The Wealth Gap and the Collapse of the U.S.

The gap just became a little wider;

 - November 06, 2009

 http://www.foxnews.com/politics/2009/11/06/unemployment-rate-tops-percent-million-people-look-jobs/

Unemployment Rate Tops 10 Percent as 16 Million People Look for Jobs

 The Labor Department says the economy shed a net total of 190,000 jobs in October, less than the downwardly revised 219,000 lost in September.

WASHINGTON -- Nearly 16 million people can't find jobs, the Labor Department said Friday, pushing the unemployment rate over 10 percent (10.2%) for the first time since 1983.

The Labor Department said Friday that the economy shed a net total of 190,000 jobs in October, less than the downwardly revised 219,000 lost in September. August job losses were also revised lower, to 154,000 from 201,000.

But the loss of jobs last month exceeded economists' estimates. It's the 22nd straight month the U.S. economy has shed jobs, the longest on records dating back 70 years.

Counting those who have settled for part-time jobs or stopped looking for work, the unemployment rate would be 17.5 percent, the highest on records dating from 1994.

 Friday's report is the first since the government said last week that the economy grew at a 3.5 percent annual rate in the July-September quarter, the strongest signal yet that the economy is rebounding. But that isn't fast enough to spur rapid hiring, raising the specter of a jobless recovery.

In addition, many economists worry that persistently high unemployment could undermine the recovery by restraining consumer spending, which accounts for 70 percent of the economy. (Brilliant!)

 One sign of how hard it still is to find a job: the number of Americans who have been out of work for six months or longer rose to 5.6 million, a record. They comprise 35.6 percent of the unemployed population, matching a record set last month.

 Congress sought to address the impact of long-term unemployment this week by approving legislation extending jobless benefits for the fourth time since the recession began. The bill would add 14 to 20 extra weeks of aid and is intended to prevent almost 2 million recipients from running out of unemployment insurance during the upcoming holiday season. President Barack Obama is expected to quickly sign the legislation. ( More helium for the bubble.)

The employment report showed that job losses remain widespread across many industries. Manufacturers eliminated a net total of 61,000 jobs, the most in four months. Construction shed 62,000 jobs, down slightly from the previous month.

Retailers, the financial sector and leisure and hospitality companies all continued to reduce payrolls.

The Associated Press contributed to this report

A boat docked in a tiny Mexican village. An American tourist complimented the Mexican fisherman on the quality of his fish and asked how long it took him to catch them. "Not very long," answered the Mexican. "But then, why didn't you stay out longer and catch more?" asked the American.

The Mexican explained that his small catch was sufficient to meet his needs and those of his family. The American asked, "But what do you do with the rest of your time?" "I sleep late, fish a little, play with my children, and take a siesta with my wife. In the evenings, I go into the village to see my friends, play the guitar, and sing a few songs... I have a full life."

The American interrupted, "I have an MBA from Harvard, and I can help you! You should start by fishing longer every day. You can then sell the extra fish you catch. With the extra revenue, you can buy a bigger boat." "And after that?" asked the Mexican. "With the extra money the larger boat will bring, you can buy a second one and a third one and so on until you have an entire fleet of trawlers. Instead of selling your fish to a middle man, you can then negotiate directly with the processing plants and maybe even open your own plant. You can then leave this little village and move to Mexico City , Los Angeles , or even New York City ! From there you can direct your huge new enterprise."

"How long would that take?" asked the Mexican. "Twenty, perhaps twenty-five years," replied the American. "And after that?"

"Afterwards? Well my friend, that's when it gets really interesting," answered the American, laughing. "When your business gets really big, you can start selling stocks and make millions!" "Millions? Really? And after that?" said the Mexican.

"After that you'll be able to retire, live in a tiny village near the coast, sleep late, play with your children, catch a few fish, take a siesta with your wife and spend your evenings doing what you like and enjoying your friends."

--- the formation of survivalist militias in America as a result of societal breakdown ---

The "Us" and the "Them" in a Societal Collapse:

 
Mr. Rawles,

I am a retired Army warrant officer working for the Army teaching Electronic Warfare and Signal Intelligence. I only started reading your blog last week. It's addictive, but slightly disturbing.
 
Having worked for the Army for 27 years in a number of different failed countries I may have a unique perspective on survival that I would like to share with your readers. I believe most of the "survivalist community" is vastly underestimating the impact that other humans are going to have on their plans. Hunkering down and waiting for everyone to die off is a simplistic plan and I believe has almost no chance of working. You may be able to hide your retreat, but you can't hide the land it sits on. That land itself may become a scarce commodity if the US transitions to an agrarian economy.
 
Food is the key resource. Most communities are at risk because they simply don't have enough calories stored to get them through any kind of crisis. But, storage is no more than limited capital to allow people time to grow more food. Food production requires land....if your retreat is sitting on farmable land, it will be a scarce resource.
 
Carrying capacity of the US using non-petroleum farming techniques is far lower than most of your readers probably think. Also, most areas of the US, especially cities, don't have anywhere near enough farm-able land to go back to some kind of agrarian pattern. Without public infrastructure and modern transportation, we are going to experience a huge die-off caused mostly by starvation. In a total collapse scenario without immediate restoration of the economy, basically everyone who lives in a city is doomed unless they can take over some kind of farm land.
 
If you live in an area without enough farm land, you will be a "have not". Period. I don't care how much food you have stored in your basement.
 
Here is my key point. These teeming millions will not just starve and go away. I believe that anyone who thinks they can defend a working farm against raiders is deluding themselves.
 
1. People are dangerous. They are the most dangerous animal on earth. You can never lose sight of that! In almost any society breakdown scenario you can think of, you will be surrounded by starving predators that are much more dangerous than tigers. In the USA, every one of them (or at least the vast majority) will be armed with firearms. The ones currently without firearms will obtain them by any means necessary including looting government armories. These are thinking-breathing and highly motivated enemies.
 
2. Raiders, defined as "outlaw looting groups" may be a threat for a very short period, but I really don't see groups of more than 4-6 ever forming...they will be quickly replaced by much larger groups of "citizens" doing essentially the same things, but much better armed and organized.
 
An Example: A few hours after Albania's political crisis in 1998, (which was caused by a national lottery scam), almost every adult male in the country procured an AKM from government stocks. Armories were the first targets looted. I flew into Tirana packing a pistol and a sack of money, naively thinking I would be able to move around the country and defend myself. What a laugh. Everyone had me outgunned, and the vast majority of them had military training of some sort. I never got out of the capital city. Every road seemed to have roadblocks every few miles, blocked by armed local citizens.
 
3. Without central authority, people don't just starve and go away. They form their own polities (governments). These polities are often organized around town or city government or local churches. They may call it a city counsel or a committee or a senate. The bottom line is, "We The People" will do whatever "We" have to do to survive. And that specifically includes taking your storage goods.
 
4. When (not if) a polity forms near you, you had better be part of that process. If not, you will be looked upon as a "resource" instead of a member of the community. The local polity will pass a resolution (or whatever) and "legally" confiscate your goods. If you resist, they will crush you. They will have the resources of a whole community to draw upon including weapons, vehicles, manpower, electronics, tear gas, etc. Every scrap of government owned equipment and weaponry will be used, by someone. Anyone who plans to hold out against that kind of threat is delusional.
 
Link for more:
http://www.survivalblog.com/2009/11/letter_re_some_ground_truththe.html

so true DTM...and so sad.  americans live in a country run by freaks--harvard MBAs and yale/harvard lawyers--who don't want anyone else to have a life because that's wasted productivity, or what some business schools call "slack." they think their job is to eliminate slack. seriously...Marx was right about this class of people...lock em up or give them therapy but we never should've given them power over our lives. 

will healthy people ever decide to say no?  

Yep.  Your AK is not going to stop a M1 Abrams tank.  It won't even waste in ammo rolling over your survival retreat.  It is best to join the local community.

Excellent post today by Chris Martenson (for subscribers only). It leaves no doubt that the U.S. Stock Market is being manipulated and propped up by the U.S. government. One of the doctors I work with came in and said to me, "Mike, the stock market is up!" I replied, "But it was just down after the dismal unemployment figures were released."

It explains what happened to the market once again today.

As Chris points out, such market manipulation will only lead to further misallocation of precious resources. Problems like energy independence, jobs, and the environment are put on the shelf while our government and the financial oligarchs play with paper. This is just one more facade in the empire of illusion.

God help us.

Posted by Karl Denninger in Consumer at 15:22  

Consumer Credit: Awful

Where are my green shoots?

Consumer credit decreased at an annual rate of 6 percent in the third quarter of 2009.  Revolving credit decreased at an annual rate of 10 percent, and nonrevolving credit decreased at an annual rate of 3-3/4 percent.  In September, consumer credit decreased at an annual rate of 7-1/4 percent.

Yuck.

Here's the graphical representation.

Nothing good in here.  The non-revolving flattened out some in September (gee, you think "cash for clunkers" might have influenced August and September?) but revolving credit - that is, credit cards - continues its base jump without any appreciable change in slope.

Here's the longer-term view:

We are a credit-based system, as are all modern monetary systems.   No meaningful economic recovery can or will occur until the consumer has purged his balance sheet of the inappropriate debt he has and is once again able to earn and borrow.

If we supposedly exited the recession on or before September, it sure isn't apparent in this report.  You can put a fork in that line of garbage - it's done.

PS: The next update of the Z1, due out in a couple of months, should be interesting..... especially the "Ponzi Finance" indicator....

I did my part

I paid off and quit using my credit cards.  I didn't cancel them because I didn't want to take the credit hit, because I may still try to lock in a low rate mortgage. i will cancel them if they try to cancel my grace period or place an annual fee on them. I am tired of being a slave for the banks.

"If you doubt that entrenched power and corruption runs very, very deep, I suggest you watch Bill Moyers’ interview with Glenn Greenwald. Washington is now a place unto itself. Those of us outside the Beltway are merely a backdrop that lends the Capital a false sense of legitimacy. Empires in decline always go through this phase." - Dave Cohen

As far as the well-being of our country and its citizens are concerned, our "leaders" are essentially acting in this way:

A particularly good article by Cohen of the ASPO from a couple days ago:

Decline of the Empire — Now What? | Energy Bulletin

Dave Cohen 11-5-2009

.....

....As problems become more intractable over time, our resistance to making real changes to confront those problems, our social inertia, becomes more entrenched. Thus the solution to debt-based economic problems is more debt. The solution to liquid fuels problems is marginally more fuel efficient cars, not alternatives to driving. We study an expansion of the rail system instead of building one to provide an actual alternative to flying or driving between cities. We dream of hypothetical biofuels in the far-off future to solve an oil supply problem in the here & now.

The only real difference between my remarks here and those in my original article is that this time I am relating the vicious circle to the wacky world of make believe bank solvency. And if you think about it, what’s the difference between Extend & Pretend and Futility’s Vicious Cycle? There is no difference. Conceptually, they are identical.

The problem is Bank Solvency. Social inertia manifests as dithering or active obstruction by banks, Federal regulators, the Fed, the Treasury, and the Congress. The President talks pretty, but does nothing of substance. Unrecognized bank losses continue to pile up but resistance to remedial actions and reform in Finance only becomes more entrenched. Policy-makers act as if the crisis does not exist. Futility reigns as we approach a new day of reckoning.

As Professor Black said above, “it’s the insanity of not resolving insolvent places … [but] instead feeding money in, good after bad.” The longer this unwillingness to come to grips with reality goes on, the more likely it becomes that the banking system will blow up again, and again take all of us down with it.

Let us explore another aspect of America’s decline. You will recall that Tech Ticker’s Henry Blodget qualified his question to Professor Black, assuming that this [CIT deal] was not simply a matter of bad faith. He framed his question in terms of Tim Geithner’s incompetence instead. There is little doubt that Geithner is incompetent, but that’s not the whole story.

I am not criticizing Henry Blodget, whom I respect, when I say out loud what he didn’t care to go into: the entire Finance reform issue has been a charade, a matter of Bad Faith, since the October, 2008 post-Lehman meltdown. Here is the legal definition of Bad Faith—

The fraudulent deception of another person; the intentional or malicious refusal to perform some duty or contractual obligation.

 

In this case, the fraudulent deception has been carried out against the American People by the Too-Big-To-Fail Banks in cahoots with the Federal Reserve, and the Executive (e.g. the Treasury, the regulators) and Legislative branches of government. It is plainly the duty of the Federal government, if not that of the banks, to reduce our exposure to insolvent banks which pose a systemic risk should they fail.

The law always imputes intentionality. Hence the definition of Bad Faith. But I don’t care whether this is a complex conspiracy—a conscious collaboration—between the banks and policy-makers, or whether it’s just that all these people see things exactly the same way—an unconscious collusion. Nothing relies on this distinction, for it does not change the ultimately destructive effects of an unreformed Finance system.

(However, if you follow the money, apparent influence is exactly where you’d expect it to be. And if you look at Tim Geithner’s appointment book, he does spend an inordinate amount of time on the phone with the heads of Goldman Sacks, Citigroup and JP Morgan Chase. As usual, we can prove nothing.)

In perpetuating this fraud, Wall Street & Washington ensure that we are forever stuck on the Futility merry-go-round.

I would have to write a book to fully document the persistent pattern of government catering to Big Finance. Like Kevin Phillips, many people have written one or are doing so now. The entire raison d’etre for Simon Johnson’s Baseline Scenario is to tell you about this stuff everyday. So I will only mention a couple egregious recent examples of Bad Faith here. And away we go—

• “The U.S. government plans to alter the way that a similar rescue would be handled in the future. Draft legislation proposes that banks, hedge funds and other financial firms holding more than $10 billion in assets would pay to rescue companies whose collapse would shake the financial system” (Bloomberg). For additional details, read the New York Times’ Bill Seeks To Shift Rescue Costs To Big Banks. Barney Frank helped craft this brainstorm, which is called the Financial Stability Improvement Act of 2009.
• The best part of the “Stability Improvement” legislation decrees that “the identification of systemically dangerous financial firms by federal regulators remain entirely secret, and never be revealed to the public” (Baseline Scenario). This clandestine group of Too-Big-To-Fail institutions will be regulated by “a powerful financial services oversight council, led by the Treasury secretary and composed of top regulators, to set policy and tougher regulations for the largest companies and mediate disputes between federal agencies. It would also give the Federal Reserve Board a lead role in directly supervising many of the largest financial conglomerates” (New York Times).

The “Stability Improvement” act applies to a super-secret list of institutions who will be regulated by the Treasury secretary and other regulatory ne’er-do-wells. The Fed will supervise this group of never-to-revealed-to-the-public super-sized institutions. No one will be accountable to the public for anything this group does or does not do. Perfect!

The Obama administration and the Congress are putting forward a new plan to handle the next, inevitable round of Too-Big-To-Fail bank failures instead of breaking up large institutions that pose a systemic risk. Rather than dispose of the problem, the government proposes to drain the rest of the banking system and put ordinary citizens—those of us who are not Masters of the Universe— at risk again. The Powers-That-Be would rather bend over backwards to preserve the status quo than put JP Morgan Chase or Citigroup out of the rent-seeking business (whereby one obtains competitive advantage through political manipulation).

Nobody, including Barney, seems to have asked a pertinent question. What happens when runs on 3 or 4 Too-Big-To-Fail banks cause them all to fail more or less at the same time? See Rolfe Winkler’s article cited above. This would have happened in October, 2008 if then Treasury secretary and former giant vampire squid CEO Hank Paulson hadn’t extorted us—ah, sorry, I meant “scared us silly”—to get $700 billion from Congress to bail out the banks.

What was it Einstein said? Insanity is doing the same thing over and over again and expecting different results.

Here’s a second item from Yves Smith at Naked Capitalism—

• Harper’s Magazine has written up the lengths to which the authorities will go in censoring views that dissent with what is the unstated official policy: that no demand of the banking industry is too unreasonable not to be catered to.The object lesson is the gutting of the falsely-branded derivatives reform bill. It arrived with a loophole so large you could drive a truck through it, namely that customized derivatives were not covered. So this bill will do nothing to impede the growth of complex opaque products; in fact, it encourages it, since banks will have no oversight if they tweak a product so that is can be deemed “customized.” It was further weakened by excluding most of the banks in America and by excluding a whole swathe of end users. The final insult was making the derivatives clearing house self-regulating.
• The hearings on the bill had testimony scheduled only from what amounted to industry flacks. Someone apparently realized at the 11th hour that that might not go over with the correctly angry public too well. So less than 24 hours prior to the session before the House Financial Services Committee, an invitation was issued to Rob Johnson, a former managing director at Bankers Trust Company and former economist at the Senate Banking Committee and Senate Budget Committee.

And what happened to genuine reformer Rob Johnson? Congresswoman Melissa Bean (D, Ill), filling in for the curiously absent Barney Frank, cut his testimony short. At first, Johnson refused to quit.

Johnson gamely continued. “When I hear the testimony today that are largely financial institutions and end users, I believe that I represent a third group that comes to the table, which is the taxpayers, the working people of the United States,” he said.

 

But Melissa, whose 2009-10 campaign committee has collected $107,700 from the Securities and Investment industry, cut Johnson off again. And then came the final insult, not only to Johnson, but to all of us—

The House Financial Services Committee has refused to publish [Johnson's] testimony, offering “the dog ate my homework” level excuses, first that they hadn’t gotten it, then that it was in the wrong format, then that their IT department was experiencing difficulties (always a good one when real reasons are running thin). The last one was pure Catch-22: that he had gotten his written testimony in too late.

 

You can read Johnson’s statement to the committee, which they themselves never heard or published, at the Roosevelt Institute.

It’s Bad Faith everywhere you look. There is no escaping the Futility’s Vicious Circle in the current, entrenched political arrangement. As with the all-encompassing Buddhist Wheel of Suffering, our tragic Fate appears to be Cast In Stone.....

......

I love this; it puts everything in perspective!