1. The claim that jobs offshoring by US corporations increases domestic employment in the US is one of the greatest hoaxes ever perpetrated. As I demonstrated in my syndicated column at the time and again in my book, How The Economy Was Lost (2010), Slaughter reached his erroneous conclusion by counting the growth in multinational jobs in the U.S. without adjusting the data to reflect the acquisition of existing firms by multinationals and for existing firms turning themselves into multinationals by establishing foreign operations for the first time. There was no new multinational employment in the U.S. Existing employment simply moved into the multinational category from a change in the status of firms to multinational.
If Slaughter (or Cohen) had consulted the Bureau of Labor Statistics nonfarm payroll jobs data, he would have been unable to locate the 5.5 million jobs that were allegedly created. In my columns I have reported for about a decade the details of new jobs creation in the U.S. as revealed by the BLS data, as has Washington economist Charles McMillion. Over the last decade, the net new jobs created in the U.S. have nothing to do with multinational corporations. The jobs consist of waitresses and bartenders, health care and social services (largely ambulatory health care), retail clerks, and while the bubble lasted, construction.
These are not the high-tech, high-paying jobs that the “New Economy” promised, and they are not jobs that can be associated with global corporations. Moreover, these domestic service jobs are themselves scarce.
But facts have nothing to do with it. Did Slaughter, Cohen, the Chamber, and the Wall Street Journal ever wonder how it was possible to have simultaneously millions of new good-paying middle class jobs and virtually the worst income inequality in the developed world with all income gains accruing to the mega-rich? – Paul Craig Roberts: America’s Job Losses are Permanent http://www.counterpunch.org/roberts10282010.html
2. It takes around 150,000 new jobs each month to keep pace with labor force growth. In other words, 100,000 new jobs each month would be a 50,000 jobs deficit. The major cause of the US trade deficit with China is “globalism” or the practice, enforced by Wall Street and Wal-Mart, of US corporations offshoring their production for US markets to China in order to improve the bottom line by lowering labor costs. The US government blames the US trade deficit with China on an undervalued Chinese currency. However, the Chinese currency has risen 17.5% against the dollar since 2006, but the US trade deficit with China has not declined. – Paul Craig Roberts: America’s Job Losses are Permanent http://www.counterpunch.org/roberts10282010.html
3. The rich are better protected from awkward investigations that might expose in any well-documented way the increasingly greater inequalities that are made possible and encouraged by the political and economic design of our societies. In some countries of Europe, even where the banks have been the most reckless in their lending policy, blame for the crisis is shifted to the workers in the name of “high labour costs”. The next step is to rebuild the banks’ loan reserves at the expense of the workers with new policy and laws permitting private companies and the public sector to cut wages, sack workers at will, scale back pensions and slash social spending. – “Worldwide Concentration of Wealth” by Daniel Raventos http://www.counterpunch.org/raventos10292010.html
4. The Merrill Lynch and Capgemini reports offer definitions of the rich on whom their reports are based. Some are designated as HNWIs (High New Worth Individuals), while others are UHNWIs (where the U stands for Ultra). The former are those who have assets of over a million dollars not counting primary residence, collectibles, consumables, and consumer durables. Hence these reports aim to assess what the rich have in terms of ready cash and assets that are easily and rapidly turned into cash. The same definition applies to the Ultra-HNWIs but their assets start from 30 million dollars. These definitions make it clear that they refer to people of a much greater effective wealth than the starting level of one or thirty million dollars, as adding the excluded assets would show.- “Worldwide Concentration of Wealth” by Daniel Raventos http://www.counterpunch.org/raventos10292010.html
5. According to the Merrill Lynch and Capgemini definitions there were 8.8 million HNWIs in the world in 2005, a figure that rose to 9.5 million in 2006 and 10.1 million in 2007. In 2008, with the onset of the economic crisis, the figure dropped to just below 2005 levels, with 8.6 million HNWIs around the world. By 2009, it had risen again to 10 million, almost the same as in 2007, the year before the crisis. In these years, the joint wealth of these individuals worldwide was 33.4 trillion dollars in 2005, 37.2 trillion in 2006, 40.7 trillion in 2007, falling to 32.8 trillion in 2008. In 2009, with the crisis now full-blown, it rose again to 39 trillion. To grasp what these quantities really mean, it might be instructive to consider that they equal some three times the GDP of the United States. – “Worldwide Concentration of Wealth” by Daniel Raventos http://www.counterpunch.org/raventos10292010.html
6. We are told almost every day that unemployment in the US is 9.6%, yet this is simply a fraud. The unemployment figure being reported excludes many people who are clearly unemployed–notably “discouraged” workers who have given up looking for jobs because the effort is pointless, workers who would like to work but can’t find jobs, and workers who hold part-time jobs, but want full-time work. If we add these people to the total, America’s unemployment rate today is over 17%, which is one-in-six working-age people, not the one-in-ten that you get using the more restrictive methodology that gets all the media attention. – “America’s Happy News Media” by Dave Lindorff http://www.counterpunch.org/lindorff10292010.html
7. Here is also a misreporting process when it comes to another statistic–the weekly number of new jobless claims at unemployment offices.The latest number, 434,000 new unemployment claims, was hailed in the media as “good news” because it is, as AP noted in its report, “the second lowest number of claims for this year,” and was below the average for the year. But what was that average? 450,000. That is, we are supposed to consider it good news that this past week, 16,000 fewer workers than average went to file a new unemployment claim.But so ingrained has this nonsense become that when the weekly unemployment figure was announced, the stock market took a quick jump, rising briefly more than 50%, as if things were turning around finally! – “America’s Happy News Media” by Dave Lindorff http://www.counterpunch.org/lindorff10292010.html
8. Nor do the normal employment/unemployment reports mention that half of workers who are unemployed don’t even qualify for unemployment benefits, or that not all workers whose ordinary unemployment benefits expire are eligible for extended benefits (only those in states whose official unemployment rate is greater than 8.6% offer extended benefits, meaning if you are unemployed in a state where the rate is 8.5%, you’re out of luck). And not all states even offer extended benefits. – “America’s Happy News Media” by Dave Lindorff http://www.counterpunch.org/lindorff10292010.html
9. The quantity of money does not matter; what matters is spending (“expenditure”). That’s what creates economic activity and growth. There’s plenty of liquidity in the system right now, in fact, the banks still have nearly $1 trillion in reserves from the last round of quantitative easing, but businesses aren’t investing it in because consumers and households are deeply in debt and unwilling to borrow regardless of the low rates. So loan demand has dried up, money is turning over slower (velocity), and the slump continues. Here’s a clip from a recent post by Reuter’s Felix Salmon that helps to clarify the point:
“…businesses aren’t borrowing or investing — and insofar as they are borrowing, they’re using the proceeds to buy back their stock, rather than to employ more people.
The net result is that the banks — whose collective cost of funds is now less than 1% — are now lending overwhelmingly to just one borrower: (ed–the US gov.)
U.S. banks now own more than $1.5 trillion in Treasuries and taxpayer-backed debt issued by mortgage giants Fannie Mae and Freddie Mac, according to the latest weekly data provided by the Fed. It’s a 30 percent increase from the week prior to the Fed’s Dec. 16, 2008, announcement that it was lowering the main interest rate to 0-0.25 percent.
Outstanding commercial and industrial loans at U.S. banks have fallen from $1.6 trillion in October 2008 to $1.2 trillion this past September, Fed data show. The $390 billion drop is equivalent to a 24 percent reduction in credit to businesses.
It’s truly outrageous that banks are lending more money to the U.S. government than they are to all commercial and industrial borrowers combined…. Bernanke’s monetary policy simply isn’t helping the broad mass of the U.S. population.” (America’s failing monetary policy, Felix Salmon, Reuters)
Quantitative easing (QE) may push down long-term interest rates and move a few investors out of Treasuries and into stocks, but it won’t increase demand, narrow the output gap, or lower unemployment in any meaningful way.
Here’s how Keynes summed it up in an article titled “An Open Letter to President Roosevelt”:
“The object of recovery is to increase the national output and put more men to work. In the economic system of the modern world, output is primarily produced for sale; and the volume of output depends on the amount of purchasing power… Broadly speaking, therefore, an increase of output cannot occur unless by the operation of one or other of three factors. Individuals must be induced to spend more out of their existing incomes; or the business world must be induced, either by increased confidence in the prospects or by a lower rate of interest, to create additional current incomes in the hands of their employees, which is what happens when either the working or the fixed capital of the country is being increased; or public authority must be called in aid to create additional current incomes through the expenditure of borrowed or printed money. In bad times the first factor cannot be expected to work on a sufficient scale. The second factor will come in as the second wave of attack on the slump after the tide has been turned by the expenditures of public authority. It is, therefore, only from the third factor that we can expect the initial major impulse. … Thus as the prime mover in the first stage of the technique of recovery I lay overwhelming emphasis on the increase of national purchasing power resulting from governmental expenditure which is financed by Loans and not by taxing present incomes. Nothing else counts in comparison with this.”
So, when consumers cannot spend (because they are underwater on their mortgages, credit cards etc), and businesses won’t spend because there are no profitable outlets for investment, then the government must spend (by increasing its budget deficits) or the economy will plunge back into recession.
– Michael Whitney http://www.counterpunch.org/whitney11092010.html
10. The real story on employment is told by the BLS’s household survey, which is taken every month and looks at 60,000 randomly selected households. That survey shows that far from the US economy adding jobs, 330,000 jobs were lost in October.
With very little real economic good news to talk about, the government and the Federal Reserve have liked to cite the stock market, which has now returned to pre-economic crisis levels. That should make us feel good, right?
Except that unmentioned is that insiders–the executives of America’s companies, who have to report any trading in their companies’ stock to the Securities & Exchange Commission — have been selling their holdings at a record pace this year, and especially in the last few months. Bloomberg reports that in October, insiders sold an all-time record of $662 million in shares of their own companies, while buying only $1.6 million of stocks in their companies. That’s a sell:buy ratio of 423:1
Among the largest companies, executives were unloading their company shares at a ratio of 3177:1.
You have to ask: what do these insiders know about the future direction of their businesses, and of our economy, that we don’t know? My guess is they are all dutifully telling analysts and investors that things are just great, but you’ve gotta wonder: Why are they all getting out now?
The other thing that they don’t talk about is that some 70 percent of the trading on Wall Street these days is now automated trading, with big investment banks like JP MorganChase and Goldman Sachs using big mainframe computers to buy and sell stocks, holding them literally for seconds or less. Take a look some time at a day’s trading graph. You will see almost every day a straight vertical line as millions of shares are bought or sold simultaneously at the opening of markets at 9:30 am Eastern Time, followed almost always by a reversal of direction as those whose computers made a collective, instant buy or sell decision take their profits and run. This is a new phenomenon, and hardly one that offers any predictive insights, or that bodes well for those who see the markets as an “efficient” way to allocate capital.
So we hear that inflation is “not a problem,” running officially at about 1.1% right now. That is comforting, but it isn’t an accurate reflection of what is happening in the supermarket or at the gas station. If we were to use the methodology that the was used prior to 1981, the CPI rate of increase right now would be coming in about 8%. My guess is that, if you are one of those lucky four-in-five American workers who still has a real job, you have not gotten a raise anywhere near 8% this year or last.
– Dave Lindorff http://www.counterpunch.org/lindorff11092010.html
11. The data on third-quarter GDP, which was released the prior week, was even bleaker. Most reports focused on the 2.0 percent growth number, which was slightly higher than had been expected.
However these reports missed the fact that most of this growth was due to the extraordinary pace of inventory accumulation in the quarter. The rate of accumulation in the third quarter was the second-highest ever, adding 1.4 percentage points to growth for the quarter. Excluding this jump in inventories, the economy grew at just a 0.6 percent annual rate in the third quarter. If inventory growth returns to a more normal level, fourth quarter growth will likely be negative.
– Dean Baker http://www.counterpunch.org/baker11092010.html
12. Last week, the Federal Reserve announced a plan to buy an additional $600 billion worth of Treasury bonds in an attempt to stimulate the economy. On Democracy Now!, economist Michael Hudson argues that the $600 billion T-bill buy will help Wall Street at the expense of ordinary Americans.
The Fed justifies the purchase as an infusion of cash into the U.S. economy. The buy-up will certainly be an infusion of cash into U.S. banks. In effect, the Fed will help the government pay back the banks that lent money to finance deficit spending. The hope is that these banks, suddenly flush with cash, will help the U.S. economy by lending money to finance projects that will create wealth and jobs (i.e. opening factories and hiring more workers).
However, as Hudson points out, there’s no guarantee that the banks are going to use the windfall to build wealth in the U.S. On the contrary, he argues, there’s every reason to suspect that they’ll invest the money overseas in currency speculation deals. Why? Because the Fed has also put massive pressure on Congress to push China into raising its currency by 20%. The banks know this because the House voted overwhelmingly to approve such a threat in September.
If the banks convert their extra billions to Chinese currency, and China raises the value of its currency in response to the threat of an across-the-board U.S. tariff on its imports, then banks that bought Chinese RMB when it was still artificially cheap will reap huge profits overnight.
— Lindsay Beyerstein http://www.commondreams.org/headline/2010/11/09-3
The National Deficit Commission proposes to cut the federal government’s budget deficit by $4 trillion over the next decade. But 75% of the “savings” will come from gutting programs that help stabilize the middle class and their communities. None of it comes from policies that would harm the rich.
For example, the commission proposes cutting the tax deduction for mortgage payments. Not only will this render housing much less affordable for millions of prospective home buyers, it will reduce housing prices, perhaps substantially, for without the tax writeoff, buyers will be able to afford much less house. This will decimate the sole source of wealth of tens of millions of Americans. It would lower Social Security cost-of living adjustments while raising the minimum retirement age. The Commission’s proposals would increase co-pays and deductibles for Medicare, making it unaffordable to millions. It proposes taxing as income the health insurance benefits millions receive from their employers. The Child Tax Credit would be eliminated as would 10% of all federal government jobs.
The Commission’s proposals would actually lower the maximum tax on the highest income earners, from 35% to 24%. The nominal tax rate on corporate income would fall as well, from 35% to 26%. There is nothing proposed to raise taxes after so many decades of steadily amassed wealth. No financial transactions tax (as the IMF recommends) to stanch the kind of tsunami of speculative buying and selling that brought down the economy. Such a tax would raise over $700 billion over the next decade.
Robert Freeman http://www.commondreams.org/view/2010/11/14-1
“According to the Bureau of Economic Analysis, real corporate profits neared an all-time high in the last three months of 2010, with companies raking in an annualized $1.68 trillion in pre-tax operating profits…. The Federal Reserve estimates that companies are sitting on about $1.9 trillion….
How can the corporate economy be so profitable while the jobs economy remains so weak? Part of the answer lies in improved productivity. When the recession hit, businesses fired millions of workers then asked the rest to make up the difference—and, in many cases, they did. Productivity increased 3.9 percent in 2010, while labor costs fell….
…in the last quarter of 2010, the story was all about Wall Street. Profits actually decreased a bit at nonfinancial firms. But companies like investment banks and insurers saw profits climb to an annualized $426.5 billion. The financial sector now accounts for about 30 percent of the economy’s overall operating profits….
Still, record-high profits do not necessarily translate into improvements in the economy—as the country’s 14 million jobless workers would be (not so) happy to tell you. For the past year, companies have hesitated to spend all of that cash, worried about a lack of good investment opportunities and fearful about demand. The upside is that it seems they are beginning to spend down their $1.9 trillion pile. The downside is that it does not seem that it will be to the immediate benefit of American workers.” (“More Profits, Fewer Jobs”, Annie Lowrey, Slate)