As a general
rule the most successful man in life is the man who has the best information
Government
attempts to inflate the money supply and stimulate growth through quantitative
easing have failed, so far, because they gave the stimulus to banks, not
directly to their citizens - stimulation will only work if the cash is spent:
- Giving the money to bankers is the
equivalent to burying it - banks used the money to shore up their
balance sheets and do not loan it out
- Consumers are already buried in
debt and facing mass layoffs so taking on yet more debt by borrowing
more money from the banks is not an option
There seems to
have been a lesson recently learned. Instead of
spending every penny they have and borrowing more - gleefully maxing out
their credit limits - Americans are turning into savers. The savings rate, a short while ago in negative territory, has turned
upwards and today is five percent.
Recent research
shows:
“The economic impact of further US
consumer deleveraging will depend on income growth – with no income
growth, each percentage point increase in the savings rate reduces spending
by over $100 billion. US consumers have accounted for more than
three-quarters of US GDP growth since 2000 and for more than one-third of
global growth in private consumption since 1990.” McKinsey
Global Institute
Consumers will
not borrow and spend when they're unemployed, underemployed or fear for their
jobs. When consumers have no money to spend demand is reduced, this starts a
vicious loop, prices are reduced when there are no buyers, which reduces
profit margins, which results in layoffs, which results in even greater
unemployment, underemployment and fear of job loss.
What's holding
the US economy back from recovery is not a lack of consumer and business
confidence, a poor housing market or suppressed demand, although all exist.
They exist because they are all symptoms caused by the root problem of the US
economy - a lack of good jobs. High quality American jobs were shipped
off-shore by the millions and continue to be off-shored today.
US corporations
need overseas operations to service their foreign markets, that’s a
given and there’s nothing wrong with it. However many US companies
shuttered their plants in America, rebuilt those plants overseas, and used
foreign labor to manufacture the very same products Americans use to make.
As an aside - these
same US corporations are now screaming for a second “tax holiday”
in which they can repatriate their enormously increased profits back to
America at roughly six percent instead of the usual 35% US corporate tax
rate. All the while increasing their overseas investments and off-shoring
more American jobs.
The communities
that lose these off-shored high paying jobs never recover, the people who
lost those jobs were never retrained and if they were for what? Likely to
face increasingly stiffer and stiffer competition for a much lower paying job
- with no benefits such as health coverage or ensured retirement security -
in the service industry.
JOLTS stands for
Job Openings and Labor Turnover Survey. July’s JOLTS show there were
4.32 officially unemployed people looking for work for every job
available. Use the real, unofficial unemployed statistics, and its 7.7
people looking for work for every job available – there’s no
shortage of people willing to work - there’s a jobs shortage.
People need to
work, they need a job to support themselves, feed, shelter and cloth their
families. And yes, have some cash left over from their pay cheque for
discretionary spending. The off-shoring of millions of jobs from America took
away millions of opportunities for Americans to better themselves and instead
gave American opportunity to foreigners. In return, America was forced to
create a service industry based economy, one where
people need two jobs, and still barely have enough to cover the basics of
survival let alone money left for discretionary spending.
Central Bank and
government intervention/stimulation doesn’t work - only robust job
creation can right the floundering western economies.
Manufacturing
jobs traditionally have provided high wages and good benefits that allow
workers to care for their families. Yet big business, the multinationals
responsible for off-shoring, are addicted to non-unionized and benefit free
cheap overseas labor.
The American
Recovery and Reinvestment Act (ARRA) of 2009, required that funds provided by
the bill could not be used to purchase foreign made iron, steel, and
textiles. The Senate provision was tougher still - it mandated that all
manufactured goods purchased with ARRA money had to be American made - Buy
American. The U.S. Chamber of Commerce, the National Association of
Manufacturers, the Emergency Committee for American Trade in Washington,
General Electric, Caterpillar and many other US transnational corporations
opposed the “Buy American” part of the Act.
The American
middle class is being destroyed because of off-shoring American jobs. The US
middle class drives the US economy and the US economy is by far the largest
driver of the global economy so the consequences of the destruction of the US
middle class is international in effect.
"An important part of the job fraud is
to make the people feel like the loss of jobs is due to the recession, not
off-shoring. Long before the recession, South Carolina lost its textile
industry; North Carolina lost its furniture industry; Detroit its automobile
industry, and California its computer industry, etc. President Obama wants to
increase exports, but we have nothing to export. Today, the United States has
the export profile of an eighteenth century colony... Last week, the Wall
Street Journal announced that the largest chemical producer in the United
States was off-shoring. Most of the job loss is from off-shoring, not the
recession. But Washington acts as if nothing can be done to limit the
off-shoring and protect our economy.
Globalization
has developed into a trade war with production looking for the cheapest
country to produce, with fierce competition for industry and jobs." Washington's Job Fraud by Sen. Fritz
Hollings
Twelve million
jobs are needed just to get back to even yet:
- US taxpayers are still funding
Federal programs that provide incentives (loans, subsidies, credits, or
loan guarantees) for US corporations to relocate their jobs offshore.
- Companies can defer paying taxes
on their overseas income indefinitely while deducting many of the
expenses caused by moving offshore. Companies that would owe U.S. taxes
on overseas profits can avoid payment by reinvesting the proceeds
abroad.
- According to recent data from the
Commerce Department U.S., multinational firms reduced their workforce in
this country by 2.9 million between 1999 and 2009,. Meanwhile, they
added 2.4 million workers overseas - many of these multinational firms
are represented on Obama’s Jobs Council.
- American guest worker programs
such as the H-1B, L-1, and B-1 visas are often used to bring in lower
cost foreign workers who substitute for and compete against, American
workers
- Almost every company on the
Fortune 500 list of companies has increased its presence and overseas
investments while at the same time laying off U.S. workers
Recently
President Barack Obama started an Advisory Council for Jobs and
Competitiveness. When announcing the Jobs Council Obama said:
“Our job is to do everything we can to
ensure that businesses can take root, and folks can find good jobs.
We’re going to build stuff, and invent stuff.”
Jeff Immelt,
Chairman and Chief Executive Officer at GE, is the head of President Obama's
26 member Council on Jobs and Competitiveness - the sole purpose of which is
creating jobs in the USA.
General
Electric:
- CEO Jeff Immelt, chair of the
council, since taking control of GE in 2001, has slashed GE’s US
job rolls by 20 percent
- G.E. did not pay any taxes on $5.1
billion in profits for 2010. GE did earn $3.2 billion of tax payer's
money in tax benefits by utilizing existing loopholes and tax shelters.
- GE just moved their diagnostic imaging
equipment manufacturing X-ray business from Wisconsin to Beijing, China
"In a regulatory filing just a week
before the Japanese disaster put a spotlight on the company's nuclear reactor
business, G.E. reported that its tax burden was 7.4 percent of its American
profits, about a third of the average reported by other American
multinationals. Even those figures are overstated, because they include taxes
that will be paid only if the company brings its overseas profits back to the
United States. With those profits still offshore, G.E. is effectively getting
money back.
Such
strategies, as well as changes in tax laws that encouraged some businesses
and professionals to file as individuals, have pushed down the corporate
share of the nation's tax receipts — from 30 percent of all federal
revenue in the mid-1950s to 6.6 percent in 2009."G.E.’s
Strategies Let It Avoid Taxes Altogether By David Kocieniewski
Then
there’s this by US Congressman Kucinich:
“As 14 million Americans struggle with
unemployment, General Electric, under Mr. Immelt’s leadership, is
exporting highly-sophisticated technology to the Chinese in order to book
short-term profits for GE. GE strives mightily to avoid paying federal income
taxes, but goes ‘all in’ on a deal to transfer U.S.
government-subsidized technology to the Chinese. Jeffrey Immelt has a
conflict of interest. He cannot ethically advise the President on how to
create American jobs and promote American competiveness, while at the same
time leading a company that is exporting American technology and, along with
it, American jobs.” Congressman Dennis Kucinich (D-OH)
Members of
Obama’s Jobs Council, from other U.S. multinational corporations,
include:
- Intel, CEO and President Paul
Otellini - Intel, led by council member Paul Ottellini, shed 21 percent
of its U.S. workforce in the last five years
- Citigroup Inc., Chairman Richard
Parsons - Citigroup received one of the biggest bailouts in history
- U.S. multinational corporations
which waged a campaign against the “Buy American” program
are represented on the council
- Multinational companies, with
current or former chief executive officers on Obama’s jobs
council, have, over the past four years, almost doubled the cumulative
amounts they’ve reinvested overseas
America’s
economy use to be a job creation engine but in the last decade
(2000-2010) job creation actually went into reverse - the effects have
been horrendous.
The official
unemployment rate, at 9.1 per cent, remains more than twice as high as it was
in 2007. The real jobless rate is considerably higher - include those who
have become so discouraged that they didn't look for
a job last month (2.6 million), and those working part-time hours because
they cannot find full-time work (8.8 million), and the combined unemployment
and underemployment rate would be approaching 20%.
Latest data,
Census Bureau Report, released September 12th:
- A record 46.2 million people -
nearly 1 in 6 Americans - are now counted among the nations poor
- The number of Americans without
health insurance has reached 49.9 million, the most in over twenty
years. The number of people covered by employment based health plans
declined from 170.8 million (2009) to 169.3 million in 2010
- The overall poverty rate has
climbed from 14.3 percent to 15.1 percent
- In 2010, the median - or midpoint
- household income was $49,445, down 2.3 percent from 2009
- Working-age Americans (ages 18-65)
now represent nearly 3 out of 5 poor people, rising from 12.9 percent in
2009 to 13.7 percent in 2010
One of the
biggest proponents of off-shoring - the McKinsey Global Institute - found, in
their 2003 report, Off-shoring: Is It A Win-Win Game?, that while the
American economy gained from off-shoring, American workers didn’t.
The report
estimated that with no
off-shoring American workers received 72 cents for each dollar of economic
activity, while after off-shoring began American workers received only 45
cents.
“Can we trust the resilience of our
economy? The starting point is convincing people of the probability of
re-employment. … Over the past 10 years, the US economy has created a
total of 35 million new private sector jobs, or an average of 3.5 million new
jobs per year. At
this rate of job creation, the vast majority of displaced workers are
re-employed within 6 months.” Diana Farrell, lead
author of the McKinsey report
Even in 2003 the
US economy wasn’t creating enough jobs for all the US workers displaced
by off-shoring. Today’s job creation is a different situation than in
2003 - it’s far worse. The American economy is not creating jobs - no
jobs were created in August 2011 - let alone 3.5 million a year.
“Jobs off-shoring is nothing more than
an activity in pursuit of the lowest cost factor.” –
Paul Craig Roberts
David Ricardo,
the originator of the free trade theory, described jobs off-shoring as the
betrayal of one’s own country in pursuit of “absolute advantage.”
American jobs
sent out of the country aren’t likely to return anytime soon and as
long as employers can continue to take advantage of much lower production
costs in other countries, and the breaks they receive from America for
exporting them there, why would they bring them back?
Conclusion
"NOT MADE
IN AMERICA" stickers are now found on nearly every item for sale in
America. In 1985, the US imported less than $4 billion worth of goods from
China, and the country had just a small trade deficit. Today, the US spends
almost $400 billion per year just on Chinese goods and has a massive trade
deficit with the world.
Real new wealth,
and an economic superpower, are only created when a countries resources are
used to manufacture goods to sell at home and abroad, and when a countries
natural resources are used to provide solid long term high paying jobs. When
people are working, and have discretionary income, economic stimulus results.
The United States of America was an economic superpower for these very
reasons. The US needs to regenerate and re-grow its economy - restart the
process of generating new wealth - this creates jobs and brings national
prosperity.
Exploitation of
the United States own natural resources, combined with a solid manufacturing
sector and the right infrastructure
spending stimulus will, in this author’s opinion, be the economic
drivers of a resurgent US economy.
Are companies engaged in the search for, development and
extraction of natural resources on your radar screen?
If not, maybe
they should be.
Richard Mills
Aheadoftheherd.com
If you're
interested in learning more about the junior resource market please come and
visit Richard at www.aheadoftheherd.com. Membership is free, no credit card or personal
information is asked for.
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