‘Big crash coming’ says Jimmy Dore, introducing his guest Paul Stone. They agree that the economy is being mismanaged, because interest rates are too high and the debt is ballooning.
The problem is that everything depends on facts and interpretation, and about the only fact that is unchallengeable is that the public debt is soaring. Stone tells Dore that it is accelerating and he expects it to increase by a trillion dollars every fifty days by the end of this year. Who is going to buy it, and how will the government be able to continue servicing the interest?
The Federal Reserve’s interest rate is at a 23-year high. There is no immediate prospect of easement: one of the Fed’s governors,
Christopher Waller cites wage inflation especially in the service sector as the justification. This may be putting the cart before the horse: workers in the service sector tend to earn less than those in manufacturing industry or the FIRE economy so they will have suffered disproportionately from the high recent inflation and will seek more money to make ends meet.
Nor, arguably, is employment generally so low as to require this tightening of credit to dampen inflation. Officially it is running at 3.9% (
Feb 2024) as against the long term average of 5.7%; but Stone says that if measured in the old way the rate would be 25% - as it was during the Depression era, observes Dore. Stone’s claim is echoed (‘24.9%’) by the
Ludwig Institute, whose ‘True Rate of Unemployment’ tracks ‘the percentage of the U.S. labor force that does not have a full-time job (35+ hours a week) but wants one, has no job, or does not earn a living wage, conservatively pegged at $25,000 annually before taxes.’
If that higher unemployment figure is a fairer picture then it is another reason to question the government’s decision to permit a vast influx of ‘undocumented’ migrants into the US. These are not needed to open up new Western territories and in general may not be qualified to remedy shortfalls in high-skill sectors. Instead they are likely to compete for jobs that pay relatively little; this will put a brake on wage increases in those sectors and tend to cement the poorer sort into un- and under-employment. Further, the trend towards automation (robotised supermarket checkouts etc) will reduce even such opportunities and help to swell a class at least partly dependent on State benefits; and, perhaps, garner more support for a political party that presents itself as the friend of the poor.
Little wonder that the government is papering over the cracks with truckloads of freshly printed money; but unless the intention is to replicate the German hyperinflationary spiral of 1923 there will have to be a major revision of monetary and fiscal policy. In the interim there are those who will try to square the circle by hitting welfare (my brother tells me that some are saying the poor ‘don’t deserve pensions’, or have irresponsibly failed to put aside funds for their old age - out of what spare income, exactly?)
From one point of view investment is the problem. In a thriving economy ordinary people are paid well enough to buy each other’s goods and services, turning over the money again and again. Instead,
the velocity of money has crashed to about one-seventh of its febrile peak in 2008 and is less than half of what it was in 1960.
At the same time the
Gini measure of economic inequality in the US has soared to record levels and the excess cash of the upper echelons tends to be invested rather than spent. For decades, corporations and wealthy individuals have absorbed most of the increase in the country’s real wealth and their surplus ‘walketh about as a roaring lion, seeking whom he may devour’: hedge funds are buying up medical practices, care homes, veterinary outfits… and residential property.
Increasingly, ordinary people will be earning a pittance (if they have work at all) and be soaked for the dubious services of medicine and college education and the rent of the ground under their feet. The great American empire is turning Ottoman, a land of pashas and peasants, something Elia Kazan’s uncle fought to escape (watch
‘America, America’ if you can.) Why else would the people consider a maverick like Trump?
Ah, the 1960s! To most of us Brits the cartoon caveman Fred Flintstone was an aspirational fantasy - imagine, a detached home in the suburbs and a private car! - but for millions of Americans it was an amusing take on their reality. Now we are in the world of ‘
Nomadland’, people caravanning about for sessional work until their health gives out.
In the video at top Jimmy Dore advocates gold and silver as hedges against the predicted crash of the system (Paul Stone is the CEO of Colonial Metals Group.) This is okay for a moderate level of disaster, though if the paper dollar evaporates gold on its own does not operate efficiently as a monetary basis - it is too valuable (an old rule of thumb is that ‘an ounce of gold buys you a handmade suit.’) Hence the retired business magnate
Hugo Salinas Price has long argued for coinage based on silver (by weight rather than nominal value) as well as gold - effectively the bimetallic system required under
Article 1, Section 10 of the US Constitution.
In the worst case, even gold doesn’t protect you. In Britain from time to time we unearth hoards of gold artefacts and coins apparently abandoned by surviving Anglo-Saxon nobility fleeing the Norman Conquest of 1066. Some of the fugitives sailed to Constantinople, fought for the Byzantine Emperor and were granted lands in Crimea (aka ‘New England’)… but they never came back for their gold.
The true wealth of a country, apart from its natural resources, is its people. In old age
Thomas Jefferson suggested that every time half the population had passed away there should be a revision of the Constitution, the living citizenry being the sole source of power and authority. They would then agree on the new form of the institutions by which they would govern themselves. So much for ‘originalism’!
What I perceive as an outsider - but I have a dog in the fight, as the next two generations of my family are US citizens - is the progressive trashing not just of the US economy but of its institutions also. Whatever the outcome of the multiple trials and official investigations concerning the egregious Mr Trump, it looks to many as though the courts and agencies of America have been politicised and weaponised to prevent his standing again for the Presidency and to preserve some kind of ‘business as usual’ for the ‘uniparty’ establishment. The result is a dangerous diminution of the public trust in institutional impartiality and justice that holds a vast and disparate nation together - ‘Out of many, one,’ a motto that needs urgent attention.
