Next time you hear an economist or denizen of Wall Street talk about how the "American economy" is doing these days, watch your wallet.
There are two American economies. One is on the mend. The other is still coming apart.
The one that's mending is America's Big Money economy. It's comprised of Wall Street traders, big investors, and top professionals and corporate executives.
The Big Money economy is doing well these days. That's partly thanks to Ben Bernanke, whose Fed is keeping interest rates near zero by printing money as fast as it dare. It's essentially free money to America's Big Money economy.
Free money can almost always be put to uses that create more of it. Big corporations are buying back their shares of stock, thereby boosting corporate earnings. They're merging and acquiring other companies.
And they're going abroad in search of customers.
Thanks to fast-growing China, India, and Brazil, giant American corporations are racking up sales. They're selling Asian and Latin American consumers everything from cars and cell phones to fancy Internet software and iPads. Forty percent of the S&P 500 biggest corporations are now doing more than 60 percent of their business abroad. And America's biggest investors are also going abroad to get a nice return on their money.
So don't worry about America's Big Money economy. According to a Wall Street Journal survey released Thursday, overall compensation in financial services will rise 5 percent this year, and employees in some businesses like asset management will get increases of 15 percent.
The Dow Jones Industrial Average is back to where it was before the Lehman bankruptcy filing triggered the financial collapse. And profits at America's largest corporations are heading upward.
But there's another American economy, and it's not on the mend. Call it the Average Worker economy.
Last Friday's jobs report showed 159,000 new private-sector jobs in October. That's better than previous months. But 125,000 net new jobs are needed just to keep up with the growth of the American labor force. So another way of expressing what happened to jobs in October is to say 24,000 were added over what we need just to stay even.
Yet the American economy has lost 15 million jobs since the start of the Great Recession. And if you add in the growth of the labor force -- including everyone too discouraged to look for a job -- we're down about 22 million.
Or to put it another way, we're still getting nowhere on jobs.
One out of eight breadwinners is still out of work. Most families in the Average Worker economy rely on two breadwinners. So if one out of eight isn't working, chances are high that family incomes are down compared to what they were three years ago.
And that means the bills aren't getting paid.
According to a recent Washington Post poll, more than half of all Americans -- 53 percent -- are worried about making their mortgage payments. This is many more than were worried two years ago, when the Great Recession hit bottom. Then, 37 percent expressed worry.
Delinquency rates on home loans are rising. Distressed sales are up as a percent of total sales.
Most people in the Average Worker economy own few shares of stock, if any. Their equity is in their homes. But with all the delinquencies and distressed sales, the housing market has a glut of homes for sale. As a result, home prices are still dropping. So the net worth of most Americans is still dropping.
And even though interest rates are falling, most people in the Average Worker economy can't refinance their homes. They can't get home equity loans. Banks don't want to lend to the Average Worker economy because people in it are considered bad credit risks. They still owe lots of money, their family incomes are down, and their net worth has fallen.
And according to the Reuters/University of Michigan survey of American consumers, expectations about personal finances are at an all time low.
Inhabitants of the Big Money economy are celebrating Republican wins last week. They figure financial regulations will be rolled back, environmental regulations will be canned, the Bush tax cut will be extended to the top 1 percent, and it will be harder for workers to form unions.
Inhabitants of the Average Worker economy aren't so sure. The economy has been so bad they're angry at politicians. They showed their anger at the ballot box. They took it out on incumbents.
But if nothing changes in the Average Worker economy, there will be hell to pay.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
James K. Galbraith: Obama's Problem Simply Defined: It Was the Banks
Martin Ford: A Lame Duck Revolution: Take Another Shot at the Public Option
Six Reasons for U.S. to Abandon Free-Trade Myth: Ian Fletcher - Bloomberg,com
"Oct. 26 (Bloomberg) -- The price of living in the fantasy world of free-trade economics continues to rise for America.
Failure to recognize the pitfalls will probably mean a continuing struggle to emerge from recession, as much U.S. domestic demand leaks abroad due to the trade deficit, rather than being recycled at home. And America will continue to lose key industries: not just the primitive ones a developed nation should shed, but the high-tech jobs of the future.
Any serious discussion of free trade must confront David Ricardo’s celebrated 1817 theory of comparative advantage, whose tale of English cloth and Portuguese wine is familiar to generations of economics students. According to a myth accepted by both laypeople and far too many professional economists, this theory proves that free trade is best, always and everywhere, regardless of whether a nation’s trading partners reciprocate.
Unfortunately for free traders, it is riddled with holes, some of which even Ricardo acknowledged. If they held true, the hypothesis would hold water. But because they often don’t, it is largely inapplicable in the real world.
[snip]
The longer we do nothing, on the assumption that the world trading system will rebalance itself, the more likely that it will break down in unpredictable and counterproductive ways."
That is a big advantage especially in an economy that is suffering.
Protectionists like Morici are now arguing the absurd - to impose a 40% surtax on all foreign currency transactions for buying imports. Well, WHO is going to pay for that instantaneous 40% rise in consumer product prices?
The protectionists are our trading partners! Can u look me in the eye and tell me the communist Chinese aren't protectionists? They manipulate their currency!!! They still haven't opened their markets. Same with the Koreans.
It will not change unless we band together in enough numbers to worry the powers that be and take matters into our own hands. This will involve a series of well organized boycotts of corporations and strikes such as many of us did about 40 years ago. We need to do this SOON, while we non-rich still have enough monetary clout to carry off a boycott.
http://www.thelibertyvoice.com/ralph-nader-ron-paul-agree-ballot-access-laws-are-rigged-against-independent-third-party-candidates
Ralph Nader & Ron Paul Agree: Ballot Access Laws are Rigged Against Independent & Third Party Candidates | The Liberty Voice
The ballot access laws would have to be changed:
http://www.amazon.com/Progressives-Guide-Raising-Hell-Grassroots/dp/1603582932
Amazon.com: The Progressive's Guide to Raising Hell: How to Win Grassroots Campaigns, Pass Ballot Box Laws, and Get the Change We Voted For-- A Direct Democracy Toolkit (9781603582933): Jamie Court: Books
"Change is no simple matter in American politics-a fact that Americans have recently learned well. Elections rarely produce the change they promise. After the vote, power vacuums fill with familiar values, if not faces. Promises give way to fiscal realities, hope succumbs to pragmatism, and ambition concedes to inertia. The old tricks of interest groups - confuse, diffuse, scare - prevail over the better angels of American nature.
But populist energy can get change making and change-makers back on the right track..."
The Federal Absentee ballot allows write-ins:
http://www.fvap.gov/resources/media/fwab.pdf
FEDERAL WRITE-IN ABSENTEE BALLOT INSTRUCTIONS
It would NOT be easy, but it's possible that a slate of independent or third-party candidates could be elected to Congress and the White House, bypassing the Democrats and Republicans, both beholding to corporations.
President William K. Black sounds good right now.
Progressives should employ a similar strategy. Shipping jobs overseas is destroying the American economy and yet there is no public outcry of any consequence.There is no discussion about American corporations choosing profits over patriotism. There is no concerted effort on the part of either party to staunch the flow of American jobs being shipped overseas.
Progressives must come together and move the Democratic party in a direction that will clearly define it as the party that protects American workers and business from unfair overseas competition.
A party that will not allow products sold in the United States to be made with slave labor, in plants that have no envoirmental regulations, from countries that have histories as human rights violators.
If Democrats fail to position themselves in this way then the Amercan worker will be forced not by law or decree but rather by economic necessity to enslave themselves
http://en.wikipedia.org/wiki/The_Time_Machine
We, the American working class, are coming down to the standard of living of the Indians, Chinese, etc.
http://dictionary.reference.com/browse/iron+law+of+wages
Iron law of wages | Define Iron law of wages at Dictionary.com
"the doctrine or theory that wages tend toward a level sufficient only to maintain a subsistence standard of living. "
People living at that level don't buy much.
Amen.
Read the entire post at http://unorthodoxthoughs.wordpress.com/
Not that they would do anything about their friends on Wall St...
The 'other' economy has no advocates in a system that is purchased by Corporate money.
A pox on both parties. We just don't matter.
If the Dems had prevailed - the difference would have been amnesty for Illegals sharing a smaller piece of the pie.