[jeffkrol]

–Why there will be a full-blown depression in 2012 Monetary Sovereignty – Mitchell

The Naked Capitalism blog quotes the N.Y. Times, in an article titled, “More Proof That Obama is Herbert Hoover”:

An extraordinary amount of personal income is coming directly from the government. Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government.

By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession. Moody’s Analytics estimates $37 billion will be drained from the nation’s pocketbooks this year.

And President Obama not only wants federal budget cuts, he is aiming for a $4 trillion cut – the biggest cut even he can imagine. He’s ready to cut spending for everything – Medicare, Social Security, Medicaid – and to compound the problem, he wants to increase income taxes (but “only” on the wealthy, so that won’t remove money from the economy . . . or will it?)

Consider the enormous money drain from the economy, when the government reduces spending and compounds it with increased taxes. The economy is starved for money, and the government wants to cut the supply. Talk about applying leaches to cure anemia!

Question for debt-hawks: Where is the money going to come from to grow our economy? Given any thought to that?

The article’s author makes one final comment:

Even knowing how dedicated to bad ends Obama is, I still feel like I’ve walked into a parallel universe. He’s now determined to make these horrific entitlement cuts a sign of his manhood. This is “Change” for sure, to a more brutal, grasping, dog eat dog society, all administered by self serving elites. They will in the end reap the whirlwind they are creating, but not before it mows a path of destruction through our social order.

Based on where Obama and the Tea/Republicans are headed, there will be a depression (not just a recession) next year. Only a miracle of realization, by both parties, can save us now.

Rodger Malcolm Mitchell

[Nesster]

Of course 'the other side' insists that all of this government provided income has crowded out the only Real Productive Jobs: those in the private sector. I know there are serious economists who have 'shown' this, only I've never been able to follow their argument.

Let's see: we cut off benefits so unemployed people 'have to' find real jobs. But because they no longer can afford to buy stuff, and because of other budget cut backs, the private companies lose 2 of their markets: selling to the American consumer and to the Government... these private sector companies will export. Which will at the same time help balance our trade... though of course, in order to be competetive given a low dollar, these private sector companies will have to cut payrolls, or move the jobs to lower cost areas...

Meanwhile, as this happens on the Federal level, the situation is even more dire in the states. Wholesale layoffs and benefits cuts. I saw the bars in Minneapolis are going out of business because there aren't enough state workers coming in for happy hour.

Of course, drug testing those who still manage to qualify for assistance will eliminate horrendous fraud from the system. And business no longer needs to compete with welfare checks and fat contracts given to government union thugs, they should be free to tap into this drug-free, motivated and realistic labor force.

Nah, I still don't get it. There has to be something else I'm missing.

[jeffkrol]

Of course 'the other side' insists that all of this government provided income has crowded out the only Real Productive Jobs: those in the private sector. I know there are serious economists who have 'shown' this, only I've never been able to follow their argument.

Let's see: we cut off benefits so unemployed people 'have to' find real jobs. But because they no longer can afford to buy stuff, and because of other budget cut backs, the private companies lose 2 of their markets: selling to the American consumer and to the Government... these private sector companies will export. Which will at the same time help balance our trade... though of course, in order to be competetive given a low dollar, these private sector companies will have to cut payrolls, or move the jobs to lower cost areas...

Meanwhile, as this happens on the Federal level, the situation is even more dire in the states. Wholesale layoffs and benefits cuts. I saw the bars in Minneapolis are going out of business because there aren't enough state workers coming in for happy hour.

Of course, drug testing those who still manage to qualify for assistance will eliminate horrendous fraud from the system. And business no longer needs to compete with welfare checks and fat contracts given to government union thugs, they should be free to tap into this drug-free, motivated and realistic labor force.

Nah, I still don't get it. There has to be something else I'm missing.

You can't crowd out by whats not there.................. unless they all pay like $300/week for full time......

[Ratmagiclady]

This isn't a Depression: ...the corporations are making *plenty,* hand over fist.

It's a looting.

They will make serfs of us.

[newarts]

This isn't a Depression: it's a looting.

They will make serfs of us.

Which is better, Serf or Vassal?*

Will we get a choice?

Great Grandpa was a "Carry-in boy" at 12; indentured to and housed in a lamp chimney factory.

* I looked it up & hope I get to be a Vassal.

[Nesster]

...silly me, duh! Of course, it is government presence in the free market that has been forcing corporations to not pass on any productivity gains to employees, but to rather collect these as profits and so on. Once the government is out of the public assistance business, corporations can take up the slack. This means immediate raises to those still employed - call it the Jack Boot Removal Dividend - and a lucrative new market in private label food stamps.

[mikemike]

Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics.

To me this statistic is eyepoppingly absurd and frightening.

By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession.

While this one is encouraging. Although I wish they would be more specific like it will go down to $1 of every $10. The vagueness could mean that it is going down to $1.95 out of every $10.

Combine that with something like this and you will see why the "middle class" who are generally not eligible to receive any welfare benefits but are obliged to pay taxes get less and less as income is redistributed through the tax code.

bubble-destroyed-middle-class-marketwatch: Personal Finance News from Yahoo! Finance

Next time anyone wants to bitch about economic inequality they should take into account the welfare payments being made to those who don't pay taxes and talk only about after financial obligations income.

Slightly OT, but from the same article I linked above. I can't even imagine how someone can sleep at night knowing that they owe more in debt over the next 12 months than they will make in income during that time period. Even scarier is that a majority of people are in decent financial shape regarding current debt to current disposable income (my own ratio is a bit over 25%) so there are some people out there that are so far out over the edge of a cliff that they make up for the rest of us.

[Nesster]

Combine that with something like this and you will see why the "middle class" who are generally not eligible to receive any welfare benefits but are obliged to pay taxes get less and less as income is redistributed through the tax code.

So, real wages being stagnant for more than a decade is caused by the middle class paying taxes in order to pay for those jobless people?

Or is it that the tax cuts somehow unequally hurt the middle class? And that would be because the wealthiest did not get enough of a tax cut?

I wonder, I did a quick google but I don't think I had the right terms, how much of each $10 in income went to the wealthiest? About $1.60 to the top 1% per this
Share of U.S. Income Going to the Top 1% of U.S. Citizens


I gotta say, Hoover has Bush/Obama beat in the top 1% share thing

[mikemike]

Is that data after tax or before tax?

Regardless, that shows that even if you taxed the rich at 100%, their $1.6/10 couldn't pay for the welfare programs, much less all the other costs of running the federal government.

Here is an interesting video showing the scope of the problem with government spending course we are on.

You Tube

You Tube

[Nesster]

Regardless, that shows that even if you taxed the rich at 100%, their $1.6/10 couldn't pay for the welfare programs, much less all the other costs of running the federal government.

This seems true enough on first look. (And I'll leave the NMT stuff aside)

However, how much of that $1.60/$10 accrues to these people - I was trying to find the 5% equivalent number - due to those at the bottom receiving enough to continue buying.

As far as the leveraging, the article you linked those charts from makes a good case for why that happens. Again, the main beneficiaries are the wealthy/corporations/offshore manufacturers. Of course individual responsibility principles should hold: you get in hock, bud, you lose. The problem with that is the sheer size of the loser contingent, and the concentrated interests arrayed to make sure he stays in hock.

But, it really comes back to: how much starvation and/or homelessness will one tolerate in America? because the other side of this is that when the programs end and the cutbacks begin, there's going to be a lot of that. Maybe FDR was totally wrong about what to do about the Depression. But it is scary to think that we are in a position to possibly end up there again.

[shooz]

For a better explanation, see the thread called " It's a wallstreet government".
Or as I like to say, stop BSing and tax the crap out of them.
End of problem.

[jeffkrol]

Gov. deficits are private sector surpluses for the economy...

Why is it so hard to understand?


Say the gov just STOPPED spending money... how long before it is all "collected" and bound up in relatively few areas..

Think of fed money as a renewable resource................... that you don't have to renew......

This chart shows the sectoral financial balances for the US, using the identity from above. The government balance is shown as a mirror image of the private balance (that is, above 0 percent means a positive balance, and below 0 percent is a negative balance). The capital account is the negative of the current account, so a positive balance there is a negative trade balance.

We see from the chart that the "normal" situation in the US is a private sector surplus, and a (growing) current account deficit. These are offset by a government budget deficit. The exception was the Clinton years, when government ran a surplus and the private sector ran unprecedented deficits. That private sector deficit continued for almost a decade (with a reprieve during the Bush recession), and led to the mountain of private sector debt that helped to bring on the financial crisis. When the crisis hit, the private sector retrenched and the government budget deficit grew--to 10% of GDP.

Government Deficits Translate into Surpluses for the Non-Government Sector | Credit Writedowns

[Parallax]

I don't see what the big deal is about depression 2012. I've been depressed since about 1978. What's one more year?

[jeffkrol]

This is the exact same terminology Bair is using. So clearly, when she says “some of us did see this coming”, it is true, some of us did see this coming. And what we are saying now is that we are headed for another crisis in short order. And I suspect when this is over , that’s when people will start taking her view more seriously.

Sheila Bair blames Geithner, Paulson and Bernanke for the credit crisis | Credit Writedowns

an exit interview with Bair that was scathing in its condemnation of both the Bush and Obama Administrations in which she served. More compellingly, she has now gone on the record with an Op-Ed in the Washington Post writing those same sharp criticisms herself.

The nation is still struggling with the effects of the most serious financial crisis and economic downturn since the Great Depression. But Wall Street seems all too ready to return to the same untenable business practices that brought it to its knees less than three years ago.And some in government who claim to be representing Main Street seem all too ready to help.

Already we have heard rationalization of the subprime mortgage debacle and denigration of those of us who have advocated long-term, structural changes in the way we regulate the financial industry. Too many industry leaders, as well as some government officials, compare the crisis to a 100-year flood. “Who, us?” they say. “We didn’t do anything wrong. Nobody saw this coming.”

The truth is, some of us did see this coming. We tried to stop the excessive risk-taking that was fueling the housing bubble and turning our financial markets into gambling parlors. But we were impeded by the culture of short-termism that dominates our society.

-Short-termism and the risk of another financial crisis

[reeftool]

Hmmmm.... so the Wall St. guys who pull the strings are going to create another crash just in time to influence another election?