The Extraordinary Deterioration of our Next Generation

Like all other societies, America’s greatest national resource is its next generations.  They provide the energy, vitality, fresh ideas, and population growth that maintain America’s forward momentum.   But something is wrong with this picture, when we examine the deterioration of our current next generation.  Let’s give this some critical thought.

First, let us define demographic terms as Next Generation or  Generation Y or Millenials: ages 18 to 34; Generation X–ages 35-50;  Baby-Boomers–ages 51-69.

The following material summarizes the perfect storm that engulfs our next American generation.

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From Zero Hedge:  Study Shows Student Debt Delays Home Buying By Seven Years

The Student Loan Debt and Housing Report 2017 by the National Association of Realtors and the nonprofit group American Student Assistance shows the obvious: Student debt delays household formation, home buying, and saving.

The U.S. currently has a student debt load of $1.4 trillion, which accounts for 10 percent of all outstanding debt and 35 percent of non-housing debt. The magnitude of the debt continues to grow in size and share of the overall debt in the economy. While this amount of debt has risen, the homeownership rate has fallen, and fallen more steeply among younger generations.

Student loan debt impacts other life decisions including employment, the state the debt holder lives in, life choices such as continuing education, starting a family, and retirement.

Twenty-two percent were delayed by at least two years in moving out of a family member’s home after college due to their student loans.

Among non-homeowners, 83 percent cite student loan debt as the factor delaying them from buying a home. This is most frequently the case due to the fact that the borrowers cannot save for a downpayment because of their student debt. Among homeowners, 28 percent say student debt is impacting the ability to sell their existing home and move to a different home. The delay in buying a home among non-homeowners is seven years and three years for homeowners.

Awareness of Tuition Costs
  • Before attending college, 28 percent of borrowers knew generally the school “might be expensive” or “might be cheap”, but had no further information.
  • More than one-quarter of borrowers had an understanding of tuition, but had little understanding of other costs such as fees and housing expenses.
  • One in five borrowers understood all the costs including tuition, fees, and housing.

Defaults

  • Thirty-two percent of student loan borrowers surveyed had defaulted or forbore on their student loan debt
  • Two-fifths of borrowers who had personal incomes of less than $25,000 in 2016 had defaulted or forbore on their student loan debt in the past.

Life Choices

  • Among life choices, more than half of respondents believe they are delayed in continuing their education or starting a family due to student loan debt.
  • Forty-one percent would like to get married, but are delayed from marriage due to their student loan debt.
  • Only 13 percent of respondents did not have a life event delayed due to debt.
  • 28 percent of respondents rent with roommates.
  • Fifteen percent live with friends or family and pay rent, and 15 percent live with friends and family and do not pay rent.
  • Twenty percent own their own home and 16 percent rent solo.
  • Thirty-five percent of younger millennials live with family (both paying and not paying rent) compared to just 24 percent of older millennials.

Student Debt Impacts

Mish Notes

Younger millennials are those born 1990 to 1998. Older millennials are those born 1980 to 1989.
  1. The study did not ask how many regretted going to college.
  2. The study did not ask how many regretted paying what they did pay for college.
(End of Zero Hedge article)
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From Pew Research Center:  For First Time in Modern Era, Living With Parents Edges Out Other Living Arrangements for 18- to 34-Year-Olds

 

PEW RESEARCH CENTER

May 24, 2016

Share living with spouse or partner continues to fall

Broad demographic shifts in marital status, educational attainment and employment have transformed the way young adults in the U.S. are living, and a new Pew Research Center analysis of census data highlights the implications of these changes for the most basic element of their lives – where they call home. In 2014, for the first time in more than 130 years, adults ages 18 to 34 were slightly more likely to be living in their parents’ home than they were to be living with a spouse or partner in their own household. 1

This turn of events is fueled primarily by the dramatic drop in the share of young Americans who are choosing to settle down romantically before age 35. Dating back to 1880, the most common living arrangement among young adults has been living with a romantic partner, whether a spouse or a significant other. This type of arrangement peaked around 1960, when 62% of the nation’s 18- to 34-year-olds were living with a spouse or partner in their own household, and only one-in-five were living with their parents. 2

By 2014, 31.6% of young adults were living with a spouse or partner in their own household, below the share living in the home of their parent(s) (32.1%). Some 14% of young adults were heading up a household in which they lived alone, were a single parent or lived with one or more roommates. The remaining 22% lived in the home of another family member (such as a grandparent, in-law or sibling), a non-relative, or in group quarters (college dormitories fall into this category).

It’s worth noting that the overall share of young adults living with their parents was not at a record high in 2014. This arrangement peaked around 1940, when about 35% of the nation’s 18- to 34-year-olds lived with mom and/or dad (compared with 32% in 2014). What has changed, instead, is the relative share adopting different ways of living in early adulthood, with the decline of romantic coupling pushing living at home to the top of a much less uniform list of living arrangements.

Among young adults, living arrangements differ significantly by gender. For men ages 18 to 34, living at home with mom and/or dad has been the dominant living arrangement since 2009. In 2014, 28% of young men were living with a spouse or partner in their own home, while 35% were living in the home of their parent(s). For their part, young women are on the cusp of crossing over this threshold: They are still more likely to be living with a spouse or romantic partner (35%) than they are to be living with their parent(s) (29%). 3

In 2014, more young women (16%) than young men (13%) were heading up a household without a spouse or partner. This is mainly because women are more likely than men to be single parents living with their children. For their part, young men (25%) are more likely than young women (19%) to be living in the home of another family member, a non-relative or in some type of group quarters.

A variety of factors contribute to the long-run increase in the share of young adults living with their parents. The first is the postponement of, if not retreat from, marriage. The median age of first marriage has risen steadily for decades. In addition, a growing share of young adults may be eschewing marriage altogether. A previous Pew Research Center analysis projected that as many as one-in-four of today’s young adults may never marry. While cohabitation has been on the rise, the overall share of young adults either married or living with an unmarried partner has substantially fallen since 1990.

In addition, trends in both employment status and wages have likely contributed to the growing share of young adults who are living in the home of their parent(s), and this is especially true of young men. Employed young men are much less likely to live at home than young men without a job, and employment among young men has fallen significantly in recent decades. The share of young men with jobs peaked around 1960 at 84%. In 2014, only 71% of 18- to 34-year-old men were employed. Similarly with earnings, young men’s wages (after adjusting for inflation) have been on a downward trajectory since 1970 and fell significantly from 2000 to 2010. As wages have fallen, the share of young men living in the home of their parent(s) has risen.

Economic factors seem to explain less of why young adult women are increasingly likely to live at home. Generally, young women have had growing success in the paid labor market since 1960 and hence might increasingly be expected to be able to afford to live independently of their parents. For women, delayed marriage—which is related, in part, to labor market outcomes for men—may explain more of the increase in their living in the family home.

The Great Recession (and modest recovery) has also been associated with an increase in young adults living at home. Initially in the wake of the recession, college enrollments expanded, boosting the ranks of young adults living at home. And given the weak job opportunities facing young adults, living at home was part of the private safety net helping young adults to weather the economic storm.

Educational attainment, race and ethnicity linked to young adult living arrangements

Beyond gender, young adults’ living arrangements differ considerably by education and racial and ethnic background—both of which are tied to economic wherewithal. For young adults without a bachelor’s degree, as of 2008 living at home with their parents was more prevalent than living with a romantic partner. By 2014, 36% of 18- to 34-year-olds who had not completed a bachelor’s degree were living with their parent(s) while 27% were living with a spouse or partner. Among college graduates, in 2014 46% were married or living with a partner, and only 19% were living with their parent(s). Young adults with a college degree have fared much better in the labor market than their less-educated counterparts, which has in turn made it easier to establish their own households.

Among racial and ethnic groups, record-high shares of black and Hispanic young adults (36% for each group) lived in the home of their parent(s) in 2014. By comparison, 30% of white young adults lived at home. White young adults are more likely to be living with a spouse or partner (36%). But the trends are similar for all major racial and ethnic groups including whites: Since 1960 a greater share are living at home and fewer are married or cohabiting and living in their own household.

For black young adults, living with mom and/or dad is now the most common arrangement, as only 17% were living with a spouse or romantic partner in 2014. For Hispanic young adults living with parent(s) is also the dominant arrangement as 30% were living with a spouse or significant other in 2014. Generally, young adult blacks and Hispanics lag behind young whites both in terms of educational attainment and employment status.

This report presents the historical trends in the share of young adults who live with their parent(s). The first section presents a simple classification of living arrangements. The second section examines trends in living with parents by demographic and geographic groups. The third section explores the shift away from living with a romantic partner and toward living with parents. The final section examines the relationship between living with parents and trends in the labor market opportunities of young adults.

Other key findings:
• The growing tendency of young adults to live with parents predates the Great Recession. In 1960, 20% of 18- to 34-year-olds lived with mom and/or dad. In 2007, before the recession, 28% lived in their parental home.
• In 2014, 40% of 18- to 34-year-olds who had not completed high school lived with parent(s), the highest rate observed since the 1940 Census when information on educational attainment was first collected.
• Young adults in states in the South Atlantic, West South Central and Pacific United States have recently experienced the highest rates on record of living with parent(s).
• With few exceptions, since 1880 young men across all races and ethnicities have been more likely than young women to live in the home of their parent(s).
• The changing demographic characteristics of young adults—age, racial and ethnic diversity, rising college enrollment—explain little of the increase in living with parent(s).

(End of Pew Research Center article)

From Breitbart:  Study: Millennials Delaying Entry into Adulthood

Getting lost in suburbia is taking on a grim new meaning in the U.S.

The nation’s suburbs, once the wellspring of the American Dream, now has the highest rate of premature deaths from drug overdoses, according to a new findings from the County Health Rankings, a collaboration between the Robert Wood Johnson Foundation and the University of Wisconsin Population Health Institute. Just a decade ago, America’s suburbs had the lowest rate of premature death from ODs.

The spike in drug-related deaths is contributing to what County Rankings’ Marjory Givens said is setting off “alarm bells” among public health experts: More younger Americans are dying prematurely, especially those aged 15 to 44. The drug overdose epidemic is the top cause of early death among 25- to 44-year-olds, an age many people in this group traditionally buy their first homes and embark on careers.

Yet for many adults, such achievements appear unobtainable, leading to what experts call “deaths of despair.”

The data on drug-related deaths in suburbia “is absolutely an interesting and troubling finding,” Givens, the deputy director of data and science for County Health Rankings, said. “Access to affordable health care is important, but we know it’s so much more than that. Social and economic factors are so important — the ability to have a good job, having social and family supports.”

 Good jobs and the kind of social structure that propped up generations of Americans are fading in many areas of the country. Workers without college degrees have found themselves especially vulnerable to changes in the labor market. In the 1970s, Americans with only high school degrees could look forward to earning a steady, livable wage with benefits, but those days are long gone.

White Americans without college degrees are suffering from “deaths of despair” after years of weak demand for their skills and stagnant wages, according to research from Princeton economists Anne Case and Nobel Prize winner Angus Deaton. Earlier this month, they noted the phenomenon had spread across the country, touching both rural areas and cities.

 The impact of globalization, intensified by trade policy that effectively pits American workers against their lower-wage peers around the world, isn’t limited to suburbia.

Economists Peter Schott of the Yale School of Management and Justin Pierce of the Federal Reserve have found that mortality rates spiked in counties around the U.S. that suffered the greatest economic disruption after trade policy was changed to make it easier for manufacturers to ship jobs to China or for Chinese companies to do business in the U.S.

“What you see is that mortality rates rise and stay high in the most exposed counties,” Schott said, noting the spike in unemployment in those regions after the U.S. liberalized trade with China in 2000. The sharpest increase in death rates were found in communities in the Southeast and in New England where manufacturing jobs have evaporated.

“Trade policy is sometimes sold as everyone wins — that’s clearly too simple a way of picturing it,” he said.

  Economic distress is prompting some Americans to look for relief in the form of drugs, alcohol and other unhealthy behaviors. The opioid crisis appears to be exacerbating these problems.

“There’s a desire to escape from stress and anxiety and hopelessness and shame,” said Shannon Monnat, a sociologist at Pennsylvania State University. She noted that deaths from drug overdoses are highest among white men but are rising fastest among women. “Swaths of the country are doing pretty badly.”

She added, “The evidence is growing stronger every day that income inequality is bad for health.”

The problems go far beyond white adults, the County Health Rankings found. While premature deaths due to drug overdose were highest among whites and Native Americans in 2015, the overall premature mortality rate — including those due to suicide and homicide — are highest among American Indians, Alaskan natives and blacks.

The study also looked at people between 16 to 24, or what Givens calls an “invisible population.” One out of eight of this age group are considered disconnected from either the labor market or education market. Neither working nor in school, these young Americans are at higher risk for suffering from poverty and teen births, all of which can hurt their ability to become successful adults. More than one in five young adults in rural counties are considered disconnected, compared with slightly more than one in eight in the cities.“There is some sense of urgency here,” Givens said. “The communities with higher rates of youth disconnection are those those that have struggled with economic growth.

(End of CBS Money Watch article)

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From Zero Hedge:  Generation Y Wakes Up From The American Dream, Faces An American Nightmare

Dec 26, 2012

by Tyler Durden

Three and a half years after the worst recession since the Great Depression, the earnings and employment gap between those in the under-35 population and their parents and grandparents threatens to unravel the American dream of each generation doing better than the last.  We have noted a number of times that these divides are growing and warned of the social tension this could create and, as Bloomberg notes, it does not appear to be getting any better.  Generation Y professionals entering the workforce are finding careers that once were gateways to high pay and upwardly mobile lives turning into detours and dead ends. “This generation will be permanently depressed and will be on a lower path of income for probably all of their life – and at least the next 10 years,” as middle-income jobs are disappearing.

Via Bloomberg:

“Generation Y professionals entering the workforce are finding careers that once were gateways to high pay and upwardly mobile lives turning into detours and dead ends. Average incomes for individuals ages 25 to 34 have fallen 8 percent, double the adult population’s total drop, since the recession began in December 2007. Their unemployment rate remains stuck one-half to 1 percentage point above the national figure.”

(Commentary:  This narrative provided by Bloomberg about unemployment and average income figures is fraudulent.  Please refer to the next section below, titled “Let’s examine the actual condition of the American economy to understand the profound depth of this national crisis, within which our next generation is now embroiled.)

Three and a half years after the worst recession since the Great Depression, the earnings and employment gap between those in the under-35 population and their parents and grandparents threatens to unravel the American dream of each generation doing better than the last. The nation’s younger workers have benefited least from an economic recovery that has been the most uneven in recent history.

Which is leading to an increasingly disenfranchised generation:

“This generation will be permanently depressed and will be on a lower path of income for probably all of their life — and at least the next 10 years,” says Rutgers professor Cliff Zukin, a senior research fellow at the university’s John J. Heldrich Center for Workforce Development. Professionals who start out in jobs other than their first choice tend to stay on the alternative path, earning less than they would have otherwise while becoming less likely to start over again later in preferred fields, Zukin says.

Only one-fifth of those who graduated college since 2006 expect greater success than their parents, a Rutgers survey found earlier this year. Little more than half were working full time. Just one in five said their job put them on a career path.

As the dream fades:

“I had a lot of faith in the system, the mythology that if you work really hard you can achieve anything, and the stock market always goes up,” says 2009 law school graduate Elizabeth Hallock, 33. “It was pretty naïve on my part.”

And fingers are pointed:

Hallock is the named plaintiff in one of 14 lawsuits against some of the nation’s best-known law schools, including her alma mater, the University of San Francisco School of Law. The civil complaints, filed in 2011 and 2012, accuse the institutions of overstating graduates’ job-placement results and incomes.

Young Americans are struggling to reconcile their lack of economic rewards with their relatively privileged upbringings by Baby Boomer parents and the material success of their older peers, Generation X, born in the late 1960s and 1970s…

But whose fault is it?

“It’s a generation that had really high expectations, in some part driven by the way they were raised by their boomer parents,” she says. “Yet in the past five years they have had reality slammed in their face by the employment situation.”

As…

The same housing crash that hammered young architects and loan officers also slammed lawyers. Law schools are turning out about 45,000 degree holders a year for about 25,000 full-time positions available to them, according to the National Association for Law Placement Inc. in Washington. The class of 2011 had the lowest placement with law firms, 49.5 percent, in 36 years.

“It is not the perfect path to wealth and success that people may have envisioned,” says Robin Sparkman, editor in chief of The American Lawyer magazine in New York.

Which is leading to lawsuits – by the new lawyers against their schools…

“It’s hard to look at the information the schools were putting out and say it’s not misleading,” says Derek Tokaz, research director of the nonprofit Law School Transparency initiative. It published research showing that the chance of recent graduates getting permanent full-time work in law was far lower than the 80-95 percent total employment rates the schools typically boasted.

But for some – a new different life is peeking through…

“As it is, all of my possessions still fit in the back of my truck,” she says. “I can pack it in a couple hours, pick up the trailer and horses and move anywhere the gas tank will take me at the drop of a hat. What can the system take away from you when you have that kind of freedom?”

(End of Zero Hedge article)

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From Zero Hedge:  Millennials: A Menacing Metamorphosis To The Status Quo

By Tyler Durden

Apr 10, 2017

Submitted by Stock Board Asset Management

Last week, Gordon T. Long and Charles Hugh Smith discussed in an interview of the current generational shift occurring in the United States. The interview is called Called Millennials: A Menacing Metamorphosis. To note, both Gordon T. Long and Charles Hugh Smith understand their baby boomer generation is the status quo, and is currently being uprooted by the millennials, who are slated to take the reins in the next 8 years. In my opinion, this should be coined the ‘clash of generations’, where ultimately the millennials will be stitching their beliefs and ideas on the American fabric. As expressed in the interview, the status quo is underestimating the serious ramifications of this generational shift.

General shifts in America are completely normal and have produced serious economic and or social consequences through time.  One of the best blueprints and guides of generational shifts is the Strauss–Howe generational theory explaining the four cycles of with-in a full-generation (80-100 years). In fact, starting in the 2007/2008 period,  Strauss–Howe generational theory explains how the United States started the generation shift called the Fourth Turning where the old order is destroyed giving light to the new order i.e. Millennials: A Menacing Metamorphosis.

The interview touches on 10 important points of how the millennial beliefs and ideas will change the American landscape in the next 8 years. Changes that we see today include household formation, retail trends, transportation trends, and the shift to urbanization.

During the US Presidential Election, the most noticeable idea that the millennial generation was underestimated by the status quo was the unanimous support for Bernie Sanders rather than the status quo Hillary Clinton.

When peaking into Bernie Sanders’s platform, it understood as far-left leaning, which could highlight the core belief system of the millennials. This may serve as a guide in the direction America is headed.

 

Millennials are virtually split when it comes to Socialism or Capitalism. This is a much different view than the status quo, which alludes to serious economic adjustments are on the horizon.

 

As of 2017, millennials are 36% of the workforce and in 8 years are projected to be 75% of the workforce.

 

 

The millennial generation has a much different composition of demographics versus the prior generation. Leads to social adjustments…

 

 

Here is 1-4 changes of how the millennial generation is different from the past. Economic stagnation has shaped the millennial generation in to who they are today.

 

Student debt levels are a defining point of the millennials generation. No other generation has ever taken on this much student debt despite being the most educated.

Millennials are currently making economic decisions based on the burdensome of student loan debt.

A major shift in real estate as millennials demand urban centers, which is a complete flip from prior generations pushing out to suburbia.

 

 

Changes: Pattern of Closeness With Parents During Upbringing:

 

Changes:  Adult children expecting to help out their aging parents:

Millennials are the most technology-centric generation yet.

 

 

Millennials are driving skyrocketing social media infrastructure.

Millennials are submerged in media use.

 

Millennials will have a profound change in the transportation industry. Technology and crowd-sharing has pushed millennials to Uber and Lyft. This will be challenging for the auto industry to maintain auto sales, along with energy producers of crude products.

 

Millennials are already having a drastic change in the retail space. The technology millennials are adapting is contributing to the retail apocalypse.

 

The millennial generation has been subjected to fear and war in their entire lifespan. This generation has witnessed the negative effects of globalism hollowing out the middle class around them. Millennials search for security, which may explain why Bernie Sanders was the best platform of choice, because he offered ‘light at the end of the tunnel’.

 

More social ramifications for the US economy are the millennials thought of various forms of debt should be forgiven. The old order has produced a debt ball and chain.

 

Last but not least, Gordon T. Long and Charles Hugh Smith forgive the millennials and blame the educational system for why the millennials think the way they do.

For the next 8 years one should sit down, strap in, and hold-on. The generational rollercoaster will involve chills and thrills, but it’s completely normal. All we say is just be on the right side of history.

The video below provides a full presentation of this Zero Hedge article with excellent insights proved by the authors, Gordon T. Long and Charles Hugh Smith.

(End of Zero Hedge article)

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From Bloomberg:  A Quarter of Millennials Who Live at Home Don’t Work — or Study

 (End of Bloomberg article)

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Commentary:  The operative thought that runs throughout these articles is “What is actually going on.”  That question has been posed because this website has a mission to rethink everything about how our next generation has found itself in this monumental one-of-a-kind social, economic, and psychological human disaster.

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Let’s examine the actual condition of the American economy to understand the profound depth of this national crisis, within which our next generation is trapped.

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Please note that the economic measurements below are provided by the well-respected economic analytics firm:

American Business Analytics & Research LLC
The Hearst Building
5 Third Street, Suite 1301
San Francisco, CA 94103

Contact:  John Williams, President

johnwilliams@shadowstats.com

Please note that the economic information provided by the federal government is untrustworthy.  John Williams and his firm are nationally well-regarded for sound and accurate information and analyses.

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UNEMPLOYMENT: March 2017—–actual 22.5%

March Unemployment: U.3 Declined to 4.5% from 4.7%, U.6 Fell to 8.9% from 9.2% and ShadowStats-Alternate Fell to 22.5% from 22.7%

Comment:  That’s right, the actual unemployment rate for the nation is approximately 22.5% when Williams takes out the fraudulent fixes inserted by the fraudulent U.S. Bureau of Labor Statistics (BLS).   A major part of the fraud is in reducing the unemployment rate by the  discouraged American workers who drop out of the labor force and stop looking because of the thin job market.  By the way, a 22.5% unemployment rate is equivalent to the average unemployment rate during the Great Depression of the 1930s.  The red and grey unemployment trend lines are fictitious in both quantitative and trending terms.  The blue trend line is trustworthy because the fraudulent fixes have been removed.

CONSUMER INFLATION:  March 2017 is actually 10.1%

Official CPI-U Inflation Fell by 0.29% (-0.29%) in March, Pushing Annual CPI-U Inflation Lower to 2.38% (Was 2.74%), with CPI-W at 2.35% (Was 2.82%) and ShadowStats is at 10.1% (was 10.5%)

Commentary:  Yes, the actual inflation is four times as high as the official number with its fraudulent fixes.

Of the two charts below, the bottom chart, using the reliable 1980 formula for calculation, is the most accurate.

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GROSS DOMESTIC PRODUCT (GDP):  4th Quarter 2016—–actual -1.9% (negative growth)

The Fed reported the GDP at just under +2% growth, and the actual growth without the fraudulent fixes is just under -2%.  In other words, the actual GDP is showing an economic decline or deterioration of approximately 2%.  Thus, the official Fed GDP is overstated by 4 times the actual GDP.

Highlights:

• 2016 Annual GDP Growth Still Was Weakest Since the Economic Collapse, Both Before and After Inflation Adjustment

• Broad Outlook Continues for Non-Recovering Activity and Economic Disruption

 Americans Not On The Labor Force: March 2017
94,200,000 Americans Not On The Labor Force
79,430,000 Americans Not On The Labor Force—2000

 

42,585,000 Americans Are Living At Or Below the Poverty
Level—March 2017

See trend line below:

 

 All the above measurements are grim features and reflect an actual dilemma much closer to a “Greater Depression” than the current trope chosen by the “mainstream media,” namely, the misleading term, ”The Great Recession.”

We’re living in a condition of economic depression akin to the Great Depression of the 1930s, but we are living in a “mainstream media”-manufactured bubble of false reality.  There are no breadlines to highlight our actual dilemma because we have 42,483,000 Americans receiving food stamps.

To receive accurate and honest economic reporting, stay with American Business Analytics & Research LLC, the this link:  www.shadowstats.com

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From Zero Hedge:  50% Of Americans Live Payday-To-Payday; 33% Can’t Write A $500 Emergency Check

It’s been more than seven years since the ‘great recession’ officially ended, but while Fed policies have successfully generated massive asset bubbles which have accrued solely to the benefit of America’s wealthiest, the majority of American families remain as vulnerable to financial disaster as they were during the height of the crisis.

In fact, a recent study found that some 50% of Americans are woefully unprepared for a financial emergency with nearly 1 in 5 (19%) having absolutely no savings set aside to cover an unexpected expense.  Meanwhile, nearly 1 in 3 (31%) Americans couldn’t write a $500 check to cover an unexpected household emergency expense if they had to, according to a survey released by HomeServe USA, a home repair service.

Moreover, a separate survey released Monday by insurance company MetLife found that 49% of employees are “concerned, anxious or fearful about their current financial well-being” with less than 40% reporting that they’re “in control” of their finances.

If you’re like us, then perhaps you’re confused by how the information above jives with the Fed’s assertions that ‘everything is awesome’ which seems to be reinforced by new daily highs in equity markets.

Of course, the issue is that the overwhelming majority of Americans haven’t participated in the Fed’s latest asset bubbles and are instead still crippled under the same amount of debt as they had during the recession. In fact, the New York Federal Reserve on Monday predicted that total household debt will reach its previous peak of $12.7 trillion this year with lower mortgage balances being offset by much higher student and auto debt.

For evidence of ‘main street’ America’s struggles with soaring debt balances, one has to look no further than the shocking delinquencies of 2016 vintage subprime auto ABS structures which are underperforming even 2007/2008 vintage securitizations.

And while most have attributed the rising delinquencies solely to deteriorating lending standards and an increasing mix of ‘deep subprime’ loans, UBS Global Macro Strategist, Matthew Mish, thinks there is a better answer, namely failed Fed policies.

As we’ve also argued over the years, while the Fed’s misguided QE and interest rate policies have done a masterful job of creating asset bubbles around the world they’ve done precious little to actually stimulate economic/wage growth, in real terms.

In our view, the root causes of the rise in delinquency rates can be traced back to US consumer income inequality and aggressive easing in lending conditions, primarily from non-bank lenders. In short, the mosaic we see is one where central bank reflation efforts, namely QE and low interest rate policies, have been more successful at fuelling higher asset prices and wealth creation for a subset of the consumer and less effective in stimulating real income growth (particularly at the median and below). Wealth creation becomes self-reinforcing in an environment of financial repression, with more cash looking for opportunities for deployment. For the financial sector that means more loan growth, and many less regulated, non-bank financial intermediaries have happily filled the void, incentivized by low interest rates that help sustain a lower cost of capital for themselves and lower funding costs for their borrowers.

However, the overall credit quality of borrowers has not kept pace with improvement in the aggregate economy. Our prior Evidence Lab work posits that about 38% of US consumers do not generate positive cash flow and roughly 25-30% of US consumers have not seen improving consumer finances (i.e. they do not own their own home or have significant wealth tied to stock markets). As of Q4’16, 18% of US consumers indicated they were likely to default on one loan payment over the next 12 months vs. 13% in Q3’16. This cohort of at-risk consumers reported being about 4x as likely to embark on a major durable goods purchase (e.g. house, car) in the next year.

This is not just a theoretical issue, but perhaps a problem already. 37% of those aged 21-34 in Q4’16 stated they were likely to default on one loan over the next 12 months, up from 27% in Q3, and outpacing other age brackets. We have only asked this specific question twice before in our Evidence Lab Survey and will be keen if these trends continue in our Q1 survey

And while the subprime auto market, on a standalone basis, may not represent the ‘systemic risk’ that subprime housing did in 2007, when combined with outstanding subprime balances on student loans and other types of debt it’s a $1.3 trillion issue.

Is subprime auto lending too small to matter from a financial stability point of view? In isolation, yes. According to TransUnion, subprime auto lending balances outstanding total $179bn, or 16% of all auto loans outstanding. And subprime balances are about 1.2x above balances as of Q3’09. However, our earlier thesis would suggest subprime auto may be too narrow a lens to view the debate. More broadly, the good news is that subprime mortgage debt outstanding totals $567bn, or 7% of all mortgage loans. Subprime balances are about 0.4x 2009 levels. The bad news is subprime student loans balances total $370bn, or 30% of all loans outstanding. And balances are 2.3x 2009 levels. Subprime credit card debt totals $113bn ($88bn bankcard, $25bn private label) – reflecting 12% and 20% of all loan balances, respectively, and about 0.8x 2009 levels. And subprime personal loan balances total $17bn, or 16% of all debt, and 1.1x levels seen in 2009 (Figure 7).

 In short, we estimate subprime consumer debt outstanding totals a still significant $1.25tn, comprised primarily of mortgage, student and auto loans.

But, as UBS concludes, the next massive subprime debt unwind won’t be that big of a deal because this time around all of the risk has been laid off on taxpayers…

Comparatively, however, debt levels outstanding are down from 2009 peak levels near $1.9tn. In addition, loan loss risk is increasingly borne by the government (e.g., student, FHA-backed mortgage loans), not the banks.

________________________________________________________________

Our National Debt:  September 2017—–$20 Trillion

America’s Disintegration:”  Moving From Historical Background to the Present

                                                                                                  $20 Trillion

 

 

 

 

 

 

 

 Commentary:  Something tectonic has occurred from the beginning of the Reagan Administration to 2008, when our national debt had streaked to $10 trillion per the chart above.  And then from 2009 through 2016, under the Obama Administration, and in just EIGHT additional years, our national debt skyrocketed almost another $10 trillion to a total of $20 trillion. 

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Comprehensive Financial Statistics:  September 2017

 

 

 

 

 

 

 

 

 

 

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The Brookings Institution Is Forced To Concede The Deterioration of Our Next Generation

In the Brookings Institution article below, dated March 25, 2013, there is a stark analysis of the condition of our next generation.  Their false narrative begins with an out-and-out lie as follows:

“The labor market news this month has been impressive, with above-expected job creation numbers, a continued dip in the unemployment rate, and falling jobless claims all giving reason for optimism about the state of the economic recovery.”

But there is no way they can cover up incontrovertible facts, including the actual increase in national unemployment in March of 2013, as revealed by the honest and widely respected American Business Analytics & Research LLC.

The U3 calculation (in red) and the U6 calculation (in grey) are grossly understated by the fraudulent U.S. Bureau of Labor Statistics (BLS).  That is a fact because the BLS has blatantly refuses to count unemployed workers who have given up looking for work due to their weak local labor market.  This is gross hypocrisy because when an unemployed worker stops looking for work, the national employment increases.  Removing that fraudulent adjustment from the BLS calculation of unemployment results in the blue line, which indicates a 23% national unemployment level—-the same level of unemployment recorded in the Great Depression of the 1930s.

 

 

 

 

 

 

 

 

 

 

 

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From Brookings Institution:  Addressing Long-Term Unemployment For American’s Next Generation of Workers

The labor market news this month has been impressive, with above-expected job creation numbers, a continued dip in the unemployment rate, and falling jobless claims all giving reason for optimism about the state of the economic recovery.  However, the encouraging top-line figures mask persistent fragility in the labor market.

Notably, long-term unemployment remains stubbornly high, particularly for young workers. Early jobs are critical for establishing future earnings and employment trajectories, thus the health of the labor market for younger workers may serve as a harbinger for the economy’s longer-term vibrancy. Young job-seekers continue to face historically poor employment prospects, and the employment picture for these workers has not improved at the same pace as other age groups.  

While the conversation in Washington has focused on budget politics, policymakers who lose sight of the challenges facing young workers do so at great risk to the future health of the American economy. In addition to safeguarding basic protections for the long-term unemployed, Congress can help jobless younger workers by protecting and expanding AmeriCorps.

Long-term unemployment for young workers during the Great Recession spiked to historic levels, and remains at record-high rates even during today’s increasingly robust recovery (i) (This is intentional disinformation from Brookings).

Typically, long-term unemployment (defined as workers looking for a job for between six months and one year), has returned to pre-recession levels by this point in an economic recovery. Yet in February, 44 months into the current recovery, persistent unemployment amongst 20 to 24 year old job-seekers was 237% of historic rates. 646,000 young workers were out of work for six months or more.

While extended unemployment remains a significant problem for the labor market as a whole, the depth of the problem for younger workers is particularly troubling due to the slow pace of improvement for this group. On average, long-term unemployment has decreased by 41 percent for all workers from its peak (More intentional disinformation). Yet, for 20 to 24 year-old job-seekers, the extended unemployment rate has declined by just 23 percent since its peak. The older the worker, the more rapid the rate of improvement in the long-term unemployment rate relative to its peak. For instance, long-term unemployment has fallen far more sharply for prime-age workers: a 46 percent drop for 35 to 44 year olds, and a 59 percent drop for 45 to 54 year olds.[ii]

Long-term unemployment for young job seekers has long-lasting impacts.  Unemployment today predicts unemployment tomorrow, in addition to enduring impacts on earnings, particularly for those with long durations of joblessness.(iii)

Recent research finds that unemployed young workers experience persistent effects on employment prospects for at least a decade, and highlights the long-term negative impact on earnings and employment prospects for college students who graduate during a recession.(iv)

Long durations of unemployment for youth are likely to exacerbate these negative effects. For instance, workers in the early stages of their careers develop social networks that allow for upward career mobility, via internal promotion or external transition to a better position.

Young workers also learn more about the labor market while on the job, discovering their strengths and weaknesses, as well as their personal preferences regarding industry and occupation. As a result, workers’ early jobs may be particularly important for establishing “job fit.”

Prolonged joblessness at the beginning of a worker’s career may be particularly deleterious due to its negative impact on this iterative process.  Effective and efficient matching of workers to jobs is a key element for a productive workforce for the future, thus prolonged joblessness for youth should be of particular concern to those worried about the country’s long-term economic growth.

Protecting basic unemployment benefits, including the federal long-term unemployment benefits program, is a key first step that will not only benefit young jobseekers, but also the many older workers who continue to face challenges in the labor market.

However, youth unemployment can be tackled through other avenues as well. Policymakers should address long-term unemployment among young people through an expansion of the AmeriCorps program – or, at a bare minimum, by protecting this program from cuts.

AmeriCorps hires recent college graduates and others to address the critical needs in American communities.  Corps members receive valuable labor skills.  A study from the University of Texas found that participants in AmeriCorps were more likely to report they had basic work skills than their peers.(v)  Furthermore, the program provides much needed support to communities still recovering from the Great Recession. For example, AmericCorps-funded CityYear corps members serve as tutors, mentors, and after-school programming staff for elementary school students in cash-strapped public schools in Detroit, where public funding has been slashed due to the deep impacts of the recession and slow recovery.

The budget sequester is slated to cut several thousand positions from AmeriCorps in the coming months.[vi]  Prior to the sequester, AmeriCorps’ budget had already been trimmed by eight percent in the wake of the recession.[vii] Recent Republican budget proposals have zeroed out funding for the volunteer program.  AmeriCorps is a relatively inexpensive federal program, costing about one billion dollars a year (compared to, for instance, $718 billion in annual defense spending), and yielding meaningful impacts for both its participants and the communities that it serves.  Instead of slashing the program, Congress should signal a renewed commitment to America’s young workers and economically-devastated communities through a renewed and reinvigorated investment in AmeriCorps.

Notes:

[i] Unless otherwise noted, long-term unemployment is defined as jobseekers who have been looking for work for 6 to 12 months. Young worker are defined as those ages 20-24.

[ii] It is worth noting that the decline in long-term unemployment for youth out of work for a year or more has been relatively commensurate with the drop in this rate for other age groups. This may be because young workers are dropping out of the labor market after a year of joblessness, or because younger workers are likely to take dead-end jobs rather than continuing to search for a job well-suited to their skill set. In either case, the more impressive decline in rates of long-term unemployment for 20-24 year olds out of work for a year or more is not necessarily a positive story about the labor market for these young workers. Another possible reason is the wording of the BLS survey.  It is possible that young people who had fulltime unpaid internships would answer the questions as if they were not seeking gainful employment.

(End of Brookings Institution article)

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From Zero Hedge:  Jamie Dimon Warns “Something Is Wrong” With The US

While Jamie Dimon tried to maintain his traditionally optimistic outlook in his annual letter to shareholders, there was a distinct undertone of pessimism in the latest 45 page letter released earlier today, in which he writes that while the U.S. is “truly an exceptional country,” probably stronger than ever before, he cautions that “something is wrong – and it’s holding us back.”

Here are the highlights from the gloomy passage reposted below in its entirety.

Dimon’s letter notes that the economy has been growing much more slowly in last decade or two than in the 50 years before then, with real median household incomes in 2015 2.5% lower than they were in 1999 and the percentage of middle class households shrinking, yet not even someone as intelligent as Dimon can bring himself to fully admit that much if not all of it has to do with America’s relentless debt binge, and the gargantuan debt load accumulated and carried by Americans, whether in the form of personal, student, auto debt, be it corporate debt which is at a record high, or, naturally, the sovereign debt which is on the disturbing side of 100% as a percentage of GDP.

Among other things, Dimon observes:

  • Over last 16 years, U.S. has spent trillions on wars when it could have been investing that money productively.
  • Since 2010, when the government took over student lending, direct government lending to students has gone from ~$200b to >$900b, creating dramatically increased student defaults, population that’s “rightfully angry” about how much money they owe, particularly since it reduces ability to get other credit.
  • Healthcare costs are essentially twice as much per person vs most other developed nations.
  • Labor force participation is too low.

Dimon also writes that the regulatory environment is “unnecessarily complex, costly and sometimes confusing;” says poorly conceived and uncoordinated regulations have damaged economy, inhibiting growth and jobs. He also says that he isn’t looking to throw out entirety of Dodd-Frank or other rules; “it is, however, appropriate to open up the rulebook in the light of day and rework the rules and regulations that don’t work well or are unnecessary.”

 Furthermore, the JPM CEO sees need for “consistent, transparent, simplified and more risk-based capital standards” and says that it’s clear banks have too much capital, and more of that capital can be safely used to finance the economy,

Finally, in the most amusing twist, Dimon sees “Too Big to Fail” as essentially solved and adds that taxpayers won’t pay if a bank fails as shareholders and debtholders are at risk for all losses. Just like in the case of Monte Paschi a few months ago, right?

We will certainly check back on that #timestamp in several years.

* * *

Here is the full excerpt from Dimon (link to full letter):

It is clear that something is wrong — and it’s holding us back.

Our economy has been growing much more slowly in the last decade or two than in the 50 years before then. From 1948 to 2000, real per capita GDP grew 2.3%; from 2000 to 2016, it grew 1%. Had it grown at 2.3% instead of 1% in those 17 years, our GDP per capita would be 24%, or more than $12,500 per person higher than it is. U.S. productivity growth tells much the same story, as shown in the chart [below].

Our nation’s lower growth has been accompanied by – and may be one of the reasons why – real median household incomes in 2015 were actually 2.5% lower than they were in 1999. In addition, the percentage of middle class households has actually shrunk over time. In 1971, 61% of households were considered middle class, but that percentage was only 50% in 2015. And for those in the bottom 20% of earners – mainly lower skilled workers – the story may be even worse. For this group, real incomes declined by more than 8% between 1999 and 2015. In 1984, 60% of families could afford a modestly priced home. By 2009, that figure fell to about 50%. This drop occurred even though the percentage of U.S. citizens with a high school degree or higher increased from 30% to 50% from 1980 to 2013. Low-skilled labor just doesn’t earn what it used to, which understandably is a source of real frustration for a very meaningful group of people. The income gap between lower skilled and skilled workers has been growing and may be the inevitable consequence of an increasingly sophisticated economy.

Regarding reduced social mobility, researchers have found that the likelihood of workers moving to the top-earning decile from starting positions in the middle of the earnings distribution has declined by approximately 20% since the early 1980s.

Many economists believe we are now permanently relegated to slower growth and lower productivity (they say that secular stagnation is the new normal), but I strongly disagree.

We will describe in the rest of this section many factors that are rarely considered in economic models although they can have an enormous effect on growth and productivity. Making this list was an upsetting exercise, especially since many of our problems have been self-inflicted. That said, it was also a good reminder of how much of this is in our control and how critical it is that we focuson all the levers that could be pulled to help the U.S. economy. We must do this because it will help all Americans.

Many other, often non-economic, factors impact growth and productivity.

Following is a list of some non-economic  items that must have had a significant impact on America’s growth:

  • Over the last 16 years, we have spent trillions of dollars on wars when we could have been investing that money productively. (I’m not saying that money didn’t need to be spent; but every dollar spent on  battle is a dollar that can’t be put to use elsewhere.)
  • Since 2010, when the government took over student lending, direct government lending to students has gone from approximately $200 billion to more than $900 billion – creating dramatically increased student defaults and a population that is rightfully angry about how much money they owe, particularly since it reduces their ability to get other credit.
  • Our nation’s healthcare costs are essentially twice as much per person vs. most other developed nations.
  • It is alarming that approximately 40% (this is an astounding 300,000 students each year) of those who receive advanced degrees in science, technology, engineering and math at American universities
    are foreign nationals with no legal way of staying here even when many would choose to do so. We are forcing great talent overseas by not allowing these young people to build their dreams here.
  • Felony convictions for even minor offenses have led, in part, to 20 million American citizens having a criminal record – and this means they often have a hard time getting a job. (There are six times more felons in the United States than in Canada.)
  • The inability to reform mortgage markets has dramatically reduced mortgage availability. We estimate that mortgages alone would have been more than $1 trillion higher had we had healthier mortgage markets. Greater mortgage access would have led to more homebuilding and additional jobs and investments, which also would have driven additional growth.

Any one of these non-economic factors is fairly material in damaging America’s effort to achieve healthy growth. Let’s dig a little bit deeper into six additional unsettling issues that have also limited our growth rate.

Labor force participation is too low.

Labor force participation in the United States has gone from 66% to 63% between 2008 and today. Some of the reasons for this decline are understandable and aren’t too worrisome – for example, an aging  population. But if you examine the data more closely and focus just on labor force participation for one key segment; i.e., men ages 25-54, you’ll see that we have a serious problem. The chart below shows that in America, the participation rate for that cohort has gone from 96% in 1968 to a little over 88% today. This is way below labor force participation in almost every other developed nation.

If the work participation rate for this group went back to just 93% – the current average for the other developed nations – approximately 10 million more people would be working in the United States. Some other highly disturbing facts include: Fifty-seven percent of these non-working males are on disability, and fully 71% of today’s youth (ages 17–24) are ineligible for the military due to a lack of proper education (basic reading or writing skills) or health issues (often obesity or diabetes).

Education is leaving too many behind.

Many high schools and vocational schools do not provide the education our students need – the goal should be to graduate and get a decent job. We should be ringing the national alarm bell that inner city schools are failing our children – often minorities and children from lower income households. In many inner city schools, fewer than 60% of students graduate, and many of those who do graduate are not prepared for employment. We are creating generations of citizens who will never have a chance in this land of dreams and opportunity. Unfortunately, it’s self-perpetuating, and we all pay the price. The subpar academic outcomes of America’s minority and low-income children resulted in yearly GDP losses of trillions of dollars, according to McKinsey & Company.

Infrastructure needs planning and investment.

In the early 1960s, America was considered by most to have the best infrastructure (highways, ports, water supply, electrical grid, airports, tunnels, etc.). The World Economic Forum now ranks the United States #27 on its Basic Requirements index, reflecting infrastructure along with other criteria, among 138 countries. On infrastructure, the United States is behind most major developed countries, including the United Kingdom, France and Korea. The American Society of Civil Engineers releases a report every four years examining current infrastructure conditions and needs – the 2017 report card gave us a grade of D+. Another interesting and distressing fact: The United States has not built a major airport in more than 20 years. China, on the other hand, has built 75 new civilian airports in the last  10 years alone.

Our corporate tax system is driving capital and brains overseas.

America now has the highest corporate tax rates among developed nations. Most other developed nations have reduced their tax rates substantially over the past 10 years (and this is true whether looking at statutory or effective tax rates). This is causing considerable damage. American corporations are generally better off investing their capital overseas, where they can earn a higher return because of lower taxes. In addition, foreign companies are advantaged when they buy American companies – often they are able to reduce the overall tax rate of the combined company. Because of this, American companies have been making substantial investments in human capital, as well as in plants, facilities, research and development (R&D) and acquisitions overseas. Also, American corporations hold more than $2 trillion in cash abroad to avoid the additional taxes. The only question is how much damage will be done before we fix this.

Reducing corporate taxes would incent business investment and job creation. The charts on page 36 show the following:

  • That job growth is highly correlated to business investment (this also makes intuitive sense).
  • That fixed investments by businesses and capital formation have gone down substantially and are far below what we would consider normal.

And counterintuitively, reducing corporate taxes would also improve wages. One of the unintended consequences of high corporate taxes is that they actually depress wages in the United States. A 2007 Treasury Department review finds that labor “may bear a substantial portion of the burden from the corporate income tax.” A study by Kevin Hassett from the American Enterprise Institute finds that each $1 increase in U.S. corporate income tax collections leads to a $2 decrease in wages in the short run and a $4 decrease in aggregate wages in the long run. And analysis of the U.S. corporate income tax by the Congressional Budget Office finds that labor bears more than 70% of the burden of the corporate income tax, with the remaining 30% borne by domestic savers through a reduced return on their savings. We must fix this for the benefit of American competitiveness and all Americans.

Excessive regulations reduce growth and business formation.

Everyone agrees we should have proper regulation – and, of course, good regulations have many positive effects. But anyone in business understands the damaging effects of overcomplicated and inefficient regulations. There are many ways to look at regulations, and the chart below and the two on page 38 provide some insight. The one below shows the total pages of federal regulations, which is a simple way to illustrate additional reporting and compliance requirements. The second records how we compare with the rest of the world on the ease of starting a new business – we used to be among the best, and now we are not. The bottom chart on page 38 shows that small businesses now report that one of their largest problems is regulations.

By some estimates, approximately $2 trillion is spent on regulations annually (which is approximately $15,000 per U.S. household annually). And even if this number is exaggerated, it highlights a disturbing problem. Particularly troubling is that this may be one of the reasons why small business creation has slowed alarmingly in recent years. According to the U.S. Chamber of Commerce, the rising burdens of federal regulations alone may be a main reason for a falling pace in new business formation. In 1980, Americans were creating some 450,000 new companies a year. In 2013, they formed 400,000 new businesses despite a 40% increase in population from 1980 to 2013. Our three-decade slump in company formation fell to its lowest point with the onset of the Great Recession; even with more businesses being established today, America’s startup activity remains below prerecession levels.

While some regulations quite clearly create a common good (e.g., clean air and water), it is clear that excessive regulation does not help productivity, growth of the economy or job creation. And even regulations that once may have made sense may no longer be fit for the purpose. I am not going to outline specific recommendations about non-financial regulatory reform here, other than to say that we should have a permanent and systematic review of the costs and benefits of regulations, including their intended vs. unintended consequences.

The lack of economic growth and opportunity has led to deep and understandable frustration among so many Americans.

Low job growth, a lack of opportunity for many, declining wages, students and low-wage workers being left behind, economic and job uncertainty, high healthcare costs and growing income inequality all have created deep frustration. It is understandable why so many are angry at the leaders of America’s institutions, including businesses, schools and governments – they are right to expect us to do a better job. Collectively, we are the ones responsible. Additionally, this can understandably lead to disenchantment with trade, globalization and even our free enterprise system, which for so many people seems not to have worked.

Our problems are significant, and they are not the singular purview of either political party. We need coherent, consistent, comprehensive and coordinated policies that help fix these problems. The solutions are not binary – they are not either/or, and they are not about Democrats or Republicans. They are about facts, analysis, ideas and best practices (including what we can learn from others around the world)

(End of Zero Hedge article)

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Now, we finally see the long-suppressed term coming to the surface:  “The Greater Depression,” instead of the fraudulent term, used since 2008, “The Great Recession.”

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From Sprott Money:  The Great Western Economic Depression

By Jeff Nielson

April 18, 2017

Western economies are “recovering”. How do we know this? We are told this, over and over and over again by our governments. Then this assertion is repeated thousands of times more by the dutiful parrots of the Corporate media.

The problem is that in the real world there is not a shred of evidence to support this assertion. In the U.S., ridiculous official lies were created claiming the creation of 15 million new jobs . In reality, there are three million less Americans with jobs today than at the official end of the “recession”.

These imaginary jobs are invented by assorted statistical frauds, with the primary deceit being so-called “seasonal adjustments”. To be legitimate, all seasonal adjustments must to net to zero at the end of each year. Instead, in the U.S.A., the biggest job creator in the nation every year is the calendar.

Beyond the grandiose but absurd claims of new jobs in the U.S., there have been few signs of economic health across the Corrupt West. Despite this, these traitorous regimes continue the pretense that their horrific mismanagement of our economies is making things better rather than worse.

There are numerous subtle means of demonstrating that Western economies have never been in more calamitous ill health than they are today. Fortunately, there are also two very large and important indicators which provide absolute proof that all of the economies of the Corrupt West are in a Greater Depression: interest rates and energy demand.

Regular readers have often seen the observation in these commentaries that interest rates across the West have never been this low for this long in the entire history of these nations – not even close. Why not? Two reasons:

  1. Interest rates this low have always been perceived (by our governments and all legitimate economic commentators) as being so reckless that any short-term benefit from such rates would have been more than offset by long-term harm.
  2. The reason why our governments have always deemed interest rates this low to be reckless is that in remotely healthy economies such rates would cause these economies to “over-heat” so rapidly and extremely that they would reach unsustainable levels of production and demand.

Are our economies over-heating? No. Nothing could be further from the truth. We see nothing but over-capacity all around us: one hundred million permanently unemployed people across the West, relentless business closures , declining real wages, and near-empty shopping malls (in “consumer economies”).

Interest rates this low are supposed to cause such rapid business expansion that the economy suffers from a labor shortage. Why are there a hundred million people unemployed across the West instead of labor shortages?

Regular readers have seen this question answered in the past in the form of a metaphor. Consider 0% and near-zero interest rates to be the economic equivalent of a defibrillator: the most-extreme, last-resort attempt to “stimulate” the human body when it is near death.

Our economies have had this economic defibrillator attached to them for more than eight years – without the slightest glimmer of life. What would happen to a human body if it was defibrillated continuously for more than eight years? Charred meat. This is what Western economies have become: charred meat.

In the case of the Corrupt West, we see this charred meat in the form of asset bubbles. Why are extremely low interest rates deemed to be so incredibly reckless? Asset bubbles. Near-zero interest rates are literally rocket fuel for the acceleration of asset bubbles.

We’ve been fueling our housing markets and our equity markets with this bubble-producing rocket fuel for more than eight years. What has been the result? Surprise, surprise: we see the biggest asset bubbles in history – especially in real estate markets .

In the United States, both its stock market bubble and bond market bubble are at all-time highs, simultaneously. This is not even theoretically possible in legitimate markets. Stocks and bonds are counter-cyclical markets.

These insane, reckless bubbles have created a thin veneer of “health” in Western economies. The absurd bubble levels (and temporary prices) in equity markets create what crooked bankers like B.S. Bernanke call “a wealth effect”: bubble prices create the illusion of greater wealth. However, with more than 80% of all equities held by the top-10%, it’s a fairly narrow illusion.

Much broader is the “wealth effect” (illusion of wealth) seen in our real estate markets. Real estate is held across a larger segment of society than equities. Also, constructing millions of superfluous housing units across the West just to satisfy the demand from speculators has created significant amounts of temporary employment in the construction and real estate industries.

What happens when the bubbles are burst, all of this illusory “wealth” evaporates, and all of the temporary employment disappears? Don’t answer that question yet.

Some readers may still refuse to believe that Western economies are mired in a permanent depression, despite the fact that eight years of defibrillation-by-interest-rate has produced no discernible reaction in these Corpse Economies. Eight years of hard-core “recovery” propaganda can be very convincing.

However, as stated at the beginning, there is a second means of proving that Western economies are mired in a Greater Depression: energy demand – meaning the lack of energy demand in the West.

It’s a simple equation. Economies use energy. Growing economies use more energy. There is no exception to this economic tautology. Even very efficient economies will require some incremental amounts of energy to grow. And our economies are not “very efficient” from an energy standpoint – the Right Wing has fought very hard for decades to prevent this.

For our economies to grow, they must consume more energy. Western economies are not consuming more energy.

Over the past eight years, all increases in global energy demand have come from the Rest of the World. According to the Western media, growth rates in the Rest of the World over the past eight years have been dismal, and those economies are using more energy.

Observe this July 2015 headline from the World Economic Forum:

“The surprising decline in US petroleum consumption”

The only reason this declining consumption is a “surprise” is because the corrupt liars in the U.S. government continue to pretend that this train-wreck economy is growing. If the U.S. government was honest and acknowledged the U.S. Greater Depression, this is the headline we would have seen at the WEF:

“The decline in U.S. petroleum consumption is expected”

Growing economies use more energy; shrinking economies use less energy. And if the Corrupt West wasn’t using its energy-intensive war machine so regularly, the collapse in energy demand in the Western world would have been even more pronounced. No economy with flat energy demand can pretend to be growing. No economy with its interest rates set permanently at near-zero levels can pretend to be growing. Both of those preceding statements are economic tautologies. Absolute proof. Western economies are not growing because two absolutely unequivocal economic fundamentals indicate such growth to be impossible. Here is a quote from the WEF article:

“Petroleum consumption in the US was lower in 2014 than it was in 1997, despite the fact that the economy grew almost 50% over this period.”

Here is the correction to that quote:

Petroleum consumption in the US was lower in 2014 than it was in 1997, despite the fact that the U.S. government pretended that the economy grew almost 50% over this period.

The convenient thing about imaginary economic growth is that it requires no energy to fuel it. There has been some small degree of divergence in the U.S. from petroleum consumption into alternative energy sources. Putting the statement above into context, since 1997, there has been very little real growth in the U.S. economy – and none in the last ten years.

Note one of the implications of two decades of imaginary U.S. GDP. The U.S. government claims the U.S. economy generates total GDP of $16.77. But in 1997; official U.S. GDP was below $10 trillion – and now we can see that most of the “GDP” since then is just more statistical smoke-and-mirrors.

The U.S. national debt might have already hit $20 TRILLION by the time this article is read. And that number excludes countless $trillions of debt which previous regimes have hidden with assorted accounting frauds. This is how/why U.S. “unfunded liabilities” exceed $200 TRILLION – because significant amounts of actual debt have been transformed into mere “liabilities” via accounting fraud.

Real U.S. debt is well above $20 trillion. Real U.S. GDP is down around $10 trillion. Without this extreme, permanent accounting fraud and years and years of falsifying GDP, it would be impossible for the U.S. government to pretend that the United States wasn’t already bankrupt. Other Western economies are only in marginally better condition – while their Traitor Governments run these economies into the ground as quickly as possible.

Look at the extreme, reckless (criminal) interest rates across the Western world. Understand what those rates mean. Look at the anemic energy demand across the Western world. Understand what it means.

The Western world is mired in a Greater Depression. To people who are paying attention, it couldn’t be more obvious.

Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers and investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but with a background in economics and law, he soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.

The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

 

(End of Sprott Money article)

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From Zero Hedge:  “It’s Bordering Chaos”: $14 Billion In Cargo Stranded At Sea, Crews “Go Crazy” On Hanjin Ghost Ships

 by Tyler Durden

The fallout from last week’s historic bankruptcy of one of the world’s biggest shipping lines, Hanjin Shipping, continued with little resolution with as much as $14 billion worth of cargo stranded at sea according to the WSJ, sending cargo owners scurrying to try to recover their goods and get them to customers. Since Hanjin’s bankruptcy protection filing, dozens of ships carrying more than half a million cargo containers have been denied access to ports around the world because of uncertainty about who would pay docking fees, container-storage and unloading bills. Some of those ships have been seized by the company’s creditors.

As Bloomberg adds, 85 Hanjin ships that have been effectively marooned offshore as ports in the U.S., Asia and Europe have turned the company’s ships away. The worry is that Hanjin ships won’t be able to pay port fees or their contents might be seized by creditors, which would disrupt port operations. The global shipping disruption comes just as companies are shipping merchandise to fill shelves and warehouses for the end-of-year holiday season.

Earlier this week, South Korean authorities rushed to piece together a capital injection. Hanjin Group will provide 100 billion won ($90 million), including 40 billion won from Chairman Cho Yang Ho, to help contain disruptions in the supply chain. At the same time, South Korea’s ruling Saenuri Party asked the government to offer about 100 billion won in low-interest loans to the shipping line if Hanjin Group provides collateral, in what is effectively a government funded DIP loan.

Some have calculated that the funding package won’t be enough: South Korea’s Ministry of Oceans and Fisheries estimates Hanjin Shipping needs more than 600 billion won to cover unpaid costs like fuel, including about 100 billion won immediately for payments such as to port operators to unload cargo from stranded ships. 

Meanwhile, in addition to the stranded cargo, there are other more pressing problems: “Our ships can become ghost ships,” said Kim Ho Kyung, a manager at Hanjin Shipping’s labor union.

“Food and water are running down in those ships floating in international waters.”  As a result, The company has started providing food, water and daily necessities to crews on six Hanjin ships anchored at ports including Rotterdam and Singapore. About 70 container movers and 15 bulk ships are stranded at 50 ports in 26 countries, according to Hanjin. One Hanjin captain operating a ship in international waters near Japan said his vessel has been given permission to enter a Japanese port Wednesday to unload cargo, but will be required to head back out soon after.

However the biggest threat is that being faced by Hanjin’s clients, who now find themselves with no products, and recourse.

 About 95% of the world’s manufactured goods—from dresses to televisions—are transported in shipping containers. Though Hanjin accounts for only about 3.2% of global container capacity, the disruption, which comes as retailers prepare to stock their shelves for the holiday season, is expected to be costly, as companies scramble to book their goods on other carriers.

Analysts don’t expect the snarl to leave U.S. retailers with inventory shortfalls for the holidays, but the longer the logjam drags on, the greater the risk.

Some of those most reliant on Hanjin, such as Samsung Electronics, which has said it has cargo valued at about $38 million stranded on Hanjin ships in international waters, are taking alternative measures:  the company said it is considering chartering 16 cargo planes to fulfill its shipment contracts, mostly to the U.S. “We’re passengers on a bus, and we’re being told we can’t get off,” Evan Jones, a lawyer for the company, said Tuesday.

For now US retailers aren’t feeling too much pain, as Nate Herman, a senior vice president for the American Apparel & Footwear Association, said: “This is not impacting store shelves now,” however he added that “It will impact store shelves if the situation isn’t resolved.” On Tuesday, the association, which represents manufacturers and retailers, held a conference call with 150 members. “People are still trying to figure out how to get their boxes off the boat and move them,” Mr. Herman said

The problem retailers face is that there is little precedent how to deal with the fallout. While Hanjin was granted protection by bankruptcy courts in Korea and the U.S., conditions are “bordering chaos,” said Lars Jensen, chief executive of SeaIntelligence Consulting in Copenhagen.

With so many Hanjin ships barred from entering ports, shippers have no idea when their cargo will be unloaded.” Jensen added that 43 Hanjin ships are en route to scheduled destinations with no guarantees that they will be allowed to unload. An additional 39 are circling or anchored outside ports. Eight ships have been seized by creditors.

While the courts’ creditor protection permits Hanjin ships to move in and out of certain terminals in those countries without fear of asset seizures, shippers and brokers say the rulings don’t solve the shipping line’s problems in the U.S., as it is unclear whether Hanjin will be able to afford to have the ships unloaded once they dock. Moreover, the courts’ rulings don’t necessarily apply to ports in Asia and Europe.

But while manufactured cargo can survive indefinitely, crews on ships can not, and as Hanjin ships drift at sea, their crews face increasing uncertainties and diminishing supplies. “We usually have food and water for about two weeks,” said the captain of a Hanjin-operated ship speaking by satellite phone from the South China Sea. But, after 12 days at sea, “everything is getting tight—food, water and fuel,” he said.The captain added that he is rationing water and cutting back air conditioning to save energy.

“The heat is driving the crew crazy,” he said. His ship was carrying lubricants and home appliances from South Asia to a Chinese port, but last Thursday, he was told to stop, as the ship could be seized at its destination.

Adding to the confusion, the WSJ adds that shippers and brokers said the Korean government has designated only three so-called base ports—Los Angeles, Singapore and Hamburg—where Hanjin vessels can unload shipments without risk of being seized by creditors.

“Even in those ports, we don’t know who is going to be paying unloading and docking fees,” a broker in Singapore said. “Korea says it will be Hanjin, but Hanjin is telling us it has no money. It’s a total mess.”

It gets worse.

The Korean Shippers Council, which represents more than 60,000 trading companies, said Wednesday  its members “have not been able to figure out the whereabouts of their freight.”

And even those who do know where their ships are, will soon find a dramatic surge in costs.  Brokers said the problems extend to carriers with vessel-sharing deals with Hanjin. They include China’s Cosco Group, Japan’s Kawasaki Kisen Kaisha Ltd., and Taiwan’s  Evergreen Marine Corp. and Yang Ming Marine Transport Corp., which typically move thousands of Hanjin containers daily. Sanne Manders, chief operating officer at California-based freight forwarder Flexport Inc., said rates on Asia-U.S. cargo have risen 40% to 50% since Monday on all sea lanes—not just those operated by Hanjin.

“That amounts to easily $600 to $700 per container,“ Mr. Manders said. ”We think this period of high prices will be 30 to 45 days,” through the initial peak for Thanksgiving-season shipping, he said. Freightos, an online marketplace for booking freight shipments, said the average price per container on Asia-U. S. routes rose 56% to $4,423 on Tuesday from $2,835 a week earlier.

The surging costs are a problem as the global shipping industry has been operating at a loss since the end of 2015, and it’s set to lose about $5 billion this year amid an oversupply of vessels, according Drewry Maritime Research.

The financial woes have made terminal operators and marine service suppliers wary of working with Hanjin’s vessels. Typically, port fees for a ship that can carry 8,000 boxes would be about $35,000 per call.

“Getting ships arrested or stranded would minimize debt exposure for vendors, but it will also get the court to quickly take steps to normalize the company and start making payments,” said Rahul Kapoor, a Singapore-based director at ship consultancy Drewry.

* * *

Meanwhile, executives with freight-booking platform Shippabo warned that companies should expect delays as many cargo containers have been rerouted on different vessels. “For the top 25 importers, this is a blip,” said Frank Layo, a retail strategist at consulting firm Kurt Salmon. “They’re diversified, they’re not shipping it all on one line.” But for smaller retailers with less sophistication, “this could be devastating,” he said.

Another word for devastating? A “justification” to miss earnings for yet one more quarter.

(End of Zero Hedge article)

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From Zero Hedge:  US Restaurant Industry Suffers Worst Collapse Since 2009

What tentative hope had emerged for a rebound for the U.S. restaurant industry at the start of the year, was doused last month when in its February Restaurant Industry Snapshot, TDn2K found that “Restaurant Sales and Traffic Tumble in February” and reported that same-store sales fell -3.7% in February, with traffic declining -5.0% . It did however leave a possibility that things may turn around as a result of the prompt disbursement of withheld tax refunds in the month, which it suggested may have adversely affected sales and traffic.

Alas, that did not happen, and restaurant struggles continued in March as sales and traffic again declined year-over-year: same-store sales were down 1.1% while traffic dropped 3.4%. March results were disappointing for an industry desperately trying to reverse performance trends; with sales now negative in 11 out of the last 12 months, the longest stretch since the financial crisis. There was a modest improvement sequentially, however, and while still negative, sales improved by 2.5% points compared to February as traffic rose marginally by 1.6%.

Explaining the sequential “improvement”, Victor Fernandez, executive director of insights and knowledge for TDn2K, said “March sales were expected to be somewhat better than February due in part to the catch-up of tax refunds that were initially delayed in February. In addition, the industry likely benefited from the shift in the Easter holiday, which fell in March in 2016. For the largest segments (quick service and casual dining), this holiday represents a potential loss of sales.”

 However, it was not enough: “The fact that sales were still negative in March given these tailwinds highlights the challenge chains have faced since the recession. Factors like restaurant oversupply and additional competition for dining occasions continue to take their toll on chain traffic.

As TDn2K further adds, with a same-store sales decline of 1.6%, the first quarter of 2017 was the fifth consecutive quarter of negative results. The last time the industry experienced a similar period was in 2009 and the first half of 2010, as the economy began recovery following the recession. Only this time the move is in the opposite direction.

Furthermore, the first quarter of 2017 followed a very disappointing 2.4 percent sales drop in the fourth quarter of 2016, highlighting the difficult operating environment currently facing many operators.

Worse, same-store traffic dropped even more, or -3.6% in Q1, consistent with the average -3.4% quarterly declines experienced since the beginning of 2016.

The growth rate in check average continues to trend down slowly. For the first quarter of 2017, the average check was up 1.9%, somewhat lower than the average 2.3%growth reported for 2016. This is likely the result of brands relying more on promotions and conservative menu price increases in response to continual declines in traffic. It confirms that restaurants don’t have even the most modest pricing power to offset volume declines.

On the other side of the spectrum, as has been the case in recent quarters, segments with the highest and lowest average check experienced better results. The strongest performance in the first quarter came from upscale casual, followed by fine dining and quick service. It is important to mention that fine dining and upscale casual are among the segments most negatively impacted by the shift in Easter.

Meanwhile, the worst segments in the first quarter were family dining and fast casual. Family dining concepts were also among the most negatively affected by the Easter shift.

A separate report from the National Restaurant Association found that its proprietary Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 98.8 in February – up 0.2 percent from a level of 98.6 in January, however this was the fifth consecutive month in which the Current Situation Index contracted (below 100), as  operators continued to report dampened same-store sales and customer traffic levels.

Furthermore, the NRA found that restaurant operators overall continued to report soft same-store sales in February, with results that were similar to January’s levels. 33% of restaurant operators reported a same-store sales increase between February 2016 and February 2017, while 51% reported a sales decline, a deterioration from January. Restaurant operators also reported dampened customer traffic levels in February.

Only 27% of restaurant operators reported an increase in customer traffic between February 2016 and February 2017, while 57% reported a decline in customer traffic. In January, 26  percent of operators reported higher customer traffic levels, while 54% said their traffic declined.

One notable finding in the TDn2k report was that despite waiters and bartenders being the fastest growing job category under the Obama “recovery”, restaurant operators list finding enough qualified employees to keep restaurants fully staffed as a primary concern. This is mainly due to skyrocketing restaurant churn rates as current restaurant workers believe they can find better options elsewhere, only to return disappointed. Turnover for restaurant hourly employees as well as managers increased again during February according to TDn2K’s People Report. These rates are currently higher than they have been in over ten years and rising.

Making matters worse for restaurants, some are finding that only by  offering higher compensation can they retain workers. So even if wages have been increasing slowly in recent years, this is expected to change soon as the labor market continues to tighten. In fact, according to a recent survey by People Report, about 80% of restaurant companies reported having to offer additional financial incentives to attract candidates in tough recruiting markets. In most almost all cases, those incentives take the form of higher base pay. Who would have though that there is a shortage of line cooks and waiters in the US.

While many continue to seek answers in the pernicious tailspin in the US restaurant industry within the supply side – pricing, competition, layout – the reality is that the key variable may remain with demand.  As some have speculated, it could simply be the reluctance or inability to eat out when money is being inflated elsewhere, to cover higher cost-of-living increases in other areas, such as rent or healthcare, even as wages for large parts of the population remain frozen.
To be sure, restaurant spending is a thermometer for discretionary spending, which varies with how well consumers are doing, and it’s the first to react as Wolf Richter correctly points out. When consumers hit their limits, the first things they cut are discretionary items, such as eating out.

As such, the worst tailspin in the US restaurant industry since 2009 remains the biggest flashing red alert suggesting that when it comes to that invincible dynamo behind the US economy, the American consumer, things have not been this bad in a long time.

(End of Zero Hedge article)

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From Zero Hedge:  “The Retail Bubble Has Now Burst”: A Record 8,640 Stores Are Closing In 2017

 04/22/2017 –

From The New York Post:  Why Americans Have Stopped  Moving

April 15, 2017

By Kyle Smith

Americans are stuck. Locked into our jobs, rooted where we live, frozen at our income levels. More than at any previous point in our history, we’ve stopped moving — whether moving up the income ladder or packing up a truck and finding another home. We’ve grown ossified, rigid.

The flip side is that we’re stable. If we weren’t so content, we’d be more willing to gamble, to shake things up, to start a new firm or join one. Maybe we’re fine where we are. But maybe this period of stasis cannot last. Maybe it even portends a period of massive disruption.

In “The Complacent Class: The Self-Defeating Quest for the American Dream,” economist Tyler Cowen presents an X-ray of societal sclerosis. This isn’t merely another exercise in nostalgia, a sentimental yearning for a bygone era (when, for instance, crime and pollution were higher, people were highly likely to marry someone who lived within five blocks and you would buy an album containing 10 lousy songs because you liked one track). Something has changed in the American character and in the American economy, and the two seem to be reinforcing each other.

For instance, parts of the country (New York City, Silicon Valley, Texas) are doing extremely well, yet able-bodied adults sit idle in other areas. Why don’t the unemployed, and the large numbers who have dropped out of the labor force, move to the boom towns? Wouldn’t it be better to drive an Uber in Brooklyn than to get by on welfare in West Virginia?

Yet labor mobility is in a funk. Especially after WWII, millions of Americans with limited resources — southern blacks — moved hundreds of miles from home to take up industrial jobs in the north. At the peak, more than 30 percent of southern-born blacks moved north, from 1920 through the 1960s. Even when technological limitations made long-distance travel extremely onerous, in the late 19 century, we were willing to travel in search of opportunity. In the second half of the 1800s, more than two-thirds of US men over 30 had moved away from their hometowns, and more than a third of those moves were for more than 100 miles.

Nowadays, moving from one state to another has dropped 51 percent from its average in the postwar years, and that number has been decreasing for more than 30 years. Black Americans, once especially adventurous, are now especially immobile. A survey of blacks born between 1952 and 1982 found that 69 percent had remained in the same county and 82 percent stayed in the same state where they were born.

This is especially troubling in context: Studies show major benefits for the children of poor people who move to better-off neighborhoods via, for instance, a program called Moving to Opportunity. If a poor child from a bad neighborhood moved to a middle-class neighborhood at age 8, his expected lifetime income would be $302,000 higher than if he stayed put. Still, the bias toward inertia is so strong that 52 percent of impoverished black families told about Moving to Opportunity declined offers to participate.
One reason people don’t move where the jobs are is because of real-estate prices — which in turn are kept at high levels by regulatory restrictions and NIMBY-ism. In New York City in the 1950s a typical apartment rented for $60 a month, or $530 today if you adjust for inflation. Two researchers found that if you reduced regulations for building new homes in places like New York and San Francisco to the median level, the resulting expanded workforce would increase US GDP by $1.7 trillion. That won’t happen, though: More homes would diminish the property values of existing homeowners.

When we lose the ability to pay for stuff, the poorest and least powerful will be the first and worst hurt.

That locked-in syndrome is a factor in economic stagnation, too: A recent Wells Fargo survey found that white-collar office productivity growth was zero. As the economy was supposedly recovering from the financial crisis, from 2009 to 2014, American median wages fell 4 percent. Men’s median incomes today are actually below 1969 levels. Had we retained our pre-1973 rates of productivity growth, the typical household would earn about $30,000 a year more than it does.

Despite all the hype attached to a few tech companies, far fewer companies are being formed than in the 1980s, and fewer Americans are working for startups. Such new companies are linked with rapid job creation. We’re coming close, Cowen says, to realizing the 1950s cliche (not really true then) of everyone clinging to a job at a handful of huge, soul-crushing companies.

So where is all this heading? “Ultimately peace and stability must be paid for,” writes Cowen. Sluggish growth, diminished productivity, unwillingness to move to a better job and fewer entrepreneurs taking risks to create fortunes adds up to less tax revenue. When we lose the ability to pay for stuff, the poorest and least powerful will be the first and worst hurt. They won’t like it.

The social, economic and political disruption represented by the ascent of President Trump is one of the early warning signs, Cowen says, that the tectonic plates of our society are rumbling. When they start to move, a lot of complacency will be destroyed in the quake.

(End of the New York Post article)

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Final Commentary:  If we were to sit back and really try to digest this stunning actual information about the American economy, one over-arching conclusion could be reached:  that after all we have seen of the “mainstream media” during and after the 2016 Presidential primaries and election process, there is no doubt that we are not being adequately informed about what is going on around us.

Irrespective of where each of us are on the political spectrum, it is clear that the “mainstream media” reporting no longer follows the ethical code and journalistic standards of our traditional American free press.  This abrogation of its duty and its privileged position as defined in the U.S. Constitution is a substantial danger to us all because we’re being deprived of the authentic information we need to cope with America’s acute social and economic condition.  In a word, we are being blinded and manipulated.  And it’s our next generation that is being brought to a standstill; immobilized, disempowered, and deteriorating in place.