“Dr. Cummings, how have you been?” John began. The two men bantered back and forth for a few minutes so the remote editing team would have whatever they needed as a lead in to suit their format.
Then the actual questioning started. John began with, “Dr. Cummings, the last time we spoke you seemed sure that our economy was in dire straights. Could you elaborate more on that? What signs are showing you that we may be reaching the tipping point?”
Dr. Cummings answered with, ” Well, let me just give you a quick laundry list of easily verifiable facts. Anyone with an internet connections could check the veracity of these very easily.'
‘First the official US unemployment rate has not been below 9% since April of 2009- and as I mentioned last time we spoke- The real unemployment rate is much higher. The blue collar numbers alone are stunning. 19.5% of Americas blue collar workers are unemployed or underemployed. Compare that to 2000 where the number was only 7.2%’
‘We have lost 10% of our middle class jobs in that same period of time. We reported 72 million middle class jobs in 2000 today there are only 65 million middle class jobs- but our population is rising so this number is compounded.’
‘In fact! The US now employs about the same number of people in manufacturing as we did in 1940- when we had only 132 million people living here- as opposed to today’s 300 million. More than twice as many people.’
‘We continue to bleed jobs with no end in sight. In 1998 25% of the worlds Hi-Tech export was the US’s compared to China’s 10%. Within ten years we had dropped to less than 15% while China had grown to 20%- It has been a shift that has not stopped, or even slowed down.’
‘These job numbers are really bad in certain areas. For instance in El Centro, CA 24.3% of the population are officially unemployed.”
“Dr. Cummings, What do you mean when you say officially unemployed? Is there an unofficial unemployed?” John queried.
“In a word- Yes.” Dr Cummings replied. “ in the beginning of 2007, there were about a million Americans which had been unemployed for 6 months or longer. Today- about four years later- we are looking at 6 million. But that is not the horrible side. There are actually many millions of people who have stopped even looking for jobs, and that no longer are collecting unemployment- even though congress has extended it beyond all precedent. They no longer qualify. They have been looking for work literally for years. Some people are putting the US unemployment rate closer to 18%, and they are making good points.”
“What about the Housing market? Are we seeing better news there?" Asked John.
“The last Census gave us lots of useful numbers- such as the 6.3 million homes for sale or rent in the US- that is by far the record by the way.’
‘CoreLogic came out with numbers showing housing prices have declined for the last three months in a row. That is a full quarter! This is at the same time the average 30-year fixed rate mortgage rates jumped 11 basis points in one week. And if that wasn’t enough o scare off US homebuyers, the banks are now talking about requiring a 30% down across the board, regardless of credit history. With 22.5% of all US residential mortgages underwater, which simply means negative equity, at the end of the third quarter; who can blame them. The banks figure that they would be breaking even right now if they had required this from day one.’
‘Meanwhile our property values are still shrinking in many places in the US. The average home price has dropped 63% in four years in Merced, CA. Los Vegas and Detroit are not far behind.”
“Isn’t the new government going to fix all of this?” Asked John.
“It would be nice to think so, but it is a bit of a Gordian knot. On a state level, New York and California may just be out of luck. In California Jerry Brown has to find 29 billion more to cut from the state budget for this year alone. The key word there is MORE, they have already been cutting.’
‘Detroit mayor Dave Bing has come up with some austerity measures to try and stop the hemorrhages there. He wants to cut 20% of the city of Detroit off from all social services. Including road repairs, street lights, garbage collection, and police patrols. It’s no wonder houses in Detroit sold on ebay for $10.00 this last year.’
‘Camden New Jersey, which happens to be the second most dangerous city in the US, is laying off about half of it’s police in a desperate attempt to stay afloat.’
‘All over the States, the local governments State and Town, have begun “police response fees” For example here in NY, the mayor is pushing a fee of $365.00 if police are called to an accident with no injuries. If injuries are present, fuel spills, or the “Jaws of life” are employed the fees will be much higher on an ala' carte system. They also will be sending out “Organ rescue” Ambulances to accident scenes. I guess in case you can’t afford the rescue fee.”
“That’s disturbing!” John replied. “But what about the Federal government. I was alluding to the new congress.”
“Well, they certainly have their work cut out for them.” Dr. Cummings replied. “ The US is going to have figure out a way to roll over existing debt, while financing new debt equivalent to 27.8% of GDP in 2011.’
The US government budget deficit increased to $150.4 billion last month. $150.4 billion missing dollars we need to find or borrow to close our budget. This is the largest November deficit ever. Bear in mind that if you were to count a dollar bill every second without rest it would take around 33 years to reach a billion. For our November deficit in 2010, our counter would have to count for 4965 odd years, a dollar bill every second, without stopping to reach OUR DEFICIT FOR NOVEMBER 2010. It would be about 500 years if he counted hundred dollar bills’
‘I heard some numbers on the radio on the way here. I haven’t had time to vet them. But I do believe them to be accurate.’
‘It took from 1776, when the United States became an independent country, until 1990, the year after the Berlin Wall fell signaling victory in the Cold War, for the federal government to accumulate a total of $3 trillion in debt.’
‘According to the Treasury Department. It only took from Jan. 20, 2009, the day President Barack Obama was inaugurated, until Oct. 15, 2010, for US administration to add $3 trillion to the federal debt. Don’t get me wrong, this is not Obama’s debt. It is CONGRESS who approved it. Whoever wanted it.’
“What about the rest of the world?” John inquired
‘China is slowly buying us, along with as much of the rest of the world it can. The Chinese government has gathered approximately $2.65 trillion in total foreign exchange reserves alone. They have drained this wealth from the economies of other nations. Not just the US, we are just the biggest players. In fact, the projections are theat the US trade deficit with China will hit 270 billion dollars by the end of 2010.’
‘Instead of reinvesting this money, China is just sitting on it. This is one of the biggest imbalances in our global economy.’
“Why are there so many conflicting opinions by the pundits if all of this is easily verifiable?” John asked.
“Look, everyone has their own ideas, agendas, soap boxes, politics, causes, and passions. I can’t begin to tell you why some people pull out statistics and say we have a solid recovery and some people say our future is bleak, but I will give you a few trends that you should watch, so you can decide for yourself what is going on.’
‘Quanitive easing – Be afraid! This is typically playing with fire. The US money base has more than doubled since the beginning of the recession. And Treasury yields have been rising steadily during the 4th quarter of 2010. Since the only way for America to print money, is to borrow it from the FED, it starts getting scarier.’