Category Archives: Economy

US State and Local government grows despite recession

While businesses across the United States slash jobs, state and local governments have actually increased employment slightly since the economic recession began in December 2007, according to a report released on Thursday.

“As is the typical pattern in recessions, overall state and local government employment continued to grow after the start of the recession, although there has been a small decline since the August 2008 peak,” said Donald J. Boyd, author of the report by the Rockefeller Institute of Government, in a statement.

Total employment in state and local government rose in 30 states, fell in 16 and was unchanged in four during the last year, the report found.

Governments have added about 110,000 jobs since the recession began, according to the report by the Rockefeller Institute, which is the public policy research arm of the State University of New York.

The recession’s impact on government employment typically lags that of the private sector, Boyd said.

“Further employment reductions are almost certainly on the way,” he said.

At least 20 states have imposed unpaid furlough days on their workers to cut spending without having to resort to layoffs, according to the report.

States also have been able to avoid shedding jobs with help from the more than $36 billion for fiscal relief they have received under the American Recovery and Reinvestment Act, the report said. (Reporting by Karen Pierog; Editing by Jan Paschal)

Bill O’Reilly and Barney Frank have heated debate

Congressman Eric Cantor “Stimulus not working as well as advertised”

A member of the House Republican leadership says he doesn’t think the $787 billion economic stimulus program the Obama administration pushed through Congress earlier this year has worked as advertised.

House GOP Whip Eric Cantor of Richmond said Tuesday that no one should be touting the benefits of stimulus — as Vice President Joe Biden has — at a time when national unemployment is at 9.4 percent.

Interviewed on CBS’s “The Early Show,” he said that when the administration pressed Congress to act immediately, it projected joblessness no higher than 8.5 percent. Cantor said at a job fair recently, some 3,200 people showed up in 90-degree weather and said people are still worried job security.

The New Great Depression

Garrett B. Gunderson, author of “Killing Sacred Cows” talks about how we as a society are welcoming a great depression by how we talk to each other. 

“Abolish the World Bank and the IMF” advises Jim Rogers

Fred Thompson on the Economy

The Debt Crisis Cannot Be Solved with More Debt!

The principal problem with the current economic crisis is that the authorities are trying to solve the debt crisis by adding more debt — which is akin to trying to cure a viral infection by injecting more viruses. In case some have forgotten, the United States is undergoing a serious credit crisis, that is, a debt crisis.

All sectors of the American economy are suffering from a chronic addiction to credit, which manifests itself as the disease of excess debt. Household, business, and public debt have reached all-time highs. Consequently, it would not seem logical for the federal government to fight the debt crisis by adding trillions of dollars to the national debt and by lowering interest rates to promote even more credit.

A debt crisis can only be solved by paying down and reducing debt; it cannot be solved by compounding ever-more debt on top of an extremely over leveraged economy.

Consumer credit, which in 1950 was only 6% of total gross domestic product (GDP), has by 2009 tripled to 18% of GDP. Bank credit, which in 1947 was 45% of GDP, has by 2009 risen to 67% of GDP. Household debt, which in 1957 was only about 45% of national income, peaked at over 120% of national income by 2007. According to the congressional budget office (CBO), federal debt, which was at an already-high level of 41% of GDP in 2008, is expected to balloon to 200% of GDP by 2038. The CBO expects federal debt to grow to 60% of GDP by 2010.

However, if you read the statements of the policy makers, it would seem that the problem is not excess credit, but exactly the opposite. In their view, the problem is a lackof credit. On April 14 of this year, President Obama made the following remarks about the crisis, stating that

“the second step has been to heal our financial system so that credit is once again flowing to the businesses and families. … The heart of this financial crisis is that too many banks and other financial institutions simply stopped lending money … I do agree … that we must provide banks with the capital and the confidence necessary to start lending again.”

More recently, on July 21, Federal Reserve Chairman Ben Bernanke stated that “many of the improvements in financial conditions can be traced, in part, to policy actions taken by the Federal Reserve to encourage the flow of credit.” And many Republican leaders have given similar statements.

It is clear that policy makers agree on something: they want more credit in the system. But what this means is that, knowingly or unknowingly, policy makers want Americans and the country to go further into debt.

Argentina suffered a similar financial collapse in 2001, when its external debt had risen to over 120% of GDP. As in most countries that have recovered from a financial crisis, total consumer, business, and government debt had dropped significantly once the bubble had burst. For instance, Argentina’s external debt fell to only 46% of GDP by September of 2008. This was no coincidence; reducing their debt was a necessary step in ending the crisis.

However, the United States seems to be headed completely in the opposite direction. As shown above, the federal debt is growing at unsustainable rates, and bank credit — contrary to what many (including the president) believe — has actually continued to grow. Bank credit increased from $9.15 trillion, at the start of the crisis in September 2008, to $9.31 trillion as of June 2009.

The only way to solve a debt crisis — a path demonstrated by other countries that have survived through similar crises — is to drastically reduce the total levels of debt. Individuals, businesses, and the government must all tighten their belts, reduce expenditures, and live well within their means. How can a monetary policy that promotes more credit and a fiscal policy that creates more debt solve the debt crisis? The answer is clear: it cannot.

In a way, the lifestyle of American people and American government has been a denial of reality. For the past 50 years, America has been living on credit and piling up excessive debt. This financial crisis, if left unhampered, would have been a wake-up call. It would have forced the reduction of debt in all sectors. However, policy makers are not allowing this necessary clean up to occur — not just through their fiscal and monetary policies, but also through public policies that prevent various foreclosures and liquidations to occur.

Not only was the apparent economic prosperity of the last 50 years artificial and unsustainable, it was essentially a borrowed prosperity. And worse, the funds were borrowed, not from real savings, but from artificially created money provided by the Federal Reserve.

You will not only learn from this 50-page book; it is the perfect item to pass on to others who are wondering about the economic crisis of 2008 and following.

This is the stark reality of the United States economy today. The prosperity of the last few decades has mostly been a grand illusion generated by artificially created credit. This financial crisis is just the “foreclosure” of the national economy. In other words, the market is simply trying to force the American economy into paying down its debt.

Therefore, any policy that effects the contrary — that is, any policy that promotes or increases debt — will only make matters worse. By piling on trillions to the national debt, the government will have to keep interest rates low for a longer period, promoting ever-greater debt. The result of this must be unsustainable higher levels of debt — and the worst financial crisis ever seen in the history of mankind.

By David Saied

David Saied is a former Securities and Exchange Commissioner for the Republic of Panama and is currently obtaining his second Masters Degree in Economic Policy at Suffolk University in Boston, Massachusetts.