Problems Galore: Where to start?

Nations around the world have decided to save their banks instead of taking the necessary steps to stabilize their economies …. As such, all the liabilities got transferred from the balance sheets of the banks to the balance sheets of the country.

The countries are running their printing presses continuously in an effort to inflate their way out of debt crisis, even if this effort is doomed to failure from the beginning.

In addition, tighter, as the world’s governments are imposing to try to close their gaping deficits (created by throwing billions to their banks) are causing people worldwide to push back.

Many officials and experts warn that the economic crisis could lead to unrest in the world – even in developed countries. Unemployment is growing in the world – especially among young people. And a sense of outrage at the injustice of the rich get richer while the poor get poorer is a growing global trend.  The countries around the world are telling their people that the giant bank bailout was necessary to save the economy. But they have not delivered, and “main streets” in the world has suffered.

As former U.S. Senator Chris Dodd said in 2008:

If it appears that [the banks] are hoarding, you have a revolution on your hands. People are so outraged and furious that tax money goes to line their pockets instead of doing the right thing. Of course, the big banks  are hoarding and refusing to lend to Main Street. In fact they admitted way back in 2008, that they would, but have not, and this is happening across the world, with all the major banks.

In March, Council of Foreign Relations, research associate Matthew Klein had pointed out the parallels between the soaring youth unemployment of the corrupt Arab countries and the United States:

We all like to speculate on the regime to be overthrown Arab next, but we should perhaps look closer to home. High unemployment? Check. Out-of-touch elites? Check. Frustrated young people? As an American of 24 years, I can testify that this rich democracy has a lot of them too.

About a quarter of Egyptian workers under 25 are unemployed, a statistic that is often cited as a cause of the revolution. In the U.S the Bureau of Labor Statistics, reported in January the unemployment rate of 21 percent for workers aged 16-24 years.

The real unemployment rate for young graduates is likely to be even greater, because it does not take into account those who went to school to try to ride the economic storm and left the country to teach English abroad. It would be better if it were all graduates who have given up looking for work full time and working part-time for lack of other options.

The uprisings in the Middle East and North Africa is a warning to the developed world. Although an Egyptian style revolution breaks out in a rich democracy is unthinkable, it is easy to recognize the frustration of a generation that has no opportunity. In fact, the “desperate generation” in Portugal got tens of thousands of people to participate in demonstrations nationwide on March 12. How long until the rest of the rich world follows their example ?

Richard Wilner noted in 2009 that less than half of Americans 16-24 years old were employed:

The number of young unemployed Americans has soared to 53.4 percent – a post-World War II high, according to the Labor Department – Millions of Americans are making sense of the likelihood that the lifetime earning potential will be reduced and together with the prediction of slow economic recovery, the transition into productive members of society could be suspended for an extended period of time.

Number represents the reverse of the report of the Department of Labor,  that the employment rate for 16-24 years has gone down to 46.6 percent – the lowest ratio of the young Americans in this age group.

 

And as I indicated last year, some groups in America are depressed level of unemployment:

34.5% of young African-American men were unemployed in October 2009.

As the third quarter of 2009, the overall unemployment rate of 9.5 percent Native American, U-6 measure shows it at 15.9 per cent.

Unemployment rate of natives with a high school degree or less is 13.1 percent. Their U-6 measure 21.9 percent.

The unemployment rate for natives with less than a high school diploma is 20.5 percent. Their U-6 measure is 32.4 percent.

Unemployment among young American Indians (18-29), with only a high school diploma is 19 percent. Their U-6 measure is 31.2 percent.

Unemployment rate for native blacks with less than a high school education is 28.8 percent. Their U-6 measure is 42.2 percent.

The unemployment rate for young black natives (18-29) with only a high school diploma is 27.1 percent. Their U-6 measure is 39.8 percent.

The unemployment rate for Hispanics born less than a high school diploma is 23.2 percent. His U-6 measure is 35.6 percent. The unemployment rate for young Latin American Indians (18-29) with only a high school diploma is 20.9 percent. Their U-6 measure is 33.9 percent.

 

The black Americans are protesting for the same reason the Arabs are protesting:  corruption, unemployment and rising food prices.

 

No wonder Chris Tilly – Director of Research Institute for Labor and Employment at UCLA – he says that African-Americans and high school dropouts are experiencing depression level unemployment.

And as I have already noted, unemployment for those earning $ 150 000 or more account for only 3%, while unemployment for the poor is 31%.

And soaring food prices in the United States:

According to the latest government data, the CPI for food at home increased by 60 basis points year-over-year by 6% compared to 10 basis points for food away from home, consumer price inflation was 2.7% .

Food inflation is now the most important household expense, according to Wal-Mart (WMT) comments at its earnings call last month. Food prices, according to the Bureau of Labor Statistics, continue to accelerate higher.

 

No wonder that the protesters are saying that the “Spring” has spread in America:

Not only Wall Street … corrupt government is at least half the problem

Because the government’s policy is to ensure high unemployment, it is not surprising that American protesters are angry at the Fed and other government agencies, not just the big Wall Street banks.

Remember, Bush and Obama’s economic policies are virtually indistinguishable. Yes, Obama may actually suffer from high unemployment.

 

As a professor of economics at MIT and points of former chief economist of the IMF Simon Johnson said:

 

(1) The government created mega-giants, and they are not a product of free competition

(2) The White House needs to “regulate and supervise them,” but it is clear that the government has no real intention to regulate or supervise the banking behemoths

(3) Giant banks are good for the economy

 

Without the government-created moral hazard bold type casino-speculation, government officials corruption, creation a system of government-sponsored credit rating agencies that had at its base model of corruption, bribery and other forms of distortion things would not have gotten so bad.

In fact, the government is so corrupt, that the Director of the Department of Economics, George Mason University, says that politicians are worse than prostitutes… they are “pimps”, as they are pimping out of American financial giants. And even if the possibility of cooperation to the Government’s big banks have a huge problem, it is also true that corruption in the government leads to corruption in the private sector. The United States has truly become a banana republic like the worst countries in Latin America.

So who thinks that the government would solve all our problems, if you have just published obstructionists to see only half the problem.