The government and “big business” want us to believe that the “Economic Recovery” since 2001 not only did exist but is alive and well today. Nothing could be further from the truth.
The U.S. economy’s impressive growth performance during the past few years is more apparent than real. What truly matters most for people is inflation-adjusted income growth and in the United States that is and remains at its lowest in the whole postwar period. Conveniently, this is generally ignored, compared with the better-looking phony numbers about real GDP and productivity growth.
People have been told that the soaring debts do not matter because they are outpaced by “wealth creation” through rising stock and house prices. Yes, but unfortunately, this kind of wealth creation through asset inflation in the markets, in contrast with wealth creation through capital accumulation in the economy, adds nothing to current income, from which the interest charges can be paid. Most probably, these have until recently been largely paid in the Ponzi way; that is, the lenders readily capitalize unpaid interest. But that must stop when asset prices cease to rise.
The U.S. economy is in far worse shape today than in it was 2001. The U.S. current account deficit over the past five years has more than doubled, from $416 billion to $850 billion. Personal savings are down from $168.5 billion to negative $33.5 billion. Government finances have swung from a surplus of $239.4 billion to a deficit of $320 billion. Indebtedness by government, businesses and consumers has soared from $18.052 trillion to $26.391 trillion, or 46%. Financial institutions boosted their indebtedness from $8.104 trillion to $12.496 trillion, or 54%. And what is the basis of this borrowing mania? Inflated asset prices.
To give you an idea of how grim and serious is the predicament of the United States today, here is a summary of America’s Economic Crisis:
1. Wholesale sellout of core strategic assets to foreign acquirers: according to official figures, more than 8,000 American companies have been sold to foreign corporations in the last 10 years
2. Decline of vital industries through bankruptcy, foreign predatory competition, and foreign acquisition: examples include steel, publishing, clothing, machine tools, automobiles, electronics, and others
3. Inability to manufacture competitively: American manufacturers suffer a 22 percent structural cost disadvantage compared to overseas competitors through taxes, health and pension benefits, litigation, regulation, and rising energy prices
4. Overdependence on imports: $1 in $4 of US consumption of manufactured goods now goes immediately and directly to imports
5. Massive wealth transfer to foreign ownership: our trade deficit, at $723 Billion in 2005, is costing $1.4 Million per minute in remittances to foreigners
6. Loss of job and career opportunities for people at all educational levels: 3 Million high-paying manufacturing jobs lost over past 5 years
7. Insourcing of foreign manufacturers destroys our domestic industries, takes profits and taxes overseas, and provides only low-skill jobs for American workers: foreign manufacturers operating in the US now account for over 20 percent of our exports and manufacturing assets, and a large percentage of our employment
8. Foreign financing of vast majority of government debt: foreign countries now control 47 percent of our total federal deficit and finance nearly 100 percent of all new borrowings - our competitors are now our bankers
9. Outsourcing key manufacturing, research, and design: unchecked offshore outsourcing benefits individual companies and shareholders but destroys entire industries and communities
10. Transition to services-oriented economy: high-paying goods-producing industries have lost net employment over the past 25 years while non-tradable service-providing employment has nearly doubled
11. Lost scientific, engineering, technological prowess: in 2004, China and India graduated a combined 950,000 engineers versus 70,000 in the US. US ranks near the bottom of science/math proficiency
12. Wealth shift into less productive assets: residential real estate now represents a record 38 percent of household net worth on record over-inflated home valuations and record mortgage levels
13. Record levels of personal and government debt: household liabilities at record levels, federal government adding record levels of debt each year financed mostly by foreign countries, trade deficits transferring unprecedented accelerating amounts of wealth to foreign hands each year
14. Misleading commonly used economic statistics: misleading incomplete statistics like GDP, job creation, and productivity belie our crumbling economic infrastructure
15. Proven failed trade policies and other legislation contributing to our demise continue unchallenged: destroying our industry and allowing our assets to be sold or taken from us.
Senior Vice President
Global Securities Group
701 Brickell Ave.
Miami, Florida 33131