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    Unemployment


    March 8th, 2010

    Comments (16)
    Read by 46 people

    Well, the train is pulling out of the station. Gold has said goodbye to the $1,000 level and is off for northern climes. It is not your last chance to get on board, but it is your last chance to get on board at these low, low prices. The hard analysis of the past few months has been identifying the intermediate bottom, but now that that is in it is time to step back and once again focus on the big picture. Friday’s Wall Street Journal has an excellent article on unemployment and the “minimum wage” law, and this is a very good time to discuss this most important subject.

    The subject of unemployment is the centerpiece of our modern economy. Let us imagine an economic discussion between a “liberal” and a conservative:

    “Liberal:” I am a sensitive, caring person. I feel the pain of the lower members of society, and I am on their side. I am in favor of all measures intended to reduce unemployment.

    Conservative: That is very commendable. So you go down to your local soup kitchen and devote hours each day to helping the poor?

    “Liberal:” No, of course not. But I favor social measures to raise these people up to a higher level.

    Conservative: Ah, I see. You favor giving my money to the poor.

    “Liberal:” You selfish monster, rugged individualist. How can you look yourself in the mirror in the morning?

    Conservative: Oh, I’m sorry. I’m sorry. I’m so ashamed.

    The reason that unemployment is so important is that, while it seems to be a political or moral issue, it is also an economic issue. And in fact it is the crucial economic issue of our age. As I have noted in the past, Franklin Delano Roosevelt was a Wall Streeter. In the 1920s, he was the manager of a vulture fund (so called because it swoops down on troubled companies and gobbles them up). On his first day in office, he rammed through legislation to give the power to create money to the commercial banks (working hand in glove with the Federal Reserve). It was passed without hearings in one day (illegally), and members of the House of Representatives did not even have copies of the bill to read when they voted on it.

    FDR’s objective was to help his Wall Street buddies. He knew (from the experience of WWI) that the issuing of new money by the banks also helps their corporate loan customers, and this is done at the expense of the working people, who suffer a decline in their real wages. In short, FDR wanted to rob from the poor and give to the rich.

    If this is what you are trying to do, then you naturally can’t tell anybody. And the well-known positions of the New Deal – that it was robbing from the rich to give to the poor and that it was the party of the working man – were blatant lies. The conservative opponents of FDR were unable to counter his policies in the public mind because they were afraid to penetrate the mask of altruism which he employed.

    During WWI, prices in the U.S. had doubled. This had caused a significant decline in the real wages of the average working man. At that time, almost every American was saving for retirement, and the depreciation of the currency sharply reduced the retirement savings of the average American. The Republicans of the day arose as the champions of the working man. They adopted the policy of the “good 5 cent cigar,” which meant a reduction in the money supply and prices back to the levels of 1914. This policy was successful, and prices (Wholesale Price Index, or what we today call the Producer Price Index) by 1933 were back down to their level of 1914 (and 1793). America had experienced 140 years of stable prices, and the savings of the average Americans were restored to their pre-World War I value.

    The Republicans were aware that their policy would cause high unemployment. The exact same thing had happened in the 1870s. At that time, the real wages of the working class were also being restored (after being forced down by the paper money of the Civil War). Higher real wages, of course, lead to unemployment. Employers cannot afford to pay the high wages. Also, wages were not being increased in nominal terms. They were only increased in real terms, in terms of what they could buy. But many working people do not understand real wages. They only think of the nominal figure they are receiving (not what it can buy). In the 1870s, these nominal wages were declining, and many wage earners felt insulted that they were being asked to accept a wage beneath their social status. Rather than accept what they felt was an insult, they lived off their increasing real savings while they sought for a job with pay that was much too high for the prices of the time. An incident from the 1930s illustrates the psychology. A businessman was trying to start up an operation and could afford to pay $40/wk. (about $680 per week in today’s money). No takers. So he offered $50/wk. But to get the job in these “bad” times, you had to kick back $10. The workers felt, “I’m a $50 man. I just have to kick back because my employer is unethical, but my status in society is recognized. In the 1870s, America had a free market, and so the unemployment was speedily reduced. The Republicans of the 1920s assumed that the same thing would happen again.

    However, the New Deal had a good thing going. They were robbing from the poor to give to the rich. But they had to pretend to rob from the rich. The paper money and easy credit policies of FDR directly benefited Wall Street and the banks. Low real interest rates cause a rise in both stock prices and corporate profits. (Most corporations carry a significant amount of debt.) And of course, it is very much to the benefit of these large corporations to pay lower real wages. Stock prices about doubled from just prior to FDR’s inauguration to the end of his first year in office and almost quadrupled by the end of his first term. (These profits far outweighed FDR’s progressive income tax, which was done for show and was filled with loopholes)

    The Republicans had pursued sound money policies from the end of the Civil War to 1933. These policies had been good for the country and good for the Republicans at the polls. American enterprise produced an explosion in wealth never before seen in any country in the history of the world. Real wages grew by an average of 60% per generation (taken as 30 years). Foreigners flooded into America (to get these higher wages) from all over the world. My ancestors immigrated to America at this time, and it is natural to assume that this large inflow (of immigrants willing to work for very low wages) would have caused unemployment among American workers. Natural but wrong. Historical Statistics of the United States, Colonial Times to 1954 (published by the U.S. Commerce Dept.) lists the unemployment rate for the U.S. in 1906 as 0.8%. That is, it was less than 1%. Those foreigners were being snapped up as they walked off the boat.

    This illustrates the unemployment problem of the time. (Today, of course, it is almost 10%.) Indeed, there was no word for unemployment in America prior to the 1870s because there was just no problem.

    Further, America is a very good model for the study of unemployment because it went through all of the stages which theoretical economics predicts. When the Pilgrims landed at Plymouth Colony, they were organized under communism. So the question of unemployment did not arise. They abolished communism in March 1623 (according to the diary of Gov. William Bradford). The conversion to private property “had very good success,” and the holiday of Thanksgiving was instituted to celebrate the new system of private property. This first Thanksgiving, by the way, was celebrated at the end of July 1623 (about Aug. 8-9 taking account of the calendar change of the 18 th century). Thus Plymouth Colony converted to a self sufficient economy.

    Then people began to specialize (division of labor), and each person produced the goods at which he was best (leading to another large increase in wealth). They exchanged their goods using the medium of money. Then, some of the older members of the community realized that they could increase production even more by hiring younger workers and training them. Thus was the relationship of employment born, and the producers of society became divided into employer and employee. This benefited both the young employee and the older employer. Everyone was better off.

    The type of phonies and frauds who pander to the paper money faction usually argue that a “capitalist” economy cannot provide full employment. (What the blazes is a capitalist economy? The term was coined by Karl Marx, and I have never heard a definition of capitalist. It changes its meaning from day to day and does nothing more than confuse people who think in terms of it. I advocate a free economy, not a capitalist one.)

    Is this true? Is a free economy unable to provide full employment? I would suggest that these people look at the facts. As the employer-employee relationship proved profitable, employers developed a hunger for more and more employees. They kept hiring more and more people. First they hired fellow Americans off the farms, and the late 19 th century is a time when Americans flooded from the farms to the cities to get the higher wages of a job. When they ran out of Americans to hire, they started to hire foreigners. The desire of American employers for more workers is insatiable, and there is only one force which can trump it.

    This is as follows. Once the New Deal had established (in people’s minds) that it was the party of the working man and that FDR was a traitor to his social class, it found that it needed to increase unemployment. If unemployment was temporarily high, ignorant working people would vote Democrat. High unemployment equaled a Democratic victory.

    One of the ways this was accomplished was by backing the Union movement of the day. Union workers (competing with ordinary Americans for jobs) were given the right (by the National Labor Relations Act) to beat up non union workers competing for the same job. These non-union workers were intimidated and forced into unemployment.

    Another of the ways was by enacting what are fraudulently called minimum wage laws. If you actually read these laws, they do not guarantee anyone a minimum wage. If the worker’s wage is to be raised, somebody has to pay the extra money, and these laws do not provide any extra money. The employer simply evades this intent by not hiring the worker, and workers whose labor value is not worth the legal minimum find themselves unemployed. The Friday WSJ article (“The Lost Wages of Youth”) demonstrated that the recent increase in the “minimum wage” (2007-09) from $5.15/hr-$7.25/hr caused massive unemployment, hitting the lowest level of workers hardest. Total teenage unemployment rose from 15% of the labor force to 27%. Black teenage unemployment rose from 38% to almost 50%. These unemployed teenagers, being idle, drift into crime, and the black-on-black murder rate in this country is horrific. (It should be noted that the first unemployment statistics to separate black from white unemployment showed that the two were almost the same. This was in 1940, when American society was openly racist and blacks were the victim of heavy discrimination. Since that time, due to the “minimum wage” laws, black unemployment has risen to double white despite numerous laws prohibiting discrimination by race.

    A third technique was to put burdens on employers, such as making them pay health care costs. Today this makes it almost impossible for older workers to get jobs because health insurance for these people is prohibitively expensive. In sum, the cause of unemployment in America is the (New Deal version of the) Democratic Party. If a magic wand could be waved which transported all Democrats to the planet Klingon, then unemployment would pretty much disappear in America, and our economy would dramatically revive. Meanwhile the Klingon economy would collapse, and their unemployment rate would go through the roof.

    But the most common way of increasing unemployment is via the Federal Reserve. The Fed has had a repeated policy since it was created of first easing and then tightening credit. The easing brings profits to credit sensitive industries (such as housing) and draws workers into jobs created in those fields. But then the money created by the Fed causes higher prices and a public demand for the Fed to tighten. Then we have a period of higher interest rates (e.g., 1979-81) and the jobs created originally are now abolished. (Today’s unemployment rate is mostly caused by the Fed tightening of 2004-06). I have charts on the economy going back to WWII, and one can clearly see the Fed easings, followed by a drop in unemployment, and the Fed tightenings, followed by a rise in unemployment. This is the part of the unemployment cycle which gets all the attention from our (short-term oriented) media.

    In these articles, I try to present an economic overview so that you can get an appreciation for the massive irrationality and ignorance of facts which pervades our society on the subject of economics. For people who already understand this and are looking for specific advice on how to protect yourself (and profit) from the dishonest policies of our government, I publish a fortnightly (every two weeks) newsletter which gives specific buy and sell signals and discusses tactics (such as whether you should be in gold or gold stocks, and what kinds of stocks). This newsletter is The One-handed Economist, and the cost is $300 per year. (It has proven a very good investment for subscribers over the past 10 years). You may subscribe either by going to my web site, www.thegoldspeculator.com and hitting the Paypal button or via the old fashion way by using the U.S. mail. Simply send a check to: The One-handed Economist, 614 Nashua St. #122, Milford, N.H. 03055. I am increasing the cash discount for using the mail to $10. So include a check for $290. (However, OHE has been at the same price for a decade, and a cost of living adjustment is due to keep the real price the same. This is a few months away.) We do not accept credit cards. OHE is sent primarily via e-mail, so be sure to include your e-mail address. But any subscriber is free to request regular mail delivery as well as e-mail.

    Thank you for your interest.

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    16 Comments...

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    1. Chris C. says:

      I disagree that if all the Democrats were to suddenly disappear one day that our unemployment would completely disappear. Look at the track record of the Republicans since 2000. Deficit spending via two illegal wars and later a financial crisis accompanied by an almost doubling of the size of the government thanks to 9/11 have led to a loss of productive jobs to the private sector. This was all work of the Neo-Cons who keep saying that it’s in our best interest to have a strong defense abroad so we can be safe at home.

      Perhaps the argument was more valid during the time of FDR, but today I see relatively little difference between right and left.

      Rate This Comment: Thumb up 0 Thumb down 0

    2. Patrick says:

      Exactly right Chris, they are all big-govt Progressives (in the Woodrow Wilson / FDR sense of the word).  Carroll Quigley must be so pleased.  The only fix I see is to get rid of all of them and start fresh by voting them all out on their butts… but unfortunately, the sheeple are not nearly knowledgeable enough or  ready to do that.

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    3. BleakoEcobamics says:

      Chris C.  — I think you have hit the nail on the head.  I see very little difference as well, the divide is between the “ruling elite” and the “general public” — and the arguments between Democrat vs. Republican is a false dichotomy that keeps the general public distracted from the real issues. 

      I have found it odd that family members from traditionally polar opposite ends of the spectrum are vehemently aligned on the issues that are priority now.  But yet they still identify themselves as “Dem” or “Repub” and consider each party superior.  And each missing the point right now IMSHO. Strange times we live in.  

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    4. infocyde says:

      The oligarpies  need to be broken up in order for all this to work.

      Rate This Comment: Thumb up 0 Thumb down 0

    5. infocyde says:

      Also trade policies that punish those who steal intellectual property must be enforced as well.  Also if we are going to provide health care to our citizens, trade policies will need to account for that when trading with countries that don’t.

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    6. Sam says:

      Comments….Very good points gentlemen, “Contraries are derived from a common medium” Aristotle. The powerful elites know that “submission is a natural instinct” therefore once you take God out of your heart, there is no vacuum in nature, something else must fill it, that is why the two party system.

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    7. Chris C. says:

      Sam, that is a very interesting statement. One interpretation of that is that the two party system, aka politics, has replaced religion as the de facto institution that people entrust, and entrust blindly and with fervor. The logical question that follows next is:

      Is it a requirement that humanity worship that which it believes to be the provider and caregiver for their well-being?

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    8. Chris, interesting question… I came across those over the Boortz.com last week and it may be applicable:

      Maybe you’ve never thought about this way … but let’s draw some comparisons on different types of education:

      If you send your child to a Catholic school it stands to reason that they’re going to learn that the Catholic church ought to be the very foundation for their lives.

      If you send your child to a Hebrew academy they’re going to be taught the religion and culture of Judaism.

      So … if you send your child to a government school why in the world would you expect them to be taught anything but that government is to be their very foundation and religion?

      When troubles arise the person who went to the Catholic school will turn to his Catholic faith; the person educated in a Jewish school will turn to his Jewish faith, and the person educated in a government school will turn to … what else? The government. So here we are at a point where the majority of the people in this country are now net tax consumers instead of net tax payers. This means that when you want something to be done, you are predisposed to rely on government rather than yourself to accomplish the task. You have a problem? The last thing you would expect is that you should solve it yourself. That’s the government’s job! And that leads us right back to The Community Organizer in Chief … Barack Obama.”

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    9. Sam says:

      Comments…..I guess you can say that Chris, but today people are lost as to what that is, the same trick has also been played by religion. Eample take christianity, or Islam the fundamentals are pure and one, christianity  divided from it’s original form you get protestant and catholic the two extremes, in Islam Sunni and shite, Just like the color spectrum, black and white come from a transparent meduim, once the intial divide is made then the whole color spectrum fills in, and every time you mix any two colors together you will get a whole new one. Just one example a sikh is a suffi muslim and hindu mix.To bring up the subject of unity these days is very difficult, first of all every loves the smell of his own dung,and right away you are accused of spreading hate.

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    10. Chris C. says:

      Mac, thanks for the info. This is all very interesting. It almost seems the way we were educated and brought up predisposes us to worship (I use the term loosely here) whatever is taught to us to be the center or our universe. It makes perfectly good sense that in an era when less and less people worship God or a god, that the state or federal government would surreptitiously take it’s place.

      My main quandary with this theory is how to explain you and I, and those of us who have seemingly broken free from this human construct. I was not brought up Catholic, Protestant, or any other religious faith.  But I was raised in a public school, and I can say looking back that one of the longest struggles of my life was the realization that much of what I had been taught in that school was wrong, or at least incomplete at best (when it came to history and economics especially). How come I did not cling to my indoctrinated ideals like so many others do? I wish I had some answers.

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    11. Sam says:

      Comments…..Chris regardless of how you were raised or educated, the truth is inside each and everyone of us. Search it out you will find it, I did.

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    12. Sam says:

      Comments…..Mac your point is right on, the best example in scripture is the story of Abraham, when he saw his people worshiping stones he asked the question, why would you worship what neither hurts or benefits you? The answer was,because that is what we found our parents worshiping. It
      didn’t make sense to Abraham and he went in search of God till he found the great cicrcle of light that encompases all things living.Today people are programed to worship what hurts them, I think it was Orwell that called it death worship.

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    13. We are proud parents.
      Sent our kids to Catholic school
      I was working too hard
      Today they are not blind.

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    14. Yassar says:

      Very interesting discussion guys, never thought of it that way with the school system.

      Just read an eye opening article, called: Against School How Public Education Cripples our Kids, and Why
      You can read it here: http://www.spinninglobe.net/againstschool.htm

      Here’s an excerpt: We have, for example, the great H. L. Mencken, who wrote in The American Mercury for April 1924 that
      “the aim of public education is not to fill the young of the species with knowledge and awaken their intelligence. … Nothing could be further from the truth. The aim … is simply to reduce as many individuals as possible to the same safe level, to breed and train a standardized citizenry, to put down dissent and originality. That is its aim in the United States… and that is its aim everywhere else.”

      Wow, the puzzle is really coming together now, how it’s all connected–the school system, the consumption and materialistic based society we live in, the dumbing down of the people into sheeple, blind obedience to the government…

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    15. Morgan says:

      ..jeje funy isnt ?? ..but here is something from the new york times.. and i hope mac slavo can give us a good answer to this..

      NEW YORK TIMES

      February 27, 2010

      China, Defying Global Slump, Faces a Labor Shortage
      By KEITH BRADSHER

      GUANGZHOU, China — Just a year after laying off millions of factory workers, China is facing an increasingly acute labor shortage.

      As American workers struggle with near double-digit unemployment, unskilled factory workers here in China’s industrial heartland are being offered signing bonuses.

      Factory wages have risen as much as 20 percent in recent months.

      Telemarketers are turning away potential customers because recruiters have fully booked them to cold-call people and offer them jobs.

      Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods.

      Rising wages could also lead to greater inflation in China. In the past, inflation has sown social unrest.

      The immediate cause of the shortage is that millions of migrant workers who traveled home for the long lunar New Year earlier this month are not returning to the coast. Thanks to a half-trillion-dollar government stimulus program, jobs are being created in the interior.

      But many economists say the recent global downturn also obscured a longer-term trend: China has drained its once vast reserves of unemployed workers in rural areas and is running out of fresh laborers for its factories.

      Since China does not release reliable, timely statistics on employment, wages are considered the best barometer of labor shortages. And temp agencies here in Guangzhou raised their rate for factory workers this week to $1.17 an hour, from 95 cents an hour before the new year holiday.
      The rate was 80 cents an hour two years ago, before the global financial crisis temporarily depressed wages and demand.

      The dearth of returning migrants set off a desperate scramble this week to recruit the workers who did step off long-haul buses and trains returning from the interior.

      At a government-run employment center in downtown Guangzhou, employers seeking workers outnumbered job-hunters Thursday afternoon.

      Outside, Liang Huoqiao, a 22-year-old plastics worker, joined a small group of men and women studying a 40-foot-wide list of companies seeking workers.

      “You can walk into any factory and get a job,” he said.

      The official China Daily newspaper said on Thursday that surveys of employers showed that one in 12 migrant workers was not expected to return here to Guangdong Province. Cities farther north along China’s coast are also running low on labor; Wenzhou alone posted a shortage of up to one million workers.

      Guangdong provincial officials announced on Wednesday that they were considering increasing the minimum wage, which varies by city and ranges from $113 to $146 a month.

      Higher wages could ease labor shortages by prompting factories to reduce their work forces.

      But many factories already pay well above the minimum wage. They are wary of further pay increases because it is not certain they can pass the increased costs on to their customers — in particular, strapped importers in the United States and the European Union.

      Rising wages suggest the re-emergence of a worker shortage that was becoming evident before the financial crisis. A government survey three years ago of 2,749 villages in 17 provinces found that in 74 percent of them, there was no one left behind who was fit to go work in city factories — the labor pool was dry.

      Mass layoffs in late 2008 and early 2009 because of the global financial crisis temporarily masked the developing shortage of industrial workers. But two powerful trends were still working to reduce the supply of young people headed for factories.

      For one, the Chinese government has rapidly expanded postsecondary education. Universities and other institutions of higher learning enrolled 6.4 million new students last year, compared to 5.7 million in 2007 and just 2.2 million in 2000.

      At the same time, China’s birth rate has been sliding steadily ever since the introduction of the “one child” policy in 1977.

      Labor shortages have returned quickly in recent weeks as these long-term trends have collided with a recovery in overseas demand for Chinese goods.

      Far more jobs are available these days in China’s interior. Government projects like rail and highway construction have absorbed millions of workers, particularly after Beijing allocated nearly $600 billion to economic stimulus spending in 2009 and 2010. Consumer spending is also rising briskly; auto sales more than doubled last month from a year before, and this has created many jobs in retailing, restaurants, hotels and other inland businesses.

      Even before the holiday, companies were struggling to find the employees needed to keep assembly lines running.

      At many factories, white-collar managers and engineers were forced to spend time on assembly lines to meet deadlines before the lunar New Year, because laborers were in such short supply. The managers often struggled with the tedious but intricate tasks required to make everything from toys to DVD players

      “People working in the office, like me, have been asked to help on the factory floor,” said Ling Niu, the sales manager at the Hengjia Electronics Company in Dongguan. “Of course, we can only help on the simpler tasks, such as packing.”

      The labor shortage is not benefiting workers just through higher wages. Personnel managers here say they are also abandoning the informal tradition of not hiring anyone over 35 — they say they are now hiring workers up to 40 years old, and sometimes older, despite concerns about whether they can keep up week after week with the rapid pace of Chinese assembly lines.

      It remains to be seen if Chinese factories will learn from their hiring difficulties now and be less quick to lay off workers during the next global downturn.

      The current system “is not stable, it’s not healthy,” said Han Dongfang, the director of the China Labor Bulletin, a Hong Kong-based group that advocates collective bargaining.

      Though the wage boost increases the prospect of inflation, it may have another more salutary aspect. The Obama administration has been pushing China to let the renminbi rise against the dollar, which would erode some of China’s formidable advantage in export markets. Rising wages in China have the same effect — while also giving Chinese families more spending power.

      Letting wages rise benefits workers, said Jing Ulrich, the chairwoman of China equities and commodities at J. P. Morgan. Letting the currency rise benefits currency speculators, she said.

      Mr. Liang, the 22-year-old plastics worker, said that he expected his pay to double in the next five years and added that he already had set his priorities.

      “For sure, I want to buy a car,” he said. “Car first, then maybe marriage later.”

      Hilda Wang contributed reporting.

       

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    16. Morgan says:

      Here is why CHINA is all the way up..and “United States of Bankers” is SINK!.

      THE SECRET OF CHINA’S MIRACLE ECONOMY:
      THE GOVERNMENT OWNS THE BANKS RATHER THAN THE REVERSE
      Ellen Brown, August 17th, 2009
      http://www.webofdebt.com/articles/secret_of_china.php
      “The banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. They frankly own the place.”
      – U.S. Senator Dick Durbin, Democratic Party Whip, April 30, 2009
      While the U.S. spends trillions of dollars to bail out its banking system, leaving its economy to languish, China is being called a “miracle economy” that has decoupled from the rest of the world. As the rest of the world sinks into the worst recession since the 1930s, China has maintained a phenomenal 8% annual growth rate. Those are the reports, but commentators are dubious. They ask how that growth is possible, when other countries relying heavily on exports have suffered major downturns and remain in the doldrums. Economist Richard Wolff skeptically observes:
      We now have a situation in the world where we have a global capitalist crisis. Everywhere, consumption is down. Everywhere, people are buying fewer goods, including goods from China. How is it possible that in that society, so dependent on the world economy, they could now have an explosive growth? Their stock market is now 100 percent higher than at its low — nothing remotely like that hardly anywhere in the world, certainly not in the United States or Europe. How is that possible? In order to believe what the Chinese are saying, you would have to agree that in a matter of months, at most a year, no more, they have been able to transform their economy from an export-based powerhouse to a domestically focused industrial engine. Nowhere in the world has that ever taken less than decades.”
      How can China’s stimulus plan be working so well, when ours is barely working at all? The answer may be simple: China has not let its banking system run roughshod over its productive economy. Chinese banks work for the people rather than the reverse. So says Samah El-Shahat, a presenter for Al Jazeera English who has a doctorate in economics from the University of London. In an August 10 article titled “China Puts People Before Banks,” she writes:
      “China is the one leading economy where the divide – the disconnect between its financial sector and the world normal Chinese people and their businesses inhabit – doesn’t exist. Both worlds are booming again and this is due to the way the government handled its banks. China hasn’t allowed its banking sector to become so powerful, so influential, and so big that it can call the shots or highjack the bailout. In simple terms, the government preferred to answer to its people and put their interests first before that of any vested interest or group. And that is why Chinese banks are lending to the people and their businesses in record numbers.”
      What Wolff calls a “global capitalist crisis” is actually a credit crisis; and in China, unlike in the U.S., credit has been flowing freely, not just to the financial sector but to industry and local government. State-owned banks have massively increased lending, with local governments and state enterprises borrowing on a huge scale. The People’s Bank of China estimates that total loans for the first half of 2009 were $1.08 trillion, 50% more than the amount of loans Chinese banks issued in all of 2008. The U.S. Federal Reserve has also engaged in record levels of lending, but its loans have gone chiefly to bail out the financial sector itself, leaving Main Street high and dry. Writes El-Shahat:
      “In the UK and US, the financial sector is booming, while the world of normal people seems to be going from bad to worse, unemployment is high, businesses are folding and house foreclosures are still taking place. Wall Street and Main Street might as well be existing on different planets. And this is in large part because banks are still not lending money to the people. In the UK and US, banks have captured all the money from the taxpayers and the cheap money from quantitative easing from central banks. They are using it to shore up, and clean up their balance sheets rather than lend it to the people. The money has been hijacked by the banks, and our governments are doing absolutely nothing about that. In fact, they have been complicit in allowing this to happen.”

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