Saturday, November 19, 2011

"As The Debt Machine Grinds to a Halt, Job Creation Falls Off A Cliff" (Charles Hugh Smith)

The jobs recession continues to worsen and has reached critical mass -- employment keeps falling in both nominal and real terms. More of the middle class are being forced down the economic food chain by the day. More people live in poverty in the US than ever before. Food stamps have become the norm. Hunger has reared its ugly head. Civil disobedience is growing.

Charles Hugh Smith has written an insightful article on the topic which can be found here:

I commend it to your review . . . as well as his website:

Here are some excerpts . . .

" . . . the “growth” of the U.S. economy since 1980 is debt-based. Debt has exceeded growth by 136%. If debt had risen in tandem with GDP, then total debt would be a mere $22 trillion instead of $52 trillion."

" . . . every incremental increase in debt has had a diminishing effect on growth. Where $1 of debt once added 70 cents to GDP, now it adds basically nothing, or even reduces GDP."

" . . . employment hasn’t hit a bump in the road; it’s off the road and sinking into a bottomless bog. Here is the civilian participation rate, which measures how many folks in the civilian population are participating in the labor market in one way or another. By this measure, the labor market has retraced to the level of the 1981-82 recession thirty years ago."

" . . . The wheels fell off the financialization and dot-com boom in 2000, and the Federal Reserve and federal government created an even more extreme version of financialization that inflated a gigantic debt/real estate bubble. Like all financial bubbles, this one burst, and once again the Fed and federal government scrambled to inflate another debt bubble.

Since the household sector was tapped out and its primary asset, the family home, had lost a third of its bubble value, the Federal government borrowed $6 trillion to bail out the banking sector and spread trillions of dollars around as stimulus and giveaways like "Cash for Clunkers."

" . . . This is not a bump in the road; it is the exhaustion of the entire model of growth that we have depended on for the past 30 years. Once the debt saturation point has been reached, adding more debt subtracts from the economy rather than adds to it. This is reflected in the decline of employment by every metric: total number of jobs, civilian participation, payrolls per capita, and employment as a percentage of the total population.

" . . . We are past the point of debt saturation, and so we need a new model of employment, and indeed of “growth” itself. Sadly, as discussed in a recent report, the Status Quo financial witch-doctors have only prescribed more debt and more unproductive friction." 



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