And the following, from the Sunday Telegraph is very much to the point of
this list. Whether we like it or not, the fate of the world's economic
future in the coming years depends on America sorting itself out soon.
Keith
<<<<
Deepening crisis traps America's have-nots
The US is drifting from a financial crisis to a deeper and more insidious
social crisis. Self-congratulation by the US authorities that they have
this time avoided a repeat of the 1930s is premature.
Ambrose Evans-Pritchard
There is a telling detail in the US retail chain store data for December.
Stephen Lewis from Monument Securities points out that luxury outlets saw
an 8.1pc rise from a year ago, but discount stores catering to Americas
poorer half rose just 1.2pc.
Tiffany's, Nordstrom, and Saks Fifth Avenue are booming. Sales of Cadillac
cars have jumped 35pc, while Porsches US sales are up 29pc.
Cartier and Louis Vuitton have helped boost the luxury goods stock index by
almost 50pc since October. Yet Best Buy, Target, and Walmart have languished.
Such is the blighted fruit of Federal Reserve policy. The Fed no longer
even denies that the purpose of its latest blast of bond purchases, or QE2,
is to drive up Wall Street, perhaps because it has so signally failed to
achieve its other purpose of driving down borrowing costs.
Yet surely Ben Bernanke's `trickle down' strategy risks corroding America's
ethic of solidarity long before it does much to help America's poor.
The retail data can be quirky but it fits in with everything else we know.
The numbers of people on food stamps have reached 43.2m, an all time-high
of 14pc of the population. Recipients receive debit cards not stamps --
currently worth about $140 a month under President Obama's stimulus package.
The US Conference of Mayors said visits to soup kitchens are up 24pc this
year. There are 643,000 people needing shelter each night.
Jobs data released on Friday was again shocking. The only the reason that
headline unemployment fell from 9.7pc to 9.4pc was that so many people
dropped out of the system altogether.
The actual number of jobs contracted by 260,000 to 153,690,000. The labour
participation ratefor working-age men over 20 dropped to 73.6pc, the lowest
the since the data series began in 1948. My guess is that this figure
exceeds the average for the Great Depression (minus the cruellest year of
1932).
Corporate America is in a V-shaped recovery, said Robert Reich, a former
labour secretary. Thats great news for investors whose savings are mainly
in stocks and bonds, and for executives and Wall Street traders. But most
American workers are trapped in an L-shaped recovery.
It is no surprise that Americas armed dissident movement has resurfaced.
For a glimpse into this sub-culture, read Time Magazine's Locked and
Loaded: The Secret World of Extreme Militias.
Time's reporters went underground with the 300-strong 'Ohio Defence Force',
an eclectic posse of citizens who spend weekends with M16 assault rifles
and an M60 machine gun training to defend their constitutional rights by
guerrilla warfare.
As it happens, I spent some time with militia groups across the US at the
tail end of the recession in the early 1990s. While the rallying cry then
was gun control and encroachments on freedom, the movement was at root a
primordial scream by blue-collar Americans left behind in the new global
dispensation. That grievance is surely worse today.
The long-term unemployed (more than six months) have reached 42pc of the
total, twice the peak of the early 1990s. Nothing like this has been seen
since the World War Two.
The Gini Coefficient used to measure income inequality has risen from the
mid-30s to 46.8 over the last quarter century, touching the same extremes
reached in the Roaring Twenties just before the Slump. It has also been
ratcheting up in Britain and Europe.
Raghuram Rajan, the IMF's former chief economist, argues that the subprime
debt build-up was an attempt -- whether carefully planned or the path of
least resistanceto disguise stagnating incomes and to buy off the poor.
The inevitable bill could be postponed into the future. Cynical as it might
seem, easy credit has been used throughout history as a palliative by
governments that are unable to address the deeper anxieties of the middle
class directly,he said.
Bank failures in the Depression were in part caused by expansion of credit
to struggling farmers in response to the US Populist movement.
Extreme inequalities are toxic for societies, but there is also a body of
scholarship suggesting that they cause depressions as well by upsetting the
economic balance. They create a bias towards asset bubbles and
overinvestment, while holding down consumption, until the system becomes
top-heavy and tips over, as happened in the 1930s.
The switch from brawn to brain in the internet age has obviously pushed up
the Gini count, but so has globalization. Multinationals are exploiting
labour arbitrage by moving plant to low-wage countries, playing off workers
in China and the West against each other. The profit share of corporations
is at record highs across in America and Europe.
More subtly, Asias mercantilist powers have flooded the world with excess
capacity, holding down their currencies to lock in trade surpluses. The
effect is to create a black hole in the global system.
Yes, we can still hope that this is a passing phase until rising wages in
Asia restore balance to East and West, but what it if it proves to be
permanent, a structural incompatibility of the Confucian model with our own
Ricardian trade doctrine?
There is no easy solution to creeping depression in America and swathes of
the Old World. A Keynesian `New Dealof borrowing on the bond markets to
build roads, bridges, solar farms, or nuclear power stations to soak up the
army of unemployed is not a credible option in our new age of sovereign
debt jitters. The fiscal card is played out.
So we limp on, with very large numbers of people in the West trapped on the
wrong side of globalization, and nobody doing much about it. Would Franklin
Roosevelt have tolerated such a lamentable state of affairs, or would he
have ripped up and reshaped the global system until it answered the needs
of his citizens?
>>>>
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/01/
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