01/20/11 Paris, France – We’re in the airport, on our way back to Washington. Below…we’ll tell you more about one family’s economy… But first, let’s look at the whole world’s economy…
Nothing much happened in the markets yesterday anyway.
“Why jobs aren’t part of US revival,” asks a New York Times headline.
The US now has a higher unemployment rate than Russia…or Britain…or Germany…or Japan. When it comes to joblessness, the US is a world leader.
But why? Economists can’t figure it out. Harvard economist Lawrence Katz says it’s “genuinely puzzling.”
After admitting that he has no idea why there are so many people without jobs, columnist David Leonhardt goes on to tell us that “fixing the job market will take years.”
Hmmm… How does he know that? And how does he think he can fix something if he doesn’t know how it’s broken?
No point in asking questions like that… The fixers never know what is going on…but they’re always ready with a solution.
In Leonhardt’s case, he proposes a few meddles that are bound to make the situation more complicated…and generally, worse.
So, since we’ve been giving unsolicited advice lately, we won’t hold back today.
First, why are so many people unemployed? The answer is very simple. Because there is no profitable work for them to do as present labor rates. Thanks to previous meddles, the US economy focused itself on building houses and importing geegaws from overseas for people who couldn’t afford to pay for them. This was a dead-end economic model. And the end came in 2007. Now, the latest figures show an uptick in manufacturing…which is clearly the direction to go. But it will take years before the US economy has made the adjustment to a new, healthier model…making and selling things at a profit.
In the meantime, unemployment levels will remain high.
But wait…there’s more. For which the adjustment is taking place, US authorities are trying to block it. How? By taking resources from the new, unborn industries and using it to prop up the old, dying ones. Like Wall Street, for example. The financial industry grew like Topsy in the bubble years. It began to shrink in the crisis of ’07-’09, but the feds came in and pumped more than a trillion dollars into the financial sector, producing record profits for the big banks, but depriving the rest of the economy of much needed capital.
Not only that, the feds also take the pressure off labor to make adjustments. Food stamps, minimum wages, unemployment compensation, make-work, shovel-ready boondoggles – all these things cause workers to think they can continue as before…that a “recovery” of the good ol’ days is just around the corner…and that they’ll soon be earning as much as they were in 2007. Maybe more!
Want to really fix the unemployment problem? Listen up. Eliminate all bailouts, subsidies, giveaways and support systems – both to business and to labor. Abolish all employment restrictions and employment paperwork. All free labor – undocumented non-citizens – to compete equally with native-born workers. Cut taxes to a flat 10% rate for everyone. Abolish every government agency that begins with a letter of the alphabet. Then abolish the rest of them.
We confidently guarantee that the nation would be back at full employment within 30 days.
But wait…you’re not reading The Daily Reckoning to solve the nation’s problems. And we’re not delusional enough to think our advice is going to make any difference whatsoever anyway.
So, let’s turn back to our normal, dreary work…trying to figure out what is going on in the world economy.
On this trip to Europe, we visited with two of our Family Office partners…
The “Family Office” is the organization we use for investing, and preserving, our own family money.
What’s “family money”? Glad you asked. It’s money that is owned by a family, rather than by one person alone… It’s money that is expected to grow and endure…for generations, if you’re lucky.
Not many people have “family money.” It’s hard to get. And hard to hold onto. You can get money by accident. But you can’t get family money by accident.
Of course, you need some money. But that’s the easy part. You can have a family fortune of any size. It’s how you look at it…and how you manage it that matters…not how much money you have.
But it’s the family that is hard…that’s where most family wealth usually washes up. And it’s why you have to prepare the next generation…develop a family culture that lasts…and avoid conflicts that destroy both the family and its money.
It’s hard work. And it’s getting harder. And becoming more necessary too. When the European and American economies were in full expansion, each generation could make its own way. Now that growth has slowed…it will be harder to start with nothing and build a fortune. The next generation may need help…
Stay tuned.
Regards,
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
…making and selling things at a profit.
_______________
Novel idea!
Nice article as usual. But also plenty of contradiction, as usual. Australia, Germany, Canada — all more socialist than the US. Also all more successful as of late. So tough to isolate socialism as the key explanatory variable, unless you have some strong notions already. Bail outs? Maybe something to that. Of course a successful economy does not need them, so chicken and egg problem.
Liked the part about family money though. Wish I had some.
Making and selling things at profit is hard work and most Americans aren’t going to cozy up to that idea again anytime soon. It will have to be forced upon them. Better to baffle ‘em with BS than blind ‘em with brillance.
I coach little league baseball. We have all star teams that get to play in post-season if they are chosen. Parents and coaches don’t teach their kids to compete. Better to suck-up to those that make the decisions, or in some cases sleep with them to get their child on the team. This same sort of problem is rampant in all phases of American life. Hard work and competition are only for those without connections, or for people with integrity.
Family $: buy things of value for your children while you can. Even if it is just a small amt. of land, silver, livestock or whatever else you can think of. You may have to go through life dead-broke, but your children will have a good start in life.
Also, you can teach them skills such as hunting, fishing, gardening, auto repair, etc. Teach them to build houses, or any other type of dwelling. If you don’t know how then buy books, or print the info from the i-net and save the material for the time they will need it.
Skills can and may well be more important in the future than gold and silver.
I have to agree with Bill’s Solution to create full employment.
There is never any shortage of work that needs to be done. It’s paper work, restictions, minimum wages, unemployment insurance, food stamps, the high cost of firing someone, payroll taxes and frictions like that that create unemployment.
Necessity is THE Mother of Invention. If it were necessary to work in order to eat then all would work. (And if someone didn’t work why then nature would shortly take care of the problem, if you know what I mean.
Companies would soon have to compete again for the best workers.
Now. Bill’s solution is extreme, but if we can agree it would work, then perhaps we can get government to at least work in that direction.
Dear Government. The old saying is Lead, Follow or Get Out of the Way. You tried leading for a while now and it’s not working. So… Get Out Of the Way!!!
One last thing. Learn how to avoid probate court with the things you own now, such as your home. In many states you can deed the property to your children and take out a life estate for yourself is one example.
I don’t know,,, When you have a company like Evergreen Solar packing it up and moving to China in the mist of serious economic problems and high unemployment ,,,and proud of it,,, something isn’t right.
ok, you’re (16-25? 30?) years old;
you have (finished/almost finished) your education;
so, go deal w/ the job/housing/healthcare/transportation/partner stuff,
NOW!
goodbye and good luck!
stay in touch and i’ll be here IF you NEED me…
…maybe…
I really like watching you guys go down the same old tired rutted road looking for new answers to problems that are either insoluble or if they are, solving them always creates many more problems. I guess you do it because you feel and think you need to do something. Its either that or face the music.
Question: Why there no jobs in the United States?
Answer: The United States is very unfriendly to business. Out of control legal system, out of control health care costs, out of control government meddling…..
Ah Bill;” the next generation may need help” Do you mean give them money? The family office providing a daily or weekly stipend? . You suffered the next generation must suffer as well .How else will they learn?
To Green Chiles, so you think that Canada is more socialist than the US? Hah, why is it so hard to find people to go to work here? You know why? Because there are a lot of people here running their own small businesses with no help from the government. You’ve been reading the fluff from the American press for far too long. Mark Twain, the great American writer said: “If you don’t read the newspaper you are uninformed. If you read the newspaper you are misinformed.”
Realestateforay, Worlds largest Property Listing Company. We are serving Realestate industry since 2006.With our vast experience in the same field, we completely understand the needs of our consumers and strive hard to meet the same.http://www.realestateforay.com
I agree with Bill but I would add to abolish unions and withdrawal from all global free trade agreements.
Make what we use and sell the remainder to the rest of the world. That’s always been how America was before the world progressives and greed became the norm.
Good concept- really BAD ideas, especially concerning labor.. you want to get people back to full employment, here’s how:
1) Tax breaks to companies that hire But SEVERE Tax INCREASES to businesses that are sitting on cash and refuse to hire.
2) Ban ‘temping’.. Business must be Forced to pay real wages and real benefits.
3) US companies Must make at least 15% of the totality of their products domestically in the US or have 25-50% tariffs imposed.
4) No income tax for those making $30k or less… Those making $1mill or more, pay 50%… those making $10mill or more, pay 70% tax
5) Double the windfall profits tax and any other money made from Wall St earnings
Summary- Business is like a uppity dog that needs a couple hard ‘pops’ with a rolled up newspaper to get it in line.
The real issue behind joblessness is not the lack of available jobs. It is an issue of the lack of individuals willing to do, well let’s face it, some pretty nasty or unseemly jobs. I was not always lucky enough to have my Degree in Nursing. Before attaining it I worked a number of jobs that could make you physically ill if you pondered them to long. I worked as a Nurses aide in a hospital and nursing home. Mopping floors and cleaning toilets at a local truck stop (probably the worst) and the list goes on. The jobs were not were not exclusive to each other as I worked two or three at the same time. My point is the average American looks down on those who do this work and they look down on the jobs themselves as if we live in a caste system where every person in this country feels superior to his neighbor. My point is if we quit handing out unemployment like it is candy, many workers will have no choice but to work the lower end jobs, because it is not going to go back to the way it was, at least for a very long time.
Get back to work America!!!
The economy is like a car. The engine of free enterprise makes it go and it used to be pretty efficient. But slowly, extras are built in to soften the ride, like welfare, social security, unemployment and medicare. These extras that are a drag on the system, are increasingly seen as necessities. With the government being the only sector that is continually booming, this car is loosing pickup and burning more gas.
Certainly, at the least take away their tax breaks and take us out of NAFTA and the WTO. What corporations operating in third world countries are doing is immoral. They dump their toxic waste on the countryside rather than spend money to clean it up. They use low paid laborers that get no pension or healthcare and just kick them aside when they can not work anymore because it is cheaper to replace the workers instead of spending money on proper work conditions, or safety protection for them. Allowing these corporations to sell in the US is no different than buying blood diamonds.
All of America’s problems started with the adoption of poorly written NAFTA and then the WTO agreements by power hungry people who cared more about their greed and ruling the world than any allegiances to the US. Ross Perot was right. Did you hear that sucking sound as most manufacturers left the US for countries with slave cheep labor? Want the US worker back to work? Put high import tariffs on companies that left the US. Certainly, at the least take away their tax breaks and take us out of NAFTA and the WTO. What corporations operating in third world countries are doing is immoral. They dump their toxic waste on the countryside rather than spend money to clean it up. They use low paid laborers that get no pension or healthcare and just kick them aside when they can not work anymore because it is cheaper to replace the workers instead of spending money on proper work conditions, or safety protection for them. Allowing these corporations to sell in the US is no different than buying blood diamonds.
Alexander, the US is unfriendly to business. The county expects corporations to treat its workers with respect, not pollute the countryside, and pay their taxes. The reason we have out of control healthcare costs and an out of control legal system is because of lack of government intervention and oversight. Not because of too much.
Dear Mr. Bonne,
Everything you say is absolutely correct.
Unfortunately none of it will ever happen.
The monster will never cut of its own head.
Be prepared and plan accordingly.
Best,
LG
Bill, when you said “All free labor – undocumented non-citizens – to compete equally with native-born workers.” did you mean “Free all labor – including undocumented non-citizens – to compete equally with native-born workers.”? I assume that’s what you mean, but I’m quoting you somewhere else and want to make sure.