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There’s No U in Recovery
By David Glenn Cox
I’m sure that you’ve seen the headlines, Ford racks up $2.7 billion in profits for the year. That’s great news, that’s wonderful news, see, the economy is turning around. Ain’t that great? That’s the headlines, good news, it’s all getting so much better now. Only how did Ford become so profitable? They did it by reducing their North American workforce by 47%.
So good news for Ford doesn’t necessarily mean good news for the economy or for you. If Microsoft were to cut their North American employees by 50% their profits would look great for a while, but sooner or later the company would begin to suffer. By outsourcing Ford looks great, but what about Ford’s suppliers here in North America? Do you suppose that if Ford outsources production that they will continue to purchase from North American suppliers?
Economy in U.S. Grew at 5.7% Pace, Most in Six Years
Jan. 29 (Bloomberg) -- "The economy in the U.S. expanded in the fourth quarter at the fastest pace in six years as factories cranked up assembly lines and companies increased investment in equipment and software.
“New York University Professor Nouriel Roubini said more than half of the 5.7 percent expansion reported yesterday by the government was related to a replenishing of inventories and that consumption depended on monetary and fiscal stimulus. As these forces ebb, growth will slow to just 1.5 percent in the second half of 2010, he said.”
For the year, even with that massaged 5.7 percent fourth quarter number, overall growth for the year was negative, -2.9 percent. So if we take Professor Roubini at his word and fourth quarter growth was only half, or 2.85 percent, what does that do to the annual number? Who is this Nouriel Roubini, you might ask. He’s the man that predicted the stock market crash in 2008. Let’s parse the fourth quarter numbers even further. What do most of us do on the 25th of December? What do we do in the weeks leading up to it? The year 2008 was the worst Christmas shopping season on record, and 2009? It was 1 percent worse, employment was down in December because merchants didn’t hire for Christmas and profits were up because of it.
So rising profits have little to do with employment numbers; on the contrary employment hurts profit numbers. Yet the numbers are proclaimed as good news, yes, good news, the economy is turning around.
“News Release: Personal income Rises by .4 Percent in November.
“Private wage and salary disbursements increased $16.1 billion in November, compared with an increase of $3.2 billion in October. Proprietors' income increased $12.3 billion in November, compared with an increase of $14.8 billion in October.” Dept. of Labor
So, with a private labor force of 154,235,000 we divided $16.1 billion between us, while “proprietors,” (you know, the boss) proprietors divided $12.3 billion between themselves. You got one buck and how many proprietors are there? They don’t say and it’s not a number that I found readily available, so let's guess. If the number were one million proprietors, that’s $1,542.35. Two million? Divide it in half. Ten million? That’s $154, but you got a buck!
We’re not done yet! “Rental income of persons increased $1.7 billion in November, compared with an increase of $2.2 billion in October. Personal income receipts on assets (personal interest income plus personal dividend income) increased $6.7 billion, compared with an increase of $6.6 billion. Personal current transfer receipts increased $11.3 billion, compared with an increase of $2.8 billion.” Dept. of Labor
So, if you’re a “proprietor" with rental income and other personal assets, then by God this economy is doing great! If, however, you work for a living, then not so much. The civilian labor force declined by 661,000 in December, but those “proprietors” are rocking out!
“Sales of new homes in November took an 11.3% plunge, a sign of just how dependent the fragile housing recovery has become on government subsidies. Sales of new single-family homes stood at a seasonally adjusted annual rate of 355,000 units, the Commerce Department said Wednesday, a 9% drop from the same month a year earlier.” Los Angeles Times, December 24, 2009
So, when we compare this month to last month, 355,000 units isn’t such a bad number. In 2008, however, new home sales were at 525,000 annually, and the worst year on record was in 1981 at 338,000. So the $8,000 tax credit is life support for the home industry. We spent $15 billion to keep the home building industry at 17,000 units above worst year ever. Does that sound like a recovery to you?
The President in his State of the Union address claimed that two million workers more would be unemployed if it hadn’t been for the stimulus bill. It’s the God's honest truth! Only the original purpose of the stimulus bill was to increase employment, not to backstop it. State governments were supposed to use highway tax funds and stimulus funds to generate new projects to hire more workers. Only highway tax revenues fell. California tax revenues fell by 40% so the stimulus funds were used instead to protect those employed and not to increase them. What will happen this year remains to be seen.
The President has asked the major banks nicely and pointedly to invest in the economy and now promises to take TARP funds repaid by the banks to fund community banks which are failing at a record rate. What are the big banks doing?
Jan. 29 (Bloomberg) – "Citigroup Inc. agreed to spend $513 million to increase its stake in LQ Inversiones Financieras SA, or LQIF, the holding company of Banco de Chile. Citigroup, based in New York, exercised an option to buy an 8.5 percent stake, increasing its total share to 41.48 percent, Quinenco SA wrote in statement posted today on the Chilean regulator’s Web site. Quinenco controls Banco de Chile through LQIF."
Like Ford's profits, don’t take it personally, there just isn't any money to be made by investing in you!
President Obama slipped in, almost between the lines of his State of the Union speech, that he wants to build more nuclear power plants as part of his green energy strategy. That was John McCain’s idea during the campaign, along with clean coal. Then the President channeled Sarah Palin’s "drill baby drill" in favor of offshore oil drilling.
First, nuclear energy isn’t green, it’s toxic and will remain toxic for thousands of years. The sealed up plants will be reminders someday of a bygone era like old water wheel gristmills, only these will be toxic gristmills. The much-touted French nuclear power program has the same problems found in American plants, namely toxic leaks and irradiated workers.
The plant construction will be called a jobs program but you don’t just get hired to build nuclear power plants. It is a specialized field, which is controlled by three or four major players worldwide. You won’t see a want ad in the paper saying help build our nuclear plant. Ditto for oil drilling. Oil prices at $72.00 per barrel means that more super tankers worldwide are being used as storage than as shipping vehicles.
“MORE than 35 very large crude carriers are contracted to store crude oil in response to the widening contango in oil markets. Brokers and ship owners estimate that up to 80m barrels of crude is either under storage or is en route to a storage destination in very large crude carriers and in some suezmaxes." Lloyds List, January 14, 2010
So echoing “drill baby drill” is a bone for that other economy that doesn’t include you. Clean coal? Sure, how about some nice safe heroin?
The idea of green energy is to eliminate toxic sources of energy, not to make them a little less toxic. We want to quit smoking, not look for a safer cigarette. That’s what you and I want, but the other side of the economy says oil, nukes and coal.
"Obama, Reid tour Nellis solar facility -- President also lauds success of Recovery Act’s first 100 days
"President Barack Obama toured the solar photovoltaic array at Nellis Air Force Base this morning for a look at how solar energy is being used in Nevada. Col. Howard D. Belote, the commander of the 99th Air Base Wing, led Obama and Senate Majority Leader Harry Reid on the tour. The event, which was closed to the public, followed Tuesday night's fundraiser for Reid at Caesars Palace.
"The Nellis solar power system was finished in December 2007 and is the largest solar photovoltaic array in the country.” Las Vegas Sun, May 27, 2009
“China Solar Panel Maker (Who Already Has Installed a Solar Farm on a U.S. Military Base), Now Sets Up 1st U.S. Plant” InsightAnalytical-GRL, Sunday, November 22, 2009
“China Solar Panel Maker Sets First U.S. Plant
“Suntech’s investment comes as anxieties are rising in Washington over foreign domination of the U.S. cleantech space. In late October the announcement of a Chinese-U.S. consortium planning to build a wind park in Texas using imported Chinese turbines led to calls that federal subsidies should be pulled from the project” Business Week
What good are green initiatives or investment in green research if the jobs are created overseas? That’s great, we're going to use less oil from Saudi Arabia by purchasing solar cells and wind turbines from China. Nuclear plants built by GE will help GE’s bottom line, not America's. Jobs, jobs, jobs, nothing else matters! Not throwing up trade walls but protecting our national energy security by making sure that American solar cells and wind turbines are the world’s finest and at least have a place at the table.
From Minnesota in the east to Wyoming in the west to Texas in the south, the continental United States has the largest wind potential in the world. When you include coastal areas, it almost doubles. No offshore drilling but off-shored turbines, no clean coal, but solar arrays, and no nukes but wind turbines and jobs designing, siting, erecting, and assembling them for Americans. That is what you do if you want to put a U in recovery.
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