PeakTrader.com

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PeakTrader:

There are several major reasons why domestic demand has been weaker after 2000.

1. U.S. firms have more market power, after the quick and massive creative-destruction process, mostly from 2000-02. So, rather than prices falling, profits rose, which reduces demand for those goods. This is particularly true in the Information-Age and Biotech Revolutions, e.g. paying too much for internet services, iPhones and cell phone services, new drugs, etc..

2. More regulations (federal and state), which are regressive, have driven-up the cost of living. So, there’s less to spend on everything else, ceteris paribus.

3. More taxes, fees, fines, fares, tolls, etc., which much are also regressive, including by state and local governments.

4. Higher gasoline prices, from the oil shock and Peak Oil, is a tax on consumption.

5. Imports became increasingly cheaper. So, there was likely some shift from domestic goods to foreign goods.

It should be noted, real wages would be higher with lower prices or a lower cost of living. However, inflation has become increasingly less of a problem, because the U.S. has been like a Black Hole in the global economy, attracting imports and capital, and even the owners of that capital themselves. Moreover, it should be noted, the U.S. has bridged the low income and high consumption gap with mountains of household and federal debt.

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Unemployed face tough competition
September 4, 2011

"America's 14 million unemployed aren't competing just with each other. They must also contend with 8.8 million other people not counted as unemployed -- part-timers who want full-time work.

And the unemployed will face another source of competition once the economy improves: Roughly 2.6 million people who aren't counted as unemployed because they've stopped looking for work."

Over 20 million full-time jobs are needed, which include part-time workers who want full-time jobs, the unemployed, and those who stopped looking for work (125,000 to 150,000 jobs are still needed each month just for population growth).

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There’s massive excess capacity, even with some destruction of capacity in this deep depression, which began in June 2009 (e.g. $5 trillion of additional federal debt, workers who’ve been unemployed and underemployed too long, early forced retirements, more going on disability, extended unemployment benefits, etc.).

Once jobs are available, many people, who dropped out of the workforce, or stopped looking for work, will come back in. So, the unemployment rate will likely rise with faster job creation. Over 12 million jobs are needed to reach full employment. Non-financial corporations are hoarding $2 trillion in cash or cash equivalents, earning enough interest for capital preservation, while banks are hoarding over $2 trillion of excess reserves.

We not only have massive excess capacity (e.g. labor and capital), we also have weak demand, which will likely remain weak, because this year we began substantial contractionary fiscal policy, and also the “middle class” will pay more for health care and spend less on everything else. We need economic policies that will turn people receiving government benefits into taxpayers.

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