Last week was a disaster for those who would have us continue to have faith that growth will save us. This week the markets must rally to restore hope to the faithful. If it does not there will be a crisis – of faith.
The signs of growth are like the promise of Christian Redemption. The sacrament must be shown to the people. Hoc est Corpus must be seen to work. The Fed must do its job. But this week it will be hard to do.
This week the revised figures for second quarter US GDP will be issued. It is expected they will massively revise growth down from the initial estimate of 2.4% to an actual 1.4% – a 40% drop!! In short the rosy picture of growth was largely a fiction.
1.4% is not growth. It is shallow breathing.
MarketWatch tries to massage this disaster away by saying,
“The downward revision will be almost entirely due to stronger imports and weaker exports.”
Which it then rather marvelously describes as,
“…the U.S. spread[ing] its wealth to its trading partners.”
Well that’s all right then isn’t it? Er no. Higher imports is why there are fewer non-service jobs in America and why unemployment claims went back up to 500K, the highest level since November ’09. You can’t create growth from imports. Those are someone elses growth. Weaker exports means you are losing. It also means someone else is winning the battle of competative devaluation. In this case Europe and China are beating the US.
Undeterred by this, MarketWatch goes on to open further vistas of stupidity. ‘Final sales to domestic customers will turn out to be strong!’ Hurray the consumer is recovering! Never mind that what she purchased was imports. Never mind that. Consumption is a good sign.
Except that this idea clashes with another blunt and ugly fact that surfaced last week. More Americans are taking out loans or hardship withdrawals from their 401(k), their state pension, than have done so for the last ten years. 11% of those who are actively participating in their 401(k) took money out. These are people who are in such financial trouble they are being forced to eat into their pension. The same figures showed that those who took a hardship withdrawal, did so two years in a row, were on average between 35 and 55 and took, on average, $8650 for the initial withdrawal.
You tell me. Is that good news and growth?
What I see is unemployment rising like a cold tide around people who are running out of cash and turning to their last stash of savings in their pension. These people used to believe in growth. But for how much longer? What frightens the bankers and the Fed is what might happen if these people lose faith in the gospel of salvation through growth.
What happens if the Priesthood lose control of the hearts and minds?
The evidence in people’s lives and communities is accumulating.
In ’07 3 US banks collapsed. in ’08 it was 26. In ’09 it jumped to 140. This year to date there have been 118 bank failures. If the rate does not get worse that will mean 185 for the year. Chances are it will get worse.
The FDIC added 73 banks to what it calls its list of U.S. “Troubled Lenders” – banks in trouble – increasing the list from 702 to 775. Things are getting worse not better.
I think it is time we looked hard at the accumulating evidence and considered that the twin gospels of Growth and Gloabalization are both bankrupt.
At the same time, the percentage of 401(k) participants that had an outstanding loan from their account rose to a record high of 22% in the second quarter. The average loan amount was $8,650 at the end of the quarter. CNN
I didn't know a thing about this, and looked, so the 401K is administered by corps like Fidelity, and there is no state pension as we know it ?
Tks for reply on last post question !
Well I find pensions a bit of a mine field as well. There are so many permutations each with its own ways of being subverted and pillaged.
The only solid thing you can say without fear is that they are all in serious, serious trouble. Most will be bankrupt within two decades.
I hesitate to try to answer any detailed questions about the US system. I just don't know enough. Sorry.