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Posts Tagged ‘Recession’

Source: Economic Policy Institute, http://www.epi.org/publication/charting-wage-stagnation/

More than 40 million US workers would get a raise if the US minimum wage was raised to $15 an hour. Doing so would do five important things to help the US economy.

1. It would increase the demand for goods and services and create jobs in the process. Currently, we are in the worst post World War II economic expansion in US history, except for the last one, you know, that negative job growth under the economic policies of the worst president in US history, George W. Bush! Outside of that expansion, the current expansion is the worst, with the lowest job growth, the least GNP growth, and lots more historically weak statistics.

2. Every US economic expansion since 1981 has been caused by artificial bubbles which have created artificial stock market bubbles, which have almost completely benefited only the rich, and mostly the super rich, at the expense of everyone else. The Bill Clinton presidency saw the creation of 22 million jobs, which came about because of simultaneous housing, tech, stock and telecommunications bubbles. The tech and telecommunication bubbles were created by Clinton’s signature on legislation. The current economic bubble has been created by an illegal housing bubble created by the big banks. See The fix is In! The Banksters are Manipulating the rise in housing prices: Mortgage applications are down for home sales–Johnhively.wordpress.com Raising the minimum wage would create more demand, possibly creating the first demand inspired economic expansion since the Great President Jimmy Carter.

3. Raising the minimum wage to $15 an hour would steer money away from the stock market bubble because it would decrease corporate profits, and perhaps gently deflate the current bubble that is due to burst in a few months anyway. The other option is to allow the bubble to run its course and essentially ruin the US economy like what occurred from 2007 to 2012 and from 1929-1933. The next recession will be worst than the last one, and it’s just around the bend.

4. Income inequality is at an all-time US high with the 1 percent stealing about 37 percent of all income produced in the USA every year compared with only 8 percent in 1980. That means the 99 means we have less money to buy things, while the rich primarily purchase things like stock options, stock, bonds and politicians. This inequality is stifling the demand sector and weakening the economy which is why the US economic expansions since 2000 are the weakest in history. This is, of course, unless, the creation and functioning of the US and worldwide economies are solely for the benefit of the 1 percent, and always at the expense of the 99 percent. You can see from the graph above the rich are stealing $17,867 from every working American, and they do this year after year after year. I think it’s time we get a little of our money back.

5. Wealth inequality is also near an all time high in the USA, and this means (along with income inequality) the rich can afford to buy the services of more politicians, which has already effectively turned our democracy into both an illusion and a myth, and this occurred perhaps as early as 1981. Raising the minimum wage would cut away a bit of the economic cancers known as wealth and income inequality.

The corporate talking heads will also insist raising the minimum wage will result in lost jobs, but there are plenty of studies showing not a whole lot on this issue. Most studies on this subject during the last twenty years show a rise in the minimum wage has a negligible impact on job loss, or jobs experience slight growth. On the other hand, most minimum wage increases that have been studied have been minimal and very local.

However, all of this is irrelevant because there is one gigantic study that shows that when the real wages of the 99 percent go up, so too does the US economy, and not just for the benefit of the few. This study is called the history of the US economy. Notice in the graph below real wages grew in the US economy from 1948 to 1978. In reality, you can go back to 1938 and see the same stuff. Inflation was low and job growth was high during the years 1938 to 1980. The middle class was strongest then, and demand for US goods was incredibly strong, especially the demand from US citizens. Even the rich got richer, although the percentage of income and wealth they could steal from the rest of us was small compared to today.

Source: Economic Policy Institute, http://www.epi.org/publication/charting-wage-stagnation/

Corporate talking heads will always lie and say raising the minimum wage will increase inflation. In reality, allowing the financial markets to rise in bubbles creates inflation, as I pointed out in my book, The Rigged Game.

Now some people will say inflation was fairly high during the 1970s, and yes that is kind of true, and then kind of not. That’s because the US government has changed the way it measures inflation twenty times since 1981, and every change has the intended effect of lowering the rate of inflation. In other words, if inflation is 1.5 percent nowadays, using the methodology of 1975, today’s inflation would be about 6 percent. Average yearly inflation during the 1970s was 7 percent, and so using today’s inflation methodology, inflation during the 1970s would have averaged about 2.5 percent, which isn’t all that much.

You can also see from the graph above how real hourly wages have stagnated since 1978, but of course, that’s a lie since real wage increases are measured against inflation, and we know inflation is no longer measured like it used to be. If inflation over the last 35 years was measured with the methodology used by the US government in 1975, US inflation would be significantly higher each of those years, and real US wage growth during this period would be negative, year after year after year for the last thirty or more years. This means real wages are significantly lower nowadays than the available statistics will allow us to measure, and this, of course, is one of the reasons why the government changed the way it measured inflation: it stops us from seeing how much we of the 99 percent are getting screwed by our corrupt government in redistributing our income and wealth to the 1 percent.

I don’t know about you, but I want my money back! Raise the minimum wage!

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The Economic Policy Institute (EPI) reports that US wages grew in real terms (wage growth minus inflation) during 2016. While good news for the people who actually do the work of producing the goods and services necessary to keep the economy humming, this is also bad news.

EPI reports that income inequality continues to rise. “Rising inequality,” the report states, “means that although we are finally seeing broad-based wage growth, ordinary workers are just making up lost ground, rather than getting ahead. The way rising inequality has directly affected most Americans is through sluggish hourly wage growth in recent decades, despite an expanding and increasingly productive economy. For example, had all workers’ wages risen in line with productivity, as they did in the three decades following World War II, an American earning around $40,000 today would instead be making close to $61,000 (EPI 2017c).” That income difference has been redistributed to the very rich since 1981.

The report went on, “A hugely disproportionate share of economic gains from rising productivity is going to the top 1 percent and to corporate profits, instead of to ordinary workers—who are more productive and more educated than ever. This rising inequality is happening largely because big corporations and the wealthy have been rewriting the rules of the economy, particularly the job market, to stack the deck in their favor. This has prevented the benefits of productivity growth from “trickling down” to reach most households.” In other words, trickle down economics was a complete farce.

Now for the bad news. The economy is heading on a crash course with the worst and most prolonged recession since the Great Depression sometime around June of this year, give or take a month or two. The severity of this recession is due to the income and wealth inequality the US and the world has experienced since 1981, the year it pretty much began. I have been watching this current business expansion unravel since before November 2015. See The Coming Recession is Going to Be a Big One-JohnHively.wordpress.com There are always certain variables that precede a recession. Many of those began a year and a half ago.

Typically, the last variables to happen before an economy tanks is that wages rise and the Federal Reserve raises interest rates. Now those variables have officially happened. The Fed will likely raise interest rates again this month.

Somebody might point out that the economy is humming along with wage growth, low unemployment, etc…. How can we go into recession?

The growth of any business expansion has much in common with hiking up a mountain. Once you step on the highest point of any mountain, the next step is down. And so it is with any economic expansion; once it hits a peak, the very next step is down into recession. This month, March 2017, is the 93rd month of this economic expansion, making it the third longest in history. Compared to every economic expansion lasting six or more years, the current is the weakest by almost every measurement. So don’t expect it to go on much longer.

Click here for the entire EPI report on wage growth in 2016.

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The Federal Reserve raised its key interest rate by 0.25% on Wednesday. The corporate news media, both liberal and conservative, claimed this signified the Fed’s confidence in the improving U.S. economy. There may be some truth to this, but maybe not.

Anybody with any knowledge of US business cycles can see our current business expansion is nearly over, which makes this a poor time to raise borrowing rates. See The Coming Recession Is Going to be a Big One–Johnhively.Wordpress.com. The current expansion is 91 months old this month, which makes it the fourth longest on record. In February 2017 it will become the third longest in US history. All the variables indicate we’ll be hitting a recession sometime before or by June 2017.

Maybe Fed officials decided to deflate the stock market and housing bubbles the US economy is in the thrall of. The US economy has been powered by a series of federally created or federally condoned bubbles since the 1980s, which is radically different from the US economy of 1933-1981. The US economy will be suffering from a massive hangover when this next recession hits, which is why it will in many ways be far worse than the last recession.

Rising rates will affect millions of Americans, including home buyers, savers and investors by increasing the cost of which they borrow. In other words, trillions of dollars are going to be redistributed from the 99 percent to rich bank shareholders and bondholders. It’ll cost you more to borrow, and the difference between the old rate and the new rate goes straight into the pockets of the rich.

Income and wealth have been massively redistributed from the 99 to the 1 percent by a series of deliberate federal government actions over the last thirty-five years. This is why interest rates have been historically low over the last eight years, and had been getting progressively lower since 1981. The demand for goods and services by the 99 percent is largely dependent on the ability to borrow to a much greater extent than earlier decades.

This is also means the Fed will have to enact negative interest rates to help bolster the economy during the next recession, which is currently the case in Europe.

Change in the form of a shift of political power from the billionaires to the middle class will finally come because of this next recession as millions more people vote via their wallets and take to the streets.

Fed officials raised its target for short-term interest rates by 0.25 percentage points to a range of 0.50% and 0.75%.

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fed-says-2-1

The Federal Reserve Bank is expected to raise interest rates tomorrow. It will most likely be a mild increase of 1/4 to 1/2 percent.

The US and world economies are heading for a recession worse than the last one, and it should begin by June 2017, give or take a few months. Then President Donald Trump will get the blame, as well as the Republican US senate and the Republican US House of Representatives.

The Republicans will blame the Federal Reserve. Blame the recession and its dire impacts on the effects of Reaganomics, which has been a long-term policy of redistributing income from the 99 to the 1 percent (I doubt Reagan intended it that way). That decreased the demand for goods and services on the part of the 99 percent, and has led to a series of bubble economies for the United States since the 1980s.

The result has been the weakest economic growth in US history under President George W. Bush. The job gains under Bush numbered less than 1.4 million jobs total, with declining real wage growth. Things have been quite a bit better under President Obama. However, the job growth numbers under Obama are far worse than any other president since and including Jimmy Carter, with the exception, of course, of Bush.

Carter had the best monthly job growth numbers of any president since 1976. See Why Did President Jimmy Carter Create More Jobs Per Year Than Any President Since Him? JohnHively.wordpress.com

The Fed and everybody else expect the current economic expansion to continue. That’s insane. All the indications and variables suggest we are on a crash course with a massive recession by June 2017. See The New Recession is Knocking at the Door, and It’s Going to Be Worse than the Last One–JohnHively.Wordpress.com

Only two US business expansions have lasted longer than 100 months. The third longest expansion began under President Ronald Reagan and lasted 92 months. Including this month, the current expansion is 91 months. That means by next June it will have lasted 98 months. Given the weaknesses of the current US economy, we most likely won’t make it much longer than June.

The Federal Reserve will likely raise interest rates tomorrow and hasten the coming of the next recession by a month or two.

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fredgraph

As you can see from the graph via the Federal Reserve Bank, real family income is still down below the level of 2007 eighty-eight months into the newest economic expansion. The median is the number of families in the middle of any series of numbers.

The top 1 percent received 99 percent of all income growth from 2010 to 2014, which was an historic record. Although incomes rose in 2015, the typical household is still worse off today than it was in 2000, adjusted for inflation. The assets of the typical family today are worth 14 percent less than the assets of the typical family in 1984. And the typical job is less secure than at any time since the Great Depression.

That’s all because the 1 percent has used its financial control over both major political parties to wage war against the 99 percent. Waging war in this case means redistributing income and wealth from the 99 to the 1 percent via the actions of the federal government.

We are now fast approaching the newest recession, which should hit by June 2017. It’ll be worse than the Great Recession in any number of ways. This will be because trillions of dollars have been redistributed to the wealthy over the last thirty-five years. This epoch is about to end.

Enough people will finally be aroused for working folks to take back control over both major political parties as the reality of the severity of the next financial crisis takes hold. Then real middle class incomes can grow again.

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income-inequality

 

Originally published in September 2016.

The next recession will hit sometime during the next twelve months, most likely by June of 2017, give or take a month or two. It will be worse than the last one, and the impacts of it will last longer than the Great Recession of 2007-2009. The effects of that recession are still being felt. Median household income, for example, is still below what it was in 2007. That is one of the reasons why the next recession will be worse than the last.

99 percent of all US income growth from 2009 to 2014 went to the top 1 percent. They invest their money in the bond, stock and political markets. This does not create demand for goods and services. It destroys that demand by using financial and political leverage to export US jobs to low wage countries.

So all of this means that roughly 23 to 36 percent of all income produced in the United States has been stolen by the 1 percent, depending on whose figures you’re using. This inequality is destroying the demand for goods and services. Back in 1980, the 1 percent were able to steal only 8 percent of all US income. That’s why job and wage growth was much greater then than now.

Nowadays, the 99 percent earn roughly 62 to 77 percent of all income, down from 92 percent in 1980. This means demand for goods and services will be weak, much weaker, in fact, during the next recession than might be imagined.

The current economic expansion is the weakest in modern US history because of that lack of demand. It’s also been illegally contrived.

Home mortgage applications

The big banks withheld 3.4 million homes from the market by 2011. This is a violation of a variety of US laws, and is called a conspiracy in restraint of trade. As you can tell from the graph above, demand for home mortgages have been historically low compared to the last housing bubble, yet prices continue to bounce up because that 3.4 million homes represented more than 50 percent of the entire available housing stock, according to Bloomberg news. Click the following link for the Bloomberg report $382B Shadow Inventory Weighs on U.S. Housing-Bloomberg News.

This has driven home builders to construct more homes in the USA, and panicked people into purchasing overpriced homes that the banks illegally benefit from. This illegal housing bubble is what has powered this economy forward, and also to its doom.

The above suggests a few ominous things.

  1. The big banks can’t take many more houses off the market during and after the next recession, leaving them unable to create another housing bubble sufficient to power the next economic expansion forward.
  2. Earning 63 to 78 percent of total US income will not allow the 99 percent sufficient financial strength to power the US out of the recession.
  3. Instead, people who have borrowed against the rising value of their homes and used credit cards to sustain their standard of living will be trying to dig out of their debt.
  4. The value of housing will drop, as it always has done during recessions. This time the drop could be 30 to 50 percent in many areas. Maybe 60 percent.
  5. Deflation, caused by a lack of demand, will likely happen.
  6. Expect negative interest rates.
  7. The stock markets will fall more than they did last time. Expect major stock indices like the S&P 500 and the Dow to plummet 50 to 90 percent.
  8. The Federal Reserve will bail out the big banks and rich investors to the tune of tens of trillions of dollars, like during the last recession. But the Fed won’t bail out the 99 percent.
  9. The government must bail out the rich, or the 99 percent, but it can’t bail out both. The politicians will chose to bail out the rich, just like last time.
  10. Unemployment will be in double figures at some point, and perhaps for a long time.
  11. A political revolution will likely be forced into place at some point to replace the current corrupt government, and the corrupt politicians of the Republican and Democratic Parties.

As a final note, it should be pointed out that very few news sources have reported the housing conspiracy. No politician of note has mentioned it to my knowledge. This suggests something ominous, and this is only a suggestion.

It is possible the CEOs of the big banks gathered together, either in person or electronically, with Republican Party, Democratic Party and Federal Reserve officials, to conspire to engineer this housing bubble in order to power this historically weak economic expansion, and to make certain they wouldn’t face federal charges in doing so.

Now this is just a suspicion, so don’t get all heated up. But since the government has made it a point not to do enforce US laws against drug money laundering and other criminal activities on the part of the bankers, it might also be reasonable to assume this housing bubble has been created with a nod and a wink from the politically powerful.

When this recession begins, there will be virtually nothing to power us out of it except a political revolution of some kind. We’ll need a new FDR. Are you listening Senator Warren?

 

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A Great Depression Homeless Camp

A Great Depression Homeless Camp. Looks a lot like a modern day homeless camp doesn’t it?

The US Bureau of Labor announced the United States created 255,000 jobs in July. While good news, and rightly praised by the pundits, there is trouble hiding behind those numbers. The US durable goods sector went into recession early last autumn, while the entire manufacturing sector followed by November. That’s over 12 percent of the economy. Here’s what isn’t well known.

The entire economy has followed the durable goods sector into recession in each of the last recessions since and including the Great Depression. Historically, it takes sixteen to eighteen months for the rest of the economy to follow durable goods. So we’re most likely looking at a recession hitting somewhere between October of this year and June 2017.

Given that 99 percent of all income growth from 2009 to 2014 went to the top 1 percent, an historic record, the next recession will likely be more severe than the last. That’s because the great middle class will historically have fewer dollars to spend during the coming recession, which means the demand for goods and services will be depressed at levels not seen in decades.

This is the fourth longest economic expansion on record, and also among the weakest when it comes to job and wage growth. The US experienced higher monthly job growth in the economic expansions of the 1960s (170,000 per month), 1980s (230,000 per month) and the 1990s (200,000 per month), despite a smaller population, smaller GNP, and less worker productivity. Those expansions also featured real wage growth, especially during the 1960s. The current boom period has seen only 184,000 jobs created per month. Contrast that with the much maligned President Carter. Job growth of 206,000 per month occurred under Carter, with a population 2/3’s the size of today, and a GNP roughly 40 percent of today’s economy. Wage growth was consistent under Carter.

In addition, the most recent housing bubble will burst, as it always has done when recessions hit. Typically, when a recession occurs along with a bursting of a bubble, things are significantly much worse than without a bubble.

So, given the bubble, and historic income and wealth inequality, we should be looking at a whale of recession that is coming down the pike at hurricane speed.

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