Is 20% The New 5%? And When Should We Start Shitting Bricks?

So I’ve been listening to the economists on the radio (Mainstream and Left) and more and more their comments seem totally disconnected from reality. None of them seem to know (or want to know, if you ask me) why the economy hasn’t recovered from the recent drop-off, and they’re even more puzzled over the looming second dip in this “Great Recession.”

And those who hoped that Obama’s attempts wouldn’t work? They’re already shouting “give more power to the corporations, they’ll fix everything for us” never mind that giving that power to the corporations has been what brought us here in the first place. Worse, I expect that they’ll continue to get their way to the bitter end.

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There’s a simple reason why there’s no recovery, and why there will NOT be a recovery: No more j0bs at the bottom of the ladder.

Here’s how an economic recovery is supposed to happen, to my surmising: After a while, when people with money finally have a need to spend some of it, they go to the store (or online nowadays) and spend that money. Now some of the money goes towards store costs (bills, profit, upkeep and paying of employees), some of the money goes to the corporation (adverts, upkeep and management salaries), and some of the money goes to the manufacturing (machines, bills and the help, both management and workers).

Used to be a lot of manufacturing happened in the United States. This meant a lot of workers could pretty much depend on getting checks on a weekly or bi-weekly rate, and earn enough to buy what they needed and pretty much what they wanted (within reason). And since these people would buy at local stores, they would support local economies (as well as the national economy – a Budweiser bought at a local bar supported the bar owner and bartender as well as Anheuser-Busch and the trucker that shipped the brew to the local distributor).

Now…with the greatest part of consumer manufacturing offloaded to China, India and other nations with lower wages, fewer workers rights and less tighter pollution restrictions, there’s a large gap in the amount of lower-level workers able to make a living. A four percent loss in manufacturing leads to greater losses in other services that cater to the working and lower classes.  Lose enough, and you get other activities that end up mopping up further monies from below (Think PayDay Loan Stores and Tax Return Loans for monies a couple weeks earlier) and gut the local economy.

You can see it in the cities and towns, where the only thing multiplying faster than Wal-Mart, Pawn Shops and Car Title Loan Stores is the empty windows of all the other businesses that couldn’t make it on the remains of the monies left. So the bar loses its bartender AND bar owner (who may have changed his business to a Rent-To-Own); when pushed to the edge people will spend their money on what they need to pay for.

But the poverty industry runs on a minimum of employees, more of a minimum than Wal-Mart at night. So there’s more people on the dole, or saying goodbye to employability as they search for jobs that aren’t there long enough to get discouraged, then drop out.

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And so if you look at the official Unemployment Rate, it tends to hang out between 9.5% and 10.5%. And if you look at the “discouraged” workers (ones not counted because they’re not “looking” although they’d work if it was worth their while) you’re actually looking at twenty percent.

Twenty per cent. One in five.

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One should ask how this will affect a bunch of things economically.

Such as inflation/deflation. If it’s true that people unemployed long enough will accept anything, at what point are we seeing unemployment NOT because of people’s unwillingness to work “beneath their station,” but people unable to find work that pays above what the Government (Federal, State OR local, depending on what’s higher) deems the minimum amount an employee should be paid.

Of course, the argument against deflation is obvious: there’s only so little you can pay someone (the minimum wage); sales jobs don’t count after a while as the untalented and/or unlucky get weeded out. And anyone who understands classes can understand the basic argument in favor of raising the minimum wage: higher minimum wage means more money directly injected into the economy from productive areas.

However, there IS the specter of dropping values on various items. Housing, collectibles, large ticket items that can be kept up long term – all these things have dropped in value as the number of people able and willing to purchase these items has dropped. Lots of people have bought collectibles as hedges against inflation ONLY TO FIND that you can’t get what you put into it when people aren’t willing to buy…or bid against each other.

As for hyperinflation, the corporations that hold our debts aren’t going to go for that as long as they can’t pin their credits to inflation. In short, they’re not gonna allow a 50% increase in prices (and wages) when they’re allowed to charge only 10-15%. Even 30% interest fades when dealing with a 50% increase in prices.

Although one can note that food prices in general are increasing. While it’s true that Chip and Soda prices haven’t kept up with inflation (although it’s caused inflation of bellies as a result), real food has found itself going upward and upward.

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So what will we see?

Well, hyperinflation is easier for a government to deal with, as they can always outlast anyone, given the ability to print as much money as they can get. They will also get the fawning dependence of those whom they’ve both broken and freed from the debts of the bankers and other debt-makers who held the people in their hand before.

But this is America, with corporations to big to fail and a populace to small to be allowed success. If they can push the minimum wage (in a way the cornerstone of progressivism, as it denotes a specific minimum price on people’s time) downward (or disappear it forever), don’t be surprised if suddenly the government finds “oodles and oodles” of restraint and self-control on their spending, forcing housing and other prices downward along with wages. The only thing increasing will be debts as people will be unable to pay off (as their wages keep dropping along with the price of living, they will have less and less to deal with debts that only increase.

Still, bet on hyperinflation with debts allowed to COLA upward (COLA: Cost Of Living Allowance). Hyperinflation is almost always easier than deflation, it’s easier to print/create coin than to destroy it (even by wearing it out).