As for a real recovery – forget it. There’s no evidence of it. Unemployment is getting worse. Housing is still going down. Profits are going down. Those aren’t the things that presage a recovery…they herald a deeper, darker depression.
The depression darkens because people are not just being laid off – their jobs are disappearing. They do not get called back to work. Instead, they stay unemployed until they run out of unemployment benefits…and then the statisticians in Washington drop them off the unemployment rolls. Currently, the first batch of those people to reach the end of their benefits came this week. Last we looked, the Pennsylvania legislature was passing a law so they could continue drawing benefits for a few weeks more.
We’ve mentioned John Williams and his excellent service called Shadow Government Statistics. He looks at the numbers and figures out how they are twisted and tortured…and then figures out what they would be if they were treated properly. Currently, the unemployment rate nationwide officially is almost 10%. But if you computed the unemployment numbers the way they did back in the Great Depression, Williams says one in five people are out of work. In some places the figure is as high as one in four.
In other words, the unemployment numbers are already beginning to look like those of the Great Depression. But that’s true of almost all the numbers. They’ve all got a ’30s era look to them. And if you stopped water boarding them, they’d tell a similar story. Almost all the indicators are worse than any we’ve seen since WWII.
Unemployment, trade, defaults, foreclosures, bankruptcies, prices, manufacturing…you name it and you have to go back to the end of WWII to find similar numbers. Of course, at the end of the war, the wartime economy shut down. Millions of people who have been in uniform…or making tanks and airplanes…were suddenly out of work. Economists thought the economy would go right back into the Great Depression. Instead, it boomed.
Those soldiers and their families had savings. They had pent up demand – they hadn’t bought a new car in 10 years…they were young…they got married…they had children…they needed baby cribs and houses. We remember going to look at one of the first major suburban developments as a child – Harundale – in Maryland, built by the Levitt Company.
It was a horrible place, but you could buy a house for peanuts…on credit. And it set the pace for the suburban consumer credit expansion of the next half a century.
But what was normal for so many years is not normal any more. Now, consumers are paying off debt faster than any time since 1952. The government, however, is making up for them. Goldman may no longer be able to push more credit onto the public; but it can push one heckuva lot of debt onto the public sector. Wall Street firms helped households ruin themselves in the Bubble of 2003-2007. Now they’re doing the same for the government, helping the feds raise money on a scale never seen before in human history.
As we said…no wonder they’re making money. Too bad.
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