The New York Times indicates that unemployment is at its highest level since the Great Depression.
In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. This includes the officially unemployed, who have looked for work in the last four weeks, and also discouraged workers who have looked in the past year, as well as millions of part-time workers who want to be working full time.
The broader rate is highest today, sometimes 20 percent, in states that had big housing bubbles, like California and Arizona, or that have large manufacturing sectors, like Michigan, Ohio, Oregon, Rhode Island and South Carolina.
It is a strange combination: workers who still have a job are doing better than in other deep recessions, while the the unemployment and underemployment figures have risen to their highest level since the Depression.
Regulators on Friday closed 9 banks in California, Illinois, Texas and Arizona, boosting the number of failed U.S. banks this year to 115.
Nine is the most in one day that the FDIC has shut since the financial crisis began taking down banks last year. The 115 total failures are the most in a year since 1992 at the height of the savings-and-loan crisis.
The FDIC expects Friday's closings will cost $2.5 billion. To replenish their fund, the FDIC wants the roughly 8,100 insured banks and savings institutions to pay premiums in advance that would have been due over the next three years.
Hundreds more bank failures are expected to raise the cost to around $100 billion through 2013. Last July, FDIC Chairman Sheila Bair predicted that the bank failure rate will increase tenfold.
Gold’s rally to record prices is still 53 percent below the 1980 inflation-adjusted peak, an indicator it will continue to climb in value.
While gold rose this year to $1,072 an ounce (on Oct. 14), consumer prices have almost tripled in the past three decades, eroding the metal’s value. Meaning bullion hasn’t kept pace with the cost of bread, fuel or medical care.
In 1980, gold hit a then-record $873 an ounce. In today’s dollars, that would be $2,287, according to the U.S. Labor Department’s inflation calculator.
Bloomberg reportsthat Treasury Secretary Timothy Geithner’s closest aides earned millions of dollars a year working for Goldman Sachs, Citigroup and other Wall Street firms. Yet, they are overseeing the handout of hundreds of billions of dollars of taxpayer funds to their former employers.
The gifts of billions of dollars of taxpayers’ money provided the banks with an abundance of low cost capital that has boosted the banks’ profits, while the taxpayers who provided the capital are increasingly unemployed and homeless.
Goldman Sachs has made so much money during this year of economic crisis that enormous bonuses are in the works.London Evening Standard reports that Goldman Sachs’ “5,500 London staff can look forward to record average payouts of around $800,000 each. The highest paid executives will get bonuses of $16 million.“
Meanwhile, New York City’s homeless shelters have reached the all time high of 39,000, 16,000 of whom are children. Long-term unemployment has become a serious problem across the country. Hundreds of thousands more Americans are beginning to run out of extended unemployment benefits. A record number of Americans, more than one in nine, are on food stamps. Mortgage delinquencies are rising as home prices fall.
Meanwhile, the political system is unresponsive to the American people. It is monopolized by a few powerful interest groups that control campaign contributions.
Arabs, China, Russia, Japan and France to end dollar dealings for oil
Robert Fisk writing in The Independent asserts that Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.
The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs.
The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said.
The United Nations called on Tuesday for a new global reserve currency to end dollar supremacy which has allowed the United States the "privilege" of building a huge trade deficit.
"Important progress in managing imbalances can be made by reducing the reserve currency country’s 'privilege' to run external deficits in order to provide international liquidity," UN undersecretary-general for economic and social affairs, Sha Zukang, said.
Speaking at the annual meetings of the International Monetary Fundand World Bank in Istanbul, he said: "It is timely to emphasize that such a system also creates a more equitable method of sharing the seigniorage derived from providing global liquidity.”
IMF warns that banks have yet to reveal their losses
The Financial Times quotes the International Monetary Fund (IMF) in announcing that banks around the world still have to reveal about half their likely losses resulting from the financial and economic crisis, warning there was still a "significant" risk of another downward lurch in the global recession.
The IMF in its Global Financial Stability Report wrote: "US domiciled banks have recognized about 60 per cent of anticipated writedowns, while euro area and UK domiciled banks have recognized about 40 per cent."
A failure to reveal the true scale of the losses they are likely to face ...would undermine the economies of the US, the UK and the euro zone and could generate a renewed vicious spiral, the IMF said.
Losses are likely to prove largest in the US and UK - where banks held more toxic assets and the downturn in commercial property has been greatest.
The president of the World Bank, Robert B. Zoellick, announced that America’s days as an unchallenged economic superpower might be numbered and that the dollar was likely to lose its favored position as the euro and the Chinese renminbi assume bigger roles.
Mr. Zoellick, who previously served as the United States trade representative and as deputy secretary of state under President George W. Bush, said that the euro provided a “respectable alternative” for financing international transactions and that there was “every reason to believe that the euro’s acceptability could grow.”
Mr. Zoellick argued that the United States and a handful of other rich nations could no longer dominate the world economy and suggested that America was losing its clout.
Stiglitz says banking problems are now bigger than pre-Lehman Brothers
Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system.
“In the U.S. and many other countries …” Stiglitz said in an interview in Paris, “The problems are worse than they were in 2007 before the crisis.”
Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”
Stiglitz, former chief economist at the World Bank and member of the White House Council of Economic Advisers, said the world economy is “far from being out of the woods”.
“We’re going into an extended period of weak economy, of economic malaise,” Stiglitz said.
The Federal Reserve faces a “quandary” in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government. “The question then is who is going to finance the U.S. government,” Stiglitz said.
Federal Reserve makes $14 billion profit on economic crisis
The Financial Times reports that the Federal Reserve has made a $14billion profit on loan programs that have provided hundreds of billions of dollars in liquidity to the financial system since the start of the crisis two years ago, according to Fed officials.
The central bank earned about $19 billion in income from charging interest and fees to financial institutions and investors that tapped the new facilities to obtain much-needed funds during the turmoil. The interest the Fed would have earned by investing the same amount in T-bills was an estimated $5 billion, leaving a $14billion gain since August 2007.
Some politicians have criticized the Fed for using billions of dollars of public funds to support the market and stricken groups such as AIG and Bear Stearns. A recent Gallup Poll found the Fed had the worst public approval rating of nine government agencies, even lower than the tax authorities.
Still to come, a doubling of the U.S. National Debt
The White House conceded that the national debt will increase by $9 trillion over the next ten years, nearly doubling a national debt that now stands at $11.67 trillion.
Until now, the White House had been estimating that the national debt would increase by $7.108 trillion between 2010 and 2019.
On Friday evening, Reuters reported that an unnamed senior administration official was saying that a report due from the Office of Management and Budget would indicate that the debt would actually increase by $9 trillion during that period, almost $2 trillion more than the administration had previously estimated.
Though mostmainstream news is citing a decline in unemployment as proof that the economy is stabilizing, the New York Times suggests that if you:
Include [those who have given up looking for a job and those part-time workers who want to be working full time] …then the rate is:
23.5 percent in Oregon
21.5 percent in both Michigan and Rhode Island and
20.3 percent in California.
The Times wrote a second article on August 7th pointing out that the unemployment rate had only declined because 400,000 people gave up their search for work and left the labor force. PhD economist John Williams wrote that accurate unemployment figures rose from 17.5% in December to 20.6% in July. Indeed, former Secretary of Labor Robert Reich wrote in April that the unemployment figures show that we are already in a depression.
Former International Monetary Fund Chief Economist and Harvard University Economics Professor Kenneth Rogoff and University of Maryland Economics Professor Carmen Reinhart forecast in February that unemployment could reach 22% within 4 years.
Additionally, the Congressional Oversight Panel on the bailouts issued a report saying that small and medium sized banks are especially vulnerable, in part they hold greater numbers of commercial real estate loans, "which pose a potential threat of high defaults." Indeed, largely because of the commercial real estate crash, the FDIC expects 500 banks to fail in coming months.
The American consumer is down-for-the-count and the Depression is just beginning
The American consumer is down-for-the-count. His credit lines have been cut, his home equity eviscerated, and his checking account swimming in red ink. That spells trouble for an economy that's 70% dependent on consumer spending for growth.
The Net Wealth of US households has declined from a peak of $22 trillion to just under $12 trillion in early March. Household equity has declined by 94%.
And this against the backdrop where the banks are still broke, business investment is at historic lows, consumers are on the ropes, the unemployment lines are swelling, the homeless shelters are bulging, the pawn shops are bustling, tent cities are sprouting up, and according to MarketWatch, “Corporate insiders have recently been selling their companies' shares at a greater pace than at any time since the top of the bull market in the fall of 2007.
Hundreds of banks are being kept on life-support but the FDIC is down to its last few farthings, and doesn't want to ignite a panic.
There are also worrying signs that China and other foreign investors may be ratcheting back purchases of treasuries at a time when the U.S. is seeking to fund a $1.8 trillion budget deficit.
Tottering on the edge of a “disastrous economic collapse.”
Well, I don’t know if I can agree with the whole statement made by President Obama today but at least we have a major world leader acknowledging that the world has been/is tottering on the edge of a “disastrous economic collapse.”
AP reports, “Lasting worldwide recovery ‘is still a ways off,’ President Barack Obama declared Friday, but he also said at the conclusion of a global summit that a disastrous economic collapse apparently has been averted.”
"’Reckless actions by a few have fueled a recession that spans the globe,’ Obama said of the meltdown that began in the United States with a tumble in housing prices and drastic slowing of business lending. The downturn now threatens superpowers and emerging nations alike.”
India joins Russia and China questioning U.S. Dollar dominance
Now India has joined Russia and China in questioning U.S. dollar dominance. Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars.
"The major part of Indian reserves is in dollars--that is something that's a problem for us," Tendulkar, chairman of the Prime Minister's Economic Advisory Council, said in an interview as he prepared to join leaders from the Group of Eight (G-8) industrialized nations at meetings to tackle the global economy.
Tendulkar said that big dollar holders face a "prisoner's dilemma" in terms of managing their holdings.
Most people assume we have three branches of government: The Judicial: the Supreme Court - The Executive: the President - The Legislative: Congress.
Almost unnoticed by most Americans, the US Federal Government introduced a fourth branch to its political structure in 2006.
Who is entirely devoted to dealing with the US’s fiscal house? Some make the argument that a bunch of greedy crooks were appointed, intent on stealing as much of the public’s money as possible with no consequences whatsoever. And Goldman Sachs provided most of the lead characters: Hank Paulson (former Treasury Secretary), John Thain, (former CEO of Merrill Lynch), Robert Rubin (the Chairman of Citigroup), Robert Steel (the head of Wachovia), Ed Liddy (who Paulson put in charge of the nationalized AIG), Mark Patterson (the current Treasury Chief of Staff), Neel Kashkari, (the guy in charge of allocating TARP funds) and let’s not forget Treasury Secretary Tim Geithner.
America’s trading partners do not have large enough trade surpluses to finance a federal budget deficit swollen to $2 trillion by gratuitous wars, recession, bailouts, and stimulus programs. Moreover, concern over the dollar’s future is causing America’s foreign creditors to seek alternatives to US debt in which to hold their foreign reserves.
Russia’s central bank now holds a larger proportion of its reserves in euros than in US dollars.
China has increased its gold reserves by 75% in recent years.
China and Brazil are considering bypassing the dollar and conducting their mutual trade in their own currencies.
Chinese officials [indicated] that neither China nor the entire world has enough spare money to purchase $4 trillion of US Treasuries over the next two years.
[Meanwhile] War, bailouts, and stimulus plans have pushed the Obama administration’s annual operating budget 50% into the red.
Federal Reserve Chairman Bernanke thought he could push down interest rates on Treasuries by purchasing $300 billion of them. However, the result was to cause a sharp drop in Treasury prices and a rise in interest rates.
As monetization of federal debt goes forward, US interest rates will continue to rise, worsening the problems in the real estate sector. The dollar will continue to lose value, making it harder for the US to finance its budget and trade deficits. Domestic inflation will raise its ugly head despite high unemployment.
The next shoe to drop will be the dollar’s loss of the reserve currency role.
[Excerpt of a review by Paul Craig Roberts, Assistant Secretary of the Treasury in the Reagan administration]
This running chart maps it all out, and it ain't pretty! Watch as --second by second-- we go further into debt. National debt, the interest on that debt, the budget deficit; the state of Social Security and Medicare, and more. The information is right here at your fingertips.
The nation’s gross domestic product was $14.2 trillion in 2008.
The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year!
Every American householdis on the hook for $109,887 for these bailouts.
China's yuan 'set to usurp US dollar' as world's reserve currency
Professor Nouriel Roubini, of New York University's Stern business school, believes that while such a major change is some way off, the Chinese government is laying the ground for the yuan's ascendance.
Roubini argues that China is better placed than the US to provide a reserve currency for the 21st century because it has a large current account surplus, focused government and few of the economic worries the US faces. He also predicts that Beijing will soon want to see the yuan included in the International Monetary Fund's special drawing rights "basket", as well as seeing it "used as a means of payment in bilateral trade."
Sen. Dick Durbin blurted out on a local Chicago radio station an obvious truth that is rarely spoken:
"The banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place."
The blunt acknowledgment that the same Wall Street banks that caused the financial crisis "own" the U.S. Congress -- according to one of that institution's most powerful members -- demonstrates just how extreme the institutional corruption is.
