Greece is on life support. Spain is ailing. Britain is far from well.
But the really sick patient in the global emergency ward isn’t in Europe. The most serious case of infectious economic disease is suffering in the heartland of global capitalism, and the prognosis is pretty grim:
“More than 15 million Americans are out of work, and nearly half have been jobless for six months or longer. New college graduates are having a terrible time finding work, and many are taking jobs that require only a high school education. Teachers are facing the worst employment market since the Depression…
“It’s impossible to overstate the threat that this crisis of unemployment poses to the well-being of the United States. With so many people out of work and so much of the rest of the population deeply in debt, where is the spending going to come from to power a true economic recovery? The deficit hawks are forecasting Armageddon, but how is anyone going to get a handle on the federal deficits if we don’t get millions of people back to work and paying taxes?
“Some inner-city neighborhoods, where joblessness is off the charts, are becoming islands of despair. Rural communities and rust belt cities and towns are experiencing their own economic nightmares.”
That’s how columnist Bob Herbert described the US jobless malaise in yesterday’s New York Times.
Europe may be going through a serious contagion built around unmanageable deficits, but the real sick man of the world economy is American and he’s out of work.
The reason Europe has a problem with “unmanageable” deficits is that by shackling themselves to a single currency and a conservative German-dominated central bank, the regional economies have removed all their fiscal options: they can’t float or devalue their currencies, stimulate their economies with new high-powered money, or use inflation for debt clearance and employment stimulation. None of this is true of the US (or the UK, yet), which has the power to spend its way out of the current crisis if it chooses to. Europe is likely to have worse unemployment and social outcomes than the US if they keep pushing this “austerity” wheelbarrow.
See Bill Mitchell at the Centre for Full Employment and Equity for a cogent summary of the essential differences between the US and European economies.
But Bob Herbert’s lament is repeated every decade in the USA.
And remember, the USA has an unlimited supply of virtually free labour: illegal migrants and 1 million prisoners.
I guess we need to accept the proposition that economic growth may be fostered by providing and trading services as against making and trading goods.
If you go to http://www.shadowstats.com, econo-statistics guru John Williams’ site, you will see that the true fiddle-free figures for the US economy. The graphs show unemployment running at 22%, the CPI at 5.5% and everything is down to billyo except for the Goldman Sachs and JP Morgan executive bonuses.
Now, the US dollar accounts for 85% of the world’s transactions in value terms and 90% of dollars are held outside of the USA. In other words, no country can afford to allow the US dollar to fail, as diseased as it might be, until all can work out a way of putting it to sleep without getting the same disease.Meanwhile, the Fed keeps printing dollars ad nauseum and funneling into Afghanistan, Iraq and the rest of their 150 bases around the globe. But one day soon that massive dollar bubble will find its way back into the main economy and off the bankers balance sheets; and when that happens inflation explode.
The global bankers need another inflationary bubble to keep the world economy afloat but they cannot print enough to clear at least 600 trillion in off balance sheet derivatives. JP Morgan alone, from reports I have read, is holding $95 trillion of these toxic derivatives contracts off balance sheet. Even the CBA has a bag of these nasty nuclear financial devices off balance sheet.
The Americans have had a free ride at everyone’s expense for the past 40 years but that is coming to an end and with it, probably the entire fiat monetary system that has allowed governments to spend more than they had and pass the debt onto the children of posterity.
If the global bankers opt for another fiat currency as the solution to this, watch gold go to $5000 an ounce overnight despite all of the efforts of the central banks and the governements they own to sell it short. Paper gold according to several credible sources is running at 100 times the availability of real metal to meet the contract should it be called. So beware!.