How Economists and Policymakers Murdered the U.S. Economy

The U.S. economy has been debilitated by the offshoring of middle class jobs for the benefit of corporate profits and by the Federal Reserve’s policy of Quantitative Easing in order to support a few oversized banks that the government protects from market discipline. Not only does QE distort bond and stock markets, it threatens the value of the dollar and has resulted in manipulation of the gold price.

 See http://www.paulcraigroberts.org/2014/01/17/hows-whys-gold-price-manipulation/

When US corporations send jobs offshore, the GDP, consumer income, tax base, and careers associated with the jobs go abroad with the jobs. Corporations gain the additional profits at large costs to the economy in terms of less employment, less economic growth, reduced state, local and federal tax revenues, wider deficits, and impairments of social services.

When policymakers permitted banks to become independent of market discipline, they made the banks an unresolved burden on the economy. Authorities have provided no honest report on the condition of the banks. It remains to be seen if the Federal Reserve can create enough money to monetize enough debt to rescue the banks without collapsing the US dollar. It would have been far cheaper to let the banks fail and be reorganized.

US policymakers and their echo chamber in the economics profession have let the country down badly. They claimed that there was a “New Economy” to take the place of the “old economy” jobs that were moved offshore. As I have pointed out for a decade, US jobs statistics show no sign of the promised “New Economy.”

The same policymakers and economists who told us that “markets are self-regulating” and that the financial sector could safely be deregulated also confused jobs offshoring with free trade. Hyped “studies” were put together designed to prove that jobs offshoring was good for the US economy. It is difficult to fathom how such destructive errors could consistently be made by policymakers and economists for more than a decade. Were these mistakes or cover for a narrow and selfish agenda?

In June, 2009 happy talk appeared about “the recovery,” now 4.5 years old. As John Williams (shadowstats.com) has made clear, “the recovery” is entirely the artifact of the understated measure of inflation used to deflate nominal GDP. By under-measuring inflation, the government can show low, but positive, rates of real GDP growth. No other indicator supports the claim of economic recovery.

John Williams writes that consumer inflation, if properly measured, is running around 9%, far above the 2% figure that is the Fed’s target and more in line with what consumers are actually experiencing. We have just had a 6.5% annual increase in the cost of a postage stamp.

The Fed’s target inflation rate is said to be low, but Simon Black points out that the result of a lifetime of 2% annual inflation is the loss of 75% of the purchasing power of the currency. He uses the cost of sending a postcard to illustrate the decline in the purchasing power of median household income today compared to 1951. That year it cost one cent to send a post card. As household income was $4,237, the household could send 423,700 postcards. Today the comparable income figure is $51,017. As it costs 34 cents to send one postcard, today’s household can only afford to send 150,050 postcards. Nominal income rose 12 times, and the cost of sending a postcard rose 34 times.

Just as the American people know that there is more inflation than is reported, they know that there is no recovery. The Gallup Poll reported this month that only 28% of Americans are satisfied with the economy. http://www.gallup.com/poll/166871/americans-satisfaction-economy-sours-2001.aspx?version=print

From hard experience, Americans have also caught on that “free trade agreements” are nothing but vehicles for moving their jobs abroad. The latest effort by the corporations to loot and defraud the public is known as the “Trans-Pacific Partnership.” “Fast-tracking” the bill allowed the corporations to write the bill in secret without congressional input. Some research shows that 90% of Americans will suffer income losses under TPP, while wealth becomes even more concentrated at the top.

TPP affects every aspect of our lives from what we eat to the Internet to the environment. According to Kevin Zeese in Alternet, “the leak of the [TPP] Intellectual Property Chapter revealed that it created a path to patent everything imaginable, including plants and animals, to turn everything into a commodity for profit.”

The secretly drafted TPP also creates authority for the executive branch to change existing US law to make the laws that were not passed in secret compatible with the secretly written trade bill. Buy American requirements and any attempt to curtail jobs offshoring would become illegal “restraints on trade.”

If the House and Senate are willing to turn over their legislative function to the executive branch, they might as well abolish themselves.

The financial media has been helping the Federal Reserve and the banks to cover up festering problems with rosy hype, but realization that there are serious unresolved problems might be spreading. Last week interest rates on 30-day T-bills turned negative. That means people were paying more for a bond than it would return at maturity. Dave Kranzler sees this as a sign of rising uncertainty about banks. Reminiscent of the Cyprus banks’ limits on withdrawals, last Friday (January 24) the BBC reported that the large UK bank HSBC is preventing customers from withdrawing cash from their accounts in excess of several thousand pounds. http://www.bbc.co.uk/news/business-25861717

If and when uncertainty spreads to the dollar, the real crisis will arrive, likely followed by high inflation, exchange controls, pension confiscations, and resurrected illegality of owning gold and silver. Capitalist greed aided and abetted by economists and policymakers will have destroyed America.

For more go to http://www.paulcraigroberts.org

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commented 2014-02-01 02:21:46 -0500 · Flag
Beauforde writes:

In other words…The IRS Gestapo said "hand over the people we deem to be tax cheats — all US persons around the globe, regardless of whether they live or earn their living away from our borders or not — because they do not open their entire life’e earnings to our prying eyes and punitive taxation…or we close the Fed Window to you (i.e. we take away the Free Money Cookie Jar that allows Swiss Bank Holding Companies to go to the Fed Window through their U.S. subsidiaries and partners and take out interest-free capital and then charge their customers interest for it…FREE MONEY)

So the Swiss Bankers — pinstriped pimps that they are — destroyed 85 years of Banking Discretion and Secrecy and betrayed a global citizenry to the Deutsch and the U.S. Big Government New Orwellians for the privilege of Free Fed Money.

P.S. The U.S.A. and Eritrea are the only two countries in the world to tax on basis of citizenship not residency. Think about that…Eritrea…
commented 2014-02-01 02:19:45 -0500 · Flag
Delroi writes:

Negative quid-pro-quo.

The treasury said: “hand over the tax evaders or we revoke SEC licenses of all swiss banks to operate banks in US. And we lean on all EU members to do the same”.
commented 2014-02-01 02:19:12 -0500 · Flag
JC writes:

why did the Swiss retreat rather than fight the US encroachment of Swiss laws?
commented 2014-02-01 02:17:43 -0500 · Flag
Beauforde writes:

Ben’s nostalgic assessment of how government and business functioned in the early 20th Century could be called the Rose-Colored Glasses Analysis. The level of corruption was as base and as prevalent in those days as it is now…human nature does not change. What has changed is the technological context and how human nature has adapted its greed and short-term self-opportunism to it.

Henry Ford would have moved his plants south of the Rio Grande if he could have made an extra 20 bucks off each Model T or if his tax burden could be lessened. You can bet on that. The only hindrance was lack of communications, mobility, and securitization of his assets. I could go on and on and write an entire historical treatise on this but I have neither the time nor the inclination.

Thomas is dead on with his assessments of the current situaiton…and Ben, I am surprised you write that Roberts must hate profits. That is a crude and inaccurate assessment, and you know it. To write “Offshoring and onshoring is done to adjust to markets and regulatory forces. If you can’t produce a product in the US at a price buyers will accept, the choice is to go out of business or take your plant to a place where you can produce at an acceptable price and thus remain in business.” is far too general and such a blanket statement could be sliced to baloney 33 ways. It opens up an entire argument about corporate greed (i.e. short-term maximization of investment by corporations that ignore destructive long-term consequences these short-term, profit-this-quarter decisions cause) and the real benefits of globalization. What ultimate good is it to buy a Chinese-made LED 80" TV for $400 when your tax burden is at 50%? You save on the idiot box and get raped on taxes…you think you are getting a great deal at Circuit City while the tax-piper is ripping your asshole out on the other end…meanwhile real inflation on things people need to live is outstripping real earnings by multiples…and the cretins in Central Government insult our intelligence and publish no-inflation statistics…this is absurd…and it makes me murderous with rage…The DOPE SHOW!

I see the only solution being the promotion of Global Tax Regime Competition and a Competitive, Compulsory Flat Tax – business and personal – in the U.S. and other industrial countries. This would solve so many ills and put armies of useless accountants and bean-counters out on the street where they belong. Yet the Bloated-Government New Orwellians in the U.S. vilify Switzerland because they attract (now made elicit) transactions and banking relations with German and American Burghers …instead of looking in the mirror and asking themselves why their citizens look to flee their punitive taxation! Instead of competing with Switzerland and other attractive tax-regimes on taxation (and competitive advantage including knowledge base, infrastructure, etc.) they seek to intimidate and legislate the low-tax Federalist option out of existence. Instead of asking how they can shrink the burden on their own citizenry and attract them to keep their capital in-country these SS-like creeps look to justify their Predatory-Behemoth-Government dogma (and save their cushy lifetime careers, the piles of cash they stick away, and the gold-plated health plans they get by a lifetime of sucking on the “public-service” teat) and defame and destroy an alternative vision of the government/taxation of citizenry dynamic.

I am full of anger and dismay at the way everybody has just accepted the Brave New World of Orwellian Statism instead of taking up arms and slaughtering this indolent class of self-serving opportunistic functionaries that sit smugly up on the government pedestal - piss-ant cretins that have never one day worked in the private economy, nor created any jobs or products or services that anyone would pay a penny for - and lord over us and dictate what we can and cannot do as if we were serfs…ring the bell when the revolution starts.
commented 2014-02-01 02:15:17 -0500 · Flag
C.R. writes:

although I might quibble with some 2nd and 3rd-order details in this exchange (tax code and shelters require 100% rehaul and elimination—except for education and capex; offshoring must be followed by moving up the manufacturing value-add curve), I think you both have nailed it, and have less disagreement than initially might appear.

And your sage summary hereunder is true wisdom and historical appreciation in written form.
commented 2014-02-01 02:13:35 -0500 · Flag
Ben writes:

In Henry Ford’s day, our military, State Dept. and Treasury protected the interests of business. No longer. All three are quite corrupt and do not follow laws or common sense. No military leader in Henry Ford’s day would send troops out in the field and not support them if they ran into a clearly superior force. But today that is the policy. In Henry Ford’s day, State actually looked out for the interests of our nation and our allies while today they look out for our enemies and deny our allies. In Henry Ford’s day, Treasury was not allied with cronies against business and against the middle class. Hank Paulson bailed out his buddies to save them from losing their jobs while lying to us that he had to do it to save us from financial Armageddon. He also supported giving his cronies money at very low interest rates so they could make money through financialization of our economy, money that savers should have been earning on their savings. Treasury calls for more spending and is against saving. All of this is BS! Henry Ford did not have these in his day.

Henry Ford designed a superlative strategy his competitors thought absurd/impossible. Many entrepreneurs have adopted a similar strategy in computers, phones, the internet, Home Depot, and many others, and each was told they could not succeed but did. Ford did not do something unusual as an entrepreneur but something quite normal. I well remember in 1970 using a $20 million IBM 360-67 model computer during my masters degree program. If you want to buy something with similar or slightly greater capabilities today you go to Toys R Us and spend $30.

As concerns corruption in our big businesses, you are quite right about many of them and quite wrong about most others, especially the small and mid-sized companies. As I said, having to deal with a corrupt government corrupts those who have to deal with it. But there is a horse and a cart in this equation and companies are the cart being dragged along by the horse, the government. If you focus on the cart, you will never be able to fix the problem. The cause of our situation is a very large, very powerful, and very corrupt government bureaucracy.
commented 2014-02-01 02:11:40 -0500 · Flag
Tom writes:

The entire off-shoring argument is a Non-starter for me, It has Never been Free Trade or Fair Trade, why did Henry Ford pay his workers an above average wage, Because he was smart enough to know they weren’t just employee’s They were Customers.

Corporate America (publicly listed co.’s) have Lost All connection with the society that protects there very interests (Military, State Dept., Treasury) they Only answer to Mr. Market, to which I say, Fine, if there is No Social Compact with our society, & The Only thing that matters is Money, please be my guest and move your company to Bermuda, Switzerland or the Malvinas, let me know how that Government Umbrella works out for you when various countries threaten to Nationalize your overseas plants, Levy Excess Taxes on your Foreign Operations, or When the Overseas Financial Institution who you use to wash your foreign earnings through, becomes Insolvent, or implodes because of Financial Malfeasance, Yea send in the Swiss Navy, send in Bermuda Financial Authorities, etc.,

The Bottom line, there are societal costs that everyone shares a burden of responsibility in meeting & paying, you don’t want to sign onto that Obligation, understood, renounce your US domiciled corp. charter and all the Not so Hidden benefits that accrue to your favor and which you benefit from, meanwhile small business that play in the domestic sand box Pay the Full Statutory Rate, Private S-corp. whatever your prevailing Federal Marginal
Tax Rate is plus the other half of Social Security ponzi scheme.

Do you know that Pig Buffett has a $2.3 Billion Tax Appeal case pending with the IRS, I’m sorry these publicly listed co.’s are Cancer, they operate as Shadow Banking operations to the FRB system, complete with an entire playbook of corruption and special interest privileges, This Country left the Realm of Capitalism in 1986, it has been nothing But officially sanctioned, & managed corruption for the past 28 years, That is what I take issue with.
commented 2014-02-01 02:08:54 -0500 · Flag
Ben writes:

Tom,

I would love to hear why you disagree with what I wrote. I assume you realize that the facts you provided just support my argument. You could have cited GE which did not pay any income taxes for 7 years.

We have very little capitalism or free markets left in the US and the financialization of our economy is criminal. Once a government becomes corrupt and pervasive, it corrupts pretty much everything including big business and the military.

I would never the Omaha event and I disrespect the oracle.

Ben
commented 2014-02-01 02:07:44 -0500 · Flag
Tom writes:

Wow, that is quite a defense of Corp. 500 America, which you are entitled to,
how about they Now Start Paying there Fair Share of the Fixed Operating Costs of USA Inc.
since the US Military and Foreign serv. dept.s primarily exist to protect there US economic interests abroad, have you even seen the effective tax rates of these corp.s Google 10%, Ibm, 12% JPM 9% you need to think about making the trip to Omaha to this Spring to chant with the rest of the converts who have seen the light at Uncle Buttons Ministrel Show !!

Could Not Disagree with your assessment More.
commented 2014-02-01 02:06:15 -0500 · Flag
Ben writes:

It is easy to debunk Roberts’ objections to offshoring jobs. He apparently thinks profits are bad. Offshoring and onshoring is done to adjust to markets and regulatory forces. If you can’t produce a product in the US at a price buyers will accept, the choice is to go out of business or take your plant to a place where you can produce at an acceptable price and thus remain in business. Roberts apparently does not know that the U
S is not business friendly. Business cannot ignore governments and must deal with them as best they can whether that means buying off regulators or influencing some legislation/treaty or getting out of Dodge. Business must do what it can do. It does not have the luxury of taking an ideological stance as Roberts does.
commented 2014-02-01 02:04:01 -0500 · Flag
Tom writes:

hard to debunk the arguments made below, once again what we have is a Failure of Leadership, idly watching the country being looted wholesale my Masters of Nothingness, Glad Snowden is getting the Noble prize, at least someone is talking truth to corrupt power.