Going the way of the Brown Pelican

The May jobs numbers are out and they weren’t good. If you take out the Census jobs, only 41,000 jobs were created and that’s 100,000 short of the population growth each month. The average length of time on unemployment increased by a 1 ½ weeks in May to 34 ½ weeks. Something else the “they should just get a job” folks won’t tell you is that fully a third of the unemployed don’t get any benefits at all. For seven million Americans their only source of income is food stamps. “well, maybe if they were staving they would work”

The stimulus money is running out and already things are starting to turn south. Retail sales are down and home prices are beginning to fall again. Why is the economy not recovering? Too little stimulus is one reason as states and local governments are forced to cut jobs due to falling revenue and this puts still more pressure on the local job markets.

The biggest reason is the willful activity of the biggest corporations. It’s no coincidence that the layoffs really picked up steam after the ‘08 elections were over and the only thing slowing down the outsourcing is that China isn’t granting new factory permits. These same companies are pushing down wages by hiring temps and forcing wage concessions. Hours worked are up but even at time and a half workers aren’t paid a living wage.

With the two tier wage systems agreed to by unions to avoid their own extinction, a large portion of US workers can afford little more than a subsistence lifestyle. They build cars they can never hope to afford much like the Mexican labor that are now building the new appliances they can’t afford either. The Americans or the Mexicans, neither can afford them.

While this is tragically unfair this is not the really bad part of this. A modern economy cannot exist where the workers can’t afford anything more than food and a cot. People that are still getting union scale are increasingly being forced out and every day we get closer to the tipping point where the economy goes into freefall. That was why the DOW dropped more than 3% today, not because they care about the unemployed. The don’t care anymore than BP cares about pelicans. (BP, Beyond Pelicans) Soon Louisiana will need a new state bird, how about the Corporate Vulture? Once confined to a small breeding grounds on lower Manhattan Island after being nearly hunted to extinction during the New Deal, its range has expanded to cover nearly the entire planet. A real success story, unlike the hapless Brown Pelican that will soon exist only in zoos. Hmmm, zoos have cages with bars… there’s an idea there somewhere… www.prairie2.com

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Will Irritable Kan change the chess game?

Japan’s Prime Minister has resigned and this is be portrayed in the west as a repudiation of his FDR like economic reforms sighting the Mt Fuji of debt that Japan has on the books. Their debt is huge but it is as completely different as comparing Tokyo sushi to the dead fish stinking up Washington (Americans can’t tell the difference, but that‘s the point). In Japan the government debt consists almost entirely of retirement savings accounts and not the result of politicians covering up an out of control trade deficit and the tax dodging of transnational corporations as in it is in the US.

In short, nobody in Japan is worried about debt much, they are worried about homeless people living in the park, something most Japanese who were born since the War have never seen. The conservatives in Japan were adopting the throw the middle class under the bus philosophy of the Chicago School of Economics. The Ayn Rand devotees always hold up Japan as a failed nanny state because they have for decades provided full employment rather than maintaining a certain level of worker insecurity, as Rand follower Allan Greenspan saw as his primary role at the Federal Reserve. (He was concerned about “wage inflation”, actual price inflation, falling real incomes for the middle class and the complete theft of their wealth were not problems, those were “good“ things.)

So why did Yukio Hatoyama resign? Back to the war, many Japanese voted for the first change of the ruling party since the war because they thought it would finally bring an end to the US occupation. But Yukio got caught misreading the military realities of east Asia and presence of the United States. He had campaigned on moving the US Marines off Okinawa to the US island of Guam. Obama has budgeted improvements to the Marine base on Guam for this purpose but Obama also went ahead with massive weapons sales to Taiwan. China has used that as an excuse to continue to increase its military forces and is considering the building off shore bases for the first time. Now Korea is on the verge a new war and on and on. Faced with these realities, Mr Yukio has been waffling on his promise to the voters to kick the US out and with Geo Bush like popularity numbers, it’s time to bring out the ritual sword before the upper house elections.

Since the PM’s party still controls the lower house that selected him and with an overwhelming margin they will choose his successor. The likely choice is Finance Minister Naoto Kan, who is a former grassroots civic activist who now pushes for raising taxes to balance the budget. He’s nicknamed "Irritable Kan" for his fiery temperament and he is also a populist that is influential in the center-left party he helped create about ten years ago with the outgoing Prime Minister.

So what does this mean? Japan will continue to embrace social democracy but the Marines will stay unless the pacifists get an unexpected boost in the elections. President Obama has put Japan in the middle of a complex chess game with China over arming Taiwan on one square and trying to revalue the Yuan on another. Revaluing the Yuan would be great for the Yen but increased military tensions make them uneasy. Japan doesn’t have a big military but many Japanese want one instead of US troops. You can expect Japan to continue to employ fewer people in the US and favoring jobs at home in Japan and they will do more trade with China as they see that as the future (they’ve seen the pictures of Detroit).

www.prairie2.com

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The tide is coming, not turning

Tax collections to date are down 6% compared to last year which means wages are going down. Any increase in economic activity can be attributed to inventory restocking and not to growth over last year and we’re not even holding our own. Make no mistake US corporations have record cash on hand and are making big profits but have no interest in aiding the recovery from the disaster they caused. They are taking advantage of the situation to drive down wages and further starve government.

46% of Americans polled feel stress from household debt even though the amount of debt has decreased overall for the first time in decades. The Senate left town without taking up the unemployment extension that the House had passed by a one vote margin. This failure to act will shortly start adding hundreds of thousands of people a week to those no longer getting checks.

The NYSE went down today, oil stocks were down but the big banks went way down as action by international regulators is seeming more likely and is being pushed by the Bank of International Settlements (BIS). It was the BIS that pulled the plug in 2008 when they realized the banks couldn’t cover the quadrillion USD in derivatives they had created.

The Euro hit four year lows today and bets (more of those derivatives) against Euro bonds set new records. China has said they will continue to hold Euro bonds but don’t expect Germany’s efforts to ban naked short selling to have any effect without the countries like the US doing so. Republicans and enough complicit Democrats have made sure it’s piracy as usual by stripping out any reference to it in the financial reform bill.

Deflation is starting to be a concern in Europe as most countries are experiencing only very low inflation rates while Ireland had prices fall significantly in April. Ireland was the first of the PIGS countries to get into trouble after the banking collapse. After transnational corporations deserted the Celtic lion for cheap labor in eastern Europe the financial services lifestyle the Irish had come to embrace ate them alive. Abandoned real-estate projects, falling prices, wide spread defaults created a new exodus of the Irish people. The better educated found jobs in Poland for the same companies at a fraction of their former wages.

Deflation is considered by most pundits to not be a concern in the US but the build up of inventories since the last dip sets up the potential of rapid price drops if corporate credit was to freeze up again. Indexes that measure how confident banks and corporations are about lending to each other by keeping track of the points spread they must pay to borrow money are trending to the bad again as they did in 2008.

While it’s impossible to predict when the double dip will come, just like the oil tide, it’s coming. www.prairie2.com

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