Guest Post: Strip Mining the U.S. Economy

By Jack Sparrow, who writes at Mercenary Trader

The employment picture constitutes yet another headwind and a significant one to the already-faltering U.S. recovery. It will undermine future spending, company earnings and profitability. Indeed, the poorer the employment picture, the greater the likelihood that households will become more cautious and that the corporate sector will further increase its self-insurance
Mohamed El-Erian, Why the Payrolls Report Matters

Strip mining is a nasty, dirty business.

Basically you rip up the land, haul away tons of rock, and then use noxious chemicals to separate out a small quantity of targeted material. What’s left behind resembles a vast denuded moonscape, or perhaps a giant open wound.

Most rich-world inhabitants don’ give a second thought to this process, for a very simple reason: we don’t have to see it. There is no reason for the man in the street to feel concern, except when resource prices rise or environmental tragedy unfolds.

The focus of this missive is not environmental, though, but economic. Because now it is the U.S. economy that is being ‘strip mined.’

In the same way that mining companies will descend on a region with heavy equipment and chemicals, brutalizing the land until nothing is left, corporations large and small are doing the same thing with the goal of extracting profits rather than minerals, to the long term cost of the U.S. economy itself.

A recent Economist chart tells the story:

“Corporate profits are back within a whisker of the all-time highs achieved before the downturn in late 2008” The Economist writes. “American profits are already back to 11% of GDP. Corporate America is reaping the rewards from cutting costs, especially in capital investment and labour, through an unpleasant mix of redundancies, reduced hours and lower pay. The great squeeze cannot go on forever, of course, but it shows no sign of slackening.”

It is this corporate “strip mining” process, along with a failure of stimulus funds to actually stimulate, that is responsible for the great top down / bottom up disconnect we have pounded the table on repeatedly (see ìSunny With a Chance of Earthquakesî as recent example).

The logic chain goes something like this:

  • The spigot of cheap money from the Fed buoys the fortunes of U.S. corporations.
  • Investors are happy to lend to blue chip borrowers, but not to small businesses.
  • Public companies keep profits up by ruthlessly slashing costs (i.e. jobs).

Wall Street then cheers the numbers as three self-reinforcing trends are sustained:

  1. Strength begets strength on the bottom up outlook for public companies.
  2. Weakness begets weakness as American jobs are “strip mined” for profit.
  3. The Fed’s easy money stance is sustained by persistent economic malaise.

In the medium term, the “strip mining” model is a recipe for continued strength in equities. It is very hard to resist a combination of robust profits and cheaply available credit (for the right borrowers) in a zero interest rate environment.

In the longer term, though, this cycle is yet another example of glaring short-termism on Wall Street, of precisely the sort that portends ultimate disaster for the U.S. economy (and for slow-footed investors who fail to cash out before the guillotine drops).

The trouble with the whole strip mining model, after all, is that the practice is not sustainable. Once you have taken what can be taken, there is nothing to be done but abandon the area and leave the land for dead – perhaps to start up another mine elsewhere.

Similarly, the notion that corporations can ìstrip mineî for profit indefinitely, even as they hoard rainy day cash in the same manner as the banks, is not remotely feasible.

And for those unaware of what’s happening, by the way, here is a little light reading:

  • Weak pivate hiring shows recovery on the ropes (Reuters).
  • The Long Term Jobless: Left Behind (Businessweek).
  • Wary US employers keep hiring plans on hold (Reuters).
  • The grimness of US unemployment (FT Alphaville).
  • The Biggest Lie About US Companies (Yahoo).
  • Michael P. Fleischer: Why Iím Not Hiring (WSJ).
  • The crisis of middle-class America (Financial Times).

Stripped of High Hopes

Last but not least: Given that the working metaphor here is “strip mining,” at least one bad pun cannot be resisted. Consider this doozy of an anecdote:

Carrianne Howard dreamed of designing video games, so she enrolled in a program at the Art Institute of Fort Lauderdale, a for-profit college part-owned by Goldman Sachs Group Inc. Her bachelorís degree in game art and design cost $70,000 in tuition and fees. After she graduated in December 2007, she found a job that paid $12 an hour recruiting employees for video game companies. She lost that job a year later when her department was shuttered.

These days, Howard, 26, makes her living in a way that doesn’t require a college diploma: by stripping at the Lido Cabaret, a topless club in Cocoa Beach, Florida. “I didn’t know what else to do,î she says. “Ií’e got a worthless degree. It’s like I didn’t attend school at all.”

– Bloomberg, Stripper Regrets Art Degree Profitable for Goldman

How many Americans now feel like Carrianne Howard, one wonders, having spent anywhere from $30,000 to $300,000 on a higher education certificate, its value now reduced to little more than something fancy to hang on the wall.

What should be done about this? Should U.S. companies somehow be forced to give up their “strip mining” ways and start hiring again? No. Trying to impose yet another heavy-handed solution on the free market would only be a recipe for greater disaster.

Companies practicing slash and burn tactics on their own workforce – engaging in the euphemistic process of “right sizing” (rather than down sizing) as they prepare for an uncertain and bleak future – are at least attempting to do right by their shareholders.

What would be nice, really – although it will probably never happen – would be recognition from on high that current economic policies are an utter failure, and have not met their aims in the slightest (except to the degree such aims were secretly focused on bailing out the connected).

The diagnosis is not exceptionally complicated. Attempts to reinvigorate the U.S. economy have failed because the torrent of cheap money provided by the Federal Reserve has consistently flowed to privileged channels, rather than into the parched cracks and crevices that need it most. A simple proximity formula applies: Those who drink most deeply from the oasis are those most closely connected to the Fed.

Meanwhile, consumers and small businesses, which represent 70% of US GDP and roughly half of all U.S. economic activity respectively, have been left to die in the desert.

Ironic, that. As China makes strides to become more like the United States, the United States is at the same time doing its seeming best to become more like ChinaÖ an economically lopsided hybrid with no true middle class, just pockets of privilege surrounded by vast swathes of increasingly resentful impoverishment.

Killing the Goose

There is at least one positive trend to come out of all this. As the average American finds his retirement prospects diminished, his bank account drained, and his food and energy bills increased, he (or she) is also in position to hit upon an important truth: You don’t need to gorge on “stuff” in order to be happy.

Consider the following, via the NYT:

Amid weak job and housing markets, consumers are saving more and spending less than they have in decades, and industry professionals expect that trend to continue. Consumers saved 6.4 percent of their after-tax income in June, according to a new government report. Before the recession, the rate was 1 to 2 percent for many years. In June, consumer spending and personal incomes were essentially flat compared with May, suggesting that the American economy, as dependent as it is on shoppers opening their wallets and purses, isn’t likely to rebound anytime soon.

On the bright side, the practices that consumers have adopted in response to the economic crisis ultimately could, as a raft of new research suggests, make them happier. New studies of consumption and happiness show, for instance, that people are happier when they spend money on experiences instead of material objects, when they relish what they plan to buy long before they buy it, and when they stop trying to outdo the Joneses.

– New York Times, But Will it Make You Happy?

What does that sound like to you? To yours truly, it sounds like America’s infamously gluttonous, reliably idiotic “shop til you drop” consumer culture, in which bigger is always better and more is better still, is at long last on the ropes.

The only way to kill a truly strong addiction is through forced withdrawal. America’s addiction to sport utility vehicles (SUVs), for example, was likely broken only by the forced withdrawal of punitively high gas prices for an extended period of time. And now we (the collective American”ìwe”) are learning, again through forced withdrawal born of harsh economic circumstance, that “Hey! I don’t really need all that crap bought on credit after all!”

This withdrawal – assuming we doní’ revert to our gluttonous, spendthrift, zero down ways at the first opportunity – is good news for the long run psychological and emotional health of the average American family. But it is very bad news for an economy 70% dependent on consumer spending, and worse news still for the ravenous corporate marketing machines aimed at getting Americans to spend, spend, spend, rather than save and live simply.

To wit: By downsizing Joe and Jane Sixpack, wedging them into a hole so tight they have been forced to give up their endless bought-on-credit fix, Wall Street may well have killed the shopaholic goose that laid the golden eggs.

This could ultimately be a good thing, but the painful macroeconomic reality of it means we must go through an adjustment period in which consumer spending becomes a significantly smaller component of the overall U.S. GDP mix (vs historic 70% levels), and that adjustment is going to HURT. How much and how soon it will hurt, we shall see.

Eat, Drink and Be Merry!

The trading implications for all the above can perhaps be summed up with the old exhortation: ìEat, drink and be merry, for tomorrow we die.î

In other words, Wall Street will have the means to ìeat, drink and be merryî as long as public companies are able to effectively continue their ìstrip miningî process against the backdrop of a fiscally cooperative ZIRP environment — and as long as macroeconomic headwinds donít become too strong.

But when the waves of turmoil return – most likely in the form of renewed sovereign debt fears, or perhaps keying off some modest geopolitical flare-up or global growth pause – then all bets are off.

The current economic path is not in the least sustainable, and when the U.S. economy mine has been well and truly “stripped,” the next phase of massively painful adjustment will begin.

JS

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58 comments

  1. Francois T

    “The current economic path is not in the least sustainableÖ and when the U.S. economy mine has been well and truly ìstripped,î ”

    For Pete’s sake, these extra characters make reading such a painful exercise!

    1. Rex

      It is a font or character set issue. Special characters like long dash and quotes didn’t translate in the copy. If you take the link to the original article at the top — Mercenary Trader — you will see a clean version.

  2. eightnine2718281828mu5

    Now that the strip miners have hauled off the US worker’s credit-worthiness, the only thing left is to strip their retirement accounts and Social Security/Medicare benefits.

    Thank God our working class isn’t as sensitive to uncertainty and risk as their CEO betters.

    1. Anonymous Jones

      “the only thing left is to strip their retirement accounts and Social Security/Medicare benefits”

      …and the pied pipers in the media are leading the mostly shorn sheep right to the trough.

      Mmmmm, like some tea with the feces they’re serving you?

      [Won’t matter much, the blunt instrument to the back of the head is coming soon enough…try to learn to enjoy eating the sh*t while you’re still around.]

      [Ha. It’s a trick to convince someone to do something against his self-interest, but to make him enraged that he’s not able to f*ck himself fast enough, well that’s just genius.]

  3. Francois T

    Most rich-world inhabitants don’t give a second thought to this process, for a very simple reason – we don’t have to see it. There is no reason for the man in the street to feel concern

    Until there is a toxic spill engulfing the streets. Wonder what form it’ll take; 5 million March on Washington? Right wing militias? Booting every incumbent out of office at the polls?

  4. Jim

    Expect to see increased use of the term “state capitalism” in future. China is basically there and Russia has a more thugist version. The US seems to be converging on a similar system from the right instead of the left (corporations taking over the government instead of socialism allowing some free enterprise). IMO we are one election away from a single party government of concentrated wealth. Maybe that is the way it is supposed to be based on it’s prevalence (my local city and county government is completely controlled by land owners and developers).

    Jim

    1. giggity

      Jim, I agree. This seems to be the case with most localities. Local politics are decided by the land owners, developers, and a smattering of “big” business types, even in the smallest of towns.

      The 2012 election will see the electorate fall for the Republican idiocy once again (not that I’m saying the Democrats are doing a good job, but we know it’ll be time for some hardcore, proper fascism once the Republicans are in full power again), and a new chapter in American history will begin. The new struggle. I just hope we have enough folks with their heads on straight to help fight it.

    2. NOTaREALmerican

      It’s been this way for a long time.

      Perhaps there is no other system possible. The worship of wealth is natural.

      I live in limousine liberal CaLi college town and it’s very difficult to hold off the developers. The assumption amongst the liberal peasantry – that the council members are “looking out for their interests” – is very hard to overcome. Especially if the council members are owned by the developers AND know which limousine-liberal songs to sing to the dumbass peasants (sustainable development, organic holistic community based growth, transit friendly, solar, etc…) But, in the end, it’s all about who pays; and developers – obviously – purchase politicians to get government to pay.

      The wealthy purchase sociopathic politicians to sing bullshit to the easily manipulated dumbasses. It doesn’t matter what ideology it is; different clowns same circus.

      1. liberal

        Especially if the council members are owned by the developers …

        Is there any locality in the US where the council members are not owned by the developers?

  5. attempter

    I’ve often said that to corporatism and “libertarianism”, society, the people, just like the earth, are seen as literally nothing but a resource mine and a waste dump.

    They’ve already proclaimed themselves outlaws as a matter of ideology and proved it with their actions; I’d give them the full outlawry they must really want.

    As for those bogus “profits”, where it’s not straight accounting fraud (all bank “profits”, for example) it’s the fraudulent return on looting public money (the Bailout, Pentagon budgets, and all other corporate welfare) or on cannibalization – cutting jobs, “consolidation”, spin-offs or M&A money shuffles, tax scams…

    I don’t know how many years it’s been since I saw a corporation of any significant size report an actual legitimate profit, and of course the looting regime has only become more brazenly kleptocratic since the intentionally triggered crash. What we’ve seen since 2008 has been nothing but disaster capitalism, disaster profiteering, disaster looting, disaster rioting.

    It’s no longer America but Bailout America. If we want the former back we must destroy the latter.

  6. Psychoanalystus

    Loved the 4 Davidowitz interviews above. They’re guaranteed to uplift your soul and brighten up your day…

    Psychoanalystus

  7. abelenkpe

    Carianne is living in the wrong part of the country to make her education worthwhile. If she honestly has skills as a video game designer there are places hiring in CA. Why would one get a degree in design and then work in HR? My sister, D student extraordinaire works in HR.

  8. Friedman's Ghost

    Problems are many and the solutions are nonexistent.

    We have a massive tide of debt and consumers are swimming against it with no way to pay it back.

    Boomers are heading into retirement scared half to death se they did not save enough and are praying anyone under 50 does not notice and will keep paying into a system from which they will never draw out.

    There is no source of jobs. Period.

    We are still way on the wrong side of the global wage arbitrage.

    A secular shift in the attitudes of consumers towards housing and risk taking is underway.

    The Fed is powerless to change attitudes.

  9. deeringothamnus

    The success of the ruling class is based upon the fact that they are more unified by the ruled. In the first place, small businesses, in cannot compete with the free money shoveled to large corporations by investors. It stinks that companies like MacDonalds can sell debt at ridiculously low rates. In the second place, too many small businesses are also at least as crooked as the larger ones, making them an investment risk. The legal framework wherein this all exists also makes contracts expensive or impossible to enforce, allows anyone to sue anyone else for any or no reason. Only those with the most money win in this scenario, stacking the deck against everyone without a few spare million.

  10. Tom Hickey

    According to Moody’s the upper 5% consumers 37.5 % and the lower 80% consumers 39% of GDP. The top quintile consumes 60%. The middle class is expendable and soon to be history as the upper tier feeds off global financialization and the profits of the multi-nationals. The great leveling is taking place as US workers get crammed down in the direction of Chinese workers.

  11. Geoff-UK

    Amateur hour around here with those extra characters. Not worth the headache–removing you from my RSS feeder. Thanks for the free info over last 3 months…

  12. Jim Haygood

    The real strip-mining is the 4% of GDP excess spent on maintaining the global US military empire.

    This steady blood-suck of wasted expense and malinvestment has already hollowed out the US economy. Now it will begin eroding living standards to Third World levels.

    No empire has ever survived, for exactly this reason — it doesn’t pay for itself. But these fundamental, macro-level misallocations of resources attract little attention from economists. We’ll be needing fewer of those value-subtracting professionals in our blighted future, too.

  13. Jim Haygood

    The real strip-mining is the 4% of GDP excess spent on maintaining the global US military empire.

    This steady blood-suck of wasted expense and malinvestment has already hollowed out the US economy. Now it will begin eroding living standards to Third World levels.

    No empire has ever survived, for exactly this reason — it doesn’t pay for itself. But these fundamental, macro-level misallocations of resources attract little attention from economists. We’ll be needing fewer of those value-subtracting professionals in our blighted future, too.

    1. PQS

      Hippie.

      Just kidding. But I did think of Gates’ comments today about the “professional left” not being satisfied until they have Canadian healthcare and have dismantled the Pentagon.

      I’d go for just the healthcare part, if I could get it. I know the Pentagon is full of white-collar welfare.

  14. curlydan

    “Companies practicing slash and burn tactics on their own workforce [are] engaging in the euphemistic process of right sizing (rather than down sizing) as they prepare for an uncertain and bleak future [and] are at least attempting to do right by their shareholders”

    Here is the crux of the problem with the corporate structure. Corporations think they are _required_ to work for the shareholders and that work requires them to increase EPS now. Each company has a short term interest to squeeze, but this will eventually backfire when the squeeze starts cutting topline revenue faster than they can squeeze the bottom. A move toward financials among companies had been prolonging the ability to increase EPS, but if the consumer is choking on too much credit, there is less and less ability to move into increased finance.

  15. May

    US is not trying to become like China (which reduced poverty);but,like India (where poverty is growing). India is also better analogy with its crumbling infrastructure, poor ed standards, and tiny elite getting jobs.

    1. liberal

      Good point. Some people blither on about India as developing, but their female literacy rate is atrocious. China’s isn’t.

  16. The humanity

    History, while not repeating itself, often rhymes.

    In the closing days of the Roman Republic, internecine class warfare destroyed the Roman Citizen Farmer, and the depravity of the Roman Empire ensued, with the Aristocracy living lavish lifestyles supported by countless slaves. In the end, there weren’t enough stakeholders left to maintain Empire, and it melted away.

    The Aristocracy is a nihilistic parasite, first bleeding, then savaging, and finally killing its host.

    1. aet

      About those slaves in Rome….since the time of Augustus onwards, the Romans found it necessary to l;imit the ability for an owner to manumit, or free, his slaves, to a number of not more than 100 per year.

      Slaves were property: and one was taxed not on income, but on property.

      That they felt the necessity of passing a Law to restrain people from freeing their slaves may go some way to clarifying that slavery was not all “cakes & ale” for their owners.
      Apparently, many Romans wanted to have fewer slaves.

      1. aet

        Oh, and the Roman empire did not fall until the 13th century.
        The Empire persisted for about 1,200 YEARS from the extinction of the Republic, which itself lasted about nene centuries.

        I guess the “American Empire”…although I would not call it that – might not have the same kind of “staying power”.
        It is a youthful place, after all: and I think that it’s just starting.
        America is not Rome. Any comparison is unwarranted, and vanishes upon detailed inspection.
        The two societies and the state of human knowledge aare simply too different for a comparison to be useful on any substantive way.

        1. skippy

          Rome had the upper hand in almost every aspect, this is not true today, time lines have condensed.

  17. Jim Haywood

    Occasionally the host pre-emptively intervenes. But in our case, 150 years of public education has done its job all too well, in incalculating a deracinated, dependent complacency.

    Were the Founding Fathers alive today, they would be executed as terrorists.

    1. Ed Straker

      “150 years of public education has done its job all too well”

      I wish I could engage in simplistic scapegoating. If only the answers were so simple.

  18. anon48

    The strip mining analogy was really clever. Reading through the first half of the article, the powerful picture that clearly emerges is that of an evil soul-less scheming corporate elite, permanently devastating any of the surrounding human landscape with which it comes in contact.

    But then half way through the article Mr. Sparrow suddenly and unexpectedly changes direction 180 degrees:

    “What should be done about this? Should U.S. companies somehow be forced to give up their “strip mining” ways and start hiring again? No. Trying to impose yet another heavy-handed solution on the free market would only be a recipe for greater disaster.”

    “Companies practicing slash and burn tactics on their own workforce – engaging in the euphemistic process of “right sizing” (rather than downsizing) as they prepare for an uncertain and bleak future – are at least attempting to do right by their shareholders.”

    He seems to imply that companies are actually conducting themselves in a reasonable fashion. So where does the author diagnose the real problems- first with failed government policies. Policies that enable a population addicted to “…America’s infamously gluttonous, reliably idiotic “shop till you drop” consumer culture, in which bigger is always better and more is better still, is at long last on the ropes.”

    Further, he foresees the need for the addicted masses to experience a form of economic withdrawal… and this seems to be where he sees the true underlying chronic problem. The withdrawal is a necessity “…we must go through an adjustment period in which consumer spending becomes a significantly smaller component of the overall U.S. GDP mix…”

    In this context, the strip miners are relegated to the role of being a symptom of the problem rather than the underlying cause. They too are not in control of their own destiny, but rather are just along for the ride… for as long as it lasts.

    I thought the strip mining metaphor was attention grabbing – but distracted from the points he was really trying to make, and with which I totally agreed

    1. Jack Sparrow

      Thanks for the kind words… re, the 180 on public companies, I agree that was a bit of a pirouette, but a necessary one given the complexity of the situation.

      Also, re, public companies (the strip miners) being another symptom rather than the source: I had not articulated that explicitly, but on thinking about it you are right, that is part of the broad thesis. We arrived here through a whole host of bad decisions and bad policies, and now many of our actions for good and ill are forced.

      1. i on the ball patriot

        When you identify a viper as a lamb you aid and abet the viper.

        When you identify intentional genocide of the global middle class and underclass by gangster ruling elite propaganda as inept strip mining you aid and abet the gangster ruling elite.

        Deception is the strongest political force on the planet.

  19. Canute

    “What should be done about this? Should U.S. companies somehow be forced to give up their “strip mining” ways and start hiring again? No. Trying to impose yet another heavy-handed solution on the free market would only be a recipe for greater disaster.”

    First, free + market = married + bachelor. Look up the definitions.

    Second, “another” heavy handed solution? Maybe I missed some heavy handedness somewhere, but all I’ve seen out of the federal government is grovelling capitulation to the financial industry.

    Here’s an idea: link government aid, subsidy, and tax breaks by some equation to non-management payroll. The operative question should be, “How much are you pumping into the economy through wages?”

    1. Doug Terpstra

      Indeed. I choked on the same point. “Trying to impose yet another heavy-handed solution on the free market would only be a recipe for greater disaster.”

      Remind me again, when have we had anything but a massively RIGGED market? And when was it that we ever imposed anything heavy-handed, or even limp-wristed for that matter, on these masters of the universe? The idea is purely academic. They own all branches of the government, including regulators and media, and such a kleptocracy will never impose heavy-handed solutions on itself.

      This unsustainable Ponzi farce must choke on its own excess. I think that’s the better point of the article, not that we can do anything at all but be well away when the Kraken falls.

  20. anonymous

    I blame Trig.

    This in an excellent evisceration of the political class. There are only two points missing. Point one: Democrats, not Republicans, won the WH and majority control of both the Senate and House. Point two: cogent critiques of the failures of the political class, such as this, avoid any mention of which political party has been in power for the last two years.

    I read eight years worth of critiques of Bush economic policies from the likes of Krugman, Brad de Long, Michelle Cottle, John Judis, Matt Yglesias et al, who never failed to point out the connections between the banksters and the Republican party. Made sense to me, because Bush and his allies in Congress were looting the public purse.

    You’d think that 9.5 percent unemployment might merit a serious, scathing critique of the Dem politicians, the Dem hacks, and all Krugman’s pals who sit on the various economic councils run by I Got My Home Loan From the Bank of Rezko.

    Instead, we get oceans of ink devoted to “the racist Tea-Party.”

    Given the porky reality of the Dem political class, it would have been infinitely preferable to have a Republican in the Oval office, and equal balance in both the House and Senate. HCR delivered millions of new customers to the insurance companies and consumed an immense amount of energy, time, and political capital.

    No matter how bad the Bush economic policies were, consumer demand, consumer confidence, and employment numbers were considerably better.

    The economic failures of this Dem administration and this Dem Congress belong as much to De Long and Krugman as they do to Obama and Pelosi. Krugman et al, theoretically at least, were supposed to be the bright stars in the room. Krugman did, to his credit, try to criticize Obama policies only to find himself accused of disloyalty and worse.

    Unfounded accusations of “racist” are destroying our ability to engage in meaningful discourse about the ineptitude of an individual who demonstrated the most appalling judgment in the administration of his personal finances, while maintaining close political connections with a class of politicians in Chicago who have been linked with corruption at the highest levels.

    But we won’t be reading much about that, because the journOlist enforcers, like Ackerman and Tomasky are quite willing to brand an journalistic critic of this administration as a bigot.

    Organizing and unionizing are the only options workers have left, short of working in a strip club. The Dem political class has abandoned the unemployed entirely and those who want real change are branded as racists.

    It’s an absolute disgrace.

    1. liberal

      No matter how bad the Bush economic policies were, consumer demand, consumer confidence, and employment numbers were considerably better.

      Your’e kidding, right? The bubble expanded on Bush’s watch, and burst only at the end. So of course those numbers looked better on his watch.

      That being said, it’s true that the two parties are least dissimilar on the question of corporate power. But if you haven’t noticed, the Republican Party is batshit crazy.

      1. anonymous

        The bubble expanded through large parts of Clinton’s presidency. Consumer confidence tanked when I Never Once Heard Rev. Wright Accuse the US Government of Creating Aids slither into the Oval Office.

        Like it or not, throughout eight years of highly questionable policies by Bush, unemployment rates were nowhere near where they are now. Keeping the bubble from popping is what Bill Ayers is Just Some Guy in My Neighborhood was supposed to prevent. I think you’re having a little trouble wrapping your mind around the concept of “dishonest” and “Harvard Law.”

        Think Al Gonzales and John Hindraker. That may help.

        Americans want jobs and real change. They got neither from Dems. The jobless are victims of De Long, Pelosi, Krugman, and Hope and Change. Whatever Bush did, demand, consumer confidence and employment didn’t collapse during his two-terms.

        Hope and Change had a green light and a mandate to do whatever it takes to keep things from crashing. His own analysts put unemployment at 8%, without the porky handout to the banksters. The money got spent and real unemployment is at 10% or higher.

        He’s clueless, you seem surprised, and rather than accept the fact, you’re blaming a guy who is starting to appear competent, at least compared to the hoop-shooting Dufus, a rapidly diminishing number of Americans would most like to have a beer with.

        You need help.

        1. skippy

          Yeah….cut off your limbs one at a time…till you have no means to eviscerate further…sounds like a plan to me.

          1. anonymous

            Republicans did a better job with the economy under Bush than Hope and Change has done with control of all three branches, a mandate for change, and Krugman and De Long giving him all the help they could.

            I don’t know how frequently you turn to Bank of Thug when you just can’t say no to that must-have new home, but at our house we try to live within our means.

            I spent eight years waiting for and writing about the need for an end to the sort of the porky politics we saw from Bush, and this is what we get pork and high unemployment?

            I’m longing for the days of simple, Republican corruption and end to the Dem ‘good times.’

            This administration has accomplished the impossible: made Bush appear like a fairly competent president.

            Take a bow, Dems!

          2. skippy

            Political parties have nothing to do with this, as they are secondary, your anguish, lament should be directed at the the ruling class.

  21. May

    Blame campaign finance. GOP will come and be worse and do again that “looting the public purse” only with even less money in the chest. On top of we will get Religious Right policies pushed on the nation.
    Bush was better in numbers because the process started under him had just begun to get under way. If he was here today, he would not see better numbers.

    Do keep this in mind also:
    http://www.examiner.com/p-383070~New_Book___The_Big_Lie__How_Our_Government_Hoodwinked_the_Public__Emptied_the_S_S__Trust_Fund__and_Caused_The_Great_Economic_Collapse___Released_Today.html
    New Book, ‘The Big Lie: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and Caused The Great Economic Collapse,’ Released Today

    See also:
    http://www.thebiglie.net/

  22. jumping

    “Corporate America is reaping the rewards from cutting costs, especially in capital investment and labour, through an unpleasant mix of redundancies, reduced hours and lower pay. The great squeeze cannot go on forever, of course, but it shows no sign of slackening.”

    I got a great idea to improve profits for corporations. Lets take HP for instance. Shouldn’t the board go over to China or India and pick up some executives that will do the same executive job for less than $30-$50million a year? I bet the board could find some well qualified chinese which would do a much better job at cost cutting and outsourcing! Not to mention, who could do the same job for less than a couple million a year, compared to the inflated $50million pay packages and severance packages. Much better for the shareholders don’t ya think!

  23. Hugh

    Strip mining, cannibalizing, these are just looting by other names. The question we should be asking ourselves is how long can all of these variants of looting continue before there is another collapse? This is beginning to look like an end stage process to me. But the question remains how long can it last. A year? I have difficulty seeing how it could last longer than this.

    1. psychohistorian

      I have given up predicting how long the criminality can go on after 40+ years of watching it. Looking at the scale of the US economy in relation to the rest of the world, adding in that we control the money supply that most commodities are traded in and can/have expanded this monetary based at will, what sort of problem can’t be bought off with a few more trillion dollars?

      Extend and pretend works if you are not on the gold standard and have all the nukes……

  24. Doug Terpstra

    I’m with Hugh. It’s astonishing to behold the continued kiting of something so grossly unsustainable, like witnessing the (apparent) suspension of gravity.

    Sparrow’s Yahoo link above is yet another article confirming that it can’t last much longer. Regarding corporations sitting on cash reserves and profits at pre-08 levels:

    “It all sounds wonderful for investors and the U.S. economy. There’s just one problem: It’s a crock.”

    “American companies are not in robust financial shape. Federal Reserve data show that their debts have been rising, not falling. By some measures, they are now more leveraged than at any time since the Great Depression.”

    “…A look at the facts shows that companies only have “record amounts of cash” in the way that Subprime Suzy was flush with cash after that big refi back in 2005. So long as you don’t look at the liabilities, the picture looks great. Hey, why not buy a Jacuzzi?”

    “…Wall Street? It’s a hustle. This healthy balance-sheet myth helps sell stocks and bonds. How many bonuses do you think get paid for telling customers the stark facts, and how many get paid for making the sale?”

    Thus fraud itself must be leveraged to keep the confidence game going.

    http://finance.yahoo.com/banking-budgeting/article/110218/the-biggest-lie-about-us-%20%20companies?mod=bb-budgeting&sec=topStories&pos=3&asset=&ccode=

  25. drb48

    I wrote the following earlier today on HuffPo in a slightly different context but it’s equally applicable here:

    The capitalists are reminiscent of the aliens from “Independence Day”. They move in, drain an area of all resources and life and move on. Unfortunately for them, unlike the aliens, they lack the capacity for interstellar travel. Once they’ve destroyed the planet, they’ve nowhere else to go.

  26. Sundog

    Sometime today it occurred to me that the “George Washington” byline seems to have become scarce around here lately. I don’t miss it.

    I grew up on the outskirts of the suburbs in a subdivision thrown on what remained after a valley was strip mined. And I’m old enough to have been through enough ups and downs that employers’ retrenching and ratcheting up productivity in the midst of this Mess is hardly a surprise.

    If I had to summarize this post it would be something like “OMG the rich get richer OMG ordinary folks get squeezed OMG Americans don’t really want that stuff Walmart sells in such vast quantities day in and day out.”

    And the tag: “On the bright side, the practices that consumers have adopted in response to the economic crisis ultimately could, as a raft of new research suggests, make them happier.” I submit that those practices are revealed less in temporary turns in consumption patterns and more clearly in local opposition across the country to the exercise of First Amendment rights.

    http://www.fpif.org/blog/no_mosque_in_my_backyard_911_Islam

    The conclusion of the post is correct; the US is setting itself up for big problems in the coming decade. IMHO little of this has to do with non-financial corporate retrenching; quite a bit has to do with refusing to recognize bad debt and propping up TBTFs while disadvantaging smaller institutions more likely to lend to SMEs; most has to do with failure of governance both in the private sector (lack of accountability and exploding remuneration) and public (jerrymandering; 70:1 voter representation in the Senate between most/least populous states; hell, just DC in general).

  27. cheale

    It won’t go on for much longer. People have stopped consuming since they’ve got no money and the easy credit has gone, and this means the consumer and finance driven economy is finished and will drag the TBTF and other companies down with the rest of us. We’re on schedule for another depression (in the next ten years).

  28. doc

    Aren’t the profits shown in the graph a bit misleading as many of the banks/financials are holding all the CDS’s and mortgages off the books? Not denying they made money off of us , the public, just saying maybe they aren’t as healthy as one might thing even though the top guys are pulling in the bucks.

  29. Lil'D

    I think “the corporations” know it’s unsustainable. They are not all acting in concert – it is in any ones best interest to strip-mine first and hardest even though that is not in the best interests of us as a whole. Yet another variation of the tragedy of the commons.

  30. farmer

    Tragedy of the commons…

    All human commerce is based on “extraction”, just like BP in the Gulf. “Take what you can” is instutiionalized, and now politicized.

  31. bayoustjohndavid

    Is it just my imagination, or did Jim Cramer say almost the same thing as Jack Sparrow Tuesday night?

    http://www.cnbc.com/id/38649249

    If you can bear to listen to the full clip, it’s astonishing to hear Cramer try to put such a happy face on the problems Sparrow describes — if the government would just let corporations export all our jobs, we could all prosper.

    I know, Cramer bashing is easy. I was just struck by the fact that Cramer’s bizarro version came on the same day.

    I also was impressed by the post but objected to 180: “Trying to impose yet another heavy-handed solution on the free market would only be a recipe for greater disaster.”

    It brought to mind something Yves Smith once wrote about most Americans think of “Little House Prairie” rather than “The Jungle” when they think of American History. Do Americans still read “The Jungle”? Are they still taught about the Triangle Shirt Factory? The fact is, industrialization worked out much better for most our great grandparents after heavy-handed solutions were imposed. Before that, it was pretty lousy. Why should globalization be any different?

  32. MadeMyMillion

    The author has made a valid point with his “strip-mining” analogy. The American consumer has been brainwashed by corporations (by way of advertising to women, primarily) to believe that they must spend their entire lives consuming products, now mostly made in China. That consumer is now broke and cannot borrow anymore to support their addiction to shopping. The party is over and these same corporations are now sucking the last morsels of profit out of the American economy by downsizing and out-sourcing. Of course, the rich have become even richer throughout this gala party. The American economy is in for a long and protracted decline that will be marked by repeated and deeper recessions. The American stock markets are NOT where I will be investing!

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