Nov 6 2012

A nation in the pangs of deleveraging – The long-term trend of a declining dollar and a collapsing middle class.

As Americans go out to vote many go blissfully unaware of the reality that our total public debt is now above $16.2 trillion.  If your only source of information was the mainstream press this fact rarely came up in any debates or journalistic investigations.  The discussion of stagnant household income never even came up in any of the important debates.  It was all simply accepted that the decrease in the standard of living was somehow a normal part of the process.  The squeeze in the middle is so extreme that we have dollar stores symbolically cropping up in places like the Silicon Valley and Beverly Hills.  Rich and poor but very little left for the middle.  While momentum continues to ebb the economy forward we are entering what you can describe as stagnation. An economy limping along while American households slowly undergo a painful process of deleveraging.

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Nov 2 2012

Dollar stores in million dollar neighborhoods. 99 Cents Store looking at Beverly Hills location in rise of the low-wage and high-wage economy. 1 out of 4 working Americans in low-wage work.

Whenever a jobs report comes out I always ask what kind of jobs are being added. There is a wide gap between skilled and unskilled labor building in this economy.  Those without the skills for select fields are being left behind to pickup jobs in the growing low-wage service sector.  It used to be the case that blue collar work with one paycheck was enough to pursue the American Dream.  That is definitely no longer the case.  We have 50 percent of college graduates under 25 working in jobs that do not require a college degree or are simply unemployed.  What we are seeing is a persistent trend that is creating a low-wage economy.  The system is learning how to work around this ongoing trend.  We now have a solid expansion of dollar stores catering to low income Americans.  Dollar stores are also popping up in unlikely locations.  That business is booming with 1 out of 7 Americans now receiving food assistance.  The US has a large portion of our population working in low-wage jobs.

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Oct 30 2012

European Union reaches highest unemployment rate since crisis started – Spain hits 25 percent unemployment rate for first time. The missing EU crisis headlines.

During the height of the US Great Depression, the unemployment rate stood at 25 percent.  This was a devastating experience for our economy and shifted policies and geopolitics for decades to come.  So when you have the European Union, the world’s largest trading bloc with two countries experiencing unemployment rates of 25 percent people should be paying more attention.  The unemployment rate in Spain for the first time hit the 25 percent mark last month.  The figures are more troubling when you dig deeper into the data.  Greece is also facing tough economic times.  At the core of the crisis is the subject matter of too much debt.  Spain is pulling back from a busted housing bubble and Greece is dealing with massive debt-to-GDP ratios.  We trade heavily with the EU so what happens in Europe is bound to have an impact in the US.  Is the crisis in Europe solved?

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Oct 27 2012

A debt inspired milestone – US Public Debt to GDP ratio over 102 percent. In the early 1980s public debt grew at one point by 20 percent. We hit that point in the 2000s yet GDP did not come along.

What is the significance of having too much debt?  Does it even matter?  It seems that politicians understand something must be done but while the bickering occurs, the status quo remains.  We recently surpassed a milestone when it comes to our debt.  Total US Public Debt to GDP now stands at over 100 percent.  That is, we have a larger public debt than what we produce per year as an entire nation.  The last time this occurred was during World War II.  Europe is dealing with massive debt as well and many countries within the union are in depressions like Spain and Greece.  There now seems to be a marginal impact on the real economy with every increase in the public debt.  There isn’t a fast rule of thumb as to what is the maximum level of debt but going over 100 percent of our GDP is not exactly a good starting point.

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