CRASH2: The fact that it hasn’t happened yet is not a reason for the smug to smirk

2359clockThe fiscal, economic, productivity and social theories of neoliberal globalism are clearly not working for anyone except a tiny minority making money on the bourses and/or in the shadow banking system. Both those areas of ‘commerce’ are now light years out of wack with the real physical economic situation on terra firma.

An overview

In the US, the so-called U3 figure gives an unemployment rate of around 5.3%, but no professional observer of any merit believes the number any more: starting with Bill Clinton and right the way through to Obama today, long-term unemployed (LTUs) are simply dropped off the statistics. It must rank as one of the greatest statistical scams of all time, but it is remarkable how few Americans are aware of what’s really going on there.

If one measures American LTUs using the pre-Clinton approach – so-called ‘U6’ – the US rate of unemployment today is 23%.

That’s a staggering 35.5 million unemployed workers.

Are the wages of those in work any better?

Nope: the US Labor Stats Bureau observes that 2015 wage levels are almost exactly the same as they were in 2010.


One in nine people of working age in the EU are unemployed (June2015)

That’s 23.3m men and women

In the year 2000 it was 20 million

In 2011, it was 22.7 million

Since 2007, real wages have been falling consistently.


In the UK, Real wages of the typical worker have fallen by almost 10% since 2008. That compares with the trend of 2% yearly real wage growth from 1980 to the early 2000s.

Over 40% of men and 27% of women in work say they would like to work longer hours.


Most markedly of all, Japan has seen a marked switch away from full-time into part-time work. The switch has been driven by employers, who have lacked confidence in Japan’s economic recovery. And it has occurred, by and large, against the wishes of Japan’s workforce. There are more people now working part-time in Japan who would rather work full-time than there are unemployed people.

After adjusting for inflation, real wages are falling rapidly. Thomsonreuter comments, ‘We are unlikely to see a meaningful pick-up in wage growth in Japan until employers have the confidence to take on more full-time workers, thereby reducing the pool of hidden unemployed.’


Some obvious conclusions
Employees in “westernised” States feel under-employed and underpaid. They feel less secure, less valued, and increasingly desperate. Not surprisingly therefore, productivity is falling everywhere. Neoliberal economists and politicians seem puzzled by this. I’m not surprised by this, just depressed at the blinkers-on-in-the-tunnel vision they employ.
78 million citizens in these four powerhouse economies are sitting doing nothing, and receiving poorer benefits as investment bank bailouts and liabilities have grown and grown alongside fruitless Quantitative Easing that has thus far been hugely quantitative but without easing anything to do with the problems faced by under-utilised labour.
The fiscal, economic, productivity and social theories of neoliberal globalism are clearly not working for anyone except a tiny minority making money on the bourses and/or in the shadow banking system. Both those areas of ‘commerce’ are now light years out of wack with the real physical economic situation on terra firma.
Why the stock markets must crash
While those of us rooted to the ground are seeing everything either stagnating or going into reverse, the bourses of the world have been powering ahead. Both Zirp and QE have aided in this process – by pushing cheap money straight to the bottom line, which in turn pushes up dividends and thus share values. Both these results are completely counterfeit and almost entirely uncorrelated to real levels of commercial output, sales and profits.
The first major sign of reality intruding has made itself felt on the Shanghai Index. The rout there has only been stopped by draconian panic measures by Beijing. Risibly, the Chinese measures have caused a rebound on other stock exchanges and pumped up the oil price, but this is merely tickling the avalanche: in the last three weeks, the departure of dollars from western stock markets has been in the billions – and accelerating noticeably.
The increasing use of short-term debt to rush into false Bull surges acts as a panic accelerator once the tide turns: investors wind up selling not just to get out, but in order to raise money to pay off debts incurred in acquiring loss-making stocks. It really is a case of the Dutch Tulip piercing the South Sea Bubble.
In a last desperate bid to boost exports back up to previous levels, Beijing has announced it will let the Yuan float somewhat. In a world where poor demand is driving down prices anyway, this is a bit like lighting a fuse and then rushing to beat it to the powder keg. Other Asian suppliers will respond, Western goods will become even less competitive, deflation will worsen, and cash-strapped workers will buy cheap – thus raising the West’s import bills. At the end of that road, everyone dies.
When will they make an end of it?
It’s no good smirking at how many times I’ve called the crash outcome since 2009: this is worse than Schadenfreude – it’s staying in the queue and giggling as the bus ploughs into it. The simple truth is that had banking madness been controlled and sovereign fiscality forgiveness been applied, we could handle what’s coming. But the kicking at incoming tides has continued unabated. Without fiddled figures, money-printing, QE, Zirp, price rigging, and gold price suppression, Crash2 would be long gone by now.
The fact that it’s now roughly twelve years late means the tectonic fault/volcano magma principle applies: the longer nothing happens, the more likely it is that San Francisco will be flattened and Pompeii buried.
If you trawl around the better-informed business and investment websites, almost all of them now expect a major stock market correction in 2015, hardly any of them believe the euro has a long-term future, nobody thinks the EU is really facing up to its migrant emergency, and only the official mouthpiece nitwits like Hugo Dixon believe debt forgiveness can be avoided.
The Social response
Once the unpicking becomes unravelling and then eventually chaos, everything on the Western political landscape will change: the US Presidential election, the UK’s EU referendum, the reaction of ClubMeds to further austerity, the Australian liberal government, and the Abe administration in Japan will all be facing uncharted shallows at the same time.
Most disturbing of all, the rekindling of tired old Marxist claims to have a monopoly of wisdom when it comes to social and economic engineering will quickly become a conflagration. Those who believe in scaling down towards community mutualised entrepreneurialism will be pushed aside by the collectivist sloganeers.
If that happens, it will prove to be the final curse of neoliberal lunacy.