After the crash: the pauperisation of middle-class America

[CHIMO]

The current global crisis of capitalism began with the severe contraction in the housing markets in mid 2007. Therefore, welcome to Year Five. This inventory of where things stand may begin with the good news: the major banks, the stock market and corporate profits have largely or completely "recovered" from the lows they reached early in 2009. The US dollar has fallen sharply against many currencies of countries with which the US trades, and that has enabled US exports to rebound from their crisis lows.

However, the bad news is what prevails notwithstanding the political and media hype about "recovery". The most widely cited unemployment rate remains at 9% for workers without jobs but looking. If instead, we use the more indicative U-6 unemployment statistic of the US labour department's bureau of labour statistics, then the rate is 15.9%. The latter rate counts also those who want full-time but can only find part-time work and those who want work but have given up looking. One in six members of the US labour force brings home little or no money, burdening family and friends, using up savings, cutting back on spending, etc.

At the same time, the housing market remains deeply depressed as 1.5-2m home foreclosures are scheduled for 2011, separating more millions from their homes. After a short upturn, housing prices nationally have resumed their fall: one of those feared "double dips" downward is thus already under way in the economically vital housing market.

The combination of high unemployment and high home foreclosures assures a deeply depressed economy. The mass of US citizens cannot work more hours – the US already is No 1 in the world in the average number of hours of paid labour done per year per worker. The mass of US citizens cannot borrow much more because of debt levels already teetering on the edge of unsustainability for most consumers. Real wages are going nowhere because of high unemployment enabling employers everywhere to refuse significant wage increases. Job-related benefits (pensions, medical insurance, holidays, etc) are being pared back.

http://www.guardian.co.uk/commentisfree/cifamerica/2011/may/27/economics-useconomy

[truedelphi]

1. My own personal word for this crisis - Humanicide.

Pare back the pension funds and have those who are retired live on less, and you will see that it is the retired person's dollars that make up a lot of the retail expenditures etc. (People with lil kids or college students are not out there spending that much.)

So then the economic crisis inflates again, so more pension funding and social net monies have to be pared back. So what if the grocery stores go under once food stamps are cut - at least Grover Norquist will have gotten his wish.

[jtuck004]

2. That first sentence gives me pause...

It would be more honest to say it began several years before that with thieving, cheating, lying investment bankers who took it upon themselves to mis-represent the value in what they were selling, an activity from which they profited (and continue to profit) from, only recently going before Congress to lie about what they did and make the entire Congress of the United States look like a bunch of fools.

Always gives me trouble when I can't get past the first assumption.

[GliderGuider]

3. Yes, it bugs me when people confuse the visible aspects of the crisis with the crisis itself.

It's like saying that the criminal activity of a bank robbery only begins when the front man points his gun at the teller. No, it begins long before that with the planning of the heist and recruiting of accomplices...

[bemildred]

4. I trace this back to Raygun and the post-Vietnam counter-revolution.

So yeah. It's not some fortuitious accident that nobody could have forseen.

[golfguru]

5. Contrast between Japan & USA

Japan has endured many worse disasters than US. But Japan
is not laying down and playing dead. There are no reports
of any looting of stores after the earthquake & tsunami which
created chaos on enormous proportions, nothing like that has
been experienced here in US.

The Japanese people will come out of all this just fine because
the average Japanese has substantial savings. Americans on the
other hand have bought homes they could not afford, have big
credit card debts, and kept borrowing more on their homes as
the house bubble kept inflating. My sub-division of 200 homes
has a dozen foreclosed & short sale homes on the market. The
prices listed makes it obvious those homeowners borrowed 30
to 40% more money on their original mortgage. I know this because
we were one of the original buyers in this all new sub-division
and we know exactly what everyone paid for their house.
And their mortgage liabilities are 40% higher than the
original price they paid.

My point is, Americans are themselves to blame for overspending.