I am not really shocked by the article.

The U.S. is too close to utilization boundaries. With no real avenues to fix the problem (increase jobs, manufacturing, exports), IMHO this is just the beginning of foreign (Asian, Mid-East) investors calling the shots in the U.S.

To preserve our independence, we must not let our rulers load us with perpetual debt. We must take our choice between economy and liberty, or profusion and servitude. If we run into such debts, we must be taxed in our meat and drink, in our necessities and in our comforts, in our labors and in our amusements. If we can prevent the government from wasting the labor of the people under the pretense of caring for them, they will be happy. - Thomas Jefferson

the negative correlation was pretty shocking. I mean seriously.

If we randomly distributed amounts of stimulus cash to the states it would be more likely to actually target boosting employment than what's being done now.

The reception at big orange is mostly positive, but there's some "just give it time" type response.

I hope that they are right, but it's been nearly 4 months since the stimulus was passed.

Each passing month means that the amount of money that has to be spent to fix this grows exponentially.

hopefully correctly at Big Orange.

From Reuters: As UAW fades, so does a path to U.S. prosperity

 

DETROIT (Reuters) - For decades, unionized manufacturing jobs have been considered the surest path to middle-class prosperity and realizing the vaunted American dream for blue-collar workers.

The United Auto Workers helped make that dream a reality.

"We created the middle class in America," said Olen Ham, one of the few surviving members of the 1937 "sit-down" strike in Flint, Michigan, which won the first union contract with General Motors Corp.

Later contracts brought paid holidays, pension benefits and health insurance, enabling blue-collar workers to buy cars and homes and to send their children to college.

But the latest concessions by the UAW with automakers Chrysler LLC and GM will make the road to the middle-class much rougher to navigate for the next generation of workers.

 

I'm reading those sets of EIs over and I am thinking about 2001 recession. It seems to me the U.S. never recovered from 2001 and that the U.S. income, i.e. workforce, middle class went more in debt and lost standard of living, income, retirement funds, wealth. It was covered up by the housing bubble.

So, the question is, has their been some sort of wage assumptions in the above set of EIs that has "gone over" a standard deviation and is now having a macro economic effect?

Very good post NDD, instructive for those who don't know about these EIs.

I seriously think China only wants to the U.S. to "fix our economy" to the point it does not stop them from overtaking the world as the #1 economy, which they are on track to do in about 3 more years as I recall (it's amazingly fast, the China PNTR is only 9 years old and the projections are something like that, maybe 5 years).

Finding out just how much of the financial TARP/TALF went to China indirectly might be interesting. I know they demanded the U.S. "protect their investments" but I did not see China as a recipient (France on the other hand was) of any CDS payouts, etc.

No, clearly you do not know the statistics on what is going on with guest workers and no they are not here because they have skills not available in the United States, which has been shown in study after study, from the GAO to the NAB.

Also, we don't do that absurd racist xenophobe insult here on EP.

And the ability of banks to provide credit. If they are not in position to lend then this will also be a drag on the economy.

In this much, we are in the same situation as prior recessions since WWII ... the downturn in consumption demand is not only those who cannot spend, but also those who are not sure whether or not they can spend.

When the economy hits the trough and there is a widespread perception that things have become as bad as they are going to get, those who find that they escaped the ax this time will engage in consumption that was postponed during the period of greatest uncertainty.

The problem is deeper than that ... the problem is, that resiliance by itself is not likely to be sufficient for a strong and sustained recovery ... and absent a Job Guarantee program, a strong and sustained recovery is required to see a substantial increase in employment.

Absent government policy, the four available growth drivers are investment in productive capacity, construction investment, debt-financed consumption, and exports.

Construction investment and debt-financed consumption are squashed as potential growth drivers by the ongoing weakness of balance sheets in the Finance Sector. Investment in productive capacity and exports are quashed by the determination to maintain an overvalued exchange rate, to maintain the lie about the affordability of our network of over 700 overseas bases, and the determination to maintain slack labor markets in service of the profits of large corporations.

And the Stimulus spending already in place is by design intended to cover less than half of the gap between current output and full employment output.

So absent government policy change, the recovery is likely to be sluggish at best, and could well run out of steam once postponed consumption has been met ... it could turn out, in other words, to be the GDP equivalent of the dead cat bounce.

Government policy can address that, but only if Congress decides to do so. And in order for Congress to decide to address the problem, we need a different Congress.

This is quite like the situation in the early years of the Roosevelt administration. If we only had the policies of the first two years of the "New Deal", it would have been a fairly miserable failure. It was, rather, the election of the New Dealers to Congress that led to the political pressure that created the far more important "Second New Deal".