European Union considers defunding Food Bank Programs

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 5, 2012

Food Banks feed two million people in Spain, twice the number of people than they did in 2007, but their future is now uncertain. Although the financial crisis that has ravaged the continent turned them into the people’s pantry, their existence is now being contested by European authorities who question whether these food banks should be funded at all.

Food banks have been funded by the EU since 1987, with twenty members as beneficiaries, but their support for 2014 and beyond will depend on the new European budgetary framework. The stakes are high between supporters of austerity and cohesion while poverty increases as a result of the crisis, 116 million EU citizens were at risk of poverty in 2010, two million more than the previous year.

The debate about funding — or not — the food banks will begin this month. The champions of moderation in spending, led by Germany and seconded by the UK, Sweden, Denmark, Finland and Holland, consider that the EU should not provide support to food banks. Last February, the European Commission decided to continue the program for this year and next while “noted the opinion of several Member States not to continue the program beyond 2013,” said a spokesman Commissioner for Social Affairs and Inclusion.

The supporters of so-called cohesion will face the defenders of feeding the people in the EU, a task that the cohesion group believes should rest with each European nation and not the EU. They have a head start: the Commission supports continued funding for food banks for the period 2014-2020, while lowering the total amount of 2,500 million euros. “It is a matter of European solidarity, more important than ever in times of economic crisis,” said the Commission. Another change is that the program should not be directed according to the chapter of the Common Agricultural Policy, which was born in the lee of agricultural surpluses. Instead, it should run according to a new framework based on ‘Social Spending and Cohesion’.

The discussion comes when, due to the crisis, “there are doubts whether the emergency food aid and other social assistance for those most in need could be completely eliminated if the food aid program of the EU is closed,” said the spokesman for the Social Affairs Commissioner.

The favorable position of the Commission is a true relief for Spain, for example, despite the funding cuts being handled. “The proposal is 2,500 million euros compared to 3,500 in the previous period,” said Fernando Miranda, the president of the Spanish Agricultural Guarantee Fund, which works within the Ministry of Agriculture. The fund is responsible for implementing the plan to assist the neediest people in the EU. Spain is the second country that benefits the most from the food bank program, with 80, 4 million euros this year.

“The downgrade would mean a drop in annual funding from 500 to about 350 million euros for all countries,” lamented the president of the Spanish Federation of Food Banks, Jose Antonio Busto. He added that the European funding provides about 40% of the food, and the rest comes from donations from supermarkets and other sources. This reduction would result, predictably, in less funding for Spain. According to his calculations, Spain would receive between “50 and 60 million euros a year, which resembles pre-crisis levels,” estimated Miranda. That is about 34% less than today.

“The drop in funding would be a problem, because demand continues to increase in Spain” warns Busto. Now two million people are fed through the food bank program. In 2007, the number was of about 850,000 people. From the people dependent on food bank programs,  21.8% belonged to the group that lives below the poverty line — 19.5% in 2009 — who have been added to the list due to the increasing unemployment.

As Society Breaks Down, People Beg for Tyranny

by Luis R. Miranda
The Real Agenda
August 11, 2011

It’s been at least 15 years since I heard calls for people to wake up because the greatest crisis in humanity’s existence was rapidly approaching. Today, as I watch video and photos from London, and previously from Syria, Egypt, the United States and Lybia, I cannot help but think that those who sought to warn us were simply and plainly correct. Perhaps the most surprising fact is that those truth tellers, who were often identified as conspiracy theorists, told us how it would happen and as the break point got closer and closer, they were even able to predict different aspects of the fall with outstanding precision.

Who would have believed 15 years ago that the world would crumble to its knees and would beg for the implementation of tyrannical policies and regimes in order to bring back law and order? I certainly didn’t. Before I began studying history and current events, I thought society would be able to take care of itself and avoid disaster. But the latest video feeds from London and everywhere else clearly show that society is lost in the foggy alternative reality they were born into 50 or more years ago. The social engineers played their hand well and now have most of the population consuming itself in a web of self-degradation, death and perversion fed to us as the sexiest fad for almost half a century.

In England, polls show that upwards of 65 percent of people are now calling for the use of rubber bullets, water canyons, police abuse and other tyrannical practices because they are too afraid to organize with their neighbors and take care of the looters that are destroying decades-old family businesses, homes, cars, shoe and clothing stores and other property to get their hands on the latest electronics, jewelry and various valuable products by breaking windows, smashing store front doors and pulling citizens from the their cars to smash their heads on the streets. Instead, British people are now calling for a government sponsored Police State.

Notice that most of the places that are being affected by riots and unrest are sections of the society whose members are unarmed and who cannot defend themselves because their government, which cannot protect them 24/7, implemented regulations to ban the people’s right to be armed and to defend their properties and their families. London shows signs of the most recent confrontation between members of the government-dependent underclass and the hard-working middle class, just as the social engineers planned it. As governments cut spending in a failed attempt to fix deficits and reduce their debt, it is exactly the underclass that feels the pinch first. But instead of attacking government policies and the entities responsible for the financial collapse, this uneducated underclass takes it upon themselves to beat the daylights out of middle class folks who suffer from the bank-sponsored self-inflicted financial crisis.

The financial and political apartheid taking place in the world -where governments steal the people’s pension funds to invest them in fictitious financial products, banks get bailed-out as they charge interest rates and / or fees for people to keep money in their accounts, the government cuts social security and medical care spending, people’s paychecks and pension buy less food- will continue to increase social volatility not only in London or Greece, but in the Americas, Asia, Africa and everywhere else. The Social Experiment failed horribly. But then again, it was meant to fail. The divisions meant to occur in order to monopolize, control and conquer arrived right on time.

The underclass as well as the dumbed down middle-class that for centuries sucked off the system through government established dependence programs only woke up after finding themselves with no jobs, no pension, no savings and no future. They woke up from their eternal state of slavery because the bribery scheme known as welfare that the government used to hook them up is suddenly crashing down, and they have not safety net to fall onto. What do I mean by bribery scheme? In 2007, the richest country in the planet had at least 52.6 percent of the people receiving government aid of some sort: pensions, social security and so on.. One in five Americans held a government job or a job that depended on government spending. Around 19 million used food stamps and 2 million got subsidized housing. If that is not government bribery, I don’t know what is it. The social engineers made sure from the start that only two classes existed: the productive class and the parasitical class. Both the government and the dependent classes are equally violent towards those who produce and who support them throughout their lives.

But perhaps one of the most abhorrent aspects of the current societal collapse is that the social engineers point to the underclass and the working class as those responsible for the crisis. That’s right. They accuse the so-called “useless eaters” for their greed and for living beyond their means and hold them responsible for the crisis we now experience. Both the underclass and a large part of the middle class are in part responsible for their greed and decadence. But weren’t they born and bathed into a system that promoted and facilitated their greed, decadence and dependence? Of course they were. Should the underclass and the middle class then be held responsible for the now developing crisis because they were greedy and dependent? Of course not. But that is what the bankers, the social engineers want the dumbed down majority to think, and that is why tonight racial divides grow bigger in London, the United States, Africa and Asia. The underclass believes that the middle class are the ones responsible for the crisis because they are successful business owners and were able to take care of themselves and their families. In the meantime, the bankers who are responsible for both classes’ misery run rampant ripping people off around the world.

The people are to blame, say the bankers, because they want more services but don’t want to pay more taxes. Due to the fact millions have not bought the propaganda, the government is now playing the collectivist card. “There is no need to look for anyone to blame because we must now come together to solve our problems”. Neither the government nor the banks want the taxpayers to fully understand that these two entities are solely responsible for the current state of affairs. Governments have bribed citizens openly for at least a century in order to control them, therefore it is insane to believe that someone will buy the government and bank sponsored propaganda.

While millions of people lose their jobs, homes and lives because they cannot afford them, a few decadent scum bags consume themselves in fake tribalism, racism, theft and violence while the cowardly ones wait for the state to do something and beg for Martial Law and a Police State. Those who accepted the American-created culture of death, sex, thuggery, drug use, suicide and gang oriented behaviours are now acting as what they always dreamed to be: a bunch of disaffected slaves with no jobs or future that look up at rappers, singers, sports figures, electronics, alcohol and drugs to fulfill their empty lives. The world went from praising explorers, scientists, fire fighters, inventors and community leaders to worship ‘bling’ and Madison Avenue-created delusion.

Those who took advantage of a corrupt debt-based system to get their holiday vacation, car and house loans were shocked after the banks that own their livelihoods cut off lines of credit three years ago to put an end to the fantasy reality they were accustomed to for so many years. Those who foolishly believed that paying into the public pension system would guarantee them some devalued change to live the rest of their lives, even though many had warned of its non-existence, were not only fools, but also irreparable willful ignorants. They trusted their government so much to give them everything, that no room was left to think that the same State could one day decided to take it all away; which is what is happening now. So now, the most dependent members of society are blaming other citizens and not the banks and the governments for their misery. Why? Because blame is the base of Statism and the State has shown people well to accept the blame game when it favours the State. They are now begging the social engineers to put an end to their misery. Events like the riots in London and the United States are just the beginning of what is turning out to be a long summer and a coming long winter. Street violence, crime and government opposition will be used by the controllers to take away more of our rights. Government will use armies and violence against peaceful protesters before bringing out austerity and a more visible Police State, to crush people’s right to speak and arm to themselves, track social media, email accounts, and any other sign of dissent.

Now, this is what a broken down society looks like in the developed world. Can you imagine what will it look like in socialist or inherently paternalistic poor countries when austerity, hunger and deep misery gets there?

How Globalism Destroys Jobs, Businesses And Wealth

American Dream
July 14, 2011

As most Americans stand around waiting for the U.S. economy to return to “normal”, there is a never ending parade of jobs, businesses and wealth heading out of the United States.  The jobs and businesses that are leaving are gone for good and will not be coming back.  This is causing unemployment to soar and government debt to skyrocket but our politicians are doing nothing about it.  Instead, politicians from both parties keep insisting that they will solve all of our problems if we will just give them our votes.

Meanwhile, American families continue to fill up their shopping carts with cheap plastic crap made on the other side of the world.  Globalism is slowly destroying the greatest economic machine that the world has ever seen and most Americans don’t even realize it.  Today, the U.S. government has surrendered massive amounts of economic sovereignty to global organizations such as the WTO, the IMF and the World Bank.  The United States has also entered into a whole host of very damaging “free trade agreements” such as NAFTA that are costing our economy huge numbers of jobs.  Our politicians always promised us that globalism would bring us to a new level of prosperity, but instead that “giant sucking sound” that you hear is the sound of the U.S. economy being hollowed out.

Our politicians and the talking heads in the mainstream media always seem to be puzzled as to why there seems to be such a lack of jobs in this country.

But it really is no great mystery.

Jeffrey Pfeffer recently wrote an article for Fortune in which he stated the following….

The U.S. seems to be shocked that its economy isn’t creating many jobs, and each monthly report on the unemployment rate and the number of new jobs somehow stimulates more handwringing. I’m not an economist, labor or otherwise, but simple observation suggests one significant contributor to the nation’s job crisis — for a long time, maybe even decades, we have been waging war on jobs and those who hold them.

That is exactly what the policies of the U.S. government have been doing for decades – they have been waging war on jobs.

Both political parties have been eagerly pushing us into a globalized economy.  Both political parties have told us not to worry as thousands of businesses, millions of jobs and trillions of dollars have left the country.

Well, so much damage has been done by this point that more Americans than ever are starting to wake up and realize that maybe globalism is not such a great thing after all.

Here is how globalism has destroyed our jobs, our businesses and our national wealth in 10 easy steps….

#1 Globalism has merged the U.S. economy with economies that allow slave labor wages.

The “minimum wage” became a whole lot less meaningful once we merged our economy with the economies of nations where it is legal to pay workers 50 cents an hour.

American workers have enjoyed all of the cheap products that have come flooding into our shores, but our politicians never told them that globalism would also mean that they would soon be directly competing for jobs with workers on the other side of the globe that are willing to work for 5 or 10 percent as much.

One big, global labor pool means that the standard of living of the hundreds of millions of workers on the other side of the world will come up slightly while the standard of living of American workers will come crashing down at a blinding pace.

Advocates of globalism never can seem to explain how U.S. workers are supposed to compete with teenage workers in Vietnam that often work seven days a week for as little as 6 cents an hour making promotional toys for big corporations.

#2 U.S. companies make bigger profits by sending jobs overseas.

If U.S. corporations can find a place where they can legally pay workers slave labor wages, what do you think they are going to do?

Corporations have a “duty to maximize shareholder wealth” and U.S. government policies actually have the effect of encouraging the offshoring of jobs.

This is even happening in industries that are on the cutting edge of new technology.

Andy Grove, the former CEO of Intel, says that our advanced technology companies are creating far more jobs overseas than they are in the United States….

Some 250,000 Foxconn employees in southern China produce Apple’s products. Apple, meanwhile, has about 25,000 employees in the U.S. That means for every Apple worker in the U.S. there are 10 people in China working on iMacs, iPods, and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology (STX), and other U.S. tech companies.

#3 Globalism has allowed foreign countries to dominate a whole host of industries that used to be dominated by the United States.

U.S. companies are having an incredibly difficult time competing against the low labor costs and the much less stringent business regulations found on the other side of the globe.

In May, the United States spent 50 billion dollars more on goods and services from the rest of the globe than they spent on goods and services from us.

This happens month after month after month.

Every month we get tens of billions of dollars poorer and the rest of the world gets tens of billions of dollars richer.

We are getting clobbered even in industries that we invented.

Do you remember when the United States was the dominant manufacturer of automobiles and trucks on the globe?  Well, in 2010 the U.S. ran a trade deficit in automobiles, trucks and parts of $110 billion.

In 2010, South Korea exported 12 times as many automobiles, trucks and parts to us as we exported to them.

How did this happen?

Well, there are a lot of reasons, but one big reason is that the business environment in the United States has become incredibly toxic.  Businesses in this country face a nightmarish web of rules and regulations and that is a big reason why so many businesses are choosing to leave this country.

In a recent article for Forbes, John Mariotti made a list of just a few of the bureaucracies that U.S. businesses must contend with on a daily basis….

#4 Jobs and manufacturing infrastructure are being lost at an astounding pace and they are not going to come back.

Jobs and manufacturing facilities are leaving this country at a blinding pace.  Nothing is being done to stop this from happening.  These jobs are not coming back and they are not being replaced.

Just consider the following statistics….

*The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

*Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost.

*The United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.

*Since 2001, over 42,000 manufacturing facilities in the United States have been closed down.

So what are all of those workers doing today?

There are sitting at home trying to figure out what has happened to the once happy lives that they enjoyed.

Today, there are 6.3 million Americans that have been unemployed for more than 6 months.  That number has risen by more than 3.5 million in just the past two years.

Right now, it takes the average unemployed worker almost 40 weeks to find a new job.  There are not nearly enough jobs for everyone and the competition for the few job openings that are available is brutal.

Only 66.8% of American men had a job last year.  That was the lowest level that has ever been recorded in all of U.S. history.

We have millions upon millions of very hard working Americans that are sitting around hoping that someone will give them a job.

But labor costs about 10 percent as much on the other side of the world so that is where all the jobs are going.

#5 Workers without good jobs can’t buy houses or cars.

A huge factor in the housing crash has been the lack of good jobs.  There are now approximately 10 percent fewer middle class jobs than there were a decade ago.

As competition for jobs increases, wages are being depressed because employers know that they have all the power.

So working class American families are being squeezed like never before.

Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.  A nice home is becoming out of reach for a lot of Americans.

Meanwhile, the cost of food and the cost of gas continue to rise.

One recent survey found that 9 out of 10 U.S. workers do not expect their wages to keep up with soaring food prices and soaring gas prices over the next 12 months.

#6 If American workers don’t have jobs they aren’t paying taxes.

Most Americans have no idea how much our trade deficit contributes to our government debt problems.  When Americans are not working, they are not paying taxes to support our federal, state and local governments.

In the years since 1975, the United States had run a total trade deficit of 7.5 trillion dollars with the rest of the world.

That is money that could have gone to U.S. workers and U.S. businesses.  That is money that taxes could have been paid on.

Instead, our workers are sitting at home and our federal, state and local governments are starving for cash.

#7 Instead of receiving taxes, the government must pay out money to our unemployed workers instead.

We are going to support our unemployed workers one way or another.  Either we are going to give them good jobs or we are going to give them welfare payments.

During the recent economic downturn, millions of American workers have been receiving unemployment benefits for up to 99 weeks.  It has become soul-crushingly difficult to find a job in America today, and we have developed a whole new class of people that have become totally dependent on the government because they simply cannot find work.

Everywhere you look, government anti-poverty programs are exploding in size.

As 2007 began, there were 26 million Americans on food stamps.  Today, there are more than 44 million Americans on food stamps, which is a new all-time record.

#8 As jobs and businesses leave our shores, many of our once great manufacturing cities have been transformed into hellholes.

In a recent article entitled “American Hellholes“, I talked about the economic decay that we are seeing all over the United States….

All over the nation many of our greatest cities are being slowly but surely transformed into post-apocalyptic wastelands.  All over the mid-Atlantic, all along the Gulf coast, all throughout the “rust belt” and all over the entire state of California cities that once had incredibly vibrant economies are being turned into rotting, post-industrial hellholes. In many U.S. cities, the “real” rate of unemployment is over 30 percent. There are some communities that will start depressing you almost the moment that you drive into them. It is almost as if all of the hope has been sucked right out of those communities.  If you live in one of those American hellholes you know what I am talking about.  Sadly, it is not just a few cities that are becoming hellholes.  This is happening in the east, in the west, in the north and in the south.  America is literally being transformed right in front of our eyes.

#9 The United States ends up borrowing back most of the money that it sends overseas every single month.

Every month tens of billions of dollars of our national wealth gets transferred to foreign countries.  In order to make ends meet, our federal, state and local governments end up borrowing gigantic amounts of money from the countries that we have sent our wealth to.

So now we have a national debt that is well over 14 trillion dollars and we owe massive amounts of money to countries like China and Saudi Arabia.

But when we borrow money from other countries that makes us even poorer in the long run.  Debt is never the answer to anything.

#10 Foreign countries are using up some of the wealth that we send them every month to buy up our infrastructure.

Most Americans don’t realize that our state and local governments are selling off our infrastructure piece by piece.  Foreign governments are literally buying pieces of America with the money that we keep sending to them.  In a recent article entitled “Our Politicians Are Selling Off Pieces Of America To Foreign Investors – And Goldman Sachs Is Helping Them Do It“, I talked about this phenomenon….

State and local governments across the country that are drowning in debt and that are desperate for cash are increasingly turning to the “privatization” of public assets as the solution to their problems.  Pieces of infrastructure that taxpayers have already paid for such as highways, water treatment plants, libraries, parking meters, airports and power plants are being auctioned off to the highest bidder.  Most of the time what happens is that the state or local government receives a huge lump sum of cash up front for a long-term lease (usually 75 years or longer) and the foreign investors come in and soak as much revenue out of the piece of infrastructure that they possibly can.  The losers in these deals are almost always the taxpayers.  Pieces of America are literally being auctioned off just to help state and local governments minimize their debt problems for a year or two, but the consequences of these deals will be felt for decades.

Sadly, neither political party seems concerned about the effects of globalism at all.

In fact, both parties continue to push for even more globalism.

But large numbers of ordinary Americans are waking up.

According to a recent Washington Post poll, only 36 percent of Americans consider “the increasing interconnection of the global economy” to be a positive thing.  Back in 2001, 60 percent of Americans believed that the globalization of the economy was a positive thing.

So maybe there is a glimmer of hope.

But until fundamental changes are actually made, globalism will continue to destroy our jobs, our businesses and our national wealth.

The Cycle of Debt Deflation

Before It’s News

One of the most famous quotations of Austrian economist Ludwig von Mises is that “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.” In fact, the US economy is in a downward spiral of debt deflation despite the bold actions of the federal government and of the US Federal Reserve taken in response to the financial crisis that began in 2008 and the associated recession. Although the vicious circle of debt deflation is not widely recognized, precisely what von Mises described is happening before our eyes.

A variety of positive economic data has been reported in recent months. Retail sales rose 0.4% in April 2010 as consumer spending rose and the US gross domestic product (GDP) grew at a rate of 3%.  In May 2010, home sales rose to a five-month high and consumer confidence rose 17% (from 57.7 to 63.3). Industrial production rose 0.8% and durable goods orders rose 2.9%, more than had been forecast. However, the modest gains reported represent the continuing adaptation of economic activity at dramatically lower levels compared to the pre-recession period and most of the reported gains have been substantially manufactured by massive government deficit spending.

Despite the widely reported green shoots, in May, the unemployment rate rose to 9.9% while paychecks in the private sector shrank to historic lows as a percentage of personal income, and personal bankruptcies rose. Roughly 14% of US mortgages are delinquent or in foreclosure, credit card defaults are rising and consumer spending hit 7 month lows. To make matters worse, the reported increase in consumer credit, in fact, points to a further deterioration because consumers appear to be borrowing to service existing debt. Outside of the federal government, which is borrowing at record levels and expanding as a percentage of GDP, and outside of the bailed out financial sector, debt deflation has continued unabated since 2008.

Money Supply vs. Debt Service

A contraction of the broad money supply is taking place because the influx of money into the US economy, i.e., lending to consumers and non financial businesses, has fallen below the rate at which money is flowing out of general circulation as a function of debt service (interest and principle payments on existing debt), thus a net drain of money from the broad US economy is taking place. As a result, additional borrowing, as consumer spending falls, appears to be servicing existing debt in a pattern that is clearly unsustainable and that signals a further rise in debt defaults in coming months.
M3
Chart courtesy of Shadow Government Statistics
The estimate of the broad money supply (the Federal Reserve’s M3 monetary aggregate) is crashing and the Federal Reserve’s M1 Money Multiplier, a measure of how much new money is created through lending activity, fell off of a cliff in 2008, and remains practically flat-lined.
MULT
Chart courtesy of the Federal Reserve Bank of St. Louis
The contraction of the broad money supply points to a potential slowing of economic activity and indicates that consumers and non financial businesses will be less able to service existing debt. Despite easing somewhat in March 2010, credit card losses are expected to remain near 10% over the next year and mortgage delinquencies, are currently at a record highs, and these dismal predictions implicitly assume a stable or growing money supply.

A tsunami of eventual mortgage defaults seems to be building and loan modifications have been a failure thus far. There have been only a small number of permanent loan modifications (295,348) under the Home Affordable Modification Program (HAMP) in 2009, out of 3.3 million eligible (60 days delinquent) loans and more than half of modified loans default.

Mortgage Delinquencies and Foreclosures
Chart courtesy of Calculated Risk
Although it has been reported that American consumers are saving at a rate of 3.4%, the contraction of the broad money supply suggests savings liquidation. Given a contracting money supply, ongoing debt defaults and declining consumer spending, the increase in non-mortgage consumer loans indicates that consumers are borrowing where possible to consolidate debts, cover debt service, or borrowing to continue operating financially as their total debt grows, thus as they approach insolvency.
CONSUMER
Chart courtesy of the Federal Reserve Bank of St. Louis
The increase in non-mortgage consumer loans has not prevented an overall decline in total household debt attributed to ongoing deleveraging by consumers. While deleveraging (paying down debt) has been interpreted as caution on the part of consumers, or as low consumer confidence, the decline in outstanding credit reflects a reduced ability to borrow, i.e., to service additional debt. This suggests that the recovery of the US economy may be illusory and that the economy is likely to contract further in coming months.
CMDEBT
Chart courtesy of the Federal Reserve Bank of St. Louis
Commercial borrowing has declined more sharply than household debt suggesting that the nominal return to growth estimated at 3% has not been matched by debt financed expansion in the private sector.
BUSLOANS
Chart courtesy of the Federal Reserve Bank of St. Louis
The broad US money supply is no longer being maintained or expanded by normal lending activity. If federal government deficit spending ($1.5 trillion annually), debt monetization and emergency actions by the Federal Reserve (totaling an estimated $1.5 trillion since 2008) to recapitalize banks are considered separately, there remains a net drain effect on the broad money supply. The scarcity of money hampers economic activity, i.e., money is less available for investment, and directly exacerbates debt defaults as consumers and businesses experience cash shortfalls, while at the same time being less able to borrow. Since unemployment is a key indicator of recession, then if the US economy were contracting, it would be evident in unemployment statistics.

Structural Unemployment

Unemployment and labor force data suggest that the US labor market is in a structural decline, i.e., millions of jobs have been and are being permanently eliminated, perhaps as a long term consequence of off-shoring, outsourcing to other countries and the ongoing de-industrialization of the United States. However, the immediate meaning of the term “structural” has to with the fact that jobs created or sustained during the unprecedented expansion of debt leading to the financial crisis that began in 2008, e.g., a substantial portion of service sector jobs created in the past two decades now appear not to be viable outside of a credit expansion.

Officially, the US unemployment rate rose to 9.9% in April 2010, which represents the percentage of workers claiming unemployment benefits. However, the total number of unemployed or underemployed persons, including so-called “discouraged workers” (Bureau of Labor Statistics U-6), rose to 17.1%. Using the same methods that the BLS had used prior to the Clinton administration, U-6 would be approximately 22%, rather than the official 17.1% statistic.

U-6 Unemployment
Chart courtesy of Shadow Government Statistics
With official U-6 unemployment of 17.1% and a workforce of 154.1 million there are roughly 26,197,000 people officially out of work. Using the pre-Clinton U-6 unemployment calculation of approximately 22%, there would be 33.9 million unemployed. If the average US household consists of 2.6 persons and if 33% of the unemployed are sole wage earners, then 55.5 million US citizens currently have no means of financial support (17.9% of the population).
Unemployment by Duration
Chart courtesy of Calculated Risk
While it has been reported that the labor force is shrinking, the characterization of workers permanently exiting the workforce by choice may be inaccurate. While a shrinking workforce could reflect demographic changes, the rate of change suggests that tens of millions of Americans are simply unemployed.
EMRATIO
Chart courtesy of the Federal Reserve Bank of St. Louis
Setting aside the question of whether or not those “not in the workforce” are, in fact, permanently unemployed, the workforce, as a percentage of the total US population, is currently at 1970s levels. Since many more households today depend on two incomes to meet their obligations, compared to the 1970s, a marked drop in the percentage of the population in the workforce points to a decline in the labor market more significant than official unemployment statistics suggest. What is more important, however, is that structural unemployment suggests structural government deficits, e.g., unemployment benefits, welfare, food stamps, etc. Since more than 2/3 of US GDP (roughly 70%) consists of consumer spending, a sustainable recovery from recession seems improbable if unemployment is worsening or if the labor force is in a structural decline, since that would imply unsustainable government deficits, whether or not they are masked by nominal GDP gains thanks to economic stimulus measures.

Government and GDP Growth

The US federal government is a growing portion of GDP, thus reported GDP growth is largely a byproduct of government deficit spending and stimulus measures, i.e., reported GDP growth is unsustainable. Total government spending at the local, state and federal levels accounts for as much as 45% of GDP, thus nominal gains would be expected when government deficit spending increases. According to some measures, reported gains in GDP are a byproduct of relatively new statistical methods and, using earlier methods of calculation, GDP remains negative.
GDP
Chart courtesy of Shadow Government Statistics
Government borrowing and spending may have offset declines in the private sector but only to a degree and only temporarily. The resulting growth in US public debt has an eventual mathematical limit: insolvency. Of course, the actual limit to US borrowing remains unknown. The continuing solvency of the US depends on the ability and willingness of governments, banks and investors around the world to lend to the US, which in turn depends on the tolerance of lenders for the US government’s profligacy and money printing by the Federal Reserve, e.g., quantitative easing and exchanging new cash for worthless bank assets. US Treasury bond auctions will fail if lenders conclude that a sufficiently large portion of their investment will be diluted into oblivion by proverbial money printing. In that event, the US dollar will surely plummet, despite deflationary pressures within the domestic US economy, and the cost of foreign goods, e.g., oil, will rise causing high inflation or triggering hyperinflation.
GFDEBTN
Chart courtesy of the Federal Reserve Bank of St. Louis
According to the Bank for International Settlements (BIS), the federal budget deficit increased from 3.1% of GDP in 2007 to 9.2% in 2010.  Rather than being the result of one-time expenses, such as temporary stimulus measures, much of the deficit represents permanent increases in government spending, e.g., due to the growing number of federal employees. If increased government spending is removed, GDP appears to be declining significantly.
GDP Minus Government Deficit Spending
Chart courtesy of Karl Denninger
Of course, sustainability has more to do with total debt than with deficit spending because a deficit assumes that there is an underlying capacity to service additional debt.

Unsustainable Debt

While asset prices have declined, e.g., real estate and equities, debt levels have remained high due to the federal government’s policy of preserving bank balance sheets, which had ballooned prior to the financial crisis to the point that overall debt in the US economy reached unsustainable levels.
Total Debt to GDP
Chart courtesy of Karl Denninger
The absolute debt to GDP ratio of the US economy peaked in 2007 when debt levels exceeded the ability of the economy to service debt from income based on production, even at low interest rates. Although US GDP began to decline prior to the advent of the global financial crisis, debt coverage had been in decline approximately since the 1970s, coincidentally, around the time that the US dollar was decoupled from gold.
Declining Debt Coverage from 1971 on
Chart courtesy of Karl Denninger
Government deficit spending cannot correct the situation because, for every dollar of new borrowing, the gain in GDP is negligible and some have argued that the US economy has passed the point of “debt saturation.”
Debt Saturation
Chart courtesy of Nathan A. Martin
In a growing economy, additional debt can result in a net gain in GDP because the money supply grows and economic activity is stimulated by transactions that flow through the economy as a result. The debt saturation hypothesis is that, as debt levels rise, additional debt has less impact on GDP until a point is reached where new debt causes GDP to decline, i.e., the capacity of the economy to service debt has been exceeded and, not only is it impossible for the economy to grow at a rate sufficient to service existing debt (since interest compounds), but economic activity actually declines further as a function of additional debt.

A Downward Spiral

The process of debt deflation is straightforward. New lending at levels that would maintain or expand the broad money supply is impossible for two reasons: (1) asset values and incomes have fallen and millions remain unemployed; and (2) debt levels remain excessive compared to GDP, i.e., real economic activity (outside of the government and financial services industry) cannot service additional debt. The inability to lend, actually the result of prior excess lending, results in a net drain of money from the economy. The drain effect, in turn, leads to further defaults as cash strapped consumers and businesses fail to service existing debt, and as debt defaults impact bank balance sheets, putting a damper on new lending and completing the cycle of debt deflation.

Keynesian economic policies, i.e., government deficit spending, are irrelevant vis-à-vis excessive debt levels in the economy and bailing out banks is not a solution since it cannot stop the deterioration of their balance sheets. The process is self-perpetuating and cannot be stopped by any government or monetary policy because it is not a matter of policy, but rather one of mathematics.

Since the presence of excess debt (beyond what can be supported by a stable GDP, or by sustainable GDP growth) impacts the broad money supply, efforts to preserve bank balance sheets, i.e., to keep otherwise bad loans on the books of banks at full value, will ultimately cause bank balance sheets to deteriorate more than they would have otherwise. The fact that US banks issued trillions in bad loans cannot be corrected by changing accounting rules, nor can the consequences be avoided by government deficit spending or by unlimited bailouts, and the problem cannot be papered over by dropping freshly printed money from helicopters flying over Wall Street. The major problems facing the US economy today—a tsunami or debt defaults, structural unemployment, massive government budget deficits, a contraction of the broad money supply outside of the federal government and the financial system, and a lack of sustainable growth—cannot be addressed as long as excess debt levels are maintained. As von Mises clearly understood, sound economic conditions cannot be restored unless and until the excess debt, which resulted from a boom brought about by credit expansion, is purged from the system. The alternative, and the current policy of the United States, is a downward spiral into a bottomless economic abyss.

40 million people in the United States are on Food Stamps

Reuters

Nearly 40 million Americans received food stamps — the latest in an ever-higher string of record enrollment that dates fromDecember 2008 and the U.S. recession, according to a government update.

Food stamps are the primary federal anti-hunger program, helping poor people buy food. Enrollment is highest during times of economic distress. The jobless rate was 9.9 percent, the government said on Friday.

The Agriculture Department said 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. USDA updated its figures on Wednesday.

“This is the highest share of the U.S. population on SNAP/food stamps,” said the anti-hunger group Food Research and Action Center, using the new name for food stamps, Supplemental Nutrition Assistance Program (SNAP). “Research suggests that one in three eligible people are not receiving … benefits.”

Enrollment has set a record each month since reaching 31.78 million in December 2008. USDA estimates enrollment will average 40.5 million people this fiscal year, which ends Sept 30, at a cost of up to $59 billion. For fiscal 2011, average enrollment is forecast for 43.3 million people.

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