2/14/11…TB said

This week’s economic calendar is relatively light with few important indicators. We will get December Consumer Credit (Monday), December Wholesale Trade and the January Budget (Thursday), and December International Trade and mid-February Consumer Confidence (Friday).
Courtesy of Steve Wood, Insight Economics, Walnut Creek CA 

…look at the following statements:

– The U..S. economy added 36,000 jobs in January, but would have been higher had it not been for the inclement weather, but even adjusting for that we need 125,000 jobs each month just to absorb new entrants to the labor pool…and 300,000 each and every month for the next five years to bring unemployment down to an acceptable rate.

– corporate earnings are up but mainly due to cost-cutting and most of their revenue is coming from foreign operations. These companies are sitting on over $1 trillion in cash.

– stock prices are being pushed up by speculation – not new investors. The proof of this is the advances almost daily on below average volume. Friday’s volume was a mere 972 million shares and since 1/30 there have been just three days of above average volume with just one average volume day.

– how can we continue to be told…and believe the economy is rebounding when more than 17% are either unemployed or under-utilized (many are working multiple part-time jobs with no benefits). Mainly because those in government, and in the financial sector – including those brilliant economists to whom  the data is all-important – don’t seem to pay attention to the vast majority of Americans who are suffering.

– the wealthiest Americans hold most of their assets in investments, while the rest hold it in their homes…which have been decimated in value – if they still can afford to own them. We are witnessing not only the largest wealth gap in U.S. history but the biggest transfer of wealth in the history of mankind as foreclosed properties are bought by pools of wealthy Americans and without their home as an asset it is virtually impossible to advance in our society. The banks and other financial institutions who caused the financial crisis are the biggest beneficiaries of this and it is only a matter of time until they create yet another crisis – this one we may not be able to recover from.

– we are being urged to resume our consumption patterns…even though most not only cannot afford it but cannot get the credit necessary to expand it!

All of the above statements in one form or another were made by TB in this column…but they were also said in an op-ed Sunday in the San Francisco Chronical (www.thegate.com), by none other than Robert Reich, who may be the only sane economist left in the country.

He pointed out that the top 10% of income earners own 90% (93% actually according to the Tax Foundation as of 2008, but TB would be willing to wager that figure is in excess of 95% now as their wealth has continued to grow and the top 1% pay a lower tax rate due to a disproportionate amount of their income being from capital gains (real or otherwise like the hedge fund operators who are taxed at just 15%) and they whine about, while the tea baggers are their dupes allowing them to get buy and trying to solve the problem by cutting necessary programs along with the fluff…that Congress passed as it favored one or more of their benefactors.

Here is the actual data from the Tax Foundation:

– the top 1% control 42% of the wealth
Top 5% control 69%, top 10% 93%
– the bottom 90% owe 73% of all debt
– the bottom 90% have just $12.2 billion in investments
– only 34% of all households earn more than $65,000, and the median is just $50,000
– here are the incomes of households as of 2008 according to the Tax Foundation:
0.1% earn $6 million or more
5% earn more than $159,619
10% earn more than $113,789
25% earn more than $67,280
The effective tax rate of the top 0.1$ is 22.7% – and NO estate tax!!! – think about that as those who work for a living subsidize the earnings of hedge fund operators! Come on tea baggers…wake up. This country places less value on those who work for a living. Just as with social security where millionaires still collect it but those who EARN more than $14,160 are penalized. This is where reform is needed not in just mindlessly slashing the budget!

Those figures should shock you because I don’t think there are many of you who would consider $67,280 enough to own a home and support a family…pay attention tea baggers!

We are about to go into a violent budget session where reason will be placed on the backburner and even the GOP proposal was not enough for the tea baggers…go back and read the unemployment data before you think it is a good idea to cut services when so many are out of work…you do not cut budgets when 90% of the economy (Main Street) is in recession and that is the economy that will drag the Wall Street economy back into it IF jobs do not materialize… most of the increase in the deficit was due to bailouts under both presidents and thus self-correcting – so stop sticking it to Obama and instead demand facts from your elected officials not the misinformation and disinformation they have been handing out…instead you had better be thankful that both supported the subsides and demand that the government does not do a better job of regulating the banks, which will not be possible if we pursue this slash and cut strategy of well meaning but misinformed voters. If so, we will  be back there again soon. There is too much to be made by too few to give a damn about five years from now….and who will you hold accountable then? Yourselfs? Most likely Wall Street will get by again unscathed by blame.

What is wrong with us? Deep down we are all hoarders…be it trash, collectibles, or money. But money has attained a new status: that you can never have enough even if it means destroying the nation in the process (didn’t we just see that with Mubarak and his $70 billion in ill-gotten gains while his people were living in squalor and we the U.S. allowed it to happen because he was an ally…now we are saying that we want to insure that the right kind of democracy is in place – can we be more hypocritical???).

Reich ends his commentary with this: “China is raising interest rates. It’s worried about both an overheated economy and also rising unemployment. The result will be a slowdown in sales by the foreign operations of American-based corporations.

“Cost reductions in the United States can’t continue to generate profits. Most of these cost cuts generate one-time gains (first it was layoffs not it is banks with reductions in loan loss reserves even as they prepare to foreclose on another one million homes this year). To the extent they’re based on job cuts or wage and benefit cuts, they reduce the capacity of American consumers in the first economy (Main Street), to buy the goods and services these companies are selling.

“Nor finally, will stock prices continue to rise because of debt-financed speculation on Wall Street. This will end as all speculative bubbles do – with a pop. When? My guess is within the next few months (as TB has said also).

“Here’s the bottom line: Don’t believe the economic cheerleaders on Wall Street and in Washington . Without a strong and broadly based recovery (I.e. jobs), America’s second economy will fall in on itself.” – Robert Reich (emphasis by TB).

Happy Valentine’s Day…where is the love???



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