The Country's in the Crapper, Part 2

The Middle Class in America Is Radically Shrinking. Here Are the Stats to Prove it

Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street. - America Without a Middle Class, devoish's CAPS Blog, July 24, 2010

Business Insider
July 15, 2010

The 22 statistics detailed here prove beyond a shadow of a doubt that the middle class is being systematically wiped out of existence in America.

The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.

So why are we witnessing such fundamental changes? Well, the globalism and "free trade" that our politicians and business leaders insisted would be so good for us have had some rather nasty side effects. It turns out that they didn't tell us that the "global economy" would mean that middle class American workers would eventually have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations. The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough.

Here are the statistics to prove it:

• 83 percent of all U.S. stocks are in the hands of 1 percent of the people.


• 61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.


• 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.


• 36 percent of Americans say that they don't contribute anything to retirement savings.


• A staggering 43 percent of Americans have less than $10,000 saved up for retirement.


• 24 percent of American workers say that they have postponed their planned retirement age in the past year.


• Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.


• Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.


• For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.


• In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.


• As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.


• The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.


• Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.


• In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.


• The top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.


• In America today, the average time needed to find a job has risen to a record 35.2 weeks.


• More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.


• For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.


• This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.


• Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.


• Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.


• The top 10 percent of Americans now earn around 50 percent of our national income.

Giant Sucking Sound

The reality is that no matter how smart, how strong, how educated or how hard working American workers are, they just cannot compete with people who are desperate to put in 10 to 12 hour days at less than a dollar an hour on the other side of the world. After all, what corporation in their right mind is going to pay an American worker 10 times more (plus benefits) to do the same job?

The world is fundamentally changing. Wealth and power are rapidly becoming concentrated at the top and the big global corporations are making massive amounts of money. Meanwhile, the American middle class is being systematically wiped out of existence as U.S. workers are slowly being merged into the new "global" labor pool.

What do most Americans have to offer in the marketplace other than their labor? Not much. The truth is that most Americans are absolutely dependent on someone else giving them a job. But today, U.S. workers are "less attractive" than ever. Compared to the rest of the world, American workers are extremely expensive, and the government keeps passing more rules and regulations seemingly on a monthly basis that makes it even more difficult to conduct business in the United States.

So corporations are moving operations out of the U.S. at breathtaking speed. Since the U.S. government does not penalize them for doing so, there really is no incentive for them to stay.

What has developed is a situation where the people at the top are doing quite well, while most Americans are finding it increasingly difficult to make it. There are now about six unemployed Americans for every new job opening in the United States, and the number of "chronically unemployed" is absolutely soaring. There simply are not nearly enough jobs for everyone.

Many of those who are able to get jobs are finding that they are making less money than they used to. In fact, an increasingly large percentage of Americans are working at low wage retail and service jobs.

But you can't raise a family on what you make flipping burgers at McDonald's or on what you bring in from greeting customers down at the local Wal-Mart.

The truth is that the middle class in America is dying — and once it is gone it will be incredibly difficult to rebuild.

30 Reasons Why 2011 Is Going To Be Another Crappy Year for America’s Middle Class

The American Dream
January 3, 2011

Do you think that 2011 will be a good year for America’s middle class? Well, you might not be so optimistic after you read the 30 statistics posted below. The truth is that 2011 is going to be another crappy year for America’s middle class, and there is not a whole lot that you or I can do about it.

Sadly, what we are facing as a nation is not just a short-term economic downturn. Rather, there are some very serious long-term economic trends that are absolutely ripping apart the U.S. middle class. For example, did you know that even though our population has been growing at a brisk pace we have lost about ten percent of our middle class jobs over the past decade? The vast majority of jobs that have been created have been low paying service jobs. We now have hordes of highly educated young people that are waiting tables and that are welcoming customers to Wal-Mart.

Without good paying jobs there is no middle class, but today American corporations are actually creating more jobs overseas than they are inside the United States. This has helped pad the profits of the big corporate fat cats, but it has been devastating for middle class communities across the United States.

Every time a factory gets closed down in America and gets set up in some other country instead, it means that the U.S. middle class is shrinking just a little bit more. The new “global economy” has been good for the bottom line of the largest U.S. corporations, it has been great for countries like China and India, but it is absolutely wiping out the U.S. middle class.

If you still have a good paying middle class job, you should be very thankful. The total number of those jobs is rapidly decreasing. Millions of those that have lost their jobs over the last several years have been forced to take lower paying jobs or even part-time jobs in an attempt to fill the void. Millions of others have not been able to find a job at all.

Meanwhile, the price of everything is going up. Have you been to the supermarket lately? The price of food is going up substantially. Many analysts are already talking about $5 a gallon gasoline in 2010. Utility bills are going through the roof. Health care premiums are soaring. Many state and local governments are seriously hiking up taxes and fees.

Tens of millions of American families are going to be forced to make what they do have stretch even farther in 2011. But for many American families the breaking point has already been reached. An all-time record number of Americans is on food stamps. An all-time record number of Americans is living below the poverty line. Personal bankruptcies and mortgage defaults continue to hover around record levels.

The U.S. economy is shaking like a leaf, and the people that are feeling it the most are the hard working American families that just want to make an honest living, pay the mortgage and feed their families.

Unfortunately, 2011 isn’t going to be any easier for those families. As a nation we continue to pursue the exact same economic policies that have allowed these horrible long-term economic trends to develop. Things are not going to change until our country starts moving in a fundamentally different direction.

The following are 30 reasons why 2011 is going to be another crappy year for America’s middle class:

#1 We are bleeding middle class jobs at a pace that is staggering. Since the year 2000, the United States has lost 10% of its middle class jobs. In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.

#2 In particular, the United States is absolutely hemorrhaging manufacturing jobs. Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of the jobs in the United States are manufacturing jobs.

#3 The decline of manufacturing in America has only accelerated over the past decade. The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

#4 Deindustrialization is creating ghost towns in some areas of the United States. Even some of America’s biggest cities are now only a shadow of what they used to be. Since 1950, the population of Pittsburgh, Pennsylvania, has declined by more than 50 percent. In Dayton, Ohio, 18.9 percent of all houses now stand empty.

#5 We have literally seen tens of thousands of American factories close down permanently over the past decade. Since 2001, over 42,000 U.S. factories have closed down for good.

#6 U.S. companies now create more jobs overseas than they do in the United States. Over the past year, American companies have created 1.4 million jobs overseas but less than a million jobs here at home.

#7 When Americans lose their jobs these days they typically end up having to take new jobs that do not pay as much. According to one recent study, the majority of unemployed Americans that have been able to find new jobs during this economic downturn have been forced to accept a cut in pay.

#8 The overwhelming majority of the jobs that the U.S. economy is creating now are low paying jobs. In fact, more than 40% of Americans who actually are employed are now working in service jobs, which are often very low paying.

#9 The number of long-term unemployed continues to skyrocket in this country. As 2007 began, there were just over 1 million Americans that had been unemployed for half a year or longer. Today, there are over 6 million Americans that have been unemployed for half a year or longer.

#10 For those who are out of work, the wait can be excruciating. It now takes the average unemployed American over 33 weeks to find a job.

#11 Millions of Americans have become extremely depressed as they have discovered that they simply cannot find any work at all. In August 2009, only 10 percent of the unemployed had been out of work for 2 years or longer. Today that number is up to 35 percent.

#12 Meanwhile, the gap between the wealthy and the poor continues to grow. According to one recent report, the wealthiest one percent of all U.S. households have an average of approximately $14 million in assets, while the average U.S. household has assets that total about $62,000.

#13 In fact, those at the very top of the income scale seem to be doing better than ever. Between 1950 and 1989, the top 1% usually earned around 7 or 8 percent of all national income. Today that figure is getting very close to 20 percent.

#14 Some of the income inequality statistics are almost too outrageous to believe. For example, the top 20 percent of U.S. working families take home approximately 47 percent of all income and earn about 10 times the amount that low-income working families bring in.

#15 Sadly, most American families are now living week to week. According to a survey released very close to the end of 2010, 55 percent of all Americans are now living paycheck to paycheck.

#16 The U.S. real estate market continues to stagnate. During the third quarter of 2010, 67 percent of all mortgages in Nevada were “underwater,” 49 percent of all mortgages in Arizona were “underwater” and 46 percent of all mortgages in Florida were “underwater.” So what happens if home prices go down even more?

#17 For millions upon millions of middle class families, their number one financial asset is their house. Unfortunately, many analysts are now projecting that U.S. housing prices will fall much lower than they are now. For example, Peter Schiff of Euro Pacific Capital says that home prices in the United States are going to decline at least 20 percent and possibly even more.

#18 But even though home prices have declined significantly, the truth is that they are still too high for most American families. Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.

#19 Most American families have found that their economic situations have significantly deteriorated over the last several years. In fact, 55 percent of the U.S. labor force has “suffered a spell of unemployment, a cut in pay, a reduction in hours or have become involuntary part-time workers” since December 2007.

#20 As tens of millions of Americans barely scrape by, saving for retirement has become an afterthought. Today, 36 percent of Americans say that they don’t contribute anything to retirement savings.

#21 The truth is that incomes all across America are going down. In 2009, total wages, median wages, and average wages all declined in the United States.

#22 So is anyone doing better? Well, one group is. In 2009, the only group that saw their household incomes increase was those making $180,000 or more.

#23 Most Americans are scratching and clawing and doing whatever they can to make a living these days. Half of all American workers now earn $505 or less per week.

#24 Millions of Americans have been forced to take part-time jobs because that is all that they could get. The number of Americans working part-time jobs “for economic reasons” is now the highest it has been in at least five decades.

#25 Some of the people that have been hit the hardest by all this have been children. According to one recent study, approximately 21 percent of all children in the United States are living below the poverty line in 2010 — the highest rate in 20 years.

#26 If all of the above was not bad enough, now we are not even living as long. According to one recent report, the United States has dropped to 49th place in the world in overall life expectancy.

#27 The sad truth is that our country is in decline and it is getting poorer. Ten years ago, the United States was ranked number one in average wealth per adult. In 2010, the United States has fallen to seventh.

#28 Our young people are supposed to be the hope of the future, but most of them are up to their eyeballs in student loan debt. Americans now owe more than $875 billion on student loans, which is more than the total amount that Americans owe on their credit cards.

#29 Life is getting harder and harder for those on the low end of the income scale. The bottom 40 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

#30 On top of everything else, the price of oil is skyrocketing again. John Hofmeister, the former president of Shell Oil, believes that American consumers could be shelling out 5 dollars for a gallon of gas by 2012. If that actually happens, it is going to absolutely devastate millions of middle class American families.

So are you depressed yet?

Well, don’t be. There is a whole lot more to life than just money.

Times are hard and they are going to get harder, but that doesn’t mean that you can’t thrive in the middle of all this. Hopefully we can all take this as a wake up call. We all need to work harder, become less wasteful, become more independent and stop living as if the good times are going to last forever.

Middle Class Being Squeezed Out of Existence

Economy in Crisis
July 27, 2010

America’s once thriving middle class is slowly but surely being squeezed out of existence as the gap between the haves and the have-nots continues to grow due to the nation’s failed trade policies that have benefited the very few, according to Michael Snyder.

“Wealth and power are rapidly becoming concentrated at the top and the big global corporations are making massive amounts of money,” Snyder writes at Yahoo! Finance. “Meanwhile, the American middle class is being systematically wiped out of existence as U.S. workers are slowly being merged into the new 'global' labor pool.”

The top 10 percent of Americans now earn roughly half of the nation’s wealth, according to The Business Insider. Just 1 percent owns 83 percent of all the nation’s stock. That same 1 percent of Americans were also the beneficiaries of 66 percent of all income growth between 2001 and 2007.

“The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough,” Snyder writes.

So tough in fact, that 61 percent of Americans now “usually or always” live paycheck to paycheck, The Business Insider says. Ninety-five percent of Americans have not earned enough additional income to meet the rise in housing costs since 1975. And the bottom 50 percent of Americans now hold less than one percent of the nation’s wealth.

The American middle class was built on the backs of the nation’s manufacturing base. So it stands to reason that the middle class would also fall with the decline of the industrial sector.

Today, top executives make, on average, 100 times more than their employees. In the 1960s, that gap was just 30 times as much. It is no coincidence then that since the 1960s, America has added roughly 46 million jobs, while shedding over two million manufacturing jobs.

“The reality is that no matter how smart, how strong, how educated or how hard working American workers are, they just cannot compete with people who are desperate to put in 10 to 12 hour days at less than a dollar an hour on the other side of the world,” Snyder writes.

The nation is now more reliant on the low-paying service sector than ever. Currently, 40 percent of those that are employed work in a service industry job. The shift from the manufacturing sector to the industrial sector has forced countless Americans out of the middle class and into lower class status, making the nation’s gap between the rich and poor even more pronounced.

In 2006, the 400 highest earning taxpayers in America made $105 billion in total adjusted gross income, for an average of $263 million each. Those making minimum wage in 2006 made approximately $13,100 for a difference of 20,000 to one.

In addition, a 2009 study by the Organization for Economic Cooperation and Development found that the U.S.' wage gap between the rich and the poor is greater than that of 30 other developed nations — including the United Kingdom, known for its class system with little upward mobility. Furthermore, the study found that America's wage gap is more fitting for an economically downtrodden nation like Russia or Turkey. The top 10 percent of earners in America made roughly $93,000 per year, while the10 percent on the low end of the scale made only $5,800 per year.

“The globalism and ‘free trade’ that our politicians and business leaders insisted would be so good for us have had some rather nasty side effects,” according to Snyder. “It turns out that they didn't tell us that the ‘global economy’ would mean that middle class American workers would eventually have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations.”

The New Path to the Middle Class

TMG Books - Are Federal Jobs The Factory Jobs of the Future?

It used to be that unionized factory jobs were the best path to the middle-class in America. Factory jobs, union factory jobs in particular, afforded the workers a good wage, health insurance, and a defined-benefit retirement plan—all three being the foundation of a middle-class lifestyle.

Most of those jobs no longer exist and in the economy of 2010, as I write this, the workers displaced by when a factory closes and their jobs being shipped overseas are slowly losing their grip on the middle-class because they are unable to find a job offering those same benefits. This is a tragedy, really.

And factory jobs are not coming back. America is making the transition from an economy where we built things to a service economy. The downside of that is that service jobs are most often not as good as a union factory job in terms of pay and benefits. And they are not the path to the middle class.

A job with Uncle Sam does provide all the pay and benefits of a factory job. In fact, Federal jobs pay more than comparable jobs in the private sector.

But don’t think that Federal jobs are safe from the same forces that shipped America’s good factory jobs overseas. For the last decade there has been a push to “privatize” Federal jobs; that is, to make Federal workers compete for their jobs with contractors.

On its face, that competition might strike you as fair when, in practice it is anything but fair and those private companies looking to take over Federal jobs quickly learned how to “play” the system. Every Federal job contracted out is one more path to the middle-class lost!

Only the owners of the companies who take over Federal jobs get rich—and the owners of these companies come from the same 5% of the population that owns 80% of the wealth of our country! They blanket Capitol Hill with lobbyists and buy our political system right out from under the working people of this country.

Federal contractors are taking over government jobs from which they are rightly prohibited. The government is even using mercenaries to fight our wars! The military is still a path to the middle-class for many Americans, it was for me, but even that is being robbed from our future generations.

Military personnel used to cook foods for the front-line soldiers and military mechanics once kept vehicles running in the motor pools; those are just two examples of good Federal jobs that have been taken over by contractors. And the truth is that the companies who assumed took those jobs from our young men and women are not doing it for less: They are not saving the American taxpayer a dime!

And what they are costing us are good jobs!

But for the time being, the Federal government does employ over two-million Americans. These are great jobs and each one represents an opportunity for the employee to achieve and maintain a middle-class lifestyle.

Federal employment is the factory floor of the future. And just like unions once fought to maintain the dignity of the American worker, every Federal employee and citizen of the United States who sees the value of having a strong and growing middle-class in our country must fight to keep Federal jobs for Federal employees.

Either that or there will be no path to the middle-class left in America!

The Country's in the Crapper, Part 1

What 'Fiscal Responsibility' and 'Austerity' Really Mean: Code Words for Delivering Public Monies into Private Hands and Raising Taxes on the Already-squeezed Middle Class

What “fiscal responsibility” really means is that, rather than saving the future for our grandchildren, as the President himself seems to think it means, it appears to be a code word for delivering public monies into private hands and raising taxes on the already-squeezed middle class. In the parlance of the International Monetary Fund (IMF), these are called “austerity measures,” and they are the sorts of things that people are taking to the streets in Greece, Iceland and Latvia to protest. Americans are not taking to the streets only because nobody has told us that is what is being planned. We have been deluded into thinking that “fiscal responsibility” (read “austerity”) is something for our benefit, something we actually need in order to save the country from bankruptcy. In the massive campaign to educate us to the perils of the federal debt, we have been repeatedly warned that the debt is disastrously large; that when foreign lenders decide to pull the plug on it, the U.S. will have to declare bankruptcy; and that all this is the fault of the citizenry for borrowing and spending too much. We are admonished to tighten our belts and save more; and since we can’t seem to impose that discipline on ourselves, the government will have to do it for us with a “mandatory savings” plan. The American people, who are already suffering massive unemployment and cutbacks in government services, will have to sacrifice more and pay the piper more, just as in those debt-strapped countries forced into austerity measures by the IMF. - Ellen Brown, Paying Down the Federal Debt When Money Is Already Scarce Just Makes Matters Worse, Web of Debt, March 2, 2010

Congress plans to slash social security 'entitlements' at a time when Wall Street has destroyed the home equity and private retirement accounts of potential retirees. Worse, they plan to increase the social security tax, disguised as a “mandatory savings tax.” This added tax would be automatically withdrawn from your paycheck and deposited to a “Guaranteed Retirement Account” managed by the Social Security Administration. Since the savings would be “mandatory,” you could not withdraw your money without stiff penalties; and rather than enjoying an earlier retirement paid out of your increased savings, a later retirement date was being called for. In the meantime, your “mandatory savings” would just be fattening the investment pool of the Wall Street bankers managing the funds. And that may be what really underlies the big push to educate the public to the dangers of the federal debt. - Ellen Brown, Paying Down the Federal Debt When Money Is Already Scarce Just Makes Matters Worse, Web of Debt, March 2, 2010

What Does Fiscal Austerity Mean?

Wikipedia - In economics, austerity is a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided. Austerity policies are often used by governments to reduce their deficit spending while sometimes coupled with increases in taxes to pay back creditors to reduce debt. Austerity was named the word of the year by Merriam-Webster in 2010.

Austerity measures are typically taken if there is a perceived threat that government cannot honor its debt liabilities. Such a situation may arise if a government has borrowed in foreign currencies which they have no right to issue or they have been legally forbidden from issuing their own currency.

In such a situation, banks may lose trust in government's ability and/or willingness to pay and refuse to roll over existing debts or demand exorbitant interest rates. Inter-governmental institutions such as the International Monetary Fund (IMF) typically come in and demand austerity measures in exchange for functioning as a lender of last resort.

When the IMF requires such a policy, the terms are known as 'IMF conditionalities'. Development projects, welfare, and other social spending are common programs that are targeted for cuts. Taxes, port and airport fees, and train and bus fares are common sources of increased user fees.

In many cases, austerity measures have been associated with short-term declines in standard of living until economic conditions improved and fiscal balance was achieved.

OECD Economic Outlook Database (version 88) from Timetric

Paying Down the Federal Debt When Money Is Already Scarce Just Makes Matters Worse

By Ellen Brown, Web of Debt
March 2, 2010

When billionaires pledge a billion dollars to educate people to the evils of something, it is always good to peer closely at what they are up to. Hedge fund magnate Peter G. Peterson was formerly Chairman of the Council on Foreign Relations and head of the New York Federal Reserve. He is now senior chairman of Blackstone Group, which is in charge of dispersing government funds in the controversial AIG bailout, widely criticized as a government giveaway to banks.

Peterson is also founder of the Peter Peterson Foundation, which has adopted the cause of imposing “fiscal responsibility” on Congress. He hired David M. Walker, former head of the Government Accounting Office, to spearhead a massive campaign to reduce the runaway federal debt, which the Peterson/Walker team blames on reckless government and consumer spending. The Foundation funded the movie “I.O.U.S.A.” to amass popular support for their cause, which largely revolves around dismantling Social Security and Medicare benefits as a way to cut costs and return to “fiscal responsibility.”

The Peterson-Pew Commission on Budget Reform has pushed heavily for action to stem the federal debt. Bills for a budget task force were sponsored in both houses of Congress. The Senate bill was narrowly defeated, and the House bill was tabled; but that was not the end of it.


Editor's Note: After applauding the passage of a bill in February 2010 to increase the federal debt limit by $1.9 trillion to $14.3 trillion, Congress wants to now reduce the federal debt. They increased the limit to fund the stimulus package, which in turn is funding their New World Order Agenda, and now they want to direct austerity measures at the people by cutting Social Security, Medicare and Medicaid, among other things.

In Obama’s State of the Union speech on January 27, he said he would be creating a presidential budget task force by executive order to address the federal government’s deficit and debt crisis, and that the task force would be modeled on the bills Congress had failed to pass. If Congress would not impose “fiscal responsibility” on the nation, the President would.

“It keeps me awake at night, looking at all that red ink,” he said. The Executive Order was signed on February 17.

What the President seems to have missed is that all of our money except coins now comes into the world as “red ink,” or debt. It is all created on the books of private banks and lent into the economy. If there is no debt, there is no money; and private debt has collapsed.

This year to date, U.S. lending has been contracting at the fastest rate in recorded history. A credit freeze has struck globally; and when credit shrinks, the money supply shrinks with it. That means there is insufficient money to buy goods, so workers get laid off and factories get shut down, perpetuating a vicious spiral of economic collapse and depression. To reverse that cycle, credit needs to be restored; and when the banks can’t do it, the government needs to step in and start “monetizing” debt itself, or turning debt into dollars.

Although lending remains far below earlier levels, banks say they are making as many loans as they are allowed to make under existing banking rules. The real bottleneck is with the “shadow lenders” – those investors who, until late 2007, bought massive amounts of bank loans bundled up as “securities,” taking those loans off the banks’ books, making room for yet more loans to be originated out of the banks’ capital and deposit bases. Because of the surging defaults on subprime mortgages, investors have now shied away from buying the loans, forcing banks and Wall Street firms to hold them on their books and take the losses.

In the boom years, the shadow lending market was estimated at $10 trillion. That market has now collapsed, leaving a massive crater in the money supply. That hole needs to be filled, and only the government is in a position to do it. Paying down the federal debt when money is already scarce just makes matters worse. When the deficit has been reduced historically, the money supply has been reduced along with it, throwing the economy into recession.

Another Look at the Budget Reform Agenda

That raises the question, are the advocates of “fiscal responsibility” merely misguided? Or are they up to something more devious? The President’s Executive Order is vague about the sorts of budget decisions being entertained, but we can get a sense of what is on the table by looking at the earlier agenda of Peterson’s Commission on Budget Reform. The Peterson/Walker plan would have slashed social security entitlements at a time when Wall Street has destroyed the home equity and private retirement accounts of potential retirees. Worse, it would have increased the social security tax, disguised as a “mandatory savings tax.” This added tax would be automatically withdrawn from your paycheck and deposited to a “Guaranteed Retirement Account” managed by the Social Security Administration. Since the savings would be “mandatory,” you could not withdraw your money without stiff penalties; and rather than enjoying an earlier retirement paid out of your increased savings, a later retirement date was being called for. In the meantime, your “mandatory savings” would just be fattening the investment pool of the Wall Street bankers managing the funds.

And that may be what really underlies the big push to educate the public to the dangers of the federal debt. Political analyst Jim Capo discusses a slide show presentation given by David M. Walker after the “I.O.U.S.A.” premier, in which a mandatory savings plan was proposed that would be modeled on the Federal Thrift Savings Plan (FSP). Capo comments:

“The FSP, available for federal employees like congressional staff workers, has over $200 billion of assets (on paper anyway). About half these assets are in special non-negotiable US Treasury notes issued especially for the FSP scheme. The other half are invested in stocks, bonds and other securities. . . . The nearly $100 billion in [this] half of the plan is managed by Blackrock Financial. And, yes, shock, Blackrock Financial is a creation of Mr. Peterson's Blackstone Group. In fact, the FSP and Blackstone were birthed almost as a matched set. It's tough to fail when you form an investment management company at the same time you can gain the contract that directs a percentage of the Federal government payroll into your hands.”

What “Fiscal Responsibility” Really Means

All of this puts “fiscal responsibility” in a different light. Rather than saving the future for our grandchildren, as the President himself seems to think it means, it appears to be a code word for delivering public monies into private hands and raising taxes on the already-squeezed middle class. In the parlance of the International Monetary Fund (IMF), these are called “austerity measures,” and they are the sorts of things that people are taking to the streets in Greece, Iceland and Latvia to protest. Americans are not taking to the streets only because nobody has told us that is what is being planned.

We have been deluded into thinking that “fiscal responsibility” (read “austerity”) is something for our benefit, something we actually need in order to save the country from bankruptcy. In the massive campaign to educate us to the perils of the federal debt, we have been repeatedly warned that the debt is disastrously large; that when foreign lenders decide to pull the plug on it, the U.S. will have to declare bankruptcy; and that all this is the fault of the citizenry for borrowing and spending too much. We are admonished to tighten our belts and save more; and since we can’t seem to impose that discipline on ourselves, the government will have to do it for us with a “mandatory savings” plan. The American people, who are already suffering massive unemployment and cutbacks in government services, will have to sacrifice more and pay the piper more, just as in those debt-strapped countries forced into austerity measures by the IMF.

Fortunately for us, however, there is a major difference between our debt and the debts of Greece, Latvia and Iceland. Our debt is owed in our own currency – U.S. dollars. Our government has the power to fix its solvency problems itself, by simply issuing the money it needs to pay off or refinance its debt. That time-tested solution goes back to the colonial scrip of the American colonists and the “Greenbacks” issued by Abraham Lincoln to avoid paying 24-36% interest rates.

Economic Fearmongering

What invariably kills any discussion of this sensible solution is another myth long perpetrated by the financial elite -- that allowing the government to increase the money supply would lead to hyperinflation. Rather than exercising its sovereign right to create the liquidity the nation needs, the government is told that it must borrow. Borrow from whom? From the bankers, of course. And where do bankers get the money they lend? They create it on their books, just as the government would have done. The difference is that when bankers create it, it comes with a hefty fee attached in the form of interest.

Meanwhile, the Federal Reserve has been trying to increase the money supply; and rather than producing hyperinflation, we continue to suffer from deflation. Frantically pushing money at the banks has not gotten money into the real economy. Rather than lending it to businesses and individuals, the larger banks have been speculating with it or buying up smaller banks, land, farms, and productive capacity, while the credit freeze continues on Main Street. Only the government can reverse this vicious syndrome, by spending money directly on projects that will create jobs, provide services, and stimulate productivity. Increasing the money supply is not inflationary if the money is used to increase goods and services. Inflation results when “demand” (money) exceeds “supply” (goods and services). When supply and demand increase together, prices remain stable.

The notion that the federal debt is too large to be repaid and that we are imposing that monster burden on our grandchildren is another red herring. The federal debt has not been paid off since the days of Andrew Jackson, and it does not need to be paid off. It is just rolled over from year to year, providing the “full faith and credit” that alone backs the money supply of the nation. The only real danger posed by a growing federal debt is an exponentially growing interest burden; but so far, that danger has not materialized either. Interest on the federal debt has actually gone down since 2006 -- from $406 billion to $383 billion -- because interest rates have been lowered by the Fed to very low levels.

They can’t be lowered much further, however, so the interest burden will increase if the federal debt continues to grow. But there is a solution to that too. The government can just mandate that the Federal Reserve buy the government’s debt, and that the Fed not sell the bonds to private lenders. The Federal Reserve states on its website that it rebates its profits to the government after deducting its costs, making the money nearly interest-free.

All the fear-mongering about the economy collapsing when the Chinese and other investors stop buying our debt is yet another red herring. The Fed can buy the debt itself – as it has been stealthily doing. That is actually a better alternative than selling the debt to foreigners, since it means we really will owe the debt only to ourselves, as Roosevelt was assured by his advisors when he agreed to the deficit approach in the 1930s; and this debt-turned-into-dollars will be nearly interest-free.

Better yet would be to either nationalize or abolish the Fed and fund the government directly with Greenbacks as President Lincoln did. What the Fed does the Treasury Department can do, for the cost of administration. There would be no shareholders or bondholders to siphon earnings, which could be recycled into public accounts to fund national, state and local budgets at zero or near-zero interest rates. Eliminating debt service payments would allow state and federal income taxes to be slashed; and the public managers of this money, rather than hiding behind a veil of secrecy, would be opening their books for all to see.

A final red herring is the threatened bankruptcy of Social Security. Social Security cannot actually go bankrupt, because it is a pay-as-you-go system. Today’s social security taxes pay today’s recipients; and if necessary, the tax can be raised. As Washington economist Dean Baker wrote when President Bush unleashed the campaign to privatize Social Security in 2005:

“The most recent projections show that the program, with no changes whatsoever, can pay all benefits through the year 2042. Even after 2042, Social Security would always be able to pay a higher benefit (adjusted for inflation) than what current retirees receive, although the payment would only be about 73 percent of scheduled benefits.”

Today incomes over $97,000 escape the tax, disproportionately imposing it on lower income brackets. Projections over the next 75 years show that just removing that cap could eliminate the forecasted deficit. When the Democratic presidential candidates were debating in the fall of 2007, Barack Obama and Joe Biden were the only candidates willing to seriously consider this reasonable alternative. President Obama just needs to follow through with the solutions he espoused when campaigning.

The Mass Education Campaign We Really Need

What is really going on behind the scenes may have been revealed by Prof. Carroll Quigley, Bill Clinton’s mentor at Georgetown University. An insider groomed by the international bankers, Dr. Quigley wrote in Tragedy and Hope in 1966:

“[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences.”

If that is indeed the plan, it is virtually complete. Unless we wake up to what is going on and take action, the “powers of financial capitalism” will have their way. Rather than taking to the streets, we need to take to the courts, bring voter initiatives, and wake up our legislators to the urgent need to take the power to create money back from the private banking elite that has hijacked it from the American people. And that includes waking up the President, who has been losing sleep over the wrong threat.

Ellen Brown is the author of Web of Debt: the Shocking Truth About Our Money System and How We Can Break Free. She can be reached through her website.

Legacy of Decades of Government Debt, Mismanagement of Economy

By The Economic Collapse
November 19, 2010

For decades, our politicians have been deeply addicted to government debt; they have stood idly by as millions of our jobs have been shipped overseas; and they have passed countless business-crushing regulations, and they never thought that it would catch up with us. Well, it has.

America has been living in the biggest debt bubble in the history of the world, and now that bubble is starting to pop. There has never been such an extended period of unemployment in the United States since the Great Depression, and millions of Americans are losing their homes. Homelessness is skyrocketing, tent cities are popping up everywhere, and countless numbers of American families are experiencing the soul-crushing despair that comes from desperately trying to hang on for month after month after month.

Now, because of the horrific hole that our politicians have dug for us, we are faced with some heartbreaking choices. For example, right now the U.S. Congress is deciding whether or not to extend long-term unemployment benefits for the nation’s jobless. Extending those benefits through the end of February would add another $12.5 billion to the U.S. national debt. But not doing it would cut off the only lifeline that many Americans have just in time for the holidays.

The extension of jobless benefits that was passed last summer expires on December 1st. If these long-term benefits are not renewed, approximately 2 million unemployed Americans will lose their checks.

But what can the U.S. Congress do? Just keep going into endless amounts of debt? As I have written about previously, the United States is never going to see another balanced budget ever again under the current system. The U.S. government is flat out broke. Somehow our politicians desperately need to find a way for the federal budget to stop hemorrhaging red ink.

There is no more “extra money” to spend. The U.S. government has piled up the biggest mountain of debt in the history of the world, and we are headed for a complete and total economic disaster because of it.

But what are we going to do? Are we going to let millions of Americans starve in the streets?

It’s not just the rapidly rising number of homeless Americans that is the problem. Millions of Americans are not going to be able to heat their homes this winter. Millions of others are going to have to choose between buying medicine and buying food, because they will not be able to afford both.

How would you like to be at a point where you could not go to the doctor because you knew that you could not pay the deductible? How would you like to be at a point where you had to decide whether to buy diabetes medicine or to buy macaroni and cheese to feed your family?

More than 42 million Americans are now on food stamps, and that number keeps going up month after month after month.

Just think about that.

42 million Americans would not be able to eat if the U.S. government did not give them handouts.

The safety net is getting awfully crowded.

If you really want to see some soul-crushing desperation, go check out the flood tunnels under the city of Las Vegas. But do not do this alone — it is very dangerous down there. Today, there are hordes of “tunnel people” who call those dark tunnels home. Nobody knows for sure how many people are down there (some people say that it is well into the thousands), but everyone agrees that the number is rapidly growing.

But in many major U.S. cities there are no flood tunnels to go to. Instead, in many areas of the United States, huge tent cities have sprouted. The following is a video news report from the BBC about the tent cities that are popping up all over America….

But it is not just “drug addicts” and the “mentally ill” that are going to these tent cities. One anonymous unemployed woman identified only as “Kaynonymous” is a highly educated professional who figures that she will end up in a tent city soon….

“I’m a 99er too. 53, female, single and once on track with an IT career. No one in their right mind would consider me for an IT position after being gone from the field for over 2 years. I have officially been a 99er since May 2010. In Aug. 2010 all of my savings and retirement funds were finally depleted—not only can I no longer make my mortgage payment, I can no longer afford utilities either. I’m just not sure that the 99ers ever had a voice outside of union organizers, and even with them it was too little too late. Guess I’ll be seeing ya’ll in the soup kitchens and tent cities. I do still have my tent…”

So we should just extend the long-term unemployment benefits, right? Well, according to a recent poll commissioned by the National Employment Law Project, 73 percent of Americans want Congress to continue paying out extended unemployment benefits.

But it is not just that simple.

America is broke.

The entire financial system is dying.

The U.S. government desperately needs to stop spending so much money.

But how can we turn our backs on people who are desperately hurting?

There are millions of Americans that have just about reached the end of their ropes. For example, one 43-year-old woman named Jacqueline recently expressed some of the extreme frustration that she is experiencing on her blog….

I am one of the 6 million poor, unemployed middle-aged Americans struggling without any safety net or income other than food stamps. I have resorted to salvaging scrap metal just to survive while keeping up an increasingly hopeless job search. On May 4th, 2010 just three weeks before my 43rd birthday, I got slapped with a diagnosis of very early stage glaucoma when I had a six year long overdue optical exam for badly needed new glasses. Without treatment — including ophthalmologist’s glaucoma monitoring exams — I will end up blind and permanently disabled. It’s not a matter of “if”, it’s a matter of when.

As a society, we will be judged by how we treat those who are the most vulnerable. It can seem easy to bash those who have lost everything, but someday you might end up in that position. In the following video, police in St. Petersburg, Florida are seen using box cutters to slice up the tents that the homeless were sleeping in….

Hopefully you were deeply disturbed by that video.

We have gotten ourselves into a giant mess, and things are only going to get worse.

Unfortunately, some extremely painful decisions are going to have to be made.

The truth is that we are so deeply in debt that the U.S. government just cannot be spending any extra money right now.

However, we also cannot turn our backs on millions of American families that are going to lose their homes and go hungry if we do not help them.

So what do we do?

What hurting Americans need most of all are not handouts — what they really need are good jobs.

But good jobs are being shipped overseas at a breathtaking pace. The United States has lost approximately 42,400 factories since 2001. The greatest economic machine in the history of the world is literally having its guts ripped out, and most of you kept voting in jokers who supported all of this de-industrialization.

For decades, our politicians kept telling us how wonderful globalization would be for America. We didn’t listen when Ross Perot warned us about “the great sucking sound” that these “free trade” agreements would bring about.

Well, look how all of that turned out. In 1985, the U.S. trade deficit with China was 6 million dollars for the entire year. In the month of August alone, the U.S. trade deficit with China was over 28 billion dollars.

In case you can’t figure it out, that means that 28 billion dollars of our national wealth was transferred to China in just one month.

This is happening month after month after month.

And yet Barack Obama continues to get up and tell us how wonderful globalism is. During his recent trip to India, Barack Obama made the following statement….

“This will keep America on its toes. America is going to have to compete. There is going to be a tug-of-war within the US between those who see globalization as a threat and those who accept we live in a open integrated world, which has challenges and opportunities.”

Yes, globalization is a threat. We should have never merged our economy with the economy of China, where workers make less than a tenth of what an American worker makes.

Jobs are flooding out of the U.S., and they are flooding into places like India and China where labor is far, far cheaper.

But without good jobs, how in the world are average Americans going to pay the bills? The answer is that an increasing number of them are not. 1.41 million Americans filed for personal bankruptcy in 2009 — a 32 percent increase over 2008.

Incomes are going down. According to the U.S. Census Bureau, median household income in the United States fell from $51,726 in 2008 to $50,221 in 2009.

Things are getting worse instead of getting better.

And things are going to continue to get worse because the U.S. government goes into more debt every single month, most state and local governments go into more debt every single month, and thanks to America’s exploding trade deficit, tens of billions of our national wealth gets transferred out of the United States every single month.

The U.S. economy is dying. There are going to be even more tent cities and even more hungry Americans. The scale of the economic nightmare that we are facing in the years ahead is going to be unimaginable.

So if you get to enjoy a warm dinner and you get to sleep in a warm bed tonight, please consider yourself to be very fortunate. Someday soon you also may find those things cruelly stripped away from you.

Jobless Millions in the Heartland Signal Death of the American Dream

Over the last 18 months, Americans over age 55 have suffered a reversal in their capital that has not fully registered psychologically. They will not be able to afford a comfortable retirement. This was true 18 months ago, just less obvious. Very few Americans enjoy a combination of private pensions, annuities, and Social Security payments sufficient to fund what Social Security says retirees need: at least 70% of their pre-retirement income in the last year of employment. They are oblivious to this assessment on the Social Security website. - The Fed Has Destroyed Your Retirement, LewRockwell.com, March 11, 2009

The Black Hole of Long-Term Unemployment

Born out of America's economic crisis is the extraordinary growth of a jobless underclass numbering in the millions.

By Andy Kroll, AlterNet
October 5, 2010

Sometime in early June -- he's not exactly sure which day -- Rick Rembold joined history. That he doesn't remember comes as little surprise: Who wants their name etched into the record books for not having a job?

For Rembold, that day in June marked six months since he'd last pulled a steady paycheck, at which point his name joined the rapidly growing list of American workers deemed "long-term unemployed" by the Department of Labor. In the worst jobs crisis in generations, the ranks of Rembolds, stranded on the sidelines, have exploded by over 400% -- from 1.3 million in December 2007, when the recession began, to 6.8 million this June. The extraordinary growth of this jobless underclass is a harbinger of prolonged pain for the American economy.

This summer, I set out to explore just why long-term unemployment had risen to historic levels -- and stumbled across Rembold. A 56-year-old resident of Mishawaka, Indiana, he caught the unnerving mix of frustration, anger, and helplessness voiced by so many other unemployed workers I'd spoken to.

"I lie awake at night with acid indigestion worrying about how I’m going to survive," he said in a brief bio kept by the National Employment Law Project, which is how I found him.

I called him up, and we talked about his languishing career, as well as his childhood and family. But a few phone calls, I realized, weren't enough. In early August I hopped a plane to northern Indiana.

In job terms, my timing couldn't have been better. I arrived around lunchtime, and was driving through downtown South Bend, an unremarkable cluster of buildings awash in gray and brown and brick, when my cell phone rang. Rembold's breathless voice was on the other end.

"Sorry I didn't pick up earlier, man, but a friend just called and tipped me off about a place up near the airport. I'm fillin' up my bike and headin' up there right now."

I told him I'd meet him there, hung a sharp U-turn, and sped north.

Twenty minutes later, I pulled into the parking lot of a modest-sized aircraft parts manufacturer tucked into a quiet business park. Ford and Chevy trucks filled the lot, most backed in. Rembold roared up soon after on his '99 Suzuki motorcycle. Barrel-chested with a thick neck, his short black hair was flecked with gray, and he was deeply tanned from long motorcycle rides with his girlfriend Terri.

"They didn't even advertise this job," he told me after a hearty handshake.

Not unless you count the inconspicuous sign out front, a jobless man's oasis in the blinding heat: "NOW HIRING: Bench Inspector."

His black leather portfolio in hand, Rembold took a two-sided application from a woman who greeted us inside the tiny lobby. He filled it out in minutes, the phone numbers, names, dates, and addresses committed to memory, handed it to the secretary, and in a polite but firm tone asked to speak with someone from management. While we waited, he pointed out the old Studebaker factories in a black-and-white sketch of nineteenth century South Bend on the wall, launching into a Cliffs Notes history of industry in this once-bustling corner of the Midwest.

A manager finally emerges with Rembold's application in hand. Rembold rushes to explain away the three jobs he had listed in the “previous employers” section -- stints at a woodworking company, motorcycle shop, and local payday lender. They’re not, he assures the man, indicative of his skills; they're not who he is. You see, he rushes to add, he's been in manufacturing practically his entire life, a hard and loyal worker who made his way up from the shop floor to sales and then to management. That kind of experience won't fit in three blank spots on a one-page form. Unswayed, the manager thanks him formulaically for applying.

If the company's interested, the manager says -- and it feels like a kiss-off even to me -- they'll be in touch, and before we know it we’re back out in the smothering heat of an Indiana summer. Rembold tucks his portfolio into one of the Suzuki's leather saddlebags.

"Well, that's pretty standard," he says, his tone remarkably matter-of-fact. "At least I got to talk to somebody. You're lucky to get that anymore."

A Perfect Storm Hits American Labor

The numbers tell so much of the story. The 6.76 million Americans -- or 46% of the entire unemployed labor force -- counted as long-term unemployed in June were the most since 1948, when the statistic was first recorded, and more than double the previous record of 3 million in the recession of the early 1980s. (The numbers have since dipped slightly, with a total of 6.2 million long-term unemployed in August.) These are people who, despite dozens of rejections, leave phone messages, send emails, tweak their cover letters, and toy with resume templates in Microsoft Word, all in the search for a job.

Not counted in this figure are so-called "discouraged workers," including plenty of former searchers who have remained on the unemployment sidelines for six months or more. In August of this year, 1.1 million Americans had simply stopped looking and so officially dropped out of the workforce. They are essentially not considered worth counting when the subject of unemployment comes up. Nonetheless, that 1.1 million figure represents an increase of 352,000 since 2009. In effect, the real long-term unemployment figure now may be closer to 7.5 million Americans.

So who are these unfortunate or unlucky people? Long-term unemployment, research shows, doesn't discriminate: no age, race, ethnicity, or educational level is immune.

According to federal data, however, the hardest hit when it comes to long-term unemployment are older workers -- middle aged and beyond, folks like Rick Rembold who can see retirement on the horizon but planned on another decade or more of work. Given the increasing claims of age discrimination in this recession, older Americans suffering longer bouts of joblessness may not in itself be so surprising. That education seemingly works against anyone in this older cohort is. Nearly half of the long-term unemployed who are 45 or older have "some college," a bachelor's degree, or more. By contrast, those with no education at all make up just 15% of this older category.

In other words, if you're older and well educated, the outlook is truly grim.

As for the causes of long-term unemployment, there's the obvious answer: there simply aren't enough jobs. Before the Great Recession, there were 1.5 workers in the U.S. for every job slot; today, that ratio is 4.8 to one. Put another way, with normal growth instead of a recession, we’d have 10 million more jobs than we currently do. Closing that gap would require adding 300,000 jobs every month for the next five years. In August 2010, the economy shed 54,000 jobs. You do the math.

Worse yet, if you imagine five workers queued up for that single position, the longer you're unemployed, the further back you stand. Economists have found that long-term unemployment dims a worker’s prospects with each passing day.

"This pattern suggests that the very-long-term unemployed will be the last group to benefit from an economic recovery," Michael Reich, an economist at the University of California-Berkeley, told Congress in June.

But when you consider the plight of the long-term unemployed, don’t just think jobs. The 2008 recession was a housing-driven crisis, thanks to the rise of subprime mortgage lending, government policy, and greed. As a result, 11 million borrowers -- or nearly 23% of all homeowners with a mortgage -- now find themselves "underwater": that is, owing more on their mortgages than their houses are worth.

Negative equity at those levels creates what Harvard economist Lawrence Katz calls a "geographic lock-in effect," stifling jobs recovery. Typically, American workers are a mobile bunch, willing to bounce from one city to the next for new jobs, but not when homeowners are staying put to avoid selling their underwater houses for a loss.

Another factor in the explosion of long-term unemployment lies in a shift away from temporary layoffs. In the recessions of 1975, 1980, and 1982, 20% of unemployed workers had been only temporarily laid off; as of August of this year, just 10% had. In their heyday, automakers and steel companies laid off workers as demand dipped, but backstopped by powerful labor unions, those workers were regularly recalled as demand and production revved up again. No more. Now, if you’re long-term unemployed, you’re undoubtedly trying to find a new job with a new employer, a more daunting process. Add it all up and you have Rick Rembold.

"Feast or Famine" in RV Land

Rembold calls himself a Democrat -- "not the peace sign, hit-the-bong type," he hastens to add, but "a tear-off-your-head-and-shit-down-your-neck Democrat."

He can't stomach Glenn Beck or talk radio here in the Land of Limbaugh, and with equal zeal he watches MSNBC's Rachel Maddow and FX's "Sons of Anarchy," a gritty, violent series about outlaw motorcycle gangs.

It was a Friday morning, and we were in Rembold's kitchen, drinking coffee and talking politics. He wore jeans and a black polo shirt, and paced as he spoke. Ideas and frustrations poured out of him like water from an open spigot; the man had a lot on his mind. The night before, I had asked him to show me around the area, especially the economic engine that sustains it: the recreational vehicle, or RV, industry. Once the coffee ran dry, we piled into my car and set off.

Cities such as Elkhart and Middlebury and Mishawaka and Wakarusa are the cradle of the RV industry. Headquartered here are major manufacturers like Jayco and Forest River. At its peak, northern Indiana churned out three-quarters of all RVs on the road -- motor homes and fifth-wheels, pop-up campers, travel trailers, and toy haulers. Producing them was grueling work, but you could fashion a middle-class lifestyle out of what it paid.

"Workin' in the RV industry, they'll work you to death," Rembold said. "People would literally be sprintin' from one place to the next with power tools in their hands."

Then came "the Panic of '08," as one RV salesman put it to me. Teetering banks choked off consumer lending as credit markets froze. The downturn pummeled the industry. In 2009, sales of fifth-wheels, a smaller trailer you hitch to a truck or SUV, plummeted by 30%, travel trailers by 23.5%, campers by 28%. Manufacturers like Jayco, Monaco Coach, and others collectively laid off thousands, and the region's unemployment rate spiked by more than 10% in a year.

When a newly elected Barack Obama arrived in Elkhart in February 2009 to tout his stimulus plan, the jobless rate was 15.3%; a month later, it reached 18.9%, more than twice the national rate. At one point, Elkhart County, with a population of 200,000, was shedding 95 jobs a day.

In the 1990s and first years of the new century, RV manufacturers couldn't hire enough workers. They ran ads in regional and national newspapers looking for more bodies.

"We couldn't even get people to drive over from South Bend to work in Elkhart," a sales rep for Jayco told me.

By the time I arrived, though, the industry had left its feast years, hit the famine ones fast, and was showing the first signs of crawling back. Driving through Middlebury, a town of 3,200 east of Elkhart, I saw a few carrier trucks hustling in or out of plants, some full employee parking lots, and rows of gleaming new RVs dotting the green landscape like herds of boxy cattle.

Whether the industry will ever fully recover, however, is unclear. The manufacturers I spoke to were optimistic about future sales.

"Despite the logic of what's going on in the economy, the buyers are still there," said Jerimiah Borkowski, a spokesman for Thor Motor Coach.

But a 2009 analysis by Indiana University's Business Research Center projected that by 2013 annual RV shipments still won't have returned to their 2006 peak.

"I personally don't think it'll ever rebound to pre-2008 levels," says Bill Dawson, vice president and general manager of Clean Seal Inc., a South Bend-based supplier of parts to the RV industry.

Dawson points to industry contractions -- Thor's $209 million acquisition of Heartland RV, the Damon Motor Coach-Four Winds merger, as well as numerous factory closings -- and says, "Fewer players mean fewer units and fewer people making them."

Rembold knows the RV industry's ebb and flow all too well. He's lived in its shadow for the majority of his working career, including 18 years with Architectural Wood Company (AWC), an Elkhart-based manufacturer of wood products used to outfit RVs and conversion vans. He's made handcrafted tables, faceplates, valences, and overhead consoles, usually from oak or maple, finishing them with the gloss that gives Kimball grand pianos and Fender guitars their shine.

But by the 1990s and 2000s, his line of work looked to be headed the way of the 8-track tape. The conversion van industry was sinking. RV manufacturers had begun replacing wood with cheaper plastics and vinyl-wrapped plywood. (At an RV show we visited, Rembold could step inside a vehicle and determine by smell alone if the manufacturer used the real thing or not.) Orders plummeted at AWC. By early 2006, the company's financial health was so dire that the owner, a good friend of Rembold's, let him go. A few years later, the company itself folded.

Rembold then caromed from one job to the next: selling used cars and motorcycles, driving a semi truck, working behind six inches of bulletproof glass as a teller at Check$mart. He briefly ended up back in RVs, supervising employees sewing tents for campers, and then, last winter, temped at a struggling wood shop. That was his last job. After the holidays, he was never called back.

Like millions in his predicament, Rembold knows his chances of finding a decent-paying job doing what he loves decrease with each temporary, non-manufacturing job he’s taken. What doesn't fit on a resume -- and so frustrates him most -- is his adaptability, if only he could convince an employer of it. College degree or not, certification or not, he insists, he's always adapted to new settings.

"Could I do construction? Hell, yeah, I could do it. I could measure in metric, in standard; I'd correct cutting mistakes, do it all. I just can't get anyone to let me do it."

As we talked, the RV plants gave way to lush farmland and we found ourselves driving through Amish country, sharing quiet two-lane roads with horse-drawn buggies. By early afternoon we rolled into the town of Topeka (pop. 1,200), past the Seed and Stove store and the Do-It Better hardware shop. Then Rembold's cell phone buzzed, a rare break in the conversation. It was his daughter, Angie, 28, the youngest of his three kids.

He listened, then yanked off his sunglasses. "You what?"

Angie managed the Check$mart in Goshen, the check-cashing outfit Rembold once worked for, and she was good at her job, Rembold had told me earlier. Now she was agitated, talking so loudly that I caught bits and pieces of the conversation over the din of the radio. Something about a bonus owed that she didn't receive. When Rembold abruptly hung up, he muttered, "Jesus H. Christ."

Later, over lunch at what looked to be Topeka's lone diner, he explained that Angie planned to quit her job over the unpaid bonus. After a full morning telling me about the nightmare of being out of work, he looked stunned.

"You'd think she'd have learned from my situation. I don't think she realizes how her life is going to change."

The Trauma of Long-Term Unemployment

It’s hard, even for the long-term unemployed, to grasp just how drastically life can change without work. Studying past recessions to discover just what does happen, researchers often focus on the collapse of the steel industry in Pennsylvania in the late 1970s that would turn a once-thriving region into a landscape of shuttered factories and ghost towns. Eighty thousand people worked in steel in the 1940s; by 1987, 4,000 remained.

In one study, male Pennsylvania workers with high seniority experienced a 50% to 100% spike in mortality rate in the first year after job loss. The life expectancies of those laid off after age 40 decreased by one to one-and-a-half years. In the long run, these laid-off Pennsylvanians suffered a 15% to 20% reduction in earnings. Those hardest hit in terms of lifelong earnings, economists found, were not low-skilled laborers or highly skilled wealthy elites, but workers who had managed to forge a middle-class lifestyle.

Suicide rates also increase, researchers have found, when unemployment rises. (In Elkhart County, near where Rembold lives, suicides exceeded the annual average by 40% last year.)

The 1980s recession in Pennsylvania was no outlier either, economic researchers have discovered, and the effects of long-term unemployment spread well beyond directly afflicted workers. In the short run, for instance, a child whose parent loses his or her job is 15% more likely to repeat a grade year in school, according to University of California-Davis economists Ann Huff Stevens and Jessamyn Schaller. This is especially true for children with less-educated parents.

Over their lifetime, the children of jobless fathers earn, on average, 9% less each year than similar children without laid-off dads, and are more likely to receive unemployment insurance and social welfare support at some point in their lifetimes. New research also suggests that the children of laid-off parents may have lower homeownership rates and higher divorce rates.

"I'm Not Competing With Some College Kid"

In the early evening, Rembold and I holed up in his office, a small room off the main hallway with a computer, two desks, and countless framed photos. Rembold clicked open a folder on his Internet browser labeled "Careers" and walked me through his daily online job-hunting routine. He checks half-a-dozen job boards regularly, though openings tend to pay only in the $8- to $10-an-hour range. He rejects most of those out of hand.

"Wouldn’t that be better than no job at all?" I ask.

Rembold gnaws on the question.

"I can't afford my home at $8 or $10 an hour," he finally replies.

Right now, he’s getting by on unemployment checks, a small inheritance from his mother that's rapidly dwindling, and loans from family members. Still, he'd rather keep trolling the job boards in the hopes of finding something offering a living wage.

"I've got a mortgage to pay, for Christ's sake," he told me.

The few openings he sees with good pay, however, involve odd hours, dusk-to-dawn shifts that would mean he'd almost never see Terri, whose schedule at an aluminum company in Elkhart is early morning to mid-afternoon.

And then, under the dollar signs lurks something else: self-respect. Unlike his father, Rembold never went to college, and doesn't consider himself too good for service-sector jobs. But he visibly agonizes over the fact that, as a 56-year-old man with decades of experience, he's competing with people half his age for low-wage jobs. After all, as a machine operator fresh out of high school at White Farm Equipment, he earned $8.64 an hour. That was 1976. Adjusted for inflation, that's equivalent to $42.42 today. No wonder the man's reluctant to flip burgers or trim hedges for $9 an hour.

His friends have suggested selling his condo and moving somewhere smaller and cheaper, maybe renting for a while, but that's the last thing he wants. It’s that self-respect again. He's already sold off one motorcycle and various musical instruments, and he and Terri now skip the big vacations that were part of their past life. Which isn't to say that Rembold currently lives like a monk. He still has the big screen in the basement, the DVD collection, the video-game systems for when the grandkids visit, a life's worth of possessions from decades of earning good money.

"Why should you have to give up your home?" he wanted to know. "It's so unbelievable to me that I don't even want to think about it. I'm in denial."

A Lost Generation?

What's to be done for people like Rick Rembold? As in most economic debates, the answer to this question divides economists and policymakers. On the left are those who lobby for more aid to jobless Americans, including another extension of unemployment insurance beyond the present cut-off date of 99 weeks. (In normal times, laid-off workers once got 26 weeks of unemployment insurance.) Some Democrats in the Senate had hoped to extend unemployment insurance by another 20 weeks up to 119 weeks, an effort spearheaded by Senator Debbie Stabenow (D-Mich.) that ultimately failed last week in the face of Republican opposition. That same camp supports a one-time “reemployment bonus,” a lump-sum payment that unemployed workers would receive to reward them for finding a new job and leaving the unemployment rolls.

Another idea gaining traction in policy circles is "wage insurance," in which the government would supplement the income of workers rehired at lower-paying jobs. Consider Rembold who, in his prime, earned $25 an hour. He says can't live on a $10-an-hour job, but if that were to become $12 or $15 an hour, thanks to a government subsidy, he'd be much more interested.

More conservative voices believe cutting jobless benefits -- a bitter pill, to be sure -- will force people back into the workforce. The Rembolds of America will then scramble harder and take those low-wage jobs faster. Of course, those who can't find work at all will be left adrift with no safety net. What's more, the cost of such cuts to taxpayers might actually prove higher, economists note, because without those benefits the jobless might instead apply for disability or other support programs and give up the search altogether.

Ideally, of course, employers and governments should avoid widespread layoffs altogether. One option sometimes suggested would be a "work-share" program. Imagine a factory of 100 workers with a boss looking to cut costs. Instead of laying off 25 workers, he would reduce all of his workers' hours by 25%. The government would then step in to fill the earnings gap. Think of it as the equivalent of collecting unemployment before you're laid off, a preventive measure to avoid the trauma -- to income, health, family -- of job loss.

None of this is likely to happen soon which is little consolation for the long-term unemployed like Rembold. Unfortunately, there are few proven solutions to their situation. Job retraining programs for unemployed workers are all the rage these days, touted by Education Secretary Arne Duncan, Treasury Secretary Tim Geithner, and President Obama as a transition to a new line of work. But a 2008 study commissioned by the Labor Department found minimal-to-no gains for 160,000 workers who went through retraining, concluding that the "ultimate gains from participation are small or nonexistent."

In the end, facing an economy that may never again generate in such quantity the sorts of "middle class" jobs Rembold was used to, what we may be seeing is the creation of a graying class of permanently unemployed (or underemployed) Americans, a genuine lost generation who will never recover from the recession of 2008.

As Mike Konczal and Arjun Jayadev of the Roosevelt Institute, a left-leaning think tank, recently wrote, unemployed workers today are more likely to abandon the workforce than find work -- something never before seen in four decades' worth of labor data.

"These workers need targeted intervention," they concluded, "before they become completely lost to the normal labor market."

"All I Need Is One Chance"

I first noticed Rembold’s tic on Sunday, my last day in Indiana. Out of nowhere, without provocation, he'd suddenly say things like "Man, I just need a job," or "All I need is a chance," or "I wanna work, make stuff with my hands." He’d been filling the lulls in our conversations with these little outbursts, symptoms, I assumed, of the worry and anxiety that never left his side. Which is why I called a few weeks after my visit, hoping for good news.

And there was, after a fashion. Angie, his daughter, had ended up sticking with Check$mart, much to his relief. But for him, the leads were sparser than ever.

"There's this neighbor here,” he said, “her son's a shift manager at the Walmart, so he's gonna see what they might have."

He also mentioned an electronic wire and cable manufacturer with openings in Bremen, a half-hour south. He'd recently applied there for the third time this year. This time around, he went on, he planned to march in and demand the interview he’d never gotten.

"I mean, what's it take to get in to see someone there?" he asked me.

Rembold doesn't have time on his side. Unlike the now-famous "99ers," the folks who received nearly two years' worth of unemployment benefits, his will expire sometime this winter, short of the 99-week mark. He's not sure what he'll do by then if he can't find work. Maybe take one of those $8-an-hour jobs after all. For now, though, he's just checking the job boards each morning, shipping off resumes and cover letters, firing up the Suzuki, chasing leads.

I asked if he still had any hope left that something good would happen.

"I don't know," he replied. " 'Course if ya don't go, ya don't know."

Andy Kroll, an associate editor at TomDispatch, is a reporter for Mother Jones magazine. He lives in Washington, D.C. To listen to him discuss the geometry of delusion in the Ponzi Era on the latest TomCast audio interview, click here, or download it as a podcast by clicking here.

Retirement Living in Elkhart, Indiana

By Gary North, LewRockwell.com
March 11, 2009

In early February, President Obama was looking for a place to symbolize the recession. He wanted to rally support for his proposed $800 billion bailout of the economy, a bailout that he admitted would send the Federal government's annual deficit to $1.7 trillion in fiscal 2010.

He chose Elkhart, Indiana, which advertises itself as the recreation vehicle capital of America, and hence the world. Elkhart's economy has collapsed. There is 15% unemployment and no hope in sight.

For years, the RV industry grew. The scene in About Schmidt was representative. The retired middle manager bought an RV for his retirement. Then his wife died. He went out on the open road by himself. He went back to his home town. Nothing remained of the places he remembered.

This industry is today representative of the profound economic breakdown we are experiencing. This is not business as usual. The industry is close to collapse.

In 2005, the Indiana Business Magazine ran a story:

"On a roll? What's behind the dramatic growth of Indiana's RV industry? Baby Boomers buying vs. higher fuel costs."

It reflected the final year of Greenspan's decade-long bubble economy. Like California housing, the RV industry seemed to levitate high above economic rationality.

It would seem like the past few years should have been tough on the recreation-vehicle business. The economy was in recession for a time and sluggish even longer, and gas prices have been moving ever-upward, which would seem like a poor climate for selling expensive discretionary items that don't exactly sip gas. Yet the RV industry – which is centered in Indiana – in recent years has enjoyed dramatic growth. And as sales have grown, Indiana's share of the business has increased as well.

These words now seem as realistic as a real estate salesman's promise to some young couple that paying ten times annual income for a house was a good bet. The home would appreciate.

The article reported that in 2004, RV manufacturers shipped 370,000 units. Of these, 236,000 were made in Indiana. The article quoted Dennis Harney, executive director of the Recreation Vehicle Indiana Council and the Indiana Manufactured Housing Association.

"The RV industry directly employs nearly 20,000 people and indirectly employs another 20,000," he says, adding that most of the jobs pay well. "The RV industry enjoys a lack of competition from foreign producers – very few RVs are imported from competing nations. Although we're a quiet industry and the business is distributed among a number of manufacturers, there are many states that would relish the opportunity to have an industry like this."

Not these days.

He went on to say,

"I think it's a critical industry for the state that's enjoying growth. I think the future is very, very bright for the industry."

Fast forward to November 2008. The RV Dealers Association sent out a press release in the form of a letter to President-elect Obama. It was a plea for a government bailout.

There are an estimated 12,332 RV-related businesses in the nation with combined revenues of $37.5 billion in 2006, including a combined payroll of nearly $5 billion for American workers in the manufacturing, retail and service sectors – employment which, as with boating, totals some 150,000. One out of every 12 American households owns an RV – a category that ranges from inexpensive pop-up tent campers to large, self-propelled motorhomes. Today, there are 8.5 million RVs in operation.

It noted that Elkhart, Indiana, had the highest unemployment rate in the nation. It still does.

Banks had ceased lending on RVs, the letter said. I wonder why. Here is a product whose largest market share is people age 55 and older. The recession is cutting into their income. The falling stock market is cutting into their retirement portfolios.

Consider the economics of an RV. Like any vehicle, RVs depreciate rapidly. They are consumer goods. They are not capital goods.

They cost a lot to operate. Gasoline is only part of it. There are maintenance expenses. Also, they suffer from competition from the used RV market.

No one needs an RV. Anyone can get into a car and drive to a vacation spot. He can pay retail for a motel, eat fast food, and fish for two weeks. Then he can go home. The cost will be far less than the depreciation of an RV plus 6 miles per gallon. The economics of the RV have little to do with efficiency. It has to do with lifestyle.

There lies the rub.

A Lost Lifestyle

Over the last 18 months, Americans over age 55 have suffered a reversal in their capital that has not fully registered psychologically. They will not be able to afford a comfortable retirement.

This was true 18 months ago, just less obvious. Very few Americans enjoy a combination of private pensions, annuities, and Social Security payments sufficient to fund what Social Security says retirees need: at least 70% of their pre-retirement income in the last year of employment. They are oblivious to this assessment on the Social Security website.

Today, about half of all workers are covered under an employer-sponsored pension, and many people are not saving as much as they should. While Social Security replaces about 40 percent of the average worker's pre-retirement earnings, most financial advisors say that you will need 70 percent or more of pre-retirement earnings to live comfortably. Even with a pension, you will still need to save. If you will not have a private pension, you will need to save more – and start saving sooner.

Yet throughout Greenspan's bubble economy, the savings rate of American households fell, going negative in 2005. The boom fooled Americans who owned stocks that they were getting richer. They weren't. They were merely benefitting from the greater fool theory of investing. That theory has brought down the real estate bubble. There will be further declines. It has ended the stock market mania. And it has just about shut down Elkhart, Indiana.

Americans have not yet recognized what has been done to them by the Federal Reserve System and the highly leveraged banks and hedge funds that thought the good ship Effortless Wealth had come into port. The hot-shots did not understand Ludwig von Mises' theory of the business cycle as the product of central bank monetary inflation. They never saw it coming.

Now the investors who believe the same dream, but without multimillion dollar severance deals, have seen their dreams called into question.

They have not yet dumped their stocks. They have just stopped buying as many. The fall of 55% by the Dow and the S&P 500 was not accompanied by a huge sell-off. The decline has been one of dribbling away. The dreams of would-be retirees have not yet been smashed. They have merely dribbled away. The crash has not yet come. It will.

Stages of Deception

First, there is a dream: easy prosperity. This dream is funded by fiat money. Next, there is a boom: easy prosperity. This boom is funded by fiat money. Next, there is reality: the stabilization of fiat money. Next, there is recession: the end of the dream.

Then what?

In the conventional scenario, there is recovery. But recovery since Greenspan arrived as chairman in October 1987 has always been based in more fiat money. That was his solution to the 22% one-day fall in the stock market in 1987. That was his solution to Bush I's recession in 1991. That was his response to the recession of 2001 and 9-11. Again and again, fiat money solved the problem. It brought back the recovery.

It is not working this time. The federal funds rate is at 0%. The economy is still falling. The Federal deficit is headed toward $2 trillion a year. No recovery is visible.

When recovery comes, it will be accompanied by price inflation on a scale never seen in peacetime America. Those who rely on pension payments and annuities will see their income shrink. They will be the primary victims.

The target market of the RV industry will be the victims of the recovery's familiar solution: fiat money. They will remain the victims for the foreseeable future.

The people at CNBC do not see this yet. The high-paid hot shots on Wall Street who lost their jobs may suspect that the gravy train has gone off the rails, but what can they do about it? They are trained in high finance, and high finance is now an appendage of the Federal government. The era of salaries has replaced the era of stock options and bonuses. The Democrats have vowed that the old days will not return. I don't think the Republicans are likely to run on a platform to bring back the world that ended in 2008.

When they run on a platform to end Medicare, I will be impressed. In 2016 or 2017, and maybe earlier, Medicare goes into the red. At that point, political reality will meet actuarial reality. There will be an inter-generational pile-up. The geezers will lose. They won't have the votes in Congress.

People over 55 today will spend their golden years in the equivalent of Elkhart, Indiana.

Yuppie Restaurants

Drive up Main Street in your town. All over America, Main Street – where people drive at 4 p.m. – is the same: Lowe's, Home Depot, Office Max, Office Depot, Wal-Mart, McDonald's, Burger King, Taco Bell, Chili's, and T.G.I. Friday. Wal-Mart is doing well. It is the place that sells what people really need, and it sells it cheap. McDonald's stock price has held up. Like Wal-Mart, it sells cheap.

Fast food saves time and is addictive: high fat. People want it, and it does not cost much. But yuppie restaurants that sell lifestyle are headed for trouble. People don't have to go to them. They offer atmosphere, but it's expensive. It's not like the neighborhood tavern, which rests on friendship. It's ersatz community. Television screens with no sound are all over the walls, often tuned to different sports events. Silent sports are ersatz sports.

If I were advising a fund manager on what to sell, it would be any company whose income relies on restaurants with silent TVs. There are no TVs at McDonald's and Taco Bell. Those places make it on volume. There is no community. They get you in and move you out. Only the playgrounds for children keep anyone there for long. Nobody takes his wife to a fast food restaurant for a romantic evening. He may take her so that she can get a break from the day's routine. That incentive will keep fast food restaurants solvent after the yuppie restaurants have closed.

Liquor sales keep yuppie restaurants going, but liquor by the drink is expensive. If someone wants to drink, he can do it at home cheaper.

The crunch will come. The yuppie restaurants have survived so far, but they will face the reality of discretionary income. It's shrinking, and it's beginning to go into savings. The more fearful Americans become, the higher the percentage of discretionary income they will save.

Conclusion

We have not yet seen real fear. We will. We have not yet seen Main Street in the condition that it has become in Elkhart, Indiana. We will.

President Obama told Elkhart that he had not forgotten the city. I suspect that by now, he has. The photo op is over. The bailout was passed. The economy is falling. The least of his concerns – and yours – is the fate of a city that bet its future on the RV industry.

In every recession, there are permanent victims. The RV industry is the poster child as this recession's permanent victim. The industry is finished. Its target market – retirees and people who dream of becoming retirees – is also a permanent victim. The dream of freedom, permanent income, no job, no kids at home, and the open road was nice while it lasted, but it's over for most people. As they die or get shipped off to retirement homes, their children will sell the old folks' RVs for pennies on the dollar. The supply of used RVs will be strong for the next decade.

Elkhart, Indiana is the symbol of the boom gone bust.

If life on the road has been your dream ever since Then Came Bronson, find a new dream. As with Bronson, the show has been canceled.

Gary North is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.