The government originally said that the US economy as measured by the GDP shrank at 0.1% in the first quarter of 2014. And that was due to abnormally cold weather probably because Global Warming had been hiding at the bottom of the oceans. Now we are told the US economy actually contracted at 2.9%. This is starting to sound serious. Maybe we can coax that Global Warming to rise up out of the oceans. But Dr John Williams at Shadow Stats keeps much more reliable statistics on the cost of living and inflation. He says that prices are going up at 8.9% which makes sense because food prices alone are soaring upwards at 22%. If we used his figure of an 8.9% increase in the cost of living, then the real GDP after being deflated for inflation is contracting at 9.8%.
Those are Depression level numbers. The first quarter of 2014 was the fifth quarter in a row of a contracting US economy. Even the Greek economy only contracted 6.2%. The Greeks have 55% youth unemployment and riots every week. That 9.8% annual decline was worse than the 1929-1933 decline of 30% over 4 years in GDP. We are talking about a rate of decline greater than that of the harshest period of life in 20th century America. Millions of Americans starved to death in the Great Depression. And yet we are declining faster and harder now than then.
We could argue that the US economy is declining at an even faster rate than 9.8%. How so? The other factor is GDP per person. More important to you than how much money is flowing through the economy is just how much is in your hands. The US population has been increasing at a little over .72% per year. That means GDP per capita declined at 10.5% not 9.8%. But that was before President Obama organized this Amnesty rush of illegal aliens. The contraction in GDP per capita for the second quarter of 2014 ought to be above 11% if you factor in both rising prices and the sudden influx of new arrivals at the border and the airports.
The government has also been lying to us about unemployment numbers to conceal from us just how badly they have mismanaged the economy. The number of Americans on disability has doubled to just over 11 million. I have met people who are recent additions to the Social Security Disability program. They seem to be far healthier than those I met 20 years ago. The Social Security Disability Fund is running low. Next year the Congress and the President will have to choose between cutting benefits 20% and raising taxes to cover the shortfall. Most likely the politicians will pass a temporary measure to get them past the 2016 elections and ask Janet Yellen to print up a few tens of billions more dollars at the Federal Reserve.
The President has people working for him who are smarter than he is. They probably are not working for his foreign policy team but some Bankers are smart. And they do run his administration. Obamacare has employer mandates on companies who have full-time workers. Locally a restaurant manger said she read the company’s new national policy that to comply with Obamacare regulations she was cutting everyone’s hours down from 40 to about 30. She had just cut their wages almost 25%. She said nobody would ever again make enough to support themselves working there. Several of the women cried. The others had Food Stamps and child support to make up the loss.
It has occurred to me that Obamacare is a mandate for job sharing. If this were the most transparent administration in history, Obama would have said,
“We are allowing millions of people to enter the country legally and illegally but we are not creating more jobs. So we have to share the few jobs we do have. What I am proposing today is that we cut the hours you work while raising taxes on your dwindling income to pay your fair share of the cost of adding all those immigrants to Food Stamps, welfare, healthcare and the schools. This will not apply to the 30.7 million of you who work for the government at either the federal, state or local levels.”
He did not say that. But that is what he did do.
David Stockman pointed out the other day that the total number of hours worked in 1997-1998 is the same as today. Job sharing by cutting us back from full-time to part-time is a necessity if our politicians and the News Media are to maintain the illusion of a recovering economy.
This takes us logically to the next question. What if we deflated the present economy for inflation since 2000 or 1990 to see what our real growth has been along? Is it true as David Stockman says that our economy is nowhere near what Washington says?
We are told that the US GDP was $2 trillion in 1974 but it is $17 trillion today. Yet every measure of income says wages are down in real terms since the 1970s. So how do we make sense of these numbers? Obviously prices are a lot higher than 40 years ago. And we have a lot more people. America had 203,211,926 people in 1970 before our wages began to decline. In 1990 we had 248,709,873 people and in 2000 we had 281,421,906. Today we have 318 million and maybe quite a few more tomorrow thanks to Obama. We have to discount our 1970 GDP for the real inflation rate and the increase in population. If we focus on our more recent history, we can see that our total number of hours worked was the same in 1998 as it is today but we added 30 million people so our GDP per capita should be down 10%.
GDP also measures things we do not consume like tanks, aircraft carriers, depleted uranium bombs and bullets and the like. The wars in Iraq and Afghanistan, Libya, Somalia, Yemen and Syria have added little positive good for the average American consumer. But US spending on the wars increased from less than $300 billion in 2000 by more than $400 billion to $700 billion last year. DHS did not exist before the Department of Defense allowed hijacked planes to fly over 8 US air bases on9-11-2001 .
Strictly speaking, our GDP would decline if the DOD and the DHS were ever audited and taxpayers saved a few trillion dollars over the years from fraud. An economist would have to revise his forecast for the economy drastically downwards if there were a sudden outpouring of honest accounting at the Pentagon.
Another area of rampant fraud in America is medical care. If we subtracted out the more than $5 billion a week in fraud from US government medical programs like Medicare and Medicaid as cited by Economist magazine, our GDP would be $272 billion less. And we could save another trillion from medical care expenses if we spent the same amount of money per person as Germany or Switzerland. But economists would warn you that doing things the German way would cut our GDP 6%. That would be over $900 billion. Clearly, America’s economy has several deep layers of fraud.
The only other numbers that make the economy look good comes from our manipulated stock markets. We learned last week that worldwide Central Banks like the Federal Reserve have $29.1 trillion invested in the stock markets. That certainly pumps up stock prices but that is not the only way governments pump up the markets.
We have had negative interest rates for six years. Low interest rates depress bond prices making stocks look better. I should point out that rates are negative if you subtract the inflation rate from the interest paid. That means our savings have been used to subsidize Bank profits and Bankers’ bonuses.
Bank loans also pump up and distort the economy. We have a fractional reserve banking system. If Mrs Jones deposits $10,000 in her account, she will receive $100 on interest payments at the end of the year. Inflation at 8.9% will cut her purchasing power by $790 more than her interest payment. But look at the Banker. He loans out her $10,000 plus $90,000 he created when he loaned out the money at 29.9% to credit card customers. He could make additional money charging late fees and the like.
The worst thing the government allows Bankers to do is to loan us money at interest that they created out of nothing. The Bankers create a checking account deposit in the Treasury’s account and exchange it for bonds. The taxpayers now owe the Banks for money the government should have created. President Lincoln created a non-interest bearing currency called the Greenback. If had Greenbacks, we would not have a a national debt of nearly $18 trillion.
We are entering a period in our economic history that is far worse than 1929-1929. Professor Steve Keen said we are headed to the worst Financial Collapse in 500 years because we have more debts to cancel than at any time in five centuries. I defined a Depression as a period in time when Unpayable Debts are canceled en masse. We have to cancel tens of trillions in Unpayable Debts.
There are three ways to cancel debts. One is to hyperinflate the currency as in Germany in 1923. Another is to default of debts through foreclosures. Our money system does not allow us to have money unless we go into debt. Conversely, when we pay our debts or they are cancelled in bankruptcy court, our money supply contracts. In 1933 Americans starved to death because there was not enough money to do business after all those homes and farms had been foreclosed.
As Steve Keen said, we are entering the worst Financial Crisis in 500 years but Debt Cancellation as originated by the Babylonians thousands of years ago would cancel this Depression rather quickly and relatively painlessly. The Bible writers seem to have copied this idea but did not practice it. It was the reason why Jeremiah said the tribe of Judah fell captive to the Babylonians. Bond slaves are disarmed and cannot fight invading armies.
So there is an alternative to mass starvation, Nationwide Food Riots and a Civil War.
We could arrest the Bankers. Seize the $40 trillion they stole from us. Issue non-interest bearing currencies like Lincoln’s Greenbacks. Ban fractional reserve banking. Seize control of the Federal Reserve. And call an international conference to cancel Unpayable Debts using those seized assets as a bargaining tool.
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