Initial unemployment claims jumped sharply last week as out-sourcing continued unabated. The weekly number is again approaching 500,000 and since 350,000 is considered neutral for job losses as this is without accounting for the need to create 150,000 new jobs each month just for new workers. Non-government Union membership dropped 10% last year, the biggest drop in a single year since the heyday of Ronald Reagan.
The stock market gave up 5% in the past three days as investors feared the worldwide market bubble could be coming to an end. Wall Street would normally be up on news of higher unemployment since this means “wage inflation” will be kept in check. The Fed has even been reassuring the business community that their thirty year policy of linking inflation to unemployment numbers is proving correct. In fact the two numbers have never moved in sync before the current crisis and really they still aren’t.
We are teetering on the edge of runaway deflation and that is what is keeping the trillions the Fed is injecting into the banking economy from producing the expected inflation not the savaging of the workforce by ruthless corporations.
Only one small bank has been seized so far today but the FDIC makes no it no secret that they expect the pace to pick up dramatically. Small and medium banks are heavily burdened with commercial loans and they have a much longer reset term than home mortgages that are typically reset after two years. Home foreclosures that doubled in number last year over a really bad year before that, the number of foreclosures is expected to double again this year. This will put even more people under water as this will continue to drive down prices. It is impossible to borrow money to build a house since the value of the house will be less than it cost to build. Without a real economy that is not going to change.
Historically it takes ten years to recover from these things but often governments change in the interim. Ours just changed to the corporate form. In the 1920’s, it took the Italian parliament two years to realize they had been put out of business by the corporations and then they just went home.
Congress hasn’t quite caught on, but it is starting to sink in as they grasp that their campaign war chests aren‘t even tip money compared to what their corporate masters can bring to bear, not to mention the stranglehold a handful of companies have on the media. www.prairie2.com