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Mass Distraction And Fake “V-Shaped” Recovery Provide Cover For The Fed Induced Crash

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By Brandon Smith

Source: Alt-Market.com

This article, originally titled ‘The Fed Just Got Cover For The Collapse Of The US Economy’, was written by Brandon Smith and first published at Birch Gold Group

The scapegoating has already started. In almost every sector of the economy that is collapsing, the claim is that “everything was fine until the pandemic happened”. From tumbling web news platforms to small businesses to major corporations, the coronavirus outbreak and the national riots will become the excuse for failure. The establishment will try to rewrite history and many people will go along with it because the truth makes them look bad.

And what is the truth? The truth is that the U.S. economy – and in some ways, the global economy – was already collapsing. The system’s dependency on ultra-low interest rates and central bank stimulus created perhaps the largest debt bubble in history – the Everything Bubble. And that bubble began imploding at the end of 2018, triggered primarily by the Federal Reserve raising rates and dumping its balance sheet into economic weakness, just like it did at the start of the Great Depression. Fed Chair Jerome Powell knew what would happen if this policy was initiated; he even warned about it in the minutes of the October 2012 Federal Open Market Committee, and yet once he became the head of the central bank, he did it anyway.

For a year leading up to the pandemic, the Fed was struggling to maintain and suppress a repo market liquidity crisis. National debt, corporate debt and consumer debt were at all-time highs. Companies were desperate for new stimulus, and they were getting crumbs from the Fed, rather than the tens of trillions that they needed just to stay afloat. The central bank had sabotaged the economy, but they had to keep it in a state of living death until they had a perfect cover event for the collapse. The pandemic and inevitable civil unrest do the job nicely.

What many people do not understand is that the Fed does not care about the economy. In fact, every Fed action since its inception in 1913 has led to the downfall of the U.S. The Fed is not a maintenance man trying to stave off collapse; the Fed is a suicide bomber willing to destroy everything including itself in order to serve a greater ideology.

Total global centralization is the goal, and every new disaster is exploited to this end by the establishment. “Order out of chaos” is the motto of the global elites; in other words, in every crisis there is “opportunity”. This crisis has been no different. Suggested solutions have ranged from the creation of a cashless society operating on a digital currency system, to permanent lockdowns in the name of stopping “global warming”, to a surveillance state and medical tyranny utilizing 24/7 tracking of citizens in order to “stop the spread of the virus”. But how does the establishment plan to get people to go along with such freedom-crushing policies?

The pandemic by itself is not enough. The George Floyd riots may be a motivator, but they might fizzle out over time. The real catalyst, as I have said for many years now, will be an ongoing economic crash. This crash, engineered in 2008, has been a long time coming. Everything that is happening today is an extension of what happened over a decade ago. That said, the current phase was set in motion in 2018, as noted above.

The virus and the lockdowns solidified the crash, and while some people including Trump are calling for a V-shaped recovery, this is not going to happen.  Perhaps Trump is referring to stock markets artificially inflated by the Fed stimulus backstop?  Is anyone gullible enough to believe the stock market represents the real economy?  Because today’s jobs report from the BLS, despite all the hype, does not suggest V-shaped recovery to me.  The US lost 40 million jobs in the span of 6 weeks.  The BLS reports a gain of 2.5 million jobs in May as the country “reopened”.  So, we are still down nearly 38 million jobs in the past couple months yet the BLS stats are being called “stunning” and a “sign of recovery”?

The assumption being made here I think is that job gains will now be constant each month from now on.  I think not.  I think the jobs that were gained in May are the peak, and every jobs report after today will disappoint.  Here’s why…

The latest Fed models predict a GDP plunge of 52.8%, and the manner in which the Fed calculates GDP is actually rigged to the upside. It is difficult to predict the REAL fall in data, but we know it will likely be larger than 52%. Keep in mind that this crash is in the 2nd quarter, while the Fed pumped trillions into the system. What exactly did this money printing buy? Well, stock markets stabilized, but the rest of the economy didn’t, and stock market optimism isn’t going to last much longer either is there are renewed lockdowns.

The primary reason we now face a second Great Depression is because the small business sector has been destroyed. Small businesses are vital to the U.S. economy, representing around 50% of the job market. The closures resulted in around 40 million job losses in the past two months. Add that to the 95 million Americans that have been out of work but not counted by the BLS as unemployed – as well as the 11 million people that are counted – and you are looking at nearly 150 million working age people not generating an income.

The latest BLS jobs gains and the way they are being hyped by the media are suspicious to me.  It seems as if the establishment is trying to convince the public that the pandemic will have no affect on the economy and that their jobs will simply be waiting for them after every new shutdown (as long as they adhere to the rules and restriction set up by state and federal governments).

But it’s only going to get worse from here on…

The public doesn’t realize it yet, but many of the businesses that shut down over the past couple months are not coming back. Sure, a lot of them will try to reopen, and there will be a last gasp of activity during the next month or two, but the levels of debt attached to these ventures was already high before the pandemic hit. The recent small business bailouts seemed as if they were designed to give people false hope. According to figures out of JP Morgan, of the 300,000 clients that applied for the small business aid, only 18,000 actually received any. And, of that 18,000, many were larger corporation, not small businesses.

Business sectors most affected include retail and service, which crashed a record 16.4% overall in April. Food service lost approximately 30% of sales. Electronics and appliances lost 60%. Clothing plunged 78%. Auto sales fell 33% in May, and the expected rebound after the reopening has been disappointing.

The businesses most likely to die first are those that had large debt obligations before the lockdowns, as well as those that received no bailout money. Even though companies like General Electric, Verizon, IBM and Tesla all have massive debt issues, they may be kept alive by government bailouts, at least for a time. Small businesses, on the other hand, appear to be slated for destruction.

In particular, I suspect most restaurants besides major chains will go into bankruptcy. Boutique stores and clothing outlets will run out of money fast. Movie theater chains will collapse. Car rental outlets will collapse. Tourism businesses will close en masse and tourism towns will suffer profit losses despite the “reopening” in some states. Larger companies, like airlines, will continue to decline, and they will have to diversify into other areas, such as shipping, in order to survive. The auto industry is not coming back any time soon.

In the case of restaurants, the social distancing requirements reduce the number of customers that they can seat at any given time. Restaurants were already suffering major declines before the pandemic, and while take-out venues might have seen an uptick because of the lockdowns, this will not last as people begin to run out of cash and start cooking at home.

The same goes for small boutique stores, which rely on consumers with expendable cash flows. Such consumers no longer exist, and notions of “extra cash” will disappear along with waning government checks. As for tourism, I think there will be some travel, as lockdown restrictions are partially lifted. Many people in the cities will try to get away for a week or two just to escape and feel normal for a little while. However, I also think mainstream economists are underestimating the number of people who will refuse to travel because of concerns about coming in contact with the coronavirus. Just as retail refuses to rebound, so will tourism profits.

Air travel is unlikely to improve for the same reasons. Social distancing makes airplane flights a losing investment as passenger capacity is reduced. New car sales will remain stagnant because people are traveling less, and the used car market is being stocked with product as average people sell off vehicles to get extra cash to make ends meet.

All of these factors result in long-term job losses and debt defaults for small businesses as well as some larger companies. Which means much higher poverty rates and further dependency on government welfare programs.

The real test for the public will come when lockdowns return. I realize that there is a bit of denial in the population when it comes to this idea. I see many people operating on the assumption that the “reopening” is a long-term situation. I assure you, it is not. As I have noted in many previous articles, the establishment intends to use what I call “wave theory”, or a cycle of shutdowns and openings over the span of a year or longer. There WILL be new lockdowns, if not in the name of a resurgence in COVID infections, it will be in the name of stopping the national riots.

The response from the American people will be critical here. Will we support further lockdowns or martial law, even though the measures would harm us economically? Or will the public resist? Will the political left embrace a second lockdown in the face of further infection spikes? Will conservatives embrace lockdowns in the face of leftist protests and riots? Both sides of the political spectrum are being tempted with the use of a totalitarian government response in order to ensure their personal “safety”.

People must be made to understand the reality of our situation: the economy has already been undermined and this threat is far greater than either the virus or the riots. This is the danger that is being hidden by the pandemic and civil unrest distractions, and it is a threat that the government has no means or intention of saving us from. We must save ourselves, and doing that requires preparation and acceptance that the world is changed.

A Debt Jubilee Is the Only Way to Avoid a Depression

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By Michael Hudson

Source: The Unz Review

Even before the coronavirus appeared, many American families were falling behind on student loans, auto loans, credit card balances and other payments. America’s debt overhead was pricing its labor and industry out of world markets. A debt crisis was inevitable eventually, but covid-19 has made it immediate.

Massive social distancing, with its accompanying job losses, stock dives, and huge bailouts to debt-strapped corporations, raises the threat of a depression. But it doesn’t have to be this way. History offers us another alternative in such situations: a debt jubilee. This slate-cleaning, balance-restoring step recognizes the fundamental truth that when debts grow too large to be paid without reducing debtors to poverty, the way to hold society together and restore balance is simply to cancel the bad debts.

The word Jubilee comes from the Hebrew word for trumpet — yobel. In Mosaic Law, it was blown every fifty years to signal the Year of the Lord, in which personal debts were to be cancelled. The alternative, the prophet Isaiah warned, was for smallholders to forfeit their lands to creditors: “Woe to you who add house to house and join field to field till no space is left and you live alone in the land.” When Jesus delivered his first sermon, the Gospel of Luke describes him as unrolling the scroll of Isaiah and announcing that he had come to proclaim the Year of the Lord, the Jubilee Year.

Until recently, historians doubted that such a debt jubilee would have been possible in practice, or that such proclamations could have been enforced. But Assyriologists have found that from the beginning of recorded history in the Near East, it was normal for new rulers to proclaim a debt amnesty upon taking the throne. Instead of blowing a trumpet, the ruler “raised the sacred torch” to signal the amnesty.

It is now understood that these rulers were not being utopian or idealistic in forgiving debts. The alternative would have been for debtors to fall into bondage. Kingdoms would have lost their labor force, since so many would be working off debts to their creditors. Many debtors would have run away (much as Greeks emigrated en masse after their recent debt crisis) and communities would have been prone to attack from without.

The parallels to the current moment are notable. The U.S. economy has polarized sharply since the 2008 financial crisis. For far too many, the debts in place leave little income available for spending on goods and services or in the national interest. In a crashing economy, any demand that newly massive debts be paid to a financial class that has already absorbed most of the wealth gained since 2008 can only further split our society.

This has happened before in modern times — after World War I, the burden of war debts and reparations bankrupted Germany, contributing to the global financial collapse of 1929-31. Most of Germany was insolvent, and its politics polarized between the Nazis and Communists. We all know how that ended.

America’s 2008 bank crash offered a great opportunity to write down the often-fraudulent junk mortgages that burdened many lower-income families, especially minorities. But this was not done, and millions of American families were evicted.

The way to restore normalcy today is a debt writedown. The debts in deepest arrears, and most likely to default, are student debts, medical debts, general consumer debts and purely speculative debts. They block spending on goods and services, shrinking the “real” economy. A debt writedown would be pragmatic, not merely a moral sympathy with the less affluent.

In fact, it could create what the Germans called an “Economic Miracle” — their own modern debt jubilee in 1948, the currency reform administered by the Allied Powers. When the Deutsch Mark was introduced, replacing the Reichsmark, 90 percent of government and private debt was wiped out. Germany emerged as an almost debt-free economy, with low costs of production that jump-started its modern economy.

In the past, the politically powerful financial sector has blocked a writedown. Until now, the basic ethic of most people has been that debts must be repaid. But it is time to recognize that most debts now cannot be paid — through no real fault of the debtors in the face of today’s economic disaster.

The coronavirus outbreak is serving as a mind-expansion exercise, making hitherto unthinkable solutions thinkable. Debts that can’t be paid, won’t be. A debt jubilee may be the best way out.

 

Michael Hudson, author of “… and forgive them their debts” and “Killing the Host,” is president of the Institute for the Study of Long-Term Economic Trends and is Distinguished Research Professor of Economics at the University of Missouri–Kansas City.

America’s Despair

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By Vladimir Odintsov

Source: New Eastern Outlook

More and more people in the United States are feeling let down by American capitalism, and the population is being plunged into depression. This was the alarming conclusion reached by two researchers from Princeton University, Anne Case and winner of the Nobel Prize in Economics Angus Deaton. Over the past fifty years, many have been left feeling disillusioned with the American economic model, hyped up extensively within the United States, which even affects life expectancy in America: it has been declining for three consecutive years, a very unusual trend for a developed country. There has been a marked increase in the mortality rate among the white population in particular since the beginning of the new millennium. The number of suicides, as well as deaths from drug and alcohol abuse has increased dramatically.

These are the bleak findings of the research on the situation in the USA conducted by well-known American economists Anne Case and Angus Deaton, who carried out a detailed analysis of the suicide and mortality epidemic that has engulfed America, noting that the United States has been experiencing a “deaths of despair” epidemic since the mid 1990s. The researchers point out that life expectancy for Americans declined for three consecutive years, from 2015 through 2017, something that had not happened since World War One, when the world was gripped by the Spanish influenza pandemic. Among the many different root causes leading to deaths of despair, the study highlights a significant fall in American wages in recent years and a dearth of good jobs, which is weakening core institutions of American life, such as marriage, faith and community. Social spending and housing-related expenses are an increasingly heavy burden for ordinary Americans.

This is despite the fact that the United States had once led the way as the number-one country in the world in terms of reducing mortality rates and increasing life expectancy in the 20th century, and many important discoveries and achievements in medicine have come from the United States.

However, the United States is now leading the way in the opposite direction.

Numerous US researchers believe that the Great Recession which began with the 2008 financial crisis is to blame for today’s greatest woes in America. However, the Great Recession was not what provoked the deaths of despair epidemic among ordinary Americans, although it did lead to the deterioration of living conditions for many people, which provoked anger and division in the United States. The deep-rooted causes of this epidemic can be traced back to a feeling of dissatisfaction with living conditions among Americans which has been there for a long time, and when inequality began to grow, young Americans began realizing that they would never be able to live the lives their parents could afford, while young people without highly professional skills have fallen even further behind.

America’s health care system which has been prescribing more and more opioids is also on the list of “culprits” responsible for the situation America has found itself in today. According to US research, one out of every two unemployed men in the US take painkillers on a daily basis, and these are usually addictive opioids. The national health-care crisis associated with substance abuse has plagued Americans for decades. The opioid epidemic in the United States is largely a failure of regulation and control. This is an area where pharmaceutical companies wield great political influence.

In recent years, there has been a sharp increase in the number of patients reporting pain, difficulties with communication, and depression. Pharmaceutical companies and distributors have taken advantage of people’s growing desperation, seeing an opportunity to promote and ramp up the sales of opioid pain medication such as OxyContin, a legal drug approved by the US Food and Drug Administration even though it is essentially no different to heroin. Between 1999 and 2018, more than 200,000 Americans died of opioid overdoses. Doctors are seeing the increasing amount of harm being caused by these drugs, and have begun prescribing them on a less frequent basis, but these opioids have opened the gateway to illegal drugs: heroin from Mexico, as well as fentanyl from China in more recent years, which is far deadlier. These drugs are causing a huge amount of damage and killing a lot of people. However, when ordinary Americans are faced with hardship and suffering, when there is social upheaval, and people begin to feel that their lives are meaningless, these drugs fill the void, and the number of deaths from drug overdoses goes up, adding to the number of suicides and alcohol-related deaths.

Alcohol-related deaths in American society today are simply ballooning out of control. According to a series of studies, “Alcohol-related deaths” have more than doubled in the last two decades. This is well ahead of the population growth rate over the same period. A study conducted over a twenty-year period found that alcohol had been the cause of more than one million deaths! Apart from people who simply drank themselves “to death”, half of the alcohol-related deaths were due to liver disease and drug overdoses from substances taken together with alcohol. Nine states — Maine, Indiana, Idaho, Montana, New Jersey, New York, North Dakota, Ohio and Virginia — have recorded a significant increase in the number of Americans binge drinking dangerous amounts of alcohol, which can lead to fatal car crashes and other fatal accidents, according to a report recently published by the CDC (The Centers for Disease Control and Prevention). Americans almost all over the country who are trying to “drown their sorrows in alcohol” are already addicted to these hard drinks, and have began drinking more heavily and more often, with a 12% increase seen in the last five years alone.

Historically, there have always been more “deaths of despair” among men than women. However, a study published in the journal Alcoholism: Clinical and Experimental Research, found that the largest annual increase in alcohol-related deaths in recent years was seen among non-Hispanic white women.

But these are not the only scourges of today’s American society. According to the January report published by the National Center for Homeless Education funded by the US Department of Education, over 1.5 million schoolchildren experienced homelessness in the 2017-2018 school year. 100,000 (7%) of these homeless schoolchildren spent the night in the open air and slept wherever they could, 7% slept in motels, 12% stayed in homeless shelters, and 74% stayed at a friend’s. And these are only the most modest estimates, but take figures from the American Institutes for Research, for example, which recorded that 2.5 million children had experienced homelessness in the year 2013. This could almost be considered some sort of historical “record”, with one in thirty American children experiencing homelessness! Criminal gangs, drug dealers, pimps and pedophiles are waiting for these children on the streets. In this context, does it really come as any surprise that crime is on the rise in the United States (especially juvenile crime)?

This grim situation in the US is hardly surprising if you look at the draft $4.8 trillion federal budget that US President Donald Trump is going to propose and use to pave the way for his re-election. After all, this budget is a continuation of a trend that has already been observed in federal budgets drafted in the United States, as we’ll see more big safety-net cuts and increased spending on defense, which even the Wall Street Journal has called out.

All of the Trump administration’s wall-to-wall “America First!” slogans cannot hide the glaringly ugly face of American reality we can see today.

The Economic Crash So Far: A Look At The Real Numbers

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By Brandon Smith

Source: Alt-Market.com

There are many problems when attempting to track a faltering economy. For one, the people in government generally do not want the public to know when the system is in decline because this looks bad for them. They prefer to rig statistical indicators as much as possible and hope that no one notices. When the crash occurs, they then claim that “no one saw it coming” and the disaster “came out of nowhere”, so how could they be to blame?

I have even heard it argued that political leaders, including the president, have a “duty” to lie about the state of the economy because once they admit to the decline they will cause a panic and perpetuate the crisis. This is stupidity. If an economic system is in disrepair and is built on a faulty foundation, then the problems should be identified and fixed immediately. The weak businesses should be culled, not bailed out. The wasteful government spending should be cut, not increased. The downturn should not be hidden and prolonged for years or decades. In most cases, this only makes the inevitable crash far worse and more damaging.

Another factor, which some people might call “conspiracy theory” – but it has been proven time and time again in history – is that the money elites have a tendency to engineer economic disasters while deliberately hiding the real statistics from the public. Why? Well, if the real data was widely disseminated, then a crash would not be much of a surprise and the populace could be prepared for it. I suspect the elites hide the data because they WANT the crash to be a surprise. The bigger the shock, the bigger the psychological effect on the masses. This fear and confusion allows them to make changes in the power structure of a nation or of the entire world that they would not be able to accomplish otherwise.

The most rigged statistics tend to be the least important overall in analysis, but this does not stop the mainstream media and investors from hyper focusing on them. How many times have you told friends and family about the collapse in manufacturing or the explosion in consumer and corporate debt, only to hear them say, “But the stock market is at all-time highs!” Yes, even though stock markets are a meaningless trailing indicator, even though GDP stats are a complete fallacy, and even though jobless numbers do not include tens of millions of people out of work, these are the stats that the average person takes mental note of when consuming their standard 15 minutes of news per day.

While the issue of rigged statistics makes analysis of a crash difficult, a willfully ignorant citizenry makes reporting on the real data almost impossible. It’s sad to say, but a large number of people do not want to hear about negative information. They want to believe that all is well, and will delude themselves with fantasies of blind optimism and endless summers. Like the tale of “The Ant And The Grasshopper”, they are grasshoppers and they see anyone who focuses on the negative as “chicken littles” and “doom mongers”. In their minds they have all the time in the world, until they freeze and starve when winter comes.

When I encounter people who actually believe the manipulated numbers or buy into the stock market farce or simply don’t want to accept that a crash could happen in their lifetime, I always ask them to consider these questions: If the global economy is not on the verge of collapse, then why did central banks keep propping it up for the past ten years? And if central banks have been propping up the system, how much longer do you think they can do this? How much longer do you think they want to do it? What if one day they decide to let the entire house of cards tumble? What if such an event actually benefits them?

We’ve seen that a broken economy can be technically held together for a decade, but under the surface, the structure continues to rot. The bottom line is that even if the elites wanted to keep the system going for another ten years, and even if politicians continued to help them by pumping out false statistics, there is no way to hide the effects of crumbling fundamentals. We saw this during the crash of 2008, and now we’re seeing it again.

After nearly ten years of stimulus inflated the largest financial bubble in history (the Everything Bubble), the Federal Reserve and other central banks halted stimulus measures and tightened global liquidity. By the end of 2018, a new crash began, the implosion of the Everything Bubble had been triggered. All of this is still just an extension of the crash of 2008, which never really subsided; it was only slowed down through tens of trillions of dollars in central bank intervention. Now, the central banks have started an avalanche that cannot be stopped. But the fact of the matter is, they don’t really want to stop it.

Here are the indicators so far that prove a crash is happening in the U.S. while a majority of the public is oblivious:

GDP numbers are completely manipulated. Government spending of taxpayer dollars on a number of inflated programs, including continued spending on Obamacare, is added to GDP calculations. Without this fancy accounting, U.S. GDP growth would actually be negative, according to ShadowStats. But even with the juiced data, official GDP growth is still in decline, falling to 1.9% and well below the 3% growth we were supposed to see this year.

Official unemployment stats remain at all-time lows, which is commonly cited by the mainstream media, Donald Trump (he used to argue the opposite three years ago), and even the Federal Reserve in reference to the health and stability of the economy. What they do not mention much is the 95 million people not in the labor force and not counted because they have been unemployed for so long. When the media does mention this fact, they claim the number is “misleading”, that most of these people are students or retired, that the retirement age is decreasing and Baby Boomers are leaving the workforce sooner, and that the people who don’t have jobs are simply “not interested” in working. None of this is true.

The retirement age is increasing in the U.S., not decreasing, according the SS Administration. Current average retirement age is now 67, up from 65, almost the same as it was during the Great Depression.

Baby Boomers are not retiring at rates similar to ten years ago, and are in fact attempting to stay in the workforce due to the poor economy. Many of them are trying to come OUT of retirement just to make ends meet.

The labor participation rate remains near record lows.

Interestingly, the Bureau of Labor Statistics (BLS) house survey that is used to determine if people “want a job” assumes that if you are near retirement age and do not have a job, you are simply not interested in a job, and they count you as “non-participating”. However, if you DO have a job and you are near retirement age, they count you as participating. It’s a rather convenient assumption on the government’s part to claim that just because an unemployed person is near retirement age, that means they “don’t want a job”.

While there is surely a small percentage of the 95 million people not counted in the labor force that do not want a job, if unemployment stats counted U-6 measurements as they used to, the unemployment rate would be closer to 20%.

Another problem is the quality of jobs being created. U.S. manufacturing jobs, as well as higher wage jobs, are in steep decline. They have been replaced with low paying jobs in the service sector.

Real wages in the U.S. have not kept up with inflation. The average worker is now losing money overall as prices rise beyond the pace of their incomes.

As more and more Millennials say they cannot afford to buy a home, rental prices have skyrocketed in the past several years. The home ownership rate plunged starting in 2006 and has not recovered since.

U.S. manufacturing has fallen to levels not seen since the crash of 2008. U.S. factory orders have slumped in 2019.

U.S. Services PMI continues to falter since spring of this year. Job growth is now slowing and over 8,500 retail stores have been closed down already in 2019. Web-based retail is not picking up the slack, as online sellers like Amazon are suffering from falling profits.

Corporate profits overall have tumbled this year and projected future profits have been drastically adjusted to the downside.

Corporate debt, consumer debt and national debt are all at historic highs. Corporate cash flow is so tight that Federal Reserve repo purchases continue to run into high demand. This debt signal is one we saw in 2007, just before the credit crisis.

U.S. trucking and railroad freight continue to log steep declines in traffic and goods. This tells us what we already know: Even though consumer spending has increased recently, this does not mean people are buying more stuff or have more disposable income. What is really happening is inflation, or stagflation. Cost of living is going up. Debt payments are going up. Consumers are spending more on the same amount of stuff, or less stuff, and have less expendable income. U.S. consumers are being bled dry.

All of these factors and more show an economy in recession or depression (depending on what historic standards you use). In the darker corners of the investment world, the great hope is that the central banks will return to pumping trillions into the banking sector ($16 trillion during the TARP bailout dwarfs the $250 billion the Fed has recently pumped out in their repo markets). They hope that this will free up even more credit. Meaning, they believe only more debt will save the system from suffering.

I say, time is up on the debt party. More stimulus will not stall the crash that is already happening, and the Fed does not appear poised to print anywhere near what it did during the credit crisis, at least not in time to change the trend. The can has been kicked for the last time. The grasshopper mentality will not save people from the clear reality. Only preparation and planning will.

‘Deaths of despair’ soaring among Gen Z & millennials: ‘It’s the economy, stupid’

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By Helen Buyniski

Source: RT.com

Young Americans are killing themselves in record numbers, the victims of a confluence of economic and sociological factors that have singled them out – even above a nationwide surge in so-called “deaths of despair.”

Suicide rates among teens and young adults aged 15 to 24 – the older end of “Generation Z” – spiked in 2017, reaching their highest point since 2000, according to a study published Tuesday in the Journal of the American Medical Association (JAMA). They’ve risen 51 percent in the past 10 years, buoyed by rising rates of anxiety and depression along with social media and drug use, and the figures may be even higher, since some intentional overdoses are not counted as suicides.

Young men saw the steepest rise in deaths, according to the JAMA study, though women are catching up to them at an alarming pace. Teens and young adults report higher rates of anxiety and depression than previous generations, and multiple studies in recent years have shown that social media use exacerbates both conditions, creating a self-perpetuating feedback loop that can have tragic consequences.

But Generation Z is simply following in the footsteps of its predecessors. The much-maligned millennial generation, defined by the Census Bureau as those born between 1982 and 2000 (meaning some are included in the JAMA study), are also killing themselves in record numbers. Drug-related deaths among ages 18 to 34 have increased 108 percent since 2007, while alcohol-related deaths are up 69 percent and suicides are up 35 percent, according to a report published last week by Trust for America’s Health. While millennials have long been written off as entitled, spoiled snowflakes, the media and society are belatedly realizing that they aren’t just layabouts unmotivated to exit their parents’ basement – this “despair” has a cause, and it’s primarily economic.

The rise of millennial and Gen Z “deaths of despair” can be traced to the yawning gap between reality and expectations. Raised on the myths of the American Dream, these are the first Americans to experience a markedly lower standard of living than their parents, the Baby Boomers who grew prosperous on the fruits of the postwar economic boom. The national debt has ballooned, driven by two decades of an unwinnable war whose cost is poised to top $6 trillion, and the Pentagon’s budget has swollen to an unprecedented size even as cuts to social services have decimated what little social safety net Americans could once count on. Multiple rounds of tax cuts for the wealthy and corporations destroyed the government’s revenue base, and perhaps unsurprisingly, economic inequality has grown to exceed even the rates seen during the Great Depression.

And even these concerns are beside the point for a generation that left college already shackled with student loan debt that can run into the hundreds of thousands of dollars and cannot be canceled even by declaring bankruptcy. Millennials who graduated in the aftermath of the 2008 crash entered the “real world” to find no jobs waiting for them. Lucky if they could find an unpaid internship or a waitressing gig, they were forced to retreat back into their parents’ basements, a crushing blow for anyone but particularly for a generation told since birth that they were special, that they could do anything they wanted, that the world was their oyster.

The US, perhaps uniquely in the developed world, views poverty as a sin, and many millennials suffer in silence, believing they are the only ones in their peer group to “flunk out” of the “real world.” Instead of finding support from friends and family, they take advantage of the ready availability of alcohol and opioids, a factor that has caused the number of “deaths of despair” to skyrocket. Some economically-depressed states, like West Virginia, have seen drug overdoses increase more than fivefold in the last 12 years, according to a report published earlier this month by the Commonwealth Fund, and many more have seen their number double and triple. That pharmaceutical companies flooded the market with opioids at the same time the rise of social media devastated the quality and complexity of human relationships is a particularly deadly coincidence.

Since 1996, the average net worth of “consumers” under 35 has declined 35 percent, according to management consultancy Deloitte. Advertisers are starting to realize that targeting this group, while it may seem like a savvy marketing decision – they constitute a quarter of the US population, after all – doesn’t make sense, since they can’t afford to buy anything. Student debt is up 160 percent since 2004 for the under-30 population, and the home-ownership rate for millennials is only 37 percent – fully eight percentage points lower than their parents. Fully 89 percent would like to own a home, according to a survey conducted last year, but nearly half have zero dollars in savings – let alone the 20 percent most mortgages require for a down payment.

Young people aren’t the only ones afflicted by the “deaths of despair” phenomenon. Life expectancy nationwide is down for the third year in a row, and a report from Trust for America’s Health published last year projects that this “epidemic” – which they define as drug and alcohol deaths plus suicide – is on track to kill more than 1.6 million people by 2025 if it continues to grow at its current rate. As the Baby Boomers start to retire only to find they cannot live on their meager savings – assuming they still have any – they, too, are killing themselves more often, with suicide rates up 40 percent from 2007 to 2015.

This is not only a young people’s problem, nor is it an easy one to solve, but acknowledging the systemic poverty afflicting the “richest country in the world” – where two-thirds of the population doesn’t have enough saved to cover a $500 crisis – is a good place to start.

The Evidence Pours In: Poverty Is Getting Much Worse In America

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By Paul Buchheit

Source: Occupy.com

A White House report recently proclaimed that the “War on Poverty is largely over and a success.” United Nations Ambassador Nikki Haley said it was “ridiculous for the United Nations to examine poverty in America.”

Well-positioned Americans must talk like this, of course, because admitting the debilitating state of poverty in America might provoke feelings of guilt for 35 years of oppressive economic policies. Wealthier people need to take an honest look at the facts. They need to face reality as it sadly exists in America today.

1 in 7 Americans is Part of the World’s Poorest 10%

According to the Credit Suisse 2018 Global Wealth Databook, 34 million American adults are among the world’s poorest 10%. How is that possible? In a word, debt. In more excruciating words: stifling, misery-inducing, deadly amounts of debt for the poorest Americans. And it goes beyond dollars to the “deaths of despair” caused by the stresses of inferior health care coverage, stagnating incomes, and out-of-control inequality.

Numerous sources report on the rising debt for the poor half of America, especially for the lowest income group, and largely because of health care and education costs. Since 2008 consumer debt has risen almost 50 percent. The percentage of families with more debt than savings is higher now than at any time since 1962.

It could be argued that Scandinavian countries face the same degrees of debt as Americans. But far less of the debt is for health and education costs. And the Scandinavian safety net is renowned for its generous provisions for all citizens.

Half of us Are in or Near Poverty

$1 in expenses twenty years ago is now $1.25. $1 in earnings twenty years ago is now still $1.

More and more Americans are facing financial difficulty. Estimates of adults living from paycheck to paycheck range from half to 60 percent to 78 percent. Any sign of a recession would be devastating for most of us.

It’s estimated that a typical U.S. household needs about $60,000 annually to meet all expenses. That’s only manageable if two adults are working full-time for $15 per hour. Beyond that, little cushion exists. No American adult in the bottom 40% has more than $31,124 in total wealth, including house and car and savings (Table 3-4).

Booming Economy, Low Unemployment, and Other Deceptions

While 1 in 7 Americans is part of the world’s poorest 10%, nearly 3 in 7 Americans are part of the world’s richest 10%. The economy is booming for THEM. Yet the Wall Street Journal has the arrogance to claim that “Americans traditionally left behind…are reaping the benefits..”

How about the “jobs for everyone” fantasy? The official unemployment rate, according to the Bureau of Labor Statistics (BLS) itself, is based on employees “who did any work for pay or profit during the survey reference week.” The BLS workforce includes contingent and alternative employment arrangements that make up about 10% of the workforce. It includes part-time workers (even one hour a week!), who make up about 16% of the workforce. And, inexplicably, it fails to count as unemployed those who have given up looking for work – 4% more Americans than in the year 2000.

Many of today’s ‘gig’ jobs don’t pay a living wage, and most have no retirement or health benefits, no job security, no government regulations backing them, and usually a longer work day, with many people putting in 10- to 12-hour days for $13 per hour or less. According to a New York Times report, “41.7 million laborers – nearly a third of the American work force – earn less than $12 an hour, and almost none of their employers offer health insurance.”

Safety Net Failures

While it’s true that the U.S. spends a greater percentage of its GDP on social safety net programs than developing countries, Americans generally have to face much higher costs for housing, heating, transportation, child care, and other basic expenses.

Beyond this, there are significant shortcomings in American social protections, as pointed out by the UN. These include the “shockingly high number of children living in poverty” and the “reliance on criminalization to conceal the underlying poverty problem.” Furthermore, with the call for work requirements comes the realization that the job market for the poorest Americans is “extraordinarily limited.”

Poverty: Not Just a Number

Poverty is living without health care, and choosing the life-threatening alternative of opioid painkillers. Poverty is the stress of overwhelming debt; the steady decline of jobs that pay enough to support a family; the inability to afford a move to a desired neighborhood; the deadening impact of inequality on physical and mental well-being.

The United Nations describes America as a nation near the bottom of the developed world in safety net support and economic mobility, with its citizens living “shorter and sicker lives compared to those living in all other rich democracies,” with the highest infant mortality rate in the developed world, the world’s highest incarceration rate, and the highest obesity levels.

Low-income Americans are often surrounded by food deserts, with insufficient access to clean water and sanitation, and with the pollution levels of third-world countries. The poorest among us are even susceptible – unbelievably – to rare tropical diseases and once-eradicated scourges like hookworm.

The extreme levels of American poverty and inequality are ripping apart once-interdependent communities with mental health and homelessness problems, and with a surge in drug and alcohol and suicide“deaths of despair.”

Part of the definition of poverty is “the state of being inferior in quality.” As one of the most unequal nations in the entire world, America is also, in many ways, one of the most poverty-stricken.

Reimagining the Middle Class

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In her new book, Alissa Quart chronicles what happens when capitalism and families collide

By Ann Neumann

Source: The Baffler

AS THE ECONOMIC STATUS OF MANY in the United States has declined over the past several decades, journalists have often focused on the challenges faced by the working poor. In her new book, Squeezed: Why Our Families Can’t Afford America, Alissa Quart writes about how economic inequality has also drastically changed the middle class, destabilizing what was once considered a secure class and sending families into the tailspin of debt, overwork, underemployment, and precarious financial states. Squeezed demonstrates that inequality is not just a problem of those left behind in the lowest financial brackets, but a feature of our current economic system characterized by working professionals who are unable to pay for child care, declining job salaries, shifting work hours, and unaffordable housing. Families too often wrestle with “penalizing” factors, like women’s depressed salaries and unaffordable health care, making success unattainable for a formerly comfortable, educated, and skilled demographic of society.

The book challenges us to reimagine our prior understanding of what it means to be middle class, even as legislators champion “traditional values” that contradict the needs and responsibilities of families—and erode a safety net that once supported U.S. workers. Some of the factors that have upended the middle class are obvious—declining salaries, for instance—but others remain masked by corporate and social portrayal of them as a benefit to today’s workers. The gig economy, which, we’re told, gives workers young and old more flexibility and independence, turns out to be a contributor to what Quart calls the forever clock, a twenty-four-hour schedule that has usurped family and free time by keeping workers on constant call. Squeezed recounts the lives of the teachers who work second jobs, the professional mothers who struggle to pay for day care, the paralegals and adjuncts who have to moonlight to pay the rent, the well educated who never found a job in their intended profession that provides a livable salary. And the book causes us to ask why so many suffer in isolation, too ashamed to acknowledge their economic plight and too belabored to politically address it.

Quart is executive editor of the Economic Hardship Reporting Project, a nonprofit organization founded by Barbara Ehrenreich (a contributing editor for The Baffler) that supports journalism examining economic inequality, its causes and solutions (EHRP has funded my own work and that of others published at The Baffler). Quart is the author of four previous books: Branded, Republic of Outsiders, Hothouse Kids, and the poetry book Monetized. She also co-writes, with Maia Szalavitz, a column for The Guardian titled “Outclassed.”

This month, Quart stopped by The Baffler office to talk to me about Squeezed. We’ve known each other for several years and I read the book in manuscript, so our conversation was casual, touching on individuals in the book, our own squeezed lives, how we can counter economic decline, and a necessary new definition of self-help.

Ann Neumann: Squeezed straddles the Trump election and very often people on the left—and the right, to be honest—are using this as a clear demarcation. I think one of the things the book does really well is point out that the mechanisms in place that harm working class families have been long in coming.

Alissa Quart: The reason Sanders and Trump could tap into anger are the numbers of those economically squeezed; it’s what I was seeing anecdotally. And you can feel that. You can feel when you go sit in people’s living rooms, when you talk to them on the phone. I went to a conference called iRelaunch that was all about helping people to start their careers over and the room just rippled with shame and fear. And acidic humor.

AN: How did the election change this book project?

AQ: I think it gave it new urgency for me. Just as it gave urgency to the Economic Hardship Reporting Project, the organization I run. I think everyone in journalism felt like we have to tell these stories. The Trump effect has made me feel like I have to keep a laser focus on the things people are ignoring and try to find a way for readers to pay attention to them. We’re all focusing on Ivanka and whether she’s the c-word or not, which is fine, there are all kinds of things happening around us and in our own lives politically that have nothing directly to do with what Trump is tweeting, but the effects of his administration and long-term trends are real and we just need to keep looking.

We just published an article at EHRP about a journalist who lives in a $17 a night Airbnb, places below what you usually scroll to. But this person was a working journalist who was getting six-figure advances fifteen or twenty years ago. There are all these human examples that constantly show this decline. Fine, maybe the job numbers are up, but how many jobs are people working and are they jobs in the professions? Are they jobs that pay enough for people to live in cities? Or they’re working three different jobs which leads us to things like, as in this book, twenty-four-hour day care.

AN: Day care centers that are open twenty-four hours to accommodate parents with nontraditional work hours or multiple jobs.

AQ: And they are growing in number. I wrote a piece on this; I called it the dystopian social net. I feel like that’s part of my life’s work. I love dystopian fiction and science fiction, probably because it seems a few clicks away from the life we’re leading. It’s a markedly different life and childhood than the one you and I had. It may be horrible, or maybe not, but we’re seeing a palpable transformation in what childhood can be in the course of twenty years.

AN: And that’s really just the decline of income?

AQ: It’s people working different hours, it’s corporations using algorithms to find out what times of day are most profitable—when they’ll have the most foot traffic in retail, for instance—and demanding that employees work those times. It’s increasing nightwork. Nontraditional could mean 11 to 3 or it could mean working in the evening, or working in different jobs, hither and thither. That alone points to a huge transformation in things like time. A lot of the issues I address in the book are really about time, how we spend it. In the twenty-four-hour day care section I use the term the forever clock. But that’s true of the upper middle class too, they feel squeezed because they’re also on a forever clock. They’re working in IT, for instance, and they’re working unusual hours and they have the expectation that they should be better paid for it. 

AN: Your work has been focused on economic inequality for a long time.

AQ: Every single one of my books is in some way about economic inequality. I used to teach at Columbia J-school and I always told my students that every writer has a central question they spend their career trying to answer and your job is to find out what your question is. It’s like a parlor game. So I think mine is: what happens when the family—or childhood—hits capitalism? What are the deformations and the formations? I read so many nineteenth-century novels as a kid that I’m fascinated by that intersection. Naturalism is ascetically but also politically and intellectually appealing to me. I think I just like the texture of family, love, money, and how they all meet.

AN: That comes out in the writing of the book because, I’ll tell you, there are economics books that I have no interest in reading because they’re a slog, a data dump. You also coin terms that give us a way to think about worker’s plights. You just mentioned the forever clock but there’s also the middle precariat.

AQ: I was trying to explain the shift in the middle class as an imaginative category. The middle class used to equal solid, fixed, stable. Temporally it was about gratification later, but your life wasn’t miserable while you were waiting for it. It wasn’t like OK, total slog, but you’re going to get that pension. We have to now think of it as a shaken category, an unstable category, and that’s a big shift. When we visualize the middle class, we’re visualizing the white picket fence, like the blue sky on the cover of the book. But it’s really this truck being squeezed between two houses.

It’s an unsettled identity, and you can fall out of it, you can barely get into it, you certainly can’t rise above it very easily. Guy Standing coined the term precariat in 2011 to describe the proletariat, which is a Marxist way of understanding the working class, crossed with precariousness. And people get that. Every time they ride an Uber or they have a gig economy Task Rabbit person come to their house they’re like, OK, that’s the precariat. But I was seeing the same thing among paralegals or those who have law degrees but were still doing temporary work.

AN: Getting a law degree can be like selling your soul to the banks.

AQ: All these people are in debt. Some of it is because they went to for-profit colleges and those colleges were really expensive and they didn’t have a good rate of placement. Which can be traced to for-profit colleges and grad schools that have very little oversight—and are sometimes indeed federally funded. It can also be traced to fewer law jobs overall and too many people imagining that law is a secure profession. This is about reimagining. Once you can reimagine a profession, even if you choose to do it—you choose to be a journalist, you choose be a lawyer—we should understand that we’re choosing something unstable. Awareness is a huge part of survival and I guess part of what I want with this book is to increase awareness. This is your self-help: Don’t blame yourself. We have to come alive to this recognition. You can still do what you love, so long as you know what it can mean.

This is a personal journey for me too. When I was younger, as a freelancer, I had some recognition that journalism was starting to fragment. It was around 2006 or 2007—but it was before that too, the’90s. The word rates used to be consistent and for freelance writers those rates became lower or stayed the same while inflation rose. I remember talking to someone and they said, “just think about us as post modern.” Now you do lots of things, it’s a hustle here and a hustle there. That person was a boomer who had a steady job, who would get social security. I remember feeling an incredible resentment.

AN: So precarious employment has been described to us as a beautiful thing. We’re not chained to a factory job, we get to think and move around, but it doesn’t pan out.

AQ: I personally came from a middle class background. As I describe in the book, my parents were college professors, originally community college professors, and they could afford to send me to a private school. They didn’t have any inheritance or anything. That’s the sort of the world I thought I’d be living in. All of us, our generation, Generation X, had an idea of the world we thought we’d be living in. The generation after us has come to understand some of these things.

AN: That they’re fucked? So do you think this is a moment in capitalism, as we watch continued market decline over the next years, when we either do something about it or devolve into a disordered society?

AQ: Yes, I think so. But this book isn’t depressing because it points to some solutions—not in a pat way, but things that will work. It’s a way to think about what kind of family safety net, federal and local, we need to make sure people aren’t falling through. For instance, a few of the people I write about in the book are on food stamps and other kinds of support, but many of them are a little above that in terms of earning power and they can’t get help. There’s a labor organizer I spoke with who tries to lower her salary to be able to get some sort of subsidized day care, some sort of health insurance program. It’s that edge: people who are middle class in terms of education, but working class in terms of earning. They’re on the edge of being working poor and not being able to access any of those services. That’s most of the people in this book. Once we understand that they’re precarious we need to find a safety net for them.

AN: What this book does is lay out the many ways that people are hurting at the moment and it kind of gives a blueprint as to how precariousness could be addressed. Subsidized day care, for instance. I had no idea about how expensive child care is.

AQ: Child care can be 30 percent of many salaries. Or more. I think for us it was 30 percent of our take-home pay.

AN: How do people do it? In the book you show us. We spend a lot of time with individuals, we get a look at their lives and there’s a revelation for a reader to think, Oh, it’s not just me. There are things that I go without, there are resources that I don’t have access to, there are crises that I lose sleep over or pray will never come my way. There’s something about this book that brings this issue to light and I wonder if that was what you thought you’d get out of the stories? Is that why you used a storytelling approach?

AQ: That’s the chick lit, soap operatic part of me. And there is something of that in these stories. You think, What’s going to happen next? Sometimes I was surprised because they did have the messy amplitude of ordinary life. The people I write about aren’t just symbolic though. Some of them I followed for years.

AN: I think of the co-parenting section where you spend time with families who are trying to come up with creative solutions. In some cases, over time, things were better; in some cases they were worse. But readers still get the sense that nothing is fixed, no one really knows what’s working.

AQ: Or like the nanny who was separated from her son when I first met her and it was one kind of story. It became a story about them reunited, but then it became a story about school choice, and then it became a story about a mixed outcome at the end. She was actually happy, but I think the reader would want her to have a more middle class life given how hard she’s worked and all the effort she’s made to make the right choices.

AN: The anxiety of her life stayed with me. There are so many things that thwart her from getting ahead. She just needs the smallest break, trying to bring her son here, trying to find an affordable place to live. She’s doing everything right and she doesn’t deserve to go through this. That’s what comes out in the story. So when you were doing this reporting, did you get a sense of relief that we’re all going through this at the same time?

AQ: I definitely did. I felt relief. I say that this book is self-help because it makes you realize that it’s not your fault. And that’s how I see self-help. I see it as awareness, really granularly understanding all the ways that systems have made it impossible for you personally to overcome financial challenges—so that you’re no longer blaming yourself.

AN: Thank God someone’s redefining self-help.

AQ: [Laughs] But that’s it. How do you not feel stigmatized, how do you not feel isolated? So many of my friends feel ashamed that they can’t figure out the school system, can’t figure out how to own their home.

AN: The various penalties—for being a woman, for having children, for having debt—stack up. Shaming has abetted this erosion of rights and financial stability.

AQ: Time, day care scheduling, and other demands mean people can’t organize. They’re ashamed of where they are and so that becomes another debilitating factor. The adjunct in one chapter feels ashamed even though she knows politically she shouldn’t. There are people like the teachers who drive for Uber, who feel ashamed even though they know they shouldn’t. And it goes on and on. I don’t want to put it back on individuals, but the personal thing that people can do is start talking openly about their monetary situation. People are startled when you do that. It can erode social norms in a weird way, but I also think it’s important that people stop fronting with one another.

I write in one chapter about the 1 percent media, about the social media where people pretend to live in more expensive places than they do. I call them wealthies, not selfies. So it’s not your imagination when you’re in any of these circumstances and you see people in a sun dappled villa. People are representing themselves in this inflated way and then you feel terrible and isolated. There are so many ways in which the stigma, the isolation, around your class position gets underlined.

AN: Has it always been shameful to be poor?

AQ: Probably.

AN: It’s not a fair question!

AQ: But let’s be clear. A lot of these people are not poor. Most of the people in this book are earning between $45,000 and $125,000. Working class is $35,000. They’re not at the poverty level.

AN: So the shame then comes from not being able to make ends meet.

AQ: The shame comes from having debt for the education that you got in order to be middle class. The shame comes from not doing as well as your peers. The shame comes from not living up to your potential. The shame comes from not owning your home, defaulting on your mortgage. Not giving your kids as good a life as you had. I’m not writing about the working poor. I’m writing about the middle poor.

AN: We still operate under the myth that as a society we can continue to lift people into middle class and lift middle class into other class brackets. We no longer have any of that upward mobility. We cannot anticipate that our children will be better off.

AQ: No, we cannot anticipate that.

AN: But that’s still the American dream, isn’t it? And that American dream has been tied to, say, home ownership or a vehicle or not having debt.

AQ: In New York it’s like what school your kid goes to. What college your kid goes to.

AN: You use the word reimagining; it’s a word that I don’t hear often enough in politics, particularly not applied to class.

AQ: I mean reimagining what it means to be successful, reimagining what it means to be middle class. In a dream scape kind of way, like, This is what we would like to see in this country. But also reimagining middle class in its truth, what it actually means now? Let’s tear the veil and not just say, Oh, it means stability or security. It doesn’t.

For Economic Truth Turn To Michael Hudson

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By Paul Craig Roberts

Source: PaulCraigRoberts.org

Readers ask me how they can learn economics, what books to read, what university economics departments to trust. I receive so many requests that it is impossible to reply individually. Here is my answer.

There is only one way to learn economics, and that is to read Michael Hudson’s books. It is not an easy task. You will need a glossary of terms. In some of Hudson’s books, if memory serves, he provides a glossary, and his recent book “J Is for Junk Economics” defines the classical economic terms that he uses. You will also need patience, because Hudson sometimes forgets in his explanations that the rest of us don’t know what he knows.

The economics taught today is known as neoliberal. This economics differs fundamentally from classical economics that Hudson represents. For example, classical economics stresses taxing economic rent instead of labor and real investment, while neo-liberal economics does the opposite.

An economic rent is unearned income that accrues to an owner from an increase in value that he did nothing to produce. For example, a new road is built at public expense that opens land to development and raises its value, or a transportation system is constructed in a city that raises the value of nearby properties. These increases in values are economic rents. Classical economists would tax away the increase in values in order to pay for the road or transportation system.

Neoliberal economists redefined all income as earned. This enables the financial system to capitalize economic rents into mortgages that pay interest. The higher property values created by the road or transportation system boost the mortgage value of the properties. The financialization of the economy is the process of drawing income away from the purchases of goods and services into interest and fees to financial entities such as banks. Indebtedness and debt accumulate, drawing more income into their service until there is no purchasing power left to drive the economy.

For example, formerly in the US lenders would provide a home mortgage whose service required up to 25% of the family’s monthly income. That left 75% of the family’s income for other purchases. Today lenders will provide mortgages that eat up half of the monthly income in mortgage service, leaving only 50% of family income for other purchases. In other words, a financialized economy is one that diverts purchasing power away from productive enterprise into debt service.

Hudson shows that international trade and foreign debt also comprise a financialization process, only this time a country’s entire resources are capitalized into a mortgage. The West sells a country a development plan and a loan to pay for it. When the debt cannot be serviced, the country is forced to impose austerity on the population by cutbacks in education, health care, public support systems, and government employment and also to privatize public assets such as mineral rights, land, water systems and ports in order to raise the capital with which to pay off the loan. Effectively, the country passes into foreign ownership. This now happens even to European Community members such as Greece and Portugal.

Another defect of neoliberal economics is the doctrine’s denial that resources are finite and their exhaustion a heavy cost not born by those who exploit the resources. Many local and regional civilizations have collapsed from exhaustion of the surrounding resources. Entire books have been written about this, but it is not part of neoliberal economics. Supplement study of Hudson with study of ecological economists such as Herman Daly.

The neglect of external costs is a crippling failure of neoliberal economics. An external cost is a cost imposed on a party that does not share in the income from the activity that creates the cost. I recently wrote about the external costs of real estate speculators. https://www.paulcraigroberts.org/2018/04/26/capitalism-works-capitalists/ Fracking, mining, oil and gas exploration, pipelines, industries, manufacturing, waste disposal, and so on have heavy external costs associated with the activities.

Neoliberal economists treat external costs as a non-problem, because they theorize that the costs can be compensated, but they seldom are. Oil spills result in companies having to pay cleanup costs and compensation to those who suffered economically from the oil spill, but most external costs go unaddressed. If external costs had to be compensated, in many cases the costs would exceed the value of the projects. How, for example, do you compensate for a polluted river? If you think that is hard, how would the short-sighted destroyers of the Amazon rain forest go about compensating the rest of the world for the destruction of species and for the destructive climate changes that they are setting in motion? Herman Daly has pointed out that as Gross Domestic Product accounting does not take account of external costs and resource exhaustion, we have no idea if the value of output is greater than all of the costs associated with its production. The Soviet economy collapsed, because the value of outputs was less than the value of inputs.

Supply-side economics, with which I am associated, is not an alternative theory to neoliberal economics. Supply-side economics is a successful correction to neoliberal macroeconomic management. Keynesian demand management resulted in stagflation and worsening Phillips Curve trade-offs between employment and inflation. Supply-side economics cured stagflation by reversing the economic policy mix. I have told this story many times. You can find a concise explanation in my short book, “The Failure of Laissez Faire Capitalsim.” This book also offers insights into other failures of neoliberal economics and for that reason would serve as a background introduction to Hudson’s books.

I can make some suggestions, but the order in which you read Michael Hudson is up to you. “J is for Junk Economics” is a way to get information in short passages that will make you familiar with the terms of classical economic analysis. “Killing the Host” and “The Bubble and Beyond” will explain how an economy run to maximize debt is an economy that is self-destructing. “Super Imperialism” and “Trade, Development and Foreign Debt” will show you how dominant countries concentrate world economic power in their hands. “Debt and Economic Renewal in the Ancient Near East” is the story of how ancient economies dying from excessive debt renewed their lease on life via debt forgiveness.

Once you learn Hudson, you will know real economics, not the junk economics marketed by Nobel prize winners in economics, university economic departments, and Wall Street economists. Neoliberal economics is a shield for financialization, resource exhaustion, external costs, and capitalist exploitation.

Neoliberal economics is the world’s reigning economics. Russia is suffering much more from neoliberal economics than from Washington’s economic sanctions. China herself is overrun with US trained neoliberal economists whose policy advice is almost certain to put China on the same path to failure as all other neoliberal economies.

It is probably impossible to change anything for two main reasons. One is that so many greed-driven private economic activities are protected by neoliberal economics. So many exploitative institutions and laws are in place that to overturn them would require a more thorough revolution than Lenin’s. The other is that economists have their entire human capital invested in neoliberal economics. There is scant chance that they are going to start over with study of the classical economists.

Neoliberal economics is an essential part of The Matrix, the false reality in which Americans and Europeans live. Neoliberal economics permits an endless number of economic lies. For example, the US is said to be in a long economic recovery that began in June 2009, but the labor force participation rate has fallen continuously throughout the period of alleged recovery. In previous recoveries the participation rate has risen as people enter the work force to take advantage of the new jobs.

In April the unemployment rate is claimed to have fallen to 3.9 percent, but the participation rate fell also. Neoliberal economists explain away the contradiction by claiming that the falling participation rate is due to the retirement of the baby boom generation, but BLS jobs statistics indicate that those 55 and older account for a large percentage of the new jobs during the alleged recovery. This is the age class of people forced into the part time jobs available by the absence of interest income on their retirement savings. What is really happening is that the unemployment rate does not include discouraged workers, who have given up searching for jobs as there are none to be found. The true measure of the unemployment rate is the decline in the labor force participation rate, not a 3.9 percent rate concocted by not counting those millions of Americans who cannot find jobs. If the unemployment rate really was 3.9 percent, there would be labor shortages and rising wages, but wages are stagnant. These anomalies pass without comment from neoliberal economists.

The long expansion since June 2009 might simply be a statistical artifact due to the under-measurement of inflation, which inflates the GDP figure. Inflation is under-estimated, because goods and services that rise in price are taken out of the index and less costly substitutes are put in their place and because price increases are explained away as quality improvements. In other words, statistical manipulation produces the favorable picture required by The Matrix.

Since the financial collapse caused by the repeal of Glass-Steagall and by financial deregulation, the Federal Reserve has robbed tens of millions of American savers by driving real interest rates down to zero for the sole purpose of saving the “banks too big to fail” that financial deregulation created. A handful of banks has been provided with free money—in addition to the money that the Federal Reserve created in order to take the banks’ bad derivative investments off their hands—to put on deposit with the Fed from which to collect interest payments and with which to speculate and to drive up stock prices.

In other words, for a decade the economic policy of the United States has been run for the benefit of a few highly concentrated financial interests at the expense of the American people. The economic policy of the United States has been used to create economic rents for the mega-rich.

Neoliberal economists point out that during the 1950s the labor force participation rate was much lower than today and, thereby, they imply that the higher rates prior to the current “recovery” are an anomaly. Neoliberal economists have no historical knowledge as the past is of no interest to them. They do not even know the history of economic thought. Whether from ignorance or intentional deception, neoliberal economists ignore that the lower labor force participation rates of the 1950s reflect a time when married women were at home, not in the work force. In those halcyon days, one earner was all it took to sustain a family. I remember the days when the function of a married woman was to provide household services for the family.

But capitalists were not content to exploit only one member of a family. They wanted more, and by using economic policy to suppress pay while fomenting inflation, they drove married women into the work force, imposing huge external costs on the family, child-raising, relations between spouses, and on the children themselves. The divorce rate has exploded to 50 percent and single-parent households are common in America.

In effect, unleashed Capitalism has destroyed America. Privatization is now eating away Europe. Russia is on the same track as a result of its neoliberal brainwashing by American economists. China’s love of success and money could doom this rising Asian giant as well if the government opens China to foreign finance capital and privatizes public assets that end up in foreign hands.