Surprise, surprise, surprise, the US economy shrank 0.1% in the last quarter of 2012. That 0.1% may not seem like a lot, but the real story its much worse then 0.1%.
Take these factors into consideration:
The economy shrank during one of the biggest panic buying phases in the firearms industry since the 1994 assault rifle ban.
Not only were people spending money on Christmas, but they were also buying all the guns, ammunition and magazines they could get their hands on,,,, and the economy still shrank.
One thing that caused a slowdown in the economy was a reduction in military spending. The question I have to ask, why does government spending play such an important roll in the economy? Maybe the government does not want the people to know how bad the economy really is?
Seems the economy is supported by two factors, housing and government spending.Neither of which are long term sustainable options.
Government tax and spend programs can not last forever. Nor can the price of housing double and triple every few years without wages doing the same.
Out Of Control Government Spending
For as far back as I can remember the term “pork barrel spending” has been thrown around in the news. Pork barrel spending is when funding for a local project is written into a bill, which is then passed into law. Pork barrel spending is not in itself a bad thing, its a way to get certain local projects funded that would be otherwise overlooked.
But there is an issue when we have have out of control spending without a proper tax base. Allowing companies like google and exxon to have a lower tax burden then the general population does not work. Those large companies move offices to places like Ireland who have a superlow, to almost no corporate tax. Those companies then avoid paying US taxes. Where does that money go? Into the pockets of the company president, CEO and stock holders.
The truth is, and we all know this, we need our jobs back from china. We need our steel mills back, we need to build our own computers, build our own truck, motors, transmissions,,,,. We need jobs that pay a liveable wage.
As long as companies build in china there will never be a long term recovery. We will see little small recoveries. In the long term wages will continue to slip, and the standard of living will continue to fall.
How can housing double and triple in price without wages doing the same? When growth in one part of the economy outpaces other parts, sooner or later the system will crash. This is what is called a “bubble”.
We need an economy based on how much we can produce, and not how much we can spend.
The government is spending massive amounts of money to support the economy. Sooner or later that spending will have to level out, or decrease.
Let Wages And Prices Go Up
Its simply amazing that we as a nation existed for a couple of hundred years by having factories and paying a liveable wage.
There is a theory that if something is made here, then its going to cost more. Ok? And?
How much money is floating around in the US? Where is that money concentrated? In the upper 1%.
If wages increase, and the amount of money in circulation does not increase, then we have an equal distribution of wealth. That 1% is then broken down to 5%, 10%,,,, and so on.
So what if wages go up? There is plenty of money out there for everyone.
The federal reserve prints money out of think air, then that money goes to the banks and wall street. Maybe its time for inflation to adjust so that money gets distributed to everyone else.
Wages have stagnated
In the 1970s before the shipyards closed here in southeast Texas a welder could make $17 an hour.
Shipyards closed in the early to mid-1980s. 30 years later wages still have not returned to what they used to be. In the late 1980 and into the 1990s, welders were making something like $10 – $12 an hour. After inflation is figured in, welders and fitters today are making a fraction of what they were making in the late 1970s and early 1980s.
Its just been within the past few years that wages in the metal working field here in southeast Texas have made it back to what people were making in the early 1980s. Even though wages have “almost” made it back, inflation has taken such a bite, that people have less buying power then they did 20 years ago.
Wages here in southeast Texas took a nose dive in the mid to late 1980s. Over the past few decades those low wages have been creeping into the rest of the nation. The collapse of the steel mills in the north escalated the issue. No jobs in Detroit, so families move, which drives up unemployment and drives down wages in other parts of the nation. Same thing for southeast Texas. No good paying jobs in Beaumont, Port Arthur or Orange, families have to move.
Of course the economy is going to shrink
Have you seen the price of food lately? My wife and I bought some cheap bacon the other day, it was something like $5 a pack.
Price of housing is past the reach of most working class families, price of fuel is oppressive, price of basic items such as food continues to go up.
When are people supposed to have expendable income?
Of course the economy is going to shrink, the middle class is being strangled to death through stagnated wages and high tax rates.
As the wars in Iran and Afghanistan start to wind down, there will be no excuse for the government to spend so much money on the military. Will the government start another war to support the economy, or will the government let the economy slip further into recession?
Either choice is a bad deal for the middle class. Lose government jobs, or pay higher taxes,,, take your pick.