Recession @ MindSay 
Yves Smith (http://www.globalstrategywatch.com/independent-insight/990e5c20df26aa346d093495f659e026/) writes, “I've been meaning to discuss how increased income disparity is bad for economic growth, because in the end you wind up with insufficient labor income to fund consumption . . . and too much capital chasing too few investment opportunities. . . . It turns out I was beaten to the punch by nearly 50 years [since]. . . former Fed chairman Marriner Eccles . . . links the consumption shortfall directly to a shift in wealth towards the top. And some of the other patterns of the Twenties, such as debt-fueled growth, are worryingly familiar.” Strange how Robert Reich and other economists should be pointing this out now, especially since the shift in wealth towards the top and debt-fueled growth have been going on for at least three decades. What good are economists who don’t raise policy issues before their disastrous effects happen?
What Fed chairman Eccles described are simple mathematical results. An economy, regardless of the economic theory that governs it, consists of workers employed by enterprises that produce goods and services for sale either domestically or internationally. The value of the products and services sold must equal the sum of the wages paid to workers, the overhead of the enterprises, and their profits. If all the products and services are sold, the sum of the incomes of the buyers must equal or surpass the value of the products and services, for if the sum is less, the products and services could not have been bought (unless the shortfall were met by borrowing), in which case the economy would have to shrink. If the shortfall were met by borrowing, the future incomes of the buyers would have to be sufficient to both buy additional products and services and service the debt. The result is that in the absence of growing wages, buyers will eventually reach a point where they can neither continue their levels of consumption nor service their debt, and the economy ceases to function.
The American economy has been characterized over the past several decades by policies that were bound to produce this result. First American companies shifted a great deal of manufacturing offshore. Second, they created conditions designed to hold down wages. Third, they made borrowing easy but expensive.
The first of these made consumption the economy’s driving force (perhaps 70% of the economy is consumption driven.) If the borrowing had not been made easy, consumption, and the economy as a whole, would have collapsed because of the restraint on wage growth that resulted from the second policy. But given that restraint, the debt assumed by consumers had to eventually reach a level that made it unserviceable. The only possible result of these policies is an economic collapse.
That economists could not have foreseen this consequence is incredible.
© 2008 John Kozy
Once again, the mainstream media is just now realizing the economic truths. Too bad, so sad.
AP
Employers Slash Jobs by Most in 5 Years
Friday March 7, 9:39 am ET
By Jeannine Aversa, AP Economics Writer
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WASHINGTON (AP) -- Employers slashed jobs by 63,000 in February, the most in five years, the starkest sign yet the country is heading dangerously toward recession or is in one already.
The Labor Department's report, released Friday, also showed that the nation's unemployment rate dipped to 4.8 percent as hundreds of thousands of people -- perhaps discouraged by their prospects -- left the civilian labor force. The jobless rate was 4.9 percent in January.
Job losses were widespread, with hefty cuts coming from construction, manufacturing, retailing, financial services and a variety of professional and business services. Those losses swamped gains elsewhere including education and health care, leisure and hospitality, and the government.
The latest snapshot of the nation's employment climate underscored the heavy toll of the housing and credit crises on companies, jobseekers and the overall economy.
To provide relief to persistent credit problems, the Federal Reserve announced Friday additional steps to inject cash into the nation's financial system to keep banks lending to customers.
The central bank will increase the amount of loans it will auction to banks on March 10 and March 24 to $50 billion each, up from the $30 billion apiece originally planned.
The Fed also said that starting Friday it will enlarge another series of transactions, called repurchase agreements, so that they will pump a net total of $100 billion into the financial system at any one time.
The Labor report also showed that the job losses suffered in January were worse than the government first reported. Employers cut 22,000 jobs, versus 17,000.
It was the first monthly back-to-back job losses since May and June 2003, when the job market was still struggling to recover from the blows of the 2001 recession.
The health of the nation's job market is a critical factor shaping how the overall economy fares. If companies continue to cut back on hiring, that will spell more trouble.
"It certainly solidifies the notion that the economy has fallen into a recession," said Ken Mayland, economist at ClearView Economics.
Friday's report was much weaker than economists were expecting. They were forecasting employers to boost payrolls by around 25,000. However, they were expecting the jobless rate to edge up to 5 percent. The reason why the jobless rate went down, rather than up, is because so many people stopped looking for work and left the labor force.
Workers with jobs, however, saw modest wage gains.
Average hourly earnings for jobholders rose to $17.80 in February, a 0.3 percent increase from the previous month. That was on target with economists' forecasts. Over the last 12 months, wages were up 3.7 percent.
With high energy and food prices, though, workers may feel squeezed and feel like their paychecks aren't stretching that far.
With the economy losing momentum, fears have grown that the country in on the brink of its first recession since 2001 or is in one already.
Economic growth slowed to a near standstill of just a 0.6 percent pace in the final quarter of last year. Many economists predict growth in the January-to-March quarter will be worse -- around a 0.4 percent pace. Some believe the economy is shrinking now.
Spreading fallout from the housing and credit debacles are the main factors behind the economic slowdown.
People and businesses alike are feeling the strains and have turned cautious. Adding to the stresses on pocketbooks, budgets and the economy: skyrocketing energy prices. Oil prices have set a string of record highs in recent days. Gasoline prices have marched higher, too.
To help shore up the economy, Federal Reserve Chairman Ben Bernanke signaled last week that the central bank is prepared to lower interest rates again. Economists predict another cut on March 18, the Fed's next meeting. The Fed, which has been slicing the rate since September, recently turned more forceful. It slashed the rate by 1.25 percentage points in the course of just eight days in January -- the biggest one-month reduction in a quarter century.
The White House and Congress, meanwhile, speedily enacted an economic relief package, including tax rebates for people and tax breaks for businesses. That -- along with the Fed's rate cuts -- should help give a lift to the economy in the second half of this year, says Bernanke.
Still, unemployment is expected to move higher this year. The Federal Reserve predict the jobless rate will rise to as high as 5.3 percent in 2008. Last year, the unemployment rate averaged 4.6 percent.
All the economy's troubles are putting people in a gloomy mood.
According to the RBC Cash Index, confidence sank to a mark of 33.1 in early March, the worst reading since the index began in 2002.
- a looming recession
- a war without end in sight
- terrorism
- Heath Ledger died
- the Democrats are trying to choke each other
- the Republicans are trying to choke each other
- the writers won't write for your favorite TV shows
- Scientology
Chill a bit. Breathe. Yeah. BREATHE. In, and out. Nice and deep. You're doing great.