GDP Growth: The Civic Duty of Every US Consumer
No panic on Wall Street — yet. Gold still over $1,600.
But watch out. Our hunch is that when people come to their senses…they will run for the exits.
Europe’s shifting from austerity to “growth”…which really means more debt.
America’s growth is phony — with fewer jobs today than when the ’08 recession began.
More people are below the poverty line. More people on food stamps. And more people so broke they can’t even go broke. CNN Money reports:
This year, hundreds of thousands of Americans are expected to be too broke to file for bankruptcy.
The average cost to file for Chapter 7 bankruptcy protection, the most common form of consumer bankruptcy, is more than $1,500, according to recent research submitted to the National Bureau of Economic Research.
As a result, anywhere between 200,000 and one million consumers are estimated to be unable to afford that steep cost this year.
The research, conducted by a group of professors from Columbia University, the University of Chicago and Washington University in St. Louis, examined how bankruptcy filings spiked after people received their tax rebates in previous years. They estimate that another 200,000 consumers, who would otherwise not have enough money to file, will use their tax refunds to pay for bankruptcy this year.
“For lots of people, bankruptcy has been taken off the table as an option because of the severe fees involved,” said Jialan Wang, co-author of the report.
And here comes the critical insight:
“It becomes harder and harder to pay off the debt as interest payments get higher, so your debt grows larger and larger,” she said.
Hey, somebody should mention this to the world’s central banks. And to Paul Krugman. And Larry Summers. And Ben Bernanke himself.
They think the key to solving the world’s financial problems is more spending…more debt and more “growth.” But you know they can’t really give the world more growth. Real growth requires real investment, real output, real risk, skills…customers with money…and all the rest. All they can really give the world for sure is more debt. Which is exactly what the plan is.
More debt is certain. Growth is unlikely…except in the ersatz version.
Thanks to LTRO, QE and the Twist the feds are really not borrowing money at all. They’re printing it. So, you might say that printing money is a debt-free approach to growth. Except that even dollar bills are debt instruments. They are “notes” from a bank of zero maturity. You can cash them in at any time. Of course, all you’ll get are more paper notes. Which just goes to show how silly the whole system is.
The trouble with the folks who are too broke to go broke is that they don’t have enough of those paper notes. If they were a major bank…or a national government…they could get more of them, just by asking. The Fed would print them up “out of thin air.”
They might as well do the same for the small deadbeats too. Why not? The paper money doesn’t cost them anything.
But today we’ve got more important things on our mind that the problems of America’s poor people. We’re thinking about growth itself…
The guy who drives out to the neighborhood bar, spends all night drinking, and then drives back home…stimulates GDP. Better yet, he crashes his car on the way home. Then, he is a real hero to the economy. He has to buy another car.
The poor sap who stays at home is a drag on growth.
The fellow who goes to McDonald’s night after night rather than cooking his own burgers…the fellow who leaves his window open with the air-conditioning running…the fellow who hires a lawn service company rather than cutting his own grass…the man who borrows money to finance a house or a vacation — all of them add to the GDP.
Want to increase GDP? Want growth? Let’s cut each other’s lawns. Let’s get others to wash our clothes…and clean our houses. Let’s make gadgets, geegaws and other worthless paraphernalia and sell them to each other! Get the housewives into the labor force. Give jobs to teenagers. Don’t do anything for yourself.
The guy who plants his own garden…who cuts his own firewood…who fixes his own roof — he is a traitor to the economy. He needs to get another job…borrow money…burn more gasoline…to buy more stuff…!
Doesn’t he know the US needs growth?
The trouble with GDP growth is that it only tells you how fast the wheels are spinning. It doesn’t tell you if you’re getting anywhere.
Turns out, more and more people are shirking their patriotic duty to waste money; they’re betraying the economy that supports them.
A report a few weeks ago told us that young people have fallen out of love with the automobile. They buy fewer of them. They drive less. They consume less fuel, less oil, less gasoline.
That certainly won’t help growth. And neither will people without jobs. There are, officially, 13.3 million of them. And 29% of them have been unemployed for a year or more. Can’t get much growth that way.
And what happens after you’ve been jobless for a year or more?
The Washington Post calls it the “incredible shrinking labor force.” People in the work pool are drowning before they are rescued.
If the same percentage of adults were in the workforce today as when Barack Obama took office, the unemployment rate would be 11.1 percent. If the percentage was where it was when George W. Bush took office, the unemployment rate would be 13.1 percent.
That helps explain a seeming contradiction in the unemployment numbers — the rate keeps dropping even though job creation has been soft.
In April, the US economy added a mere 115,000 jobs, according to Bureau of Labor Statistics data released Friday. In a normal month, that would not even be enough to keep up with new entrants into the labor market. But in this economy, it was enough to drive unemployment from 8.2 percent down to 8.1 percent, the lowest point since January 2009.
The explanation is a little-watched measure known as the “labor force participation rate.” That tracks the number of working-age Americans who are holding a job or looking for one. Between March and April, it dropped by 342,000. But because the official unemployment rate counts only those workers who are actively seeking work, that actually made the unemployment rate go down.
In February, the Republican National Committee released a research note on “The Missing Worker,” arguing that “over 3 million unemployed workers have called it quits due to Obamanomics.”
Economists say the story is considerably more complicated. For one thing, the trend predates President Obama. And while part of the story is clearly that the labor force is shrinking because the bad economy is driving workers out, another significant factor is that baby boomers are beginning to retire early — a trend that has worrying implications for future growth.
A smaller workforce means less growth!
We added the exclamation point. Less growth. The wheels are slowing down. This could be a disaster, right?
So, fewer people working means less GDP…less growth. So what?
More tomorrow…and more on the Pentagon going rogue, too.