Originally posted at BullionBullsCanada.com
While the myopic U.S. propaganda machine and the “experts” who shill for it will use the word “surprise” to describe yet another dismal U.S. jobs report, the only people who could have been surprised by today’s news are those who have had their eyes closed for the past several months (years?).
The U.S. government has just completed its most massive fiscal “stimulus” in history – by several multiples. It continues the loosest, most-reckless monetary policy in the history of the world. And yet the data is clear. This unprecedented effort to attempt to breathe life into the dying U.S. economy has produced nothing more than a feeble, temporary “dead-cat bounce”.
On the employment front, as usual the real data has been sugar-coated with more fraud by the Bureau of Labor Statistics. While the BLS is pretending there was a paltry 18,000 (net) jobs created in the U.S. in June, that number has no basis in reality. Merely subtract the phantom jobs from the absurd “birth/death model” and the U.S. economy lost more than 100,000 jobs last month – and that is before we factor in any more of the BLS’s statistical perversions.
Naturally these heavily-doctored monthly jobs reports don’t begin to tell the story on U.S. (un)employment. To do that we need to look at more meaningful statistics, laid-out in long-term charts.
Looking first at the broadest measurement of U.S. unemployment (i.e. the statistic which actually counts most of the unemployed), the picture is clear: when the U.S. economy crashed, there was the largest spike in U.S. unemployment in 80 years. The most extravagant economic stimulus in history has done nothing more than put a tiny (and temporary) dent in that throng of unemployed.
The picture is even worse when we look at the “civilian participation rate” in the U.S. work-force. Here there hasn’t even been a dead-cat bounce. The number of workers “participating” in the U.S. economy continues to go lower and lower (while the number of people collecting some form of benefits are at all-time highs).
We see confirmation of the U.S.’s “Greater Depression” when we look at government tax receipts. We can do this in two ways. We can look back at what the U.S. state and federal governments have been taking in over the past few years, and we can look ahead via what is essentially a “leading indicator” for tax receipts: withholding taxes.
Looking at the chart of U.S. state taxes and total income taxes, we see the revenue crisis which I have been stressing in my own writing. Even pundits in the media who manage to get nothing else right in their writing have observed that it will never be possible to significantly reduce the massive structural deficits in the U.S. without substantial tax increases. Yet while the deadbeat charlatans in Washington continue their absurd “debt-ceiling” tango, almost all of the focus is on spending cuts.
Illustrating that the U.S. revenue crisis can only get worse going forward, “withholding taxes” in the U.S. have made a sudden U-turn (for the worse). These are the taxes which are deducted at the source from most U.S. payrolls, according to a specific formula. The current rate of pay is projected over the balance of the year, and deductions from paycheques are made accordingly.
These tax receipts surged markedly in March, at the tail-end of the dead-cat bounce created by U.S. economic stimulus. Then, as of May 17, receipts from “withholding” turned suddenly lower and have been falling ever since. This data is unequivocal, in that it is one of the few U.S. economic “statistics” which has not and cannot be “massaged” beyond recognition with the various statistical lies the U.S. relies upon in other calculations. Simply, the projection for the remainder of this year is for U.S. employment income to go down – and this is before the U.S. economy has even really begun the “stimulus withdrawal” it will experience as this massive fiscal crutch is pulled out from under the crippled U.S. economy. In other words, we should expect this statistic to deteriorate even further going forward.
As the U.S. dollar continues to teeter on the verge of an historic collapse versus other paper currencies, it’s important to totally dispel a myth which continues to be perpetuated by the U.S. propaganda-machine: that a falling U.S. dollar will “rescue” the U.S. economy through surging exports. In reality, the opposite is true.
Above, we see a long-term chart of the U.S. trade deficit, described as the “net exports of goods and services”. As we can see, historically it was when the U.S. had a “strong dollar” that the trade balance remained nearly neutral, while the collapse in the U.S. dollar has led to all-time record trade deficits – year after year.
To those engaging in simplistic/superficial analysis (i.e. the entire mainstream media), this may seem counter-intuitive. However, anyone viewing the U.S. economy in a more sophisticated manner would not be surprised in the slightest. To understand this we must identify several parameters.
First, the U.S. voluntarily destroyed its legendary manufacturing base, simply handing all of these (relatively) high-wage jobs and value-added production to Asia. It is this value-added manufacturing which (historically) has formed the basis of a solid trade balance for all nations. Simultaneously, the U.S. stopped exporting most of these goods and began importing them instead. On that basis alone, there was little hope for any “trade salvation” for the U.S. economy, but it gets worse.
Decades of gluttonous oil-consumption and oil price-suppression by the United States has combined to drain the world of all its easily accessible oil reserves – permanently ending the era of “cheap oil”. When we combine the massive quantities of (imported) oil needed to satisfy U.S. oil gluttony with the much higher prices which are now here to stay, the “equation” for U.S. trade becomes a simple one. For every penny, which the U.S. dollar declines versus other currencies the added cost of importing oil with that weaker dollar will always greatly exceed the rise in exports.
This conclusion is demonstrated clearly when we look at the most-recent data from the chart above. First we saw a massive plunge to the worst trade deficits in history. This occurred as the U.S. dollar was plummeting to new lows all through 2007 and most of 2008. Following the Crash of ’08 and the absurd/spectacular rise in the value of the U.S. dollar, we see the U.S. trade balance radically improve. However, the moment that the U.S. dollar resumed its downward trajectory, so did the U.S. trade balance.
This leaves the U.S. economy with a choice to two poisons – both of which are deadly. On the one hand, as I and many other commentators have written, there is no possibility that the U.S. can continue to service its mountains of debts and liabilities as things stand today.
The only way in which the U.S. could even pretend not to “default” on these debts would be to massively devalue the dollar versus other currencies – so that the dollars being “repaid” by the U.S. would cost (and be worth) much less than the dollars it borrowed. However, as we see with a chart of the U.S. trade balance, if it devalues the USD enough so that it is not bankrupted by making payments on its debts it will simply be bankrupted by massive trade deficits instead.
The final “nail in the coffin” of this consumer economy is that individual Americans are just as over-leveraged with debt as the government itself.
As can be seen above, U.S. individual debt-levels have soared to all-time extremes. There was a tiny reduction in the total mountain of personal debt for Americans following the Crash of ’08. However, this minor debt-reduction was not the result of Americans repaying debt, rather it was a combination of two other factors.
On the one hand, we had an explosion of personal bankruptcies, foreclosures, and other forms of personal debt-default – that lowered the total amount of personal credit. On the other hand, the same Wall Street banks which promised to “increase lending” (when they were mooching $15 trillion in hand-outs/loss-guarantees/tax-breaks) ruthlessly cut-off credit to Americans. Thus this minor fiscal “improvement” was both involuntary and unhealthy.
This leads us to another set of “no-win” parameters for the U.S. economy. On the one hand, if U.S. financial institutions extend more credit to Americans (to fuel its consumer-economy) then this can only lead to a further explosion in bankruptcies and foreclosures. As the employment data indicates, Americans lack the cash-flow to possibly be able to service any more debt.
On the other hand, if individual Americans rein-in their spending and attempt to restore solvency at the household level, this directly implies a collapse in consumption. That collapse will, in turn, only cause the all-time record levels of U.S. mall-vacancies and mall-bankruptcies to soar even higher. This would lead to millions more lost jobs (10’s of millions?), and a deflationary collapse very similar to that of the Soviet Union.
Going all the way back to 2008, I have maintained that as a matter of arithmetic it was impossible for there to be a U.S. economic recovery. The various (terminal) structural defects in the economy, and near-infinite debts have made net U.S. economic growth totally unattainable. The faked “recovery” trumpeted by the U.S. propaganda-machine was never plausible to anyone viewing long-term charts (like those contained here).
With the Obama regime’s shotgun-stimulus now exhausted, and with the Fed’s hyperinflationary money-printing (supposedly) about to wind-down, there are no more “smoke and mirrors” which can hide the magnitude of the U.S.’s economic collapse.
I give it no more than a month before B.S. Bernanke’s latest “exit strategy” once again morphs into just more money-printing. This won’t “fix” anything, anymore than all the other $trillions printed-up by “Helicopter Ben”. It will, however, allow the U.S. government to hide its total economic collapse for a few more weeks/months.