The Great Depression Online

Great Depression Online Archive Issue:

Reflating the Consumption Debt Bubble

Great Depression Online
Long Beach, CA
January 11, 2011

Inside This Issue You Will Discover…

*** Losing People into the Woodwork
*** Making Lemons into Lemonade
*** Reflating the Consumption Debt Bubble
*** And More

Losing People into the Woodwork

December unemployment numbers, reported by the Labor Department on Friday, fell short of expectations.  Just 103,000 jobs were added in December – well off of the 150,000 jobs anticipated by economists or the 150,000 jobs needed to keep pace with population growth.  Yet, despite this, the unemployment rate mysteriously dropped from 9.8 to 9.4 percent.

How did that happen?

“A lower unemployment rate is a mixed blessing,” John Silvia, chief economist at Wells Fargo said in a note.  “Yes, we are getting more people employed but we appear to be losing people into the woodwork -- not a good sign long term.”

What Silva means is we have more “discouraged workers” – workers who’ve given up looking for a job.  And through the miracle of government accounting discouraged workers are not included in the unemployment rate.  If they were it would be a different story…

~~~~~~The $300 Trillion Dollar Crisis~~~~~~

Let's face it.  It’s really hard to get a straight answer from anyone anymore.

Our leaders keep talking about change and growth, but all around us, people are losing their life’s savings to corrupt corporations, losing their careers to unemployment, and losing their lives and families to non-stop work just to make ends meet.

It didn’t used to be like this.  Just a few decades ago, families had time to spend together, and a high school diploma was sufficient to get you a job that would allow you to live on your own.

So what happened?   


“Discouraged workers in December ticked up to 1.3 million, with those workers falling off the unemployment rate calculations,” reported CNNMoney.

“About 260,000 adults dropped out of the labor force for various reasons, and were no longer counted as unemployed by the government.  The overall participation rate in the U.S. labor force fell to a new recession low of 64.3 percent.”

That means, for one reason or another, 35.7 percent of the eligible working age population is not participating in the labor force.  We doubt they are all independently wealthy.  Still, they’re vanished from the unemployment numbers even though they are unemployed.

Making Lemons into Lemonade

Regardless of how you tally up the unemployment rate you can’t get around the fact that jobs creation ain’t happening.  Nope…103,000 jobs do not do much in the way of making up for the 8.5 million jobs lost since the economic decline began in 2007. 

But that didn’t stop the President from making lemons into lemonade.  AP reports…

‘“Now, we know that these numbers can bounce around from month to month.  But the trend is clear,’ said the president.

‘“We saw 12 straight months of private sector job growth -- the first time that’s been true since 2006,’ he said.  The economy added 1.3 million jobs last year.  And each quarter was stronger than the last, which means the pace of hiring is picking up.”

Sure, 1.3 million jobs looks good at first glance.  But, remember, that was for the entire year.  When you break it out, this amounts to 108,333 jobs added per month, which doesn’t even keep pace with population growth.

Yet it’s not just the President who’s optimistic about the direction of the economy.  Federal Reserve Chairman Ben Bernanke is enthusiastic about where things are going too…

Reflating the Consumption Debt Bubble

Just one hour after the government released the disappointing unemployment report last Friday, “Bernanke told the Senate Budget Committee that there’s rising evidence that a ‘self-sustaining’ recovery is taking hold,” reported AP.  “He said he expects stronger growth because consumers and businesses will boost spending this year.”

Before you pop the champagne cork and toast the recovery, consider that it’s a fraud.  It’s being artificially induced with the future earnings of unborn citizens.  What good is it if it takes $600 billion piled on top of the $1.7 trillion of printed money to achieve a feeble 2 percent in GDP growth?

At a minimum it discredits the notion that, as Bernanke stated, a ‘self-sustaining’ recovery is taking hold.  Take away the $2.3 trillion of printed money and you take away any illusion of recovery. 

It’s real simple.  The idea that more debt, which caused the problem in the first place, will return the economy to solid ground is absurd.  Anyone that tells you otherwise is a fool. 

Ultimately, what must happen will happen…they debt will be reconciled one way or another.  In the meantime, fantastic misallocations and price distortions will prevail.  But that’s what Bernanke wants…he wants consumers and businesses to boost spending.  He wants an artificial demand that would otherwise be nonexistent. 

In other words, he wants to reflate the consumption debt bubble.


M.N. Gordon
Great Depression Online

P.S.  These two reports: “The $300 Trillion Crisis” and “Surviving and Thriving During the Upcoming Crisis” give understandable explanations of the real state of our economy and how to protect yourself from financial ruin in the near future.

Learn more here

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