The US Economy is Set for a “Double-Dip” Recession
by Paul Craig Roberts
Happy news! The government has come up with a 5.9 percent GDP growth rate in the fourth quarter of 2009. The recession is over.
Or is it?
Statistician John Williams has informed us that 69 percent of this growth, or 4.1 percentage points, is the result of inventory accumulation. That leaves a 1.8 percent growth rate, and the 1.8 percent is likely due to the underestimate of inflation and other statistical problems.
The Federal Reserve’s own monetary evidence contradicts the recovery assurances from Fed chairman Ben Bernanke. The Federal Reserve continues to pour massive reserves into the banks. The monetary base, which consists of currency in circulation and bank reserves (the basis for new loans), has surged from $850 billion in 2009 to $2.2 trillion on February 24.
Despite this potential for massive new money creation, the broadest measure of money growth is still contracting.The banks are too impaired and so are consumers for the banks to create new money by making loans.
Although some Americans worry about the growing power of the government, few understand the real power that controls their everyday lives.
Private monopolies determine the brand of breakfast cereal we eat, the type of car we drive, where we bank, the medical treatment we receive, the fashion of our clothes, and the kind of toothbrush we use, in addition to the beer we drink, the health insurance we buy, and what we feed our pets.
Under the guise of “the free market,” conglomerates merged and bought up smaller companies, until, today, they dominate their respective markets in every commodity offered for sale in the U.S.
In this race to consolidate, companies “rationalized” their offerings, in many cases dropping up to 40 percent of what they formerly produced. They buy from the same suppliers, use interchangeable parts and common ingredients, and re-name similar brands, essentially placing the same product in different packages. For example, one company produces all of the pet food under 150 different brands.
In Washington each new day brings a fresh call to “reform entitlement programs” — Social Security, Medicare, etc., (in Congress, the word “reform” now means to eliminate, or drastically reduce). Tackling Social Security has been on the to-do list of the corporate elite for years, and they’re not waiting any longer. After years of promoting this cause, conservative think tanks have now garnered solid support from the political establishment as a whole, which includes the Republican and Democratic parties.
The newest liberal recruit to the destruction of Social Security is Thomas Friedman, the influential columnist for The New York Times, who wrote recently:
“The president needs to persuade the country to invest in the future and pay for the past… We have to pay for more new schools and infrastructure than ever, while accepting more entitlement cuts than ever [Social Security, Medicare, etc.] when public trust in government is lower than ever.” (February 20, 2010).
The nonchalance which Friedman calls for cutting Social Security is indicative of the climate in Washington, where the last remnants of liberalism have been suffocated under the heavy demands of profit-hungry corporations, especially financial institutions and big banks. For political hacks like Friedman — and there are thousands of them — the ONLY solution to curing the U.S. deficit is cutting social services in general, while specifically targeting Social Security and Medicare.
But President Obama revealed these assertions to be lies, when he recently announced, “fixing Social Security would be simple.” The Associated Press explains:
“The system is funded with a tax on earnings, up to $109,000 a year. Obama says lifting that cap to tax a larger share of income would be one way to extend the system of monthly payments for retirees. It also would be unpopular with some.” (February 19, 2010).
This idea is indeed very unpopular with the very rich, who enjoy the privilege of paying no Social Security tax after the $109,000 threshold. Obama let an unpopular truth out of the bag when he brought up this fact; but conveniently for him, many mainstream news outlets decided not to amplify the President’s voice.
Obama, however, is unlikely to promote this “radical” idea much further, since he’s already decided on a method to undermine Social Security. Obama’s National Commission on Fiscal Responsibility and Reform is a bi-partisan group that is set to attack Social Security in a way where, in the end, both political parties will be blamed, so that neither party is overburdened with guilt. The Republicans — having made their contempt for Obama more than known — are salivating at the chance to cooperate.
While bank bailouts fatten Wall Street, states continue to battle the credit crisis. In the search for innovative solutions, some political candidates are proposing that states generate their own credit by setting up their own banks.
State budgets for 2010 face the largest shortfalls on record, totaling $194 billion or 28 percent of state budgets; and 2011 is expected to be worse. Unemployment has already officially hit 10 percent, and many economists expect it to rise higher. Continued high unemployment will keep state income tax receipts at low levels and increase demand for Medicaid and other essential services states provide. The existing alternatives are spending cuts or tax increases, but both will just serve to make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. The result is a reduction in overall demand. Tax increases also remove demand, by reducing the amount of money people have to spend.
Could it all be a bad dream, or a nightmare? Is it my imagination, or have we lost our minds? It’s surreal; it’s just not believable. A grand absurdity; a great deception, a delusion of momentous proportions; based on preposterous notions; and on ideas whose time should never have come; simplicity grossly distorted and complicated; insanity passed off as logic; grandiose schemes built on falsehoods with the morality of Ponzi and Madoff; evil described as virtue; ignorance pawned off as wisdom; destruction and impoverishment in the name of humanitarianism; violence, the tool of change; preventive wars used as the road to peace; tolerance delivered by government guns; reactionary views in the guise of progress; an empire replacing the Republic; slavery sold as liberty; excellence and virtue traded for mediocracy; socialism to save capitalism; a government out of control, unrestrained by the Constitution, the rule of law, or morality; bickering over petty politics as we collapse into chaos; the philosophy that destroys us is not even defined.
We have broken from reality–a psychotic Nation. Ignorance with a pretense of knowledge replacing wisdom. Money does not grow on trees, nor does prosperity come from a government printing press or escalating deficits.
We’re now in the midst of unlimited spending of the people’s money, exorbitant taxation, deficits of trillions of dollars–spent on a failed welfare/warfare state; an epidemic of cronyism; unlimited supplies of paper money equated with wealth.
And I have pointed out that (1) the giant banks will make a killing on carbon trading, (2) while the leading scientist crusading against global warming says it won’t work, and (3) there is a very high probability of massive fraud and insider trading in the carbon trading markets.
Now, Bloomberg notes that the carbon trading scheme will be centered around derivatives:
The banks are preparing to do with carbon what they’ve done before: design and market derivatives contracts that will help client companies hedge their price risk over the long term. They’re also ready to sell carbon-related financial products to outside investors.
[Blythe] Masters says banks must be allowed to lead the way if a mandatory carbon-trading system is going to help save the planet at the lowest possible cost. And derivatives related to carbon must be part of the mix, she says. Derivatives are securities whose value is derived from the value of an underlying commodity — in this case, CO2 and other greenhouse gases…
Now that you have paid your income taxes, calculate how much you own of your own labor.
You can do this by dividing the federal, state and local income taxes you paid (including Social Security and Medicare) by your taxable income.
Generally speaking, the higher your income, the less you own of yourself. A person with $300,000 in taxable income will discover that government in the year 2002 has a claim to about one-third of his labor – the maximum tax that could be levied on a medieval serf.
If you have a low income or work primarily off the books, you will be rewarded with an “earned income tax credit,” that is, you will receive a tax “refund” even though you paid no tax. You not only own all your own labor, but also have legal claims to the incomes of higher income persons.
Democracy produces the opposite results of feudalism. Instead of an upper class living off the sweat of a lower class, the lower class lives off the sweat of an upper class.
Philosophers such as John Rawls created a philosophy to justify the latter as “moral” and the former as “immoral,” but it all comes down to the same thing: some people live off other people’s activities.
Income taxes are not the only taxes. There are property taxes, wealth taxes, excise taxes, and sales taxes. If you add together all the taxes you paid, you might find that you own no more of your own income than a 19th century slave. (A slave owed his master about half his work product, the rest being necessary for his own maintenance.)
Legislation to Establish Internment Camps on US Military Bases
Global Research, March 18, 2009
The Economic and Social Crisis
The financial meltdown has unleash-ed a latent and emergent social crisis across the United States.
What is at stake is the fraudulent confiscation of lifelong savings and pension funds, the appropriation of tax revenues to finance the trillion dollar “bank bailouts,” which ultimately serve to line the pockets of the richest people in America.
This economic crisis is in large part the result of financial manipulation and outright fraud to the detriment of entire populations, to a renewed wave of corporate bankruptcies, mass unemployment and poverty.
The criminalization of the global financial system, characterized by a “Shadow Banking” network has resulted in the centralization of bank power and an unprecedented concentration of private wealth.
Obama’s “economic stimulus” package and budget proposals contribute to a further process of concentration and centralization of bank power, the cumulative effects of which will eventually result in large scale corporate bankruptcies and a new wave of foreclosures, not to mention fiscal collapse and the downfall of social programs.
The cumulative decline of real economic activity backlashes on employment and wages, which in turn leads to a collapse in purchasing power. The proposed “solution” under the Obama administration contributes to exacerbating rather than alleviating social inequalities and the process of wealth concentration.
Nothing like it has ever happened. The President of the United States, the elected representative of the people, has just told the head of General Motors — a company that’s spent more years at #1 on the Fortune 500 list than anyone else — “You’re fired!”
I simply can’t believe it. This stunning, unprecedented action has left me speechless for the past two days. I keep saying, “Did Obama really fire the chairman of General Motors? The wealthiest and most powerful corporation of the 20th century? Can he do that? Really? Well, damn! What else can he do?!”
This bold move has sent the heads of corporate America spinning and spewing pea soup. Obama has issued this edict: The government of, by, and for the people is in charge here, not big business. John McCain got it. On the floor of the Senate he asked, “What does this signal send to other corporations and financial institutions about whether the federal government will fire them as well?” Senator Bob Corker said it “should send a chill through all Americans who believe in free enterprise.” The stock market plunged as the masters of the universe asked themselves, “Am I next?” And they whispered to each other, “What are we going to do about this Obama?”
Not much, fellows. He has the massive will of the American people behind him — and he has been granted permission by us to do what he sees fit. If you liked this week’s all-net 3-pointer, stay tuned.