“Wow…it’s amazing how many Spanish-speaking people there are in this area…”
The one that we find most striking – after being away from the US for 15 years – is how the Hispanic population has taken over.
The woman who cleans our office speaks Spanish and little English. So does the woman who cleans our house. And the gardener. And the fellow who shovels out the driveway when it snows. And the busboy in the restaurant where we have lunch.
And the maintenance man. Our landlord explained:
“Eusebio came here from Peru. He lived at Macho Pichu. He walked here. But he’s been here 10 years. And he’s great. Always ready to work. Smart. Figures things out. And always nice to work with. He charges $150 a day. Not bad really.”
On our drive to work, we put on Spanish-language radio: CNN en Espagnol. We can only understand about half of what is said. But we’re learning…
Jules, 22, rode along with us in the car…
“It’s amazing. Those people are everywhere. And you know something, they give me hope for the future. They come here. They work hard. And as long as they stay outside of the official status…that is, as long as they’re illegal immigrants, everything works well. Because they can’t go on welfare, I guess. And they can’t vote themselves special programs and benefits. They have to work for a living. And they work hard.
“There’s some movement in Congress, I think, to change the immigration laws so that these illegal immigrants would be treated a full citizens. What a mistake that would be. Pretty soon, they’d be as big a burden on the system as native-born citizens are. That’s the reason we can’t compete in the world… We have to carry too many retired people…and too many people on welfare…and too many chiselers getting a check from the government for not really doing anything…
“The country feels old and worn out…at least compared to India. But these Hispanics are something else. They’re young. And they’re not yet ruined by the system. I mean, they’re not yet leeches…”
Jules explains how to save the US from decline…below…
But first, let’s turn to a related matter.
(Bloomberg) – “Americans are down on the economy and the markets even as stocks and growth indicators are up.
“By an almost 2-to-1 margin Americans believe the economy has worsened rather than improved during the past year, according to a Bloomberg National Poll conducted March 19-22. Among those who own stocks, bonds or mutual funds, only three of 10 people say the value of their portfolio has risen since a year ago.
“During that period, a bull market has driven up the benchmark Standard & Poor’s 500 Index more than 73 percent since its low on March 9, 2009. The economy grew at a 5.9 percent annual pace during last year’s fourth quarter.”
What’s going on? The economy is doing well (the last quarter showed a 5% + growth…). Investors are making money. Why all the long faces?
That’s the problem with a zombie economy. It walks. It talks. But it still sucks the blood out of the living.
People at the top are protected. They’ve got their sweetheart deals with the feds. They’ve got their bailouts…and their bonuses. Heck, we’re not complaining. Here at the Markets and Money, they pay us enough to keep the table set and the liquor cabinet full. What more could we ask for?
But the poor man on the street is the one who feels the pain. The Great Correction is not just an economist’s abstraction. It’s everyday life. The Bloomberg report continues:
“Barely one-in-three Americans say the country is on the right track. Fewer than one in 10 say they believe the economy will be strong again within a year. Just 4 percent of Americans who cut back on spending during the recession now say they are confident enough to open their wallets, according to the poll, which has a margin of error of plus or minus 3.1 percentage points.
“Unemployment in February was 9.7 percent. Payrolls in the U.S. have dropped every month except one since December 2007. Economists expect job growth to turn around in March, with a median forecast that payrolls will rise by 192,000.
“Poll respondents rate persistently high unemployment the greatest threat to the economy over the next two years, with 75 percent calling it a high threat. Chronically high budget deficits are cited as a high threat by 70 percent, followed by homeowners who can’t pay their mortgages, which is cited by 58 percent. Higher taxes are deemed a high threat by 57 percent.
“Nine of 10 Americans believe that cutting the deficit, which is projected to reach a record $1.5 trillion this year, will require sacrifices from middle-class Americans. Still, when asked about a range of potential tax increases and spending cuts to address the problem, the large majorities of Americans favor tax increases that only affect the wealthy.”
And more thoughts….
Yes, it does appear that a fault-line is widening in America. The upper classes are educated…smart…and they have money. They can compete with the elites of any country on earth.
But the middle/lower classes have a problem. They’re used to getting paid the wages of a rich, developed country. But they don’t really have any more skills than people in India or Mexico or Russia. For thirty years the average hourly wage for an American working man has remained stagnant as more and more unskilled labor came on line. Much of it came as legal and illegal immigration from Latin America. And the rest came from labor outside the US.
China mastered the business of making things to export into the US. India took the lead in service industries, where their English-language skills could be put to work.
But there are still hundreds of millions of people who earn practically nothing; there are 500 million people in India who live on less than $3 a day, for example. As long as these people are still entering the global workforce, it’s hard to see how unskilled Americans can expect to earn more money.
This is just part of the Great Correction that Americans must live through. They have to pay down (or default on) debt – as much as $20 trillion worth – while their incomes are under pressure from competition at home and abroad…and the US economy suffers a prolonged, Japan-like slump.
Stephen Roach elaborates..and picks up our point (from Friday) about global trade:
“The political pressures are grounded in the angst of American workers. After more than a decade of stagnant real compensation and, more recently, a sharp upsurge in unemployment, US labour is being squeezed as never before. Understandably, voters want answers. It is all because of the trade deficit, they are told – a visible manifestation of a major loss of production to foreign competition. With China and its so-called manipulated currency having accounted for fully 39 per cent of the US trade deficit in 2008-09, Washington maintains that American workers can only benefit if it gets tough with Beijing.
“However appealing this argument may seem, it is premised on bad economics. In 2008-09, the US had trade deficits with more than 90 countries. That means it has a multilateral trade deficit. Yet aided and abetted by some of America’s most renowned economists, Washington now advocates a bilateral fix – either a sharp revaluation of the renminbi or broad-based tariffs on Chinese imports.
“A bilateral remedy for a multilateral problem is like rearranging the deckchairs on the Titanic. Unless the problems that have given rise to the multilateral trade deficit are addressed, bilateral intervention would simply shift the Chinese portion of America’s international imbalance to someone else. That “someone” would most likely be a higher-cost producer – in effect, squeezing the purchasing power of hard-pressed US consumers.
“The US would be far better served if it faced up to why it is confronted with a massive multilateral trade deficit. America’s core economic problem is saving, not China. In 2009, the broadest measure of domestic US saving – the net national saving rate – fell to a record low of -2.5 per cent of national income. That means America must import surplus saving from abroad to fund its future growth – and run current account and trade deficits to attract the foreign capital. Thus, for a savings-short economy, there is no escaping large multilateral trade imbalances.
“Yes, China is the biggest piece of America’s multilateral trade deficit. But that is because high-cost US companies are turning to China as a low-cost offshore efficiency solution. It also reflects the preferences of US consumers for low-cost and increasingly high-quality goods made in China. In other words, savings-short America is actually quite fortunate to have China as a large trading partner.
“Washington’s scapegoating of China could take the world to the brink of a very slippery slope. It would not be the first time that political denial was premised on bad economics. But the consequences of such a blunder – trade frictions and protectionism – would make the crisis of 2008-09 look like child’s play.”
America is in decline. Or so it appears. Its population is aging (though not nearly as fast as China’s…or even Europe’s). Its industries are old. Its institutions are old. Its infrastructure…its government…and its economic theory (stimulate consumer spending at all cost!) are all old. It is now putting in place a health care system, a costly program based on a very old model for a social-welfare state.
The anglo-saxon empire is long in the tooth too. It began in the 16th century, which makes it already longer-lived than most empires. The costs of running an empire are high. Typically, empires collect tribute to help pay for it. The US runs its empire at a huge loss…and depends on borrowing from the vassal states to stay in business.
The arithmetic is bad. Domestically as well as internationally. Each year, more and more people vote for more and more benefits that they expect someone else to pay for. It doesn’t seem likely that this could go on much longer.
But Jules had a solution:
“The place needs new blood. These Hispanic immigrants have a lot of energy. In fact, there are probably millions of people who would like to come to the US and work. They should set up a special guest-worker program, like they have in Switzerland or Dubai.
“They open the borders to these guest workers. They just have to register to get in. Then, they’re free to work…but they don’t get any Social Security…they aren’t covered by any welfare or minimum wage laws. They can’t vote. They’re just like illegal immigrants, but they can’t be deported. Oh, yes, they’d just have to pay a flat tax…10% of their wages. No complications. No deductions.
“This would really fire up the economy. There wouldn’t be any need to outsource projects overseas because you could get cheap labor here. We could compete with China and India. And then, as these people earned money, they’d buy houses and cars and so forth, which would really help the US economy too.
“The US would be a growth economy again… Of course, all our marginal native-born workers would lose their jobs…and the unions would got out of business…and we’d all have to learn Spanish… Pretty soon, I guess the country will be bilingual anyway…”
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