Economic Stories of Relevance in Today's World -- August 26, 2012

America’s Descent into Poverty ~ Paul Craig Roberts - www.paulcraigroberts.org - August 24, 2012 - The United States has collapsed economically, socially, politically, legally, constitutionally, and environmentally. The country that exists today is not even a shell of the country into which I was born. In this article I will deal with America’s economic collapse. In subsequent articles, i will deal with other aspects of American collapse.                      Economically, America has descended into poverty. As Peter Edelman says, “Low-wage work is pandemic.” Today in “freedom and democracy” America, “the world’s only superpower,” one fourth of the work force is employed in jobs that pay less than $22,000, the poverty line for a family of four. Some of these lowly-paid persons are young college graduates, burdened by education loans, who share housing with three or four others in the same desperate situation. Other of these persons are single parents only one medical problem or lost job away from homelessness.                  Others might be Ph.D.s teaching at universities as adjunct professors for $10,000 per year or less. Education is still touted as the way out of poverty, but increasingly is a path into poverty or into enlistments into the military services.                    Edelman, who studies these issues, reports that 20.5 million Americans have incomes less than $9,500 per year, which is half of the poverty definition for a family of three.                    There are six million Americans whose only income is food stamps. That means that there are six million Americans who live on the streets or under bridges or in the homes of relatives or friends. Hard-hearted Republicans continue to rail at welfare, but Edelman says, “basically welfare is gone.”                  In my opinion as an economist, the official poverty line is long out of date. The prospect of three people living on $19,000 per year is farfetched. Considering the prices of rent, electricity, water, bread and fast food, one person cannot live in the US on $6,333.33 per year. In Thailand, perhaps, until the dollar collapses, it might be done, but not in the US.....


8 Economic Threats That We Were Not Even Talking About At The Beginning Of The Summer - The Economic Collapse Blog - In the crazy times in which we live, it helps to expect the unexpected.  Sometimes you can think that you have it all figured out and then this world can throw a real curveball at you. Very few people anticipated that we would see a massive outbreak of the West Nile Virus in Texas this year or that the Mississippi River would be in danger of drying up after experiencing historic flooding last year.  Who would have thought that we would see the worst drought in more than 50 years or that horrific wildfires would burn nearly 7 million acres of land?  This is why economic conditions are always so hard to predict.  A single "black swan event" can come along and change everything almost overnight.  Our world has become incredibly unstable, and so who really knows what the rest of 2012 will bring?  Will we see a stock market crash?  Will the hurricane season be unusually bad?  Will war erupt in the Middle East?  Will we see a major earthquake on the west coast or even a volcanic eruption?  Will the upcoming election cause an eruption of anger and frustration in America?  We don't know the answers to those questions yet, and the truth is that we will probably see some things happen that very few of us are anticipating at this point.                 This is an exciting time to be a "news junkie", but unfortunately the vast majority of the news these days is bad.                        It is almost as if a "perfect storm" is developing.  Our weather is going crazy, our financial system is on the verge of collapse, our politicians seem more insane than ever, there is evidence of social decay all around us and the drumbeats of war in the Middle East grow louder with each passing day.           As strange as 2012 has been so far, I fear that things are about to get a whole lot stranger.             Not that we haven't had some very unanticipated events happen this year up to this point.         The following are 8 economic threats that we were not even talking about at the beginning of the summer....


Rising Jobless Claims Seen Keeping Unemployment Rate High - Thursday, 23 Aug 2012 - AP through Newsmax - The number of people seeking first-time unemployment benefits rose a slight 4,000 last week to a seasonally adjusted 372,000, evidence that the job market's recovery remains modest and uneven.                The Labor Department said Thursday that the four-week average, a less volatile measure, increased 3,750 to 368,000.                 Applications are a measure of the pace of layoffs. When they fall consistently below 375,000, it generally suggests hiring is strong enough to lower the unemployment rate.                Applications have risen for two straight weeks. Some economists said that indicates that hiring in August may slow from July's solid gain of 163,000 jobs......



Obama's Budget to Add $4.4 Trillion to Debt in Next Four Years - The Weekly Standard - DANIEL HALPER - August 23, 2012 - By the end of this year, the federal debt is expected to be $16.2 trillion, which is $6.2 trillion more than when President Obama first came into office four years ago. Moreover, new analysis by the Republican side of the Senate Budget Committee finds that, over the next 4 years, if Barack Obama remains president and his budget is enacted, $4.4 trillion will be added to the federal debt.             Here's a chart illustrating the projected debt over the next four years:

Republicans Eye Return to Gold Standard - The Financial Times through CNBC - Robin Harding and Anna Fifield, Financial Times - August 24, 2012 - The gold standard has returned to mainstream U.S. politics for the first time in 30 years, with a “gold commission” set to become part of official Republican party policy.            Drafts of the party platform, which it will adopt at a convention in Tampa Bay, Florida, next week, call for an audit of Federal Reserve monetary policy and a commission to look at restoring the link between the dollar and gold.                     The move shows how five years of easy monetary policy — and the efforts of congressman Ron Paul — have made the once-fringe idea of returning to gold-as-money a legitimate part of Republican debate.                      Marsha Blackburn, a Republican congresswoman from Tennessee and co-chair of the platform committee, said the issues were not adopted merely to placate Paul and the delegates that he picked up during his campaign for the party’s nomination.                      “These were adopted because they are things that Republicans agree on,” Blackburn told the Financial Times. “The House recently passed a bill on this, and this is something that we think needs to be done.”                        The proposal is reminiscent of the Gold Commission created by former president Ronald Reagan in 1981, 10 years after Richard Nixon broke the link between gold and the dollar during the 1971 oil crisis. That commission ultimately supported the status quo. “There is a growing recognition within the Republican party and in America more generally that we’re not going to be able to print our way to prosperity,” said Sean Fieler, chairman of the American Principles Project, a conservative group that has pushed for a return to the gold standard.                     A commission would have no power except to make recommendations, but Fieler said it would provide a chance to educate politicians and the public about the merits of a return to gold. “We’re not going to go from a standing start to the gold standard,” he said.                        The Republican platform in 1980 referred to “restoration of a dependable monetary standard," while the 1984 platform said that “the gold standard may be a useful mechanism”. More recent platforms did not mention it.......

http://video.cnbc.com/gallery/?video=3000111494


 Big Income Losses for Those Near Retirement - New York Times -  CATHERINE RAMPELL -  August 23, 2012 - Americans nearing retirement age have suffered disproportionately after the financial crisis: along with the declining value of their homes, which were intended to cushion their final years, their incomes have fallen sharply. The typical household income for people age 55 to 64 years old is almost 10 percent less in today’s dollars than it was when the recovery officially began three years ago, according to a new report from Sentier Research, a data analysis company that specializes in demographic and income data. Across the country, in almost every demographic, Americans earn less today than they did in June 2009, when the recovery technically started. As of June, the median household income for all Americans was $50,964, or 4.8 percent lower than its level three years earlier, when the inflation-adjusted median income was $53,508. The decline looks even worse when comparing today’s incomes to those when the recession began in December 2007. Then, the median household income was $54,916, meaning that incomes have fallen 7.2 percent since the economy last peaked.......

U.S. Incomes Fell More in Recovery, Sentier Says - Bloomberg - By Jeff Kearns - August 23, 2012 - American incomes declined more in the three-year expansion that started in June 2009 than during the longest recession since the Great Depression, according an analysis of U.S. Census Bureau data by Sentier Research LLC.                    Median household income fell 4.8 percent on an inflation- adjusted basis since the recession ended in June 2009, more than the 2.6 percent drop during the 18-month contraction, the research firm’s Gordon Green and John Coder wrote in a report today. Household income is 7.2 percent below the December 2007 level, the former Census Bureau economic statisticians wrote.              “Almost every group is worse off than it was three years ago, and some groups had very large declines in income,” Green, who previously directed work on the Census Bureau’s income and poverty statistics program, said in a phone interview today. “We’re in an unprecedented period of economic stagnation.”                      While gains in hourly earnings and average hours worked per week may have had “a minor mitigating effect” on income declines, they couldn’t offset a jobless rate that hasn’t fallen below 8 percent since February 2009 and a record duration of unemployment, according to the Annapolis, Maryland-based firm.                  The average duration of unemployment increased to a record 41 weeks in November and remains at 39 weeks, Labor Department data show. Almost 5.2 million Americans have been out of work for at least six months..............