Friday, August 31, 2007

The True Economic Picture

The True Economic Picture

“Most workers have relatively little to show in terms of real wage and income gains over this recovery. The real wage of the typical male worker, for example, is up only 1% since 2000 and not at all since 2003. Even a broader measure like real average compensation has risen less than 1% per year and has barely budged since 2003. As of 2006, the median income of working-age families (those headed by someone less than 65) was down -4.2% in real terms over the cycle, a loss of -$2,375 (2006 dollars). Poverty, at 12.3%, remains 1.0 percentage point above its 2000 trough. Though productivity growth has slowed somewhat in recent years, this business cycle has been reasonably rich in terms of efficiency gains, and these gains have generated considerable wealth. The problem is, of course, the narrow extent to which the gains have been shared. Inequality data bear this out, showing the classic "staircase" pattern to wage growth, as higher-wage workers saw greater gains.” Economy's Gains Fail to Reach Most Workers' Paychecks by Jared Bernstein and Lawrence Mishel

A new report from the Economic Policy Institute to be released in the next few days shows that despite happy talk and fudged numbers of the Bu$h administration, real wages for working folks have flat-lined and despite record profits on the ownership side, workers are faring very poorly. Production efficiencies have increased, productivity is up as are profits but working class folks’ pay checks have not kept pace. “As of Labor Day 2007, the economic recovery that began in 2001 is six years old, and the economy has consistently expanded over this period. Productivity growth, though slower of late, has been particularly strong, and after a long, slow start, employment has been consistently growing, albeit slower than past recoveries.
But most American workers have not shared in the growth and prosperity they have been helping to create. Surely, one measure of the success of an economic growth period is how much of that growth finds its way into workers' paychecks. In a period of sharply rising inequality, however, this is no ‘slam dunk.’ In fact, as much of the data in this brief reveal, many workers' wages have been stagnant for a number of years, after adjusting for inflation, particularly those at the middle and lower end of the pay scale. For example, while productivity is up nearly 20% since 2000, the real median hourly wage is up 3% overall and 1% for men, with none of this growth occurring over the three-and-a-half years since 2003. At the top of the wage scale—at the 95th percentile—real wages are up 9%.”
For the past several years the US has had the dubious distinction of experiencing a “jobless recovery”. Employment has not kept pace with production or profits. “Until the end of 2003, the United States had been experiencing a ‘jobless’ recovery, with employment stagnating at levels well below those in 2000. A widespread perception has arisen that a major culprit behind the dearth of jobs was the growing practice of U.S. firms to relocate part of their domestic operations to lower-wage countries abroad. ‘Offshoring’ presumably caused a reduction in U.S. output and a corresponding loss of jobs. In fact, after the 2001 recession, U.S. domestic production rose substantially, but output per worker—productivity—jumped so sharply that instead of rising, employment declined. That is the real cause of the jobless recovery. Had GDP growth been accompanied by a continuation of earlier rates of productivity growth, there would have been some 2 million more private sector jobs than there were at the end of 2003.” Offshoring, Import Competition, and the Jobless Recovery by Charles L. Schultze
The employment picture has been erratic and to make matters worse, wages and the standard of living for most working US residents has declined in the face of record private sector profits for the owners, corporations and CEOs. But the Bu$h administration does its best to camouflage this reality and keep it from Joe and Jane Sixpack. “With the real wages and salaries of American civilian workers lower than 5 years ago, with their debts at all time highs, with the prices of their main asset--their homes--under pressure from overbuilding and fraudulent finance, and with scant opportunities to rise for the children they struggled to educate, Americans face a dim future. Indeed, their plight is worse than the official statistics indicate. During the Clinton administration, the Boskin Commission rigged the inflation measures in order to hold down indexed Social Security payments to retirees. Another deceit is the measure called ‘core inflation.’ This measure of inflation excludes food and energy, two large components of the average family’s budget. Wall Street and corporations and, therefore, the media emphasize core inflation, because it holds down cost of living increases and interest rates. In the second quarter of this year, the Consumer Price Index (CPI), a more complete measure of inflation, increased at an annual rate of 5.2 per cent compared to 2.3 per cent for core inflation. An examination of how inflation is measured quickly reveals the games played to deceive the American people. Housing prices are not in the index. Instead, the rental rate of housing is used as a proxy for housing prices. More games are played with the goods and services whose prices comprise the weighted market basket used to estimate inflation. If beef prices rise, for example, the index shifts toward lower priced chicken. Inflation is thus held down by substituting lower priced products for those whose prices are rising faster. As the weights of the goods in the basket change, the inflation measure does not reflect a constant pattern of expenditures. Some economists compare the substitution used to minimize the measured rate of inflation to substituting sweaters for fuel oil.” The Return of the Robber Barons By PAUL CRAIG ROBERTS
But you don’t need me to tell you this. A stroll into any supermarket or your stop at any gas station will reveal just how bad things really are. The cost of living for us is going up all the time. People call it “inflation” thinking the rising cost of living is inflation when inflation is really an increase in the amount of money in circulation. The US central bank (The Federal reserve System, a group of privately owned banks) sets the money, credit and interest policies we live by; not the US Congress or US Treasury. So the economic mess we find ourselves in now is the result of Fed (and their buddies at the private equity and investment banks) policies. “The crisis is entirely the work of Fed Chairman, Alan Greenspan, whose “cheap money” policy caused a speculative frenzy in the real estate market which sent home prices through the stratosphere. In fact, the bubble originated in 2001 when Greenspan lowered interest rates to a meager 1% and ignited a refinancing boom as well as a sudden up-tick in home sales. Now, after 17 straight interest rate increases, the bubble is quickly losing steam and the effects are being felt from sea to shining sea. Rest assured, the sudden downturn in the housing market is just the first gust from an impending tornado. By the end of 2007, America’s match-stick economy will look like the rubble strewn landscape of New Orleans 9th Ward. Greenspan has been the biggest player in this pre-Depression operetta. He kept the printing presses whirring along at full-tilt while the banks and mortgage lenders devised every scam imaginable to put greenbacks into the hands unqualified borrowers. ARMs, ‘interest-only’ or ‘no down payment’ loans etc. were all part of the creative financing boondoggle which the kept the economy sputtering along after the ‘’ crackup in 2000. It worked like a charm, too. Aided by the Fed’s cheap money policy, the housing market sizzled. In just 6 years the total value of real estate jumped from $11 trillion to $21 trillion! (“From 2001 through 2005, outstanding mortgage debt rose 68% from $5293 billion to $8888 billion”) It’s the biggest expansion of debt in history and it was all engineered by seductively low interest rates. Greenspan executed the swindle with the adroitness of a carnival huckster; luring millions of buyers to the real estate gold rush. Now, many of those same buyers are stuck with enormous loans that are about to reset at drastically higher rates while their homes have already depreciated 10% to 20% in value. This phenomenon of being shackled to a ‘negative equity mortgage’ is what economist Michael Hudson calls the ‘New Road to Serfdom’; paying off a mortgage that is significantly larger than the current value of the house. The sheer magnitude of the problem is staggering.” The Fed’s role in the Housing Crash of ‘07 By Mike Whitney
All this was done purposefully. Why, you ask? Well this is how the game is rigged and they have done this many times over the years in the past. This is ongoing class warfare. Race is not a major factor, it is working class white folks will take the brunt of this. This time the ruling oligarchy wants to cripple the working class and reduce the vast majority of us to wage peons, debt slaves and surfs. “Now the real estate bubble has burst: property owners can't sell their homes or refinance them. They can't pay their mortgages so the banks foreclose and the house is sold on the courthouse steps. Within days they receive an eviction notice and they're out on the street. Since 2006, vacant dwellings have increased by more than 40% for existing homes and more than 20% for new homes. The personal tragedy these people face is overwhelming and heartbreaking. Since private banking interests created the scam of the ‘Federal’ Reserve System in 1913, seizing control of American financial powers, their ability to lend money at usurious interest rates has meant that they feed on American debtors. Until recently, they've been content to reap huge profits through ordinary money-lending means--as outlined below: But reaping huge profits through interest wasn't enough for them; they decided they'd not only make money on interest but loot workers of their hard-earned savings and income--and then financially destroy them: foreclose and keep the property for sale to another sucker.” Economic Cannibalism
This is the real deal. Read material from Websites like: , and . Once you start reading, don’t panic or get discouraged. Keep your head and learn as much as you can, you will need this knowledge to survive the rough times heading our way. View current events from this perspective and don’t go for the okey-doke. Think for yourself and prepare for the worse case scenario, it going to be a bumpy ride. The silver lining in all this is, it might (and the operative word here is might) force us to get our collective act together so we survive the coming collapse of the US economic and political system.



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