The Employment Figures for May were abysmal, proving that QE1 and QE2 have been an abject failure in improving the economy. The Federal Reserve wasted $2.0 trillion in these programs without creating any meaningful recovery or jobs improvement. This fact is no longer lost on the markets. We knew this effort would fail as there was a fatal flaw in it from the very beginning, which we have been pointing out for two years. That fatal flaw is that the cash went to Wall Street instead of Main Street, instead of households, instead of small business, where the real economy occurs and where real jobs are created. Wall Street did not pass the money down to households because that is not what they do. Instead they took the cash and bid up the prices of financial instruments, including stocks, commodities and bonds, creating worldwide inflation in food and energy, further exacerbating economic struggle, and virtually assuring a double dip recession/depression. Without giving households cash, folks cannot come up with the down payment money required to purchase real estate, which in turn has driven housing prices lower, which has wiped out any down payment money from equity positions that used to be held in higher priced real estate, but has now been wiped out by falling housing prices. Without down payment money, the real estate market is frozen, and values (collateral) are spiraling lower, below outstanding mortgage and home equity loan balances financing those properties, increasing short sales situations, where sales prices are less than what is owed on properties. Households are 70 percent of the economy, consumer spending. They are losing jobs, transferring to lower paying jobs, settling for part-term low paying jobs, unable to find cash. Weakened financial positions means they cannot even access cash from banks, no longer qualifying to borrow.
The 27 jobs reports since QE1 started have not been able to keep pace with population growth demand for jobs, have not been able to reduce unemployment in real terms when all underemployed people are considered in the count. QE1 and QE2 have failed to produce jobs growth.
May's unemployment figures were absolutely awful. The mainstream press reacted negatively to the announcement by the Bureau of Labor Statistics of the Labor Department that 54,000 non-farm payroll jobs were created in May. But the truth is, it was much worse. This 54,000 figure includes a whopper of a lie, 206,000 CESBD make believe, guesstimate jobs they hope and think that new businesses they did not count may have created in May. In other words the BLS fudged the real employment growth figure by 206,000. The truth is the economy lost 152,000 jobs in May. When we consider the economy needs to produce 150,000 new jobs per month just to breakeven, May's figure fell short of breakeven by 300,000 jobs!!!!
Our plan to fix the economy, which we proposed at the very beginning of this economic recession from October 2007, has been a trickle up strategy, and we continue to lobby for this fix. In other words, the Fed needs to print cash and buy newly issued Treasury Bonds to the tune of several trillion, but this time the cash must go to households in the form of a massive income tax rebate. The Treasury should take the cash, and rebate at least one year, maybe even two years of income taxes to every household, with a minimum payment of $15,000 per household. Households would then be required to pay down debt with half the cash they receive, which would improve household balance sheets. It would also improve Bank balance sheets, lower their non-performing loans, and improving their risk based capital ratios. This massive loan repayment would create a need for banks to increase their lending appetite to improve net interest margins and profitability. Household balance sheets would improve, allowing them to qualify for more loans. Cash in the hands of households would go a long way toward providing down payment money to purchase real estate, kick starting the housing market, adding millions of jobs in construction, manufacturing companies who supply construction materials, real estate firms, and financial institutions.
Cash in the hands of households would boost consumer spending, which would boost small business revenues, boost demand for small business products and services, incenting small businesses to hire workers, helping the employment situation in America. Large corporations would benefit because small businesses would need to resupply themselves to meet increasing demand from households, boosting demand for large corporation products and services, boosting large corporation revenues, increasing their need to hire workers. Wall Street would benefit as large corporations would need investment capital to expand to meet rising demand for their products and services. Tax revenues to local, state and federal governments would rise at every level of spending, fixing their balance sheets, boosting government sector hiring, and reducing government budget deficits, lowering sovereign and municipal debt default risk. The federal government could then take the increased tax revenues from GDP growth and retire Treasury securities sold to the Fed for cash, which was initially raised to rebate taxes to households and kick start the economy.
The Central Planners better do this soon, or else an economic depression is coming, perhaps sooner than anyone can imagine. We see the technical indicators warning that a multi-century stock market top is months away. This is no time for the Fed and Treasury to be shy. They better lower the tax burden on Americans and get cash back in the hands of consumers yesterday or else. Time is just about up.
The Labor Department reported Friday that there are 13.9 million Americans out of work, plus another 2.2 million who are out of work, looked for work in the past year, but did not look for work the past four weeks, many of whom are discouraged. Plus, there are 8.5 million who are underemployed part-time workers who want full-time work, but involuntarily are settling for part-time work. Not counted are the full-time workers who took drastic pay cuts and are working for something close to minimum wage, whereas before were earning household supportive wages. So at least 24.6 million Americans are un/underemployed, 16 percent, or one out of every six people eligible to work. The BLS revised March and April's non-farm payroll figures down.
The U.S. Dollar is being devalued by the Federal Reserve. It is headed for 54ish, per the target from the above pattern.
QE2 is nothing more than devaluation of the Dollar for the benefit of only Wall Street Money Center banks. This is a fraud on the American people who will get nothing from QE2, no jobs, no reduction of their debts, no increase in the value of their homes, no reduction of taxes, no cash, nothing. QE2 is also responsible at least in part for massive food and energy inflation which is damaging global economic growth. How? Because Wall Street has found itself with too much cash after selling fixed income Treasury and garbage securities to the Fed, and has bid up commodity prices with this cash as it seeks trading profits from commodity purchases with this newfound cash. Bernanke will one day be known as the man who was a key catalyst driving global economies into the abyss.
Economic recovery has to be bottom up, trickle up, starting with households and ending with Wall Street, not the other way around.
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"Jesus said to them, "I am the bread of life; he who comes to Me
shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
For this is the will of My Father, that everyone who beholds
the Son and believes in Him, may have eternal life;
and I Myself will raise him up on the last day."
John 6: 35, 38, 40