Posts Tagged ‘Recession’

The Top 1 Percent’s Share of Income from Wealth Has Been Rising for Decades, thanks to legislation supported by Wall Street senator’s Ron Wyden, Mitch McConnell, and Orrin Hatch, as well as President’s Bill Clinton, Barack Obama, George W. Bush, Ronald Reagan and George H.W. Bush. We can’t forget Wall Street executives and the Koch brothers are also keen political supporters of the 1 percent massing more and more of the nation’s wealth, which is mostly accrued by the rich via legislation supported by those listed above, among many others.

By the way, wealth is assets, such as stocks, bonds, gold, houses, and other things of value. Income is money derived from either salaries, wages, dividends or capital gains.

Source: Economic Policy Institute

The result of an unequal flow of political power is an unequal flow of income and an unequal flow of wealth. The result of all of that is an economy tittering on the brink of the next great depression, which will be far worse for the 99 percent than the last recession.

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A new study by the Wall Street rating agency called Standard and Poor’s reveals what many already know. High income inequality suppresses the demand for goods and services, depressing GNP growth, and leading to more severe economic crashes than would otherwise be the case.

Here’s what the report won’t tell you. The rich invest their money in the political markets and in other investment areas such as stocks and bonds.

The money going into the political markets is used to convince politicians to pass legislation that redistributes income and wealth from the 99 to the 1 percent, such as free trade treaties. In other words, government corruption is far greater during times of inequality, and also because of it.

The investment money that goes into corporate stocks push up the value of those assets. It’s just a bidding process. So when more people purchase shares of any corporations than those who are selling their shares, the value of those shares go up. The same thing is true of bonds. None of these purchases add to GNP growth, and all of these purchases can result in redistributing income from the 99 to the 1 percent.

When corporate shares head down in value, CEO’s typically cut jobs or employee compensation, or ship jobs overseas to lower wage nations, which pushes profits higher, resulting in rising share and bond prices. The result is nothing more than income redistribution.

And so when inequality rises, it snowballs via the methods above, until such time as somebody decides such inequality is a bad thing. That only happens during the most severe economic crisis’s, such as during the Great Depression when there’s less money to go around to corrupt government.

Check out the story by clicking on the link below.

Wall Street Analysts Research: High Inequality Makes US Vulnerable to Crashes–Billmoyers.com

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How can the US government charge Edward Snowden with revealing the existence of the National Security Agency (NSA) spy program on US citizens since the New York Times revealed it’s existence ten years ago? And what about New York Times reporter, James Risen? He wrote a detailed book about it called State of War. So far as I can tell in rereading the book, Snowden hasn’t revealed any information that hasn’t already been revealed.

Snowden’s defense may be simple. How can he have revealed something that has already been revealed on the New York Times best seller list? The government’s case is weak, at best.

All the crap being said about Snowden is nonsense, about being a traitor and other stuff, especially since Washington Post journalist Robert Novak revealed the identity of CIA deep undercover operative Valerie Plame right there on the pages of the Post a decade ago. That information was given to him by George W. Bush’s Undersecretary of State Richard Armitage. According to court records, this was authorized by then Vice President Dick Cheney. They revealed her identity and, in doing so, blew up a multi-billionaire dollar CIA front company named Brewster-Jennings, which she had worked for as an under cover agent, and which was used to monitor the movements of weapons and nuclear materials across the middle east. Why didn’t Novak, Cheney and Armitage go to prison? Why didn’t the Bush regime go after them? Oh, that’s right. It was all politically motivated, but the damage to national security was done.

So what has Snowden done? Nothing so far as damage to national security, and nothing so far as information that you can obtain from your local library.

At best, the government might be able to convict Snowden of giving out information by having read it in Risen’s book.

This suggests that all of this nonsense about Snowden is another attempt to distract the public. But from what impending disaster? A coming recession worst than last time? The potential and likely astronomical cost of the Affordable Care Act when it takes full effect on January 1, 2014? A secretly scheduled attack on Iran? Who knows?

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Although the US as a whole is doing better than when the Republican created economic collapse began four years ago, most Americans do not feel better off when it comes to their personal finances. There’s a reason for this. The rich have been stealing 93 percent of all income growth during these years. The rest of us are getting nothing but our jobs and incomes redistributed to the 1 percent via the policies of Obama and the policies put in place before the current president. So it’s impossible for us to feel better about our personal finances.

Click on the link below for more on this story.

Americans Feel No Better Off Than Four Years Ago–Pew Rearch Center

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The United States manufacturing sector drifted back into recession last month. “In a surprise to Wall Street, the monthly snapshot from the Institute for Supply Management fell below the 50 level that separates contracting from expanding output for the first time in three years.”

That’s the first indication that the overall US economy is heading into recession. It is a necessary step toward recession, but the other steps necessary to get into recession have not followed, at least not yet.

President Obama is loathe to look at the real reason for the weakness of the economy, which is the massive redistribution of income from the 99 to the 1 percent that the federal government has engineered at the behest of the 1 percent over the last thirty years. That has left the demand sector weak, incapable of moving forward without government help.

In other words, the economic royalists have weakened the economy so badly with their income redistribution scam that the corporate economy can no longer stand on its own.

We’re in a long-term series of fits and starts and falling that is really a slow motion collapse of the economy.

Where have you gone President Franklin Roosevelt?

Related story

US Manufacturing Sector Back in Recession–The Guardian

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Things got incredibly bad under President George W. Bush. He lead us into the Great Recession. Click on the link below to see why this is so.

Five Reasons Why Americans Are Right to Blame George Bush for the Economy

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The conventional wisdom seems to be that our biggest economic challenge is runaway government spending. The reality is that government spending is contracting and pulling economic growth down with it. And worse is yet to come.

Given the federally sponsored redistribution of income and wealth from the 99 percent to the 1 percent since 1981, the demand by the 99 percent for goods and services in sufficient amounts to keep the economy afloat cannot be sustained without heavy and increasing government spending. The economy cannot stand on its own, which is what FDR discovered when the federal government cut back on spending in 1937. This is especially true given that more and more income is being redistributed from the 99 to the 1 percent. The process is continuing unabated under President Obama.

Perhaps the best measure of active government intervention in the economy is something called “government consumption expenditure and gross investment.” This includes total spending by all levels of government (federal, state, and local) on all activities with the exception of transfer payments (such as unemployment benefits, social security, and Medicare).

The graph below shows the yearly percentage change in real government consumption expenditure and gross investment over the period 2000 to 2012 (first quarter). As can be seen, the rate of growth in real spending began declining after the end of the recession, then jumped off a cliff beginning in 2011, which means that government spending (adjusted for inflation) is actually contracting.

The following chart shows the ratio of government consumption expenditure and gross investment to GDP; it highlights the fact that government spending is also falling as a share of GDP.

Adding transfer payments, which have grown because of the weak economy, does almost nothing to alter the picture. As the chart below shows, total government spending in current dollars, which means unadjusted for inflation, has stopped growing. If we take inflation into account, there can be no doubt that total real government spending, including spending on transfer payments, is also contracting.

The same is true for the federal government, everyone’s favorite villain. As the next chart shows, total federal spending, unadjusted for inflation, has also stopped growing.
Another chart

Not surprisingly, this decline in government spending is having an effect on GDP. Real GDP in the 4th Quarter of 2011 grew at an estimated 3 percent annual rate. The advanced estimate for 1st Quarter 2012 GDP growth was 2.2 percent. A just released second estimate for this same quarter revised that figure down to 1.9 percent. In other words, our economy is rapidly slowing.

What caused the downward revision? The answer says Ed Dolan is the ever deepening contraction in government spending:

What is driving the apparent slowdown? It would be comforting to be able to blame a faltering world economy and a strengthening dollar, but judging by the GDP numbers that does not seem to be the case. The following table (see below) shows the contributions of each sector to real GDP growth according to the advance and second estimates from the Bureau of Economic Analysis. Exports, which we would expect to show the effects of a slowing world economy, held up well in the first quarter. In fact, the second estimate showed them even stronger than did the advance estimate. The contribution of private investment also increased from the advance to the second estimate, although not by as much. Exports and investment, then, turn out to be the relatively good news, not the bad, in the latest GDP report.

Instead, the largest share of the decrease in estimated real GDP growth came from an accelerated shrinkage of the government sector. The negative .78 percentage point decrease of the government sector is the main indicator that we are already on the downward slope toward the fiscal cliff.

If current trends aren’t bad enough, we are rapidly approaching, as Ed Dolan noted, the “fiscal cliff.” That is what I was referring to above when I said that worse is yet to come. As Bloomberg Businessweek explains:

Last summer, as part of its agreement to end the debt-ceiling debate (debacle?), Congress strapped a bomb to the economy and set the timer for January 2013. Into it they packed billions of dollars of mandatory discretionary spending cuts, timed to go off at exactly the same time a number of tax cuts [for example, the Bush tax cuts and the Obama payroll-tax holiday] were set to expire

The congressional deficit supercommittee had a chance to disarm the bomb last fall, but of course it didn’t. And so the timer has kept ticking. The resulting double-whammy explosion of spending cuts and tax increases will likely send the economy careening off a $600 billion “fiscal cliff.”

The fiscal contraction will actually be even worse, since the extended unemployment benefits program is also scheduled to expire at the end of the year.

So, what does all of this mean? According to Bloomberg Businessweek:

If Congress does nothing, the U.S. will almost certainly go into recession early next year, as the combo of spending cuts and tax hikes will wipe out nearly 4 percentage points of economic growth in the first half of 2013, according to research by Goldman’s Alec Phillips, a political analyst and economist. Since most estimates project the economy will grow only about 3 percent next year, that puts the U.S. solidly in the red.

One can only wonder how it has come to past that we think government spending is growing when it is not and that it is the cause of our problems when quite the opposite is true. Painful lessons lie ahead—if only we are able to learn them.

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