When the Unemployed Lose Faith in the System

by Bill Bonner.

Dow plus 71 yesterday. Gold plus $15.

Everything seems okay, doesn’t it? Good, then let’s look deeper…at the story behind the story…

As we’ve been saying, elites look out for themselves. But why not? Everyone looks out for Numero Uno. No? Isn’t that what you’d expect?

Every organization has some people in control of it. Government is no exception. Often, the people with real control are not those who appear to have the reigns of power. Sometimes, the real power is hidden…behind the scenes…

Some of the most remarkable and successful societies have been ruled by slaves. No kidding. The Mamluks in Egypt and the Janissaries in the Ottoman Empire. They were captured or bought in Europe. The boys – usually Christian – were taken to special training camps. There, they were converted to Islam and learned the arts of war and administration. They became soldiers. Or bureaucrats. Generals. Governors. They ran things on a day-to-day basis…for the elite powers behind them.

Of course, sometimes, like Rome’s barbarian troops, they turned on their masters and took over completely… Then, the master became the slave…

But that is a long, long story. Even in a complex, modern democracy the government acts first and foremost on behalf of the groups that control it.

How? Part bribery. Party larceny. They take from some. They give to others. They keep a lot for themselves.

So, it was not at all surprising that in the crisis of ’07-’09 the feds immediately bailed out the banks. That was an act of larceny. The big banks have power. They used the power to enrich themselves. Simple, huh?

This treachery cost the nation trillions of dollars, but only one out of a 1,000 people really understands what is going on. The other 999 think the feds “saved the economy.” They think Ben Bernanke is a hero, not a scoundrel.

In a representative democracy, powerful elites have to pretend to act for the good of the “people.” So, they pretend that bailouts to Wall Street are necessary. And they provide handouts to the poor, too. Food stamps, for example. People who get food stamps have little real power. But they vote. Food stamps are a cheap way to bribe the electorate.

And as more and more people are caught up in the system – as either knave, enabler, or accomplice – the more the system becomes zombified. There are just fewer and fewer people left who are actually producing wealth. The system itself then begins to creak and crumble…and finally falls apart.

We’re not fool enough to think that this is what really happens. It’s just what you’d call an “artist’s conception.” It’s an idealized, simplified theory about the way things work.

Real life is always much, much more nuanced…complicated…and infinitely messy.

Still, it gives us a way of understanding, imperfectly, the drift of things…

For example…the Fed’s quantitative easing and the Obama administration’s stimulus program.

“The US stimulus robbed our grandchildren,” writes Darrell Issa, US congressman, in The Financial Times.

We were surprised. We didn’t think there was anyone in congress – except for Ron Paul – who had any idea of what was going on. Mr. Issa seems to be another exception.

He explains that the results from the 4th quarter are now in. They show that the stimulus program “has woefully failed to reach each of its self-imposed targets.”

Employment is 6.8 million short. And fourth quarter GDP is $400 billion less than promised.

“Some 47 out of 50 US states…have lost jobs since the stimulus was passed,” he reports.

And most of the jobs that were created were zombie jobs – working in the public sector.

In other words, the feds spent $814 billion. We got nothing much for it. But the bill will be handed to future generations – who are guilty of neither larceny nor complicity.

Bill Bonner
for The Daily Reckoning

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. 

  • John

    The stimulus and bail out worked perfectly as planned. They were ever only there to bail out the elite fat cat cronies of Hank Paulsen and Ben Bernanke. Only fools believed that any of the stimulus would be use to help Main Street as opposed to Wall Street. What is amazing is that the larcency goes on right before our eyes and no one even blinks.

  • ranger

    Gentlemen: Limbaugh, Hannity, Beck and two generations of government schooling have finally succeeded in making Americans think they should rule a world they know nothing about, relying on expert minds full of stupid ideas.

  • Scott

    “Zombie workers?” Is that the expression of gratitude we offer police/fire, teachers,social workers, municipal govt workers etc? So these people don’t spend their paychecks like everyone else? Raise families, buy houses and put down roots like everyone else? Is anyone out there as sick to death as I am at this constant narrative against those who happen to work for the govt? And Darrel Issa? Are you kidding me?!! He knows what’s going on and is willing to fight against excess and corruption as long as it is someone outside his party doing the dirty. What a bastion of integrity and vision!

  • Ben (not that one)

    You’re a pretty savvy character, only until this piece I’ve always wondered if you were deliberately ignoring the root cause of our problems or just blind to reality.

    Because of the sheer amount of looting and damage being caused by the big banks what with their political power, this dwarfs our other issues.

  • not_harry

    Scott:

    Cops & Firefighters get my gratitude, because they put their lives on the line.

    The 95% of the others get all huffy when you tell them they’re not cops and firefighters and are mostly just sucking the public teat. Then they tell you to take a number and wait your turn at the window.

  • Scott

    not_harry,

    I have never had a govt. job but my brother works very hard for a county in CA. he is an IT specialist and must keep up on the dozens of programs running in their system. Half of his department has been laid off. There is no more overtime even though he works hours beyond his shift because they are so short staffed. Everyone works sick. These people keep the Sheriff’s dept running, social services, planning dept., etc, etc. I am sick and tired of people badmouthing public workers as if it is their fault for our current economic mess.

  • Noel Goetz

    Blaming public employee’s unions, health care, illegal immigration and everything else that raises your blood pressure is just another diversion from the raper-banksters agenda. If they get us pointing fingers at each other, they gain another day to line their pockets. Lets all take a deep breath, re-group and re-focus. Unfortunately our demise will be theirs as well. A deathward spiral for the dollar is a spiral for their dollar as well. They buy gold by the ton. That should be telling us something.

  • Mark

    Scott and not_harry,

    I think there are way too many cops and firemen. I have friends that are both – The cops are mainly a pain in the butt and the firemen work 2 days a week (sleep half the time and play farmville the other half). I live in a small town of about 30,000 people. We’ve got 80 city police officers that do nothing but write tickets and eat – I don’t think we need any of them. We’ve got another 100 or so county policy that overlap our town and would be more than enough by themselves to handle the utter absence of real crime in our town. Then let’s not forget the state police, DNR, railroad police, and the multitude of other state and federal authorities overseeing us. We have three fire stations and 67 firemen in our town. One firehouse and 15 firemen would be plenty. As for nearly every other government worker – I could probably get by without their service too, or at least 90% of them.

  • phelps

    Relax Scott, gov workers get paid very well for what little they do. Is the paycheck not gratitude enough? Do we need to endlessly kiss their ass? Cops are the second most useless gov workers of all and don’t get me started on social workers. They are incompetence with attitude.

  • Micah

    Scott,

    Irrespective of whether their intentions are good….. their aims laudable and valuable…. and maybe even considering that their efforts could have a market value worth what they are being paid….. it is all still the product of racketeering with stolen funds….. The approval of some sizable minority of the public and all of officialdom adds only a slight sheen of respectability to it.

    If fire protection is a valuable service, would homeowners not want it without threatening their neighbors with violence to force it upon them as well? Without the possibility of a homeowner opting out of the system that finances it, a homeowner is forced to accept graft and waste without recourse; there is no market mechanism to protect his pocketbook, only a violent mechanism to compel his prompt payment for the potential “service” you think he fails to properly appreciate.

    In publicly funded pursuits such as the the fireman you hold up for worship, only the goodwill of the group of public (commissioner, mayor, council, whatever) employees who set the compensation for the other group of public employees – in this case, the fireman – holds the ballooning of the growth in costs in check. Predictably, it performs abysmally as a cost limiter.

    The same applies to police… teachers… public sector IT workers…. the dog catcher – they are definitionally not a good value. If they were efficient and a good relative value, it wouldn’t require a sublimated threat (but only mildly sublimated) of force to inflict their ‘service’ upon those ‘served’.

    Teaching children has value, so long as it is economically efficient and serves to teach something of value to the consumer of the product; I propose that public education in the aggregate fails on both the counts of efficiency and value. The system survives to provide $200,000+ retirement incomes to administrators put to pasture (and a somewhat more modest bit of extracted largess for the underling class) not because it successfully educates, because the information imparted has value or because the delivery methodology is efficient; it is because it is a closed system (competition is priced out of the market), financed and enforced by that implicit threat of violence were the funders to attempt to withhold the funding. Anyone wishing to avoid this system will pay for it even if they eschew it. What would the state of electric vehicles be if the purchaser were required to continue paying a full share of fuel costs for the gasoline of combustion engine driving peers? Would they sell any at all, or might the requirement that he pay for it (regardless of his lack of approval of the level of efficiency or intrinsic value of the product) tend to support the sales of more gasoline powered cars, where one would not support a ‘public’ model of gasoline in addition to whatever choice he might make as the moral/responsible/convenient one? Whys should anyone decide that he will pay for gasoline or face the violence of those who think he should? Should we be surprised if he is resentful of those who show up at his house to demand his payment for the gallons of fuel he hasn’t used? Should we demand that he show proper appreciation for these public benefactors who collect his fair share, and stop blaming them for his low amount of disposable income (since it is his own fault for not choosing the gasoline powered means of conveyance)?

    Your underlying point might have some small merit in some very narrow way – it might be unfair to blame the public employees you reference individually for some contributory role in the financial crisis…… but it certainly isn’t any worse than threatening violence on me if I want to stop funding their (self-proclaimed) good works! I’ll agree to never badmouth a public worker so long as I am never conscripted, without consent, to contribute to his salary.

    All salaried activity performed with public funding is the product of pilfered funds, without exception. Your incredulity that the host might take exception to the parasite when it realizes the nature of the relationship cannot be taken as good-faith incredulity….. you must earn a living from the stolen funds yourself.

  • Deft

    Scott, most government workers are non-productive bureaucrats with lavish benefits…in the private sector they would be paid less than minimum wage because they don’t produce anything. They are a drain on the economy.

    Actually though most of us don’t produce anything anymore since the dollar being the reserve currency has caused our production to go overseas to less Socialized countries.

  • steverino

    in most communities, policeman AND firemen are sworn “officers of the law”. they are “under orders”. so we have both sides, here.
    on one hand they carry weapons and are required to put their butts on the line for OUR property and lives. on the other hand, they’re human beings and no different from anybody else when it comes to screwing up or just screwing somebody they don’t like. not all of them, any more than all of us. i think some of us see the one aspect more readily, others, the other, and i’m oversimplifying by just being dualistic. but, still, it is my “artists’s conception”. concepts are fine, but we are reminded to not mistake the map for the territory.
    scott: i think mr bonner’s point was that gov’t workers do not create wealth. they do spend money. ours. it isn’t that they aren’t our relatives and neighbors and nice folks and eat at the restaurants with us. his point is abstract & philosophical, if i understand him.
    governments do not produce wealth. therefor, the smaller the government we can have to do thing that are truly government functions, the better off we are. swollen governments are economic drains on the people and anchors to smooth economic sailing. if we have an economic mess, what is the problem? and how do we fix it? these questions need to be addressed, AND THEY ARE NOT. why? b/c the gov’t will “lose” if it fixes the problems.

  • steverino

    if the gov’t won’t address the problems, the people must. our dogs and cats are too busy. what we are doing right here, today is exactly the kind of discussion which is needed to get started. we have different values. we’re human! one see’s no problem with huge gov’t and enormous deficit spending and funding the debt [QE]. another sees the same picture and does have a problem, b/c he or she feels the whole sysytem is asinine and we now have enuf debt to enslave 3 generations to pay it back. public debt. we don’t think we owe it. but we do.
    houston, we have a problem.
    scott, listen: every single person on this page thinks we have pretty serious problem(s) here. except you. and, that’s ok. if you don’t think we have a problem or two which need to be ADDRESSED and FIXED, fine. but step away from the table, son, and let us get to work, ok?

  • City Folk

    Ha! Ha! Looks like poultry farm is phasing out and giving way to zombie farm.
    Then, supply of zombies is rising rapidly till market saturation. We will never run short of high breed zombies. Zombie economics!!! Hooray long life zombie!!!
    “Zombies of the mars unite, you have nothing to lose, be alert in polishing up your two jutting jaws.” Shouted the zombie king.

  • CT

    steverino said “we’re human! one see’s no problem with huge gov’t and enormous deficit spending and funding the debt [QE]. another sees the same picture and does have a problem.” So true, so true. We in this country are our own worst enemy. We cannot agree on anything and spend all our time making our points to the detriment of this country. It looks like it is time for this country to create a new concept of what this country is. One that everyone can agree with and actually work together for the betterment of everyone living in this country. Could happen and it won’t. Nothing is really going to change or happen except we fiddle while we burn. What a pipe dream we have created.

  • phelps who cant swim

    How much gratitude should we give gov workers? Isn’t the paycheck and benefits enough for them? Are they free of any and all scrutiny just because they “serve” us?

    Bill is being very polite with the Zombie workers reference. Incompetence with attitude is how I would describe 75% of them.

  • http://zombie.com Zombie

    Please write about Tom Freidman.

  • wishicouldright

    In my private sector profession when there’s a need to trim the workforce to boost the bottom line, middle management and poor performing individual contributors get the pink slips. If deeper cuts are required upper management tiers are trimmed. Those with pay commensurate with their skills that can deliver to the bottom line generally survive cuts in the workforce. That’s not the case with public sector organizations. Especially those at the federal level. I contend public education’s top heavy administration, state and federal, is pure theft of the peoples’ money and their childrens’ education. Fire them all unless they actually work in a classroom.

  • tiredofthebs

    In your article, you said “They raise the price of labor to the point where it no longer makes sense to hire young workers.” And that is true. However, it is also true for those of us on the other end of the age curve. I am in my early fifties and have been out of work for nearly two years. Evidently, it doesn’t make sense to hire older workers at today’s labor price, either.

  • Paul Chambers

    Here in Ca…..there is no profit being made in Construction/Paving. Therefore co’s are closing enviromental hysteria has driven operating costs thru the roof. And therefore nobody is hiring…they are still laying off and closing down……

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