American Economic Weakness

September 13, 2012

   

Sept. 7^th we had a very disappointing jobs report. Another disappointing report is expected Friday the 14th. Hewlett Packard has announced thousands of lay offs to start before the end of the year. The Fed has initiated a new round of Quantitative Easing (QE) whereby they purchase mortgage bonds in order to grow the economy.  This could be known as QE 3, but QE’s 1 and 2 both had definitive dollar amounts and dates attached to them. This QE does not have anything definite related to it; no dates and no dollars. No expectation of $40 billion in monthly bond purchases ever ending.

The intent is to weaken the dollar and increase the amount of money available in the economy. Printing money is a trick that third world countries use to heat up their economies and generate inflation. A weak dollar will generate inflation by increasing the costs of anything we import. Part of the intent of QE is to make American made products more attractive pricewise. Does that work? Did the first two rounds of QE help? Can anyone say, “QE 2 was a Godsend! I could not have hired so many employees without it!”

I also have not heard any business owners, small or otherwise, speak highly about our President’s economic policies. These four million jobs that were created under his watch sure seem to be under the radar. How can that be if there has been a constant 11 million unemployed since the end of the recession three years ago? Statistics are tricky. It all depends on when you look at the job market. If you look at the bottom of the market in 2009 and compare it to today, I suppose you could say four million jobs were created. But how many were really lost in this recession since 2007?

Let’s consider a very cogent statistic; the job seekers vs. available jobs. As of July 2012, the Bureau of Labor Statistics (BLS) shows it at 3.5 seekers per job. At the height of the recession in July 2009, it was 6.7 to 1! The numbers changed dramatically over the past three years. Why? Not because four million jobs were created, it is because millions dropped out of the job market. 

Check this out. The ratio of unemployed as a percentage of the population is cogent. In 2007, over 63% of the job aged population was employed. By August of this year, it wsa just barely over 58%. How about those out of work for six months or more? In 2007, less than 20% of unemployed Americans were out of work for six months or more. As of August 2012 that number stands at 40% per the BLS. So, of the 11.5 million+ Americans currently out of work, about 5 million have been out of work for more than six months. Ouch. One stat that is hard to track is the statistic of those who have dropped out of the workforce and ended their job search. The percentage of Americans who have been out of work and dropped out of the workforce keeps growing. This is a statistic our government does not want everyone to know about. If you did, you might want to question their abilities at job creation. 

Huffington Post recently called the government jobs reports a “Jobs Mirage.” The unemployment rate dropped because hundreds of thousands of Americans drop out of the job market each month and are no longer looking for work.  
 
Quantitative Easing may work. It may work very slowly. It could also cause a greater disaster in relation to inflation. How about unleaded gas going for $5 or $6 or more per gallon? Not just in California but in the Midwest? A weak dollar makes imported oil more expensive. If you were a Saudi Prince, you would be thanking Bernanke right now! “Allah, has blessed me! Thank you, Mr. Chairman.” 

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A final tidbit for you….Our car manufacturers are not very smart. QE will increase the prices of Japanese, German, and Korean automobiles. GM, Chrysler, and Ford will see the prices of foreign cars going up and raise the price of American Cars. Why? “We need to remain competitive even in price!” It happened in the 70’s during Jimmy Carter’s regime. History can repeat.  

Prior to the bailout, GM and Chrysler let the UAW run their businesses into the ground for them. The unsustainable union pensions and pay plans were doomed, but no fear. Our government was there to bail them out and make them whole. Now the UAW manages their holdings like GM and Chrysler from the White House. C’mon, our President is in the pocket of unions. We all know it. It’s no secret. The millions in government owned auto manufacturer shares are meaningless without some real negotiations with the unions. Those negotiations won’t start until our President’s second term. As a lame duck, will he be tough on the unions? Will he do the right thing to support the sustainability of our auto manufacturing here in the U.S.? Simple answer: No.

Obama and U.S. Foreign Policy

The Obama Administration has roundly failed in managing their foreign affairs. North Korea and Iran continue to act as rogue states with no sign of change. The situation in Afghanistan continues to deteriorate. Our relations with Pakistan are just coming back from the brink of collapse. We have rolled over like an old weak dog for Russia in relation to the placement of missiles in Poland and, in turn, alienated our strongest ally in Eastern Europe. Granted, the Bush Administration was no prize in foreign affairs, but they were much more capable in carrying the Big Stick that is needed to draw other nations into line.

A good example of the Bush Administration’s abilities and ideas at work was the Iraq War Surge. Bush ordered thousands of troops into Iraq to provide security, hunt the groups threatening the country’s stability, and train the Iraqi constabulary and military to quell the religious unrest and take command of their country’s streets. The surge was the best thing that could have happened to Iraq. The security it provided gave time for our team to highly train several Iraqi police and military units in the practice of counterinsurgency and basic law enforcement. These units have emerged victorious for the most part in relation to controlling the streets and capturing those internal terrorists who would do harm to their own people. These elite units are the only thing that is holding the nation of Iraq together for now. Though our Iraq activities ended under the auspices of the Obama Administration, the surge was devised and executed by the Bush Administration. The surge was a smart move in a war that didn’t really have a lot of smart moves.

Kim Jong Un in North Korea seems to be carrying on in his father’s footsteps. In most circles I don’t think there was any doubt he would continue antagonizing his neighbors. North Korea continues to demand much more than its share of attention. They are developing nuclear weapons. The North Korean government makes no excuses about their nuclear program being for purposes of war. The Obama Administration continues to mollycoddle them. Recently, the Administration approved new shipments of food to North Korea to help them alleviate their food shortages. What did the USA get in return? We got nothing; only the promise of additional talks about their nuke program. That has all gone out the window with the recent advent of their failed missile launch. Our President is timid when it comes to putting his foot down in the international community. He will simply allow North Korea to continue to make nukes and practice their missile ballistics. He might shake his finger at them a bit and make up some tough sounding rhetoric, but in the end nothing will be done and he will end his first term in a similar fashion to Jimmie Carter. Obama is an “internationalist.” Rather than seeing the U.S. in control of its own destiny, he prefers to place our destiny in the hands of the international community, the UN. Then we can be just as powerless as the UN.

With the exception of the recent mass murder by a U.S. Trooper and the incredible fuck up of burning some Qurans in public, the problems in Afghanistan are not due to the actions of our troops over there. They are due to the inactions and inability of the Administration to create a focused plan of action in regard to the country. This, along with our government’s inability to manage our relationship with Pakistan, has created a situation with virtually no upside. We have been in there since 2001 and should be out of there by now. Instead, our president started a surge of his own, shipping battle weary troopers from Iraq to Afghanistan to provide additional security in hopes of developing the same Nation Building success that Bush had in Iraq. No dice. Afghanistan is an entirely different country. Where Iraq had always had its provinces under control of the central government, Afghanistan is a tribal nation that has had a weak central government with virtually no control over provinces outside of the capital of Kabul.

That being the case, Afghanistan is a nightmare for regular troops. We should have maintained the action as a Special Forces action and used local indigenous troops to do all our fighting for the government there. After 11 years of conflict, our troops should not be providing security to the Afghani government. Regrettably, the Afghani military, like the Afghani government, cannot be trusted to provide security or fight corruption.

Our president will not put the screws to Afghani President Karzai and make him clean up his government. There are no Afghani patriots who would fight corruption. There is no legal system there to mete out justice to those who would take advantage of the peasants and make them pay out bribes in order to curry government favor.

The only choice our president has left us is to get out soon and let it collapse. President Karzai will face a similar fate as his predecessor, President Najibhulla who was placed in office by the Soviets. Najibullah was castrated by Taliban soldiers in 1996. After that they drug him behind a truck until he was dead. Since the Taliban were Pushtuns like himself, Najibullah believed they would not harm him. Karzai probably thinks the same thing. History does repeat itself.