the Sugar Conspiracy

Tuesday, March 15, 2005

Stocks are up, unemployment is down, taxes are low

But what does this really mean? According to this piece, stocks are up, but the dollar is plummeting against foreign currencies. The unemployment rate is a low 5.4%, but it isn't because people are finding work in large numbers, but that more and more people are simply staying out of the workforce. And real wages have remained flat, with no sign of increases any time soon.
And this isn't even the end - going down the supposedly good economic numbers, each and every one of them conceals the bad news beneath a number which seems good. So what is the story they do tell? Who is doing well in this economy? It's a good time to be among the very, very rich. Tax rates are low, inflation is almost dead in the water: which means there is no reason to take risks and invest, no competition from up and coming rich people. It is true that gasoline is up in price, but the things that rich people care about - buying companies and paying taxes - haven't been cheaper, relative everything else, in a very long time. That's why merger-mania is gripping Wall Street: there has never been a better time to sell out and cash out than right now. It is no wonder that the percentage of wealth held by the top one percent of America is now higher than it has been since the Crash of 1929.

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Because if the numbers are telling the truth, very soon, discontent is going to be busting out all over. Why is this? Because right now the United States isn't creating real economic growth, but using federal borrowing - now leaving the billion dollars a day of deficit in the rear view mirror - and easy monetary policy of the fed to get more to happen now, rather than later. This inefficient approach is generating inflation, inflation in basic commodities, particularly oil, which has reached the $50 a barrel mark, a level that OPEC says it is happy with. This credit boom, and not economic progress, is what is driving the US economy.

Because much of what has happened in the world economy over the last few years has been a credit boom, when there is a bit more activity, there is a bit more inflation. The people who have jobs are not getting wage increases, and so they feel the inflation pinch. Every new job in the Bushconomy is paid for by other people working, people who have to pay higher prices, higher prices for gasoline and other necessities that they cannot easily cut back on.

posted by chris at 2:37 PM
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