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Archive for January 3rd, 2014

The financial markets are soaring, and this has pushed the US economy into a prolonged slump, what Nobel Prize Economist Paul Krugman calls a “low-grade Depression.” Our low grade Depression has been going on since December 2007, while the financial markets have been soaring since 2009, and this is a simple case of cause and effect.

Jobs are being exported year after year, and the difference between the old US wages and the new lower overseas wages go into the pockets of the rich via higher corporate profits, rising dividends and soaring share prices. The unemployed may get unemployment insurance if they’re lucky. It’s a simple case of income redistribution.

Nearly 2 million jobs were exported from the US in 2013. Jobs are the biggest export product produced in the USA. Between 0.9 and 3 million jobs are exported year after year, according to the Federal Reserve, since just before NAFTA.

That doesn’t count the massive numbers of jobs that are created by US companies overseas, that would normally be created in the USA, and performed by US citizens, in the absence of corporate trade treaties, which are specifically negotiated to redistribute income from the 99 to the 1 percent in exactly this way. The difference between the higher wages that should be paid in the USA, and the lower wages paid overseas, is redistributed into the pockets of the super rich, thanks to corporate trade treaties, such as the looming Trans Pacific Partnership, being pushed by Wall Street President Barack Obama, and Wall Street Senators Ron Wyden, Max Baucus and Mitch McConnell.

Where the jobs have gone–Thingprogress.org

The combined job losses have depleted our tax base for schools, other public services, and the US social safety net. Where has the money gone? Directly into the pockets of the rich, which is why the financial markets are soaring.

The 1 percent have taken their ill-gotten gains and invested much of this newly available cash in the financial markets. The result has been the creation of massive financial market bubbles in the US (and perhaps throughout the world, but that’s beyond the scope of this story).

The Dow Jones Industrial average closed at 15,680.35 on December 26 2013, up from 6547.05 in 2009, a rise of almost 240 percent. Meanwhile, the NASDAQ shot up from 1293.85 on March 2, 2009 to 4156.59 on December 26, 2013, an increase of over 320 percent. Other US financial markets have posted similar gains.

Since these advances in the values of corporate share prices have been caused by income being redistributed from the 99 to the 1 percent via federal legislation, such as corporate trade treaties, the result has been a slacking of demand for goods and services in an already weak economy. That’s because the super rich invest their money with an eye toward redistributing more money from the 99 percent into their pockets, while the 99 percent buy stuff, creating demand for goods and services. That’s how the 1 percent weaken the economy and destroy jobs when they redistribute income to themselves from the 1 percent.

All of this is continually made worse by Republican and Democratic Party hacks, such as President Obama, Republican House Leader John Boehner, and Wall Street Senators such as Ron Wyden and Mitch McConnell. 100 percent of the Republican members of the US congress, and 80 to 90 percent of the Democrats elected to congress and the presidency, as well as the corporate toadies of the insanely corrupt US Supreme Court, are doing the bidding of Wall Street and other billionaires (such as the Koch Brothers) at the expense of Main Street and the nation as a whole.

The financial market bubbles will burst sooner than later, in one to five years. When this occurs, our low-grade Great Depression will become a fully ignited Great Depression. This Depression will make the current US economy look really good, although it is historically awful. The official and deliberately understated unemployment rate will rise beyond 20 percent, and perhaps approach 30 percent. The real unemployment rate, as measured during the original Great Depression, will be between 25 and 40 percent. Interest rates will plummet lower than they are now. Housing prices will collapse. The US ranks right up there with Romania when it comes to child poverty, but we will be challenging Haiti and a few African nations for first place when the financial markets burst. The number of people on food stamps will at least double compared to today.

After the bursting, the Federal Reserve will give out trillions of dollars to rich investors, hedge funds, and investment banks, in order to save the day, and their investments. Of course, Fed officials will say they loaned the money out, although it really will be a permanent loan, like last time. See breakdown-of-the-26-trillion-the-federal-reserve-handed-out-to-save-rich-incompetent-investors-but-who-purchase-political-power–Johnhively.wordpress.com.

However, the Fed’s actions will only make things worse because massive investors already know they are protected from losses by the Fed, and so there are no consequences for their insanely bad investment decisions. That’s precisely why the actions of the Fed will only prolong the misery of the bursting bubble.

The super rich will get bailed out while Main Street will have to suck it up. This means more jobs will be shipped overseas, more cities and towns will go bankrupt due to the exporting of jobs, the excess unemployed and illegal labor will continue to drive wages and salaries down.

However, the Federal Reserve bailout will also mean corporate profits will rise, dividends will shoot up, share prices will expand, and the Ponzi scheme known as the financial markets will continue or stabilize their bubbles. In other words, for 99 percent of Americans, the situation will be quite dire.

One way to cut off the bursting of the bubble at the pass is simply to raise the federal minimum wage from its current pathetic $7.25 per hour to $15 in early or mid 2014, and to $20 by early 2015. The economy can absorb this as easily as it absorbs record corporate profits, year after year, during our low-grade Great Depression, with all of its slack demand for goods and services.

This alone should tell you that prices are not connected to any laws of supply and demand. Instead, prices are largely manipulated by the large corporations, otherwise, prices would be going down with the historically lukewarm demand during these tough times, but prices keep going up, up, and up in defiance of the illegally broken laws of supply and demand. The government is looking the other way as prices of food shoot up. This is another income redistribution scam from the 99 to the 1 percent. The difference between the older prices and the newer higher prices go directly from the wallets of the 99 percent straight into the burgeoning wallets of the super wealthy that have corrupted our government and supreme court.

Some people will foolishly argue that an increase in the minimum wage to $20 will mean increased prices. No, it won’t, at least, no more than is currently the case with manipulated prices. However, even today’s manipulative corporations cannot jack-up prices continuously, although they seem to be able to all the time, whenever they want.

To pay the new minimum wage, most US publicly traded corporations will be forced to dig into their record profits, or their trillions of dollars of retained earnings (estimates are $10-14 trillion worldwide for US companies, and this also tells you how uncompetitive and bloated they are. In other words, they are not competitive at all), in order to pay their employees the higher wages.

From a purely conservative point-of-view, which is the purely conceptualized reality that the US has a competitive, free market economic system despite all the evidence to the contrary, corporate management teams will want to be competitive, just as conservatives want to believe, even in the face of such an overdue rise of the minimum wage.

Therefore, under our current conservative point-of-view, any Neanderthal management team that is dumb enough to increase their prices while their more competent rivals pay their employees the higher minimum wage out of their historically high profits and retained earnings, will go the way of the Neanderthals. It’s that simple. The companies that use their bloated, pent up financial resources in this way will live to fight another day as their Neanderthal rivals go out of business.

Investors, of course, may suffer. They may see their share prices drop temporarily, especially, as competition heats up, as corporations use up their record retained earnings, and have to contend with lower profit margins, like in any competitive economic model. However, this will bring the financial markets down much more gently than compared to a bursting bubble that awaits us in the absence of any federal intervention.

Since the bubbles have been created by redistributing money from the 99 percent to the 1 percent, it stands to reason the best antidote to such an approaching disaster is for corporate royalists to give the money back to those to whom it really belongs; the 99 percent. This can most easily and prudently be done by raising the federal minimum wage to $20 per hour over the next year and a half.

That $10 to $14 trillion US corporations are sitting on can be used to pay US citizens, which will then increase the demand for goods and services, and send the US economy into its first long-term non-bubble economic expansion since the 1960s.

Recent studies show increasing the minimum wage beefs up demand, increases employment, and that there are no negative consequences as is claimed, like job losses. Besides, an increased minimum wage is what our weak economy needs right now. And given record corporate retained earnings and record profits, the economy can easily absorb the higher wage. Enhanced demand will create good paying jobs, flood local tax bases with more income for schools and the social safety nets, safely deflate the financial market bubbles, and in the process perhaps head off the coming Great Depression, and likely even end our current low grade Depression. Furthermore, the 1 percent will have less money with which to corrupt government at all levels, and, by the way, the political markets are another area in which the 1 percent use their ill-gotten gains to invest in legislation against the 99 percent. That does create jobs for corporate lobbyists. So the 1 percent will have less money to do that little thing. So let’s do the obvious thing; raise the minimum wage to $20 an hour.

The legal and logical difference between an owner operated business and a business structured on “organized money” (a limited liability corporation) is as obvious as the difference between a single worker and a large labor union.

Therefore, one last thing needs to be mentioned. There is always somebody who will say raising the minimum wage to $20 an hour will kill small mom and pop businesses. Conceded, those are mostly businesses that operate in something that kind of resembles a competitive business environment. Those businesses should be allowed to operate with a minimum wage of say, $$12-15 an hour. However, since limited liability corporations are nothing more than “organized money,” as FDR accurately put it, and since they operate in a more collusive environment, those corporations are a totally different animal from owner operated companies, and should be made to pay the $20 minimum wage, which should also be indexed to inflation.

The government will always pass legislation that redistributes income from the 99 to the 1 percent, leading the nation into absolute disaster. So brace yourself for the looming economic disaster, just like the 1930s, only worse. One thing can be stated with great certainty. The rich have corrupted our government and have been leading us down the road of an unimaginable economic disaster for over thirty years, just like they did back in the 1920s.

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