The Financial Battle for the Middle Class – Underemployment at 20 Percent, 38 Million Americans on Food Stamps and Little Hiring. Can it be a Recovery with no Jobs for this Long?
For most Americans a jobless recovery is an oxymoron. After all, the vast majority of Americans who pump money into the economy through consuming what they earn, typically find it harder to spend if they don’t have a job to draw an income from. It is understandable that there is a lag between a recession and when companies start to hire. But over the last four decades each subsequent recession seems to add more and more months of so-called jobless recovery. Part of this has to do with the amount of exports we bring in. When spending goes down in the U.S. the actual contraction goes beyond our country and hits many of our trading partners. Yet the middle class in the U.S. has fallen behind both in nominal and inflation adjusted terms for over 40 years. Part of this has to do with the structure of our banking system and our heavy reliance on debt spending. Today, as talk of a recovery permeates the media outlets we have 38,000,000 Americans on food assistance and nearly 20 percent of Americans are registering as underemployed.
The Ultimate Ponzi Scheme – FDIC is Backing $5.3 Trillion through the Deposit Insurance Fund that now has a Balance of -$20.8 Billion. FDIC has Cash and Marketable Securities of $66 Billion. Is that Really Enough to Back Every Account for $250,000?
The FDIC is running the biggest confidence game in the country. The FDIC is now protecting through the Deposit Insurance Fund (DIF) some $5.3 trillion in deposits in banks across the country. All of this is secured by an insurance fund that is now in the negative by $20.8 billion. In the middle of this financial crisis we allowed the government to suddenly up the deposit insurance coverage from $100,000 to $250,000 which on face value seems fantastic. I mean every average American wants their money to be covered so upping it to $250,000 seems fantastic even though most middle class Americans have nothing close to that and are merely trying to pay their bills from one month to another. But what if people suddenly pulled their money out of banks similar to what occurred with IndyMac Bank in California? Think this can’t happen again? One of the too big to fail banks seems to think this might be coming down the pipeline. Some interesting information on Citigroup: Read More
The Expanding Economics of Austerity – Home Equity Loan Ads Replaced by Brown Bag Ads. Breakfast Sales take a hit as more Unemployed Avoid eating out.
The middle class of America is adapting to the new austerity taking hold. Many are changing their habits to live in a market where credit is less accessible but others are having a hard time giving up the artifacts of the debt boom decade. However you slice the numbers average Americans are confronting a leaner balance sheet. Much of this has to do with the job market that doesn’t seem to have the direction to create additional jobs. Since the recession started in December of 2007 we have lost some 8.4 million jobs. This is a 6 percent decline in our employment base and the last time we had such a stunning reversal was after World War II and demobilization occurred.
Quantitative Easing and the Electronic Money Printing Machine – Saying Goodbye to Historically Low Mortgage Interest Rates. Federal Reserve 95 Percent Complete on Buying $1.25 Trillion in Mortgage Backed Securities.
People forget that quantitative easing is a form of creating something out of nothing. This extreme form of monetary policy is called upon in certain situations when central banks reach the zero bound with their funds rate like the Federal Reserve in this current crisis. What is quantitative easing? The Federal Reserve trying to solve the economic recession via monetary policy dropped the Fed funds rate to zero to stimulate demand. Back when Alan Greenspan was chairman, he dropped rates to 1 percent to mitigate the damage of the technology bubble and set off and even bigger housing bubble. Current Fed chairman Ben Bernanke dropped rates to zero and the economy did not respond. In comes quantitative easing.