisis in sight. Dr. Roubini uses two years but how does he know? It could be two years and it could just as easily be two decades!

Beneath the globalization mandate lies peak oil and the fact that transporting goods to the farthest corners of the earth will soon be cost prohibitive! If it doesn’t grow where you live, you ain’t getting the sumbitch! These ‘freemarket assholes’ can take their ‘anti-protectionist’ bullshit and stick it where the sun don’t shine! If we fail to re-establish our manufacturing sector, we can look forward to permanent ‘Banana Republic’ status…or worse.

Not all forms of ‘genocide’ require gunplay…

Thanks for letting me inside your head,

Gegner

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