Put America To Work
If you read the headlines or listen to the political rhetoric that inundates each
and everyone of us everyday, you might believe all that is required to fix the problems of the middle class in the USA or anywhere else for that matter is a simple change to a new group or putting your faith in the incumbents.
In the article Japan, Radiation, Cars and You! pt 2 it was stated We can only monitor what governments do, not what they tell us, and make decisions as to what the real information is. This has even more truth when applied to the economy and more importantly employment.
Unfortunately, for politicians, big businesses, central banks, and governments more people are waking to their games and are refusing to believe what they say.
In the article Exporting Problems: Lessons from Central Banks, Big Business and Governments The US government bailouts were supposedly just over $1 Trillion. But were actually $16 Trillion used in secret bailouts. Since then the Federal Reserve Bank has done QE3 in December 2011 according Jim Sinclair without calling it QE3. None of this Quantitative Easing has helped the employment situation. Some banks yes, people NO! In fact, many businesses with great growth capabilities and excellent credit are being turned down for loans by the very banks that were bailed out.
During the 1930s Great Depression, the unemployment rate was 25%. The current rate using the U6 statistic supplied by the Bureau of Labor Statistics (BLS) is about 22%. Some economists think that 22% is actually low and believe it to be lots higher.
In the recent June 2012 Federal Open Market Committee (FOMC) meeting report, the language in the report contained several worrying factors. Many economists took note of the Feds forecast of GDP has dropped substantially from a reading as high as 2.9%, to todays lower range of just 1.9%
Jan Hatzius, head economist at Goldman Sachs observed five very important points in the FOMC report. You should take lots of time to read these and think of what is being said as it applies to the future.
The FOMC will continue its Maturity Extension Program and sell securities with remaining maturity of approximately 3 years or less; once the program is complete, the Fed will hold almost no securities maturating through January 2016
The FOMC retained the earlier language that the funds rate will remain exceptionally low at least through late 2014.
The FOMC downgraded its views on the economy and removed the phrase labor market conditions have improved.
Fed officials now see slower growth and have a more pessimistic view on the labor market. They expect growth to pick up very gradually (adding very to the previous language) and think the unemployment rate will decline only slowly (as opposed to gradually).
Finally, the committee put in place a more clear easing bias (QE) in the statement. The concluding sentence now says that the FOMC "is prepared to take further action", whereas previously the statement said that the committee would "regularly review the size and composition of its securities holdings". Fed officials also added that promoting a "sustained improvement in labor market conditions" could be justification for easing (in addition to promoting "a stronger economic recovery").
Reading the FOMC statements I find it appalling that a group of capable young workers whom have already lost 4 productive work years will lose another 4 years, more likely 8 years and having their lives destroyed by things they have no control over. If you consider that young people in the 18 to 25 year age bracket should have about 45 years of productive work before retirement, that has now been cut to about 33 years. What if that doesnt work?
Whether you are for or against the Affordable Healthcare Act does not matter. John Roberts was right in his vote as it clearly is another tax on the middle class of the USA. It is a tax because it forces them to pay another $54 billion over the next 10 years, whether they use it or not. Speculation is that many employers subject to this new law, may opt for downsizing their staff below the trigger level or simply close their business. This means very possibly more unemployed when the USA can simply not afford the jobs loss.
Mr. Obama in his political rhetoric has been comparing himself to Ronald Reagan, and I found that odd. At first, I thought it was another mistake like his stating that there are 57 states in the USA or he forgot who is potential political adversary is, but I was wrong.
I personally like Reagan for what he did with improving the unemployment situation by reducing business taxation. Reagans ideas may be the exact thing the USA needs to overcome these dire predictions of the FOMC.
If the USA or any country in this same situation were to mandate that all new small businesses for the next 5 years were not required to pay any federal, state. county, or local taxes including business license fees, and others so long as they had less than 10 employees from the pool of unemployed within that period this would serve multiple purposes. It would reduce unemployment, reduce government expenses, increase tax revenue from wages tax, and reduce or eliminate the terrorist activity of governments on their citizens to obtain funds.
Yes, I know this is simplistic. However, good ideas usually are simplistic. Do the math for yourself. If each state had an average of 5,000 new small (mom and pop) businesses start up, even Home Based Businesses, that would mean 500,000 people are working and no longer considered unemployed. Add in the up to 10 employees per business and that number becomes a staggering 5 million people.
Yes, a percentage of those new businesses will fail, but because of the decreased tax burden, it could be less than normally fail and those that do survive will have a good business history, and customer base to continue growing. Each business would be required to post a slogan such as Put America To Work so that their customers recognize this business is one that is trying to help the country during a period of its greatest needs.
Just released; Spain official unemployment rate 24.6%. Does this mean the real unemployment rate in Spain is closer to 50%?
http://www.internationalfinancials.com/2012/07/29/spain-unemployment-hits-new-high-at-24-6/
Copyright 2012 JD Durham
by: JD Durham
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