FEE: Minimum Wage Hikes Kick in Across the Country—at the Worst Possible Time for Small Businesses

From the Foundation for Economic Education comes Minimum Wage Hikes Kick in Across the Country—at the Worst Possible Time for Small Businesses. Washington state’s minimum wage rose $0.19 per hour this year. Several states’ wage rose a full dollar, and New Mexico’s minimum wage rose $1.50/hr.

2020 was one of the worst years in modern American history for small businesses. And now, thanks to a wave of minimum wage legislation that kicked in on January 1, things are about to get even worse.

Make no mistake: small business owners are already seriously hurting.

When state and local governments responded to the outbreak of COVID-19 in the spring with harsh lockdowns and restrictions, businesses were forced to shutter. Many in the restaurant and hospitality industry remain shut down many months later, or were briefly allowed to reopen then shut down again this fall. Meanwhile, much of the taxpayer-financed aid meant to help these businesses was instead captured by big corporations or lost to fraud and waste.

To add insult to injury, thousands of small businesses were vandalized and looted during the summer unrest after the death of George Floyd. (No, insurance doesn’t eliminate the harm).

At least 100,000 small businesses that were forced to close in 2020 will not reopen, according to Yelp. In a recent survey, almost 60 percent of small business owners said that they don’t expect their enterprise to survive through June 2021.

Many of these same small businesses teetering on the brink of collapse are about to get slapped in the face with surging labor costs. A total of 20 states had minimum wage hikes take effect this month as part of scheduled ramp-ups.

“New Mexico will see the largest jump, adding $1.50 to its hourly minimum and bringing it up to $10.50,” the Hill reports. “Arkansas, California, Illinois and New Jersey will each increase their minimum wages by $1.”

Additionally, many localities have enacted area-specific minimum wage hikes. For example, Flagstaff, Arizona just raised its minimum wage to $15 an hour while Belmont, California just upped its rate to $15.90 an hour.

These might not sound like massive hikes in absolute terms, but you have to think of it like this. Payroll is often one of the largest expenses small businesses have—and it may have just arbitrarily spiked by 5 to 15 percent.

The timing here could not be worse.

“A dramatic increase in the minimum wage even in good economic times has been shown to be harmful,” Employment Policy Institute Managing Director Michael Saltsman said. “In the current climate, for many employers it could be the final nail in the coffin.”

And employees will suffer perhaps just as much as employers. Even though they’re ostensibly meant to uplift workers, increases in the minimum wage always and inevitably hurt more than they help.

Why? A wage is important for the living standards of the worker, but that isn’t its only important aspect. A wage is a price. Prices are essential for order in an economy, so price controls throw markets into chaos.

“By the simplest and most basic economics, a price artificially raised tends to cause more to be supplied and less to be demanded than when prices are left to be determined by supply and demand in a free market,” famed free-market economist Thomas Sowell explained in his book Basic Economics. “The result is a surplus, whether the price that is set artificially high is that of farm produce or labor.”

“Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount— and, if it is not, that worker is unlikely to be employed,” Sowell writes. “Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage, because they either lose their jobs or fail to find jobs when they enter the labor force.”

Thus, as free-market economist Murray Rothbard put it, the minimum wage amounts to outlawing jobs:

“In truth, there is only one way to regard a minimum wage law: it is compulsory unemployment, period. The law says: it is illegal, and therefore criminal, for anyone to hire anyone else below the level of X dollars an hour. This means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment. Remember that the minimum wage law provides no jobs; it only outlaws them; and outlawed jobs are the inevitable result.”

So, it’s no surprise that the nonpartisan Congressional Budget Office projects that a national $15 minimum wage would destroy up to 3.7 million jobs. Of course, these hikes aren’t nationwide, and many aren’t quite up to $15 yet. Nonetheless, struggling small businesses already have so little wiggle room in their budgets and are on the brink of collapse. Thus the negative effect minimum wage hikes have on local economies will be severe.

Of course, there’s little doubt that the legislators who enacted these pre-planned minimum wage hikes hoped to help workers, not put them out of work amid an economic crisis. But the laws of basic economics are unmoved by compassionate hand-wringing—and good intentions never guarantee good results.

Alt-Market: If You Thought 2020 Was Bad, Watch What Happens In 2021

Brandon Smith at Alt-Market makes his own predictions for the new year in If You Thought 2020 Was Bad, Watch What Happens In 2021

In terms of the economy and the American social situation, 2020 is definitely one of the ugliest years on record, there’s really no way around it. That said, I get the impression that many in the public are operating under the assumption that we are about to cross over the peak of the mountain and it will be all downhill from here on. Unfortunately, this is not the case.

All eyes have been focused on the pandemic event, and the thinking is that once the pandemic is “over”, the crisis will be over and everything will go back to normal. But, as the globalists have been telling us since the outbreak began, the world “will never go back to normal again”. It’s not because of the pandemic, mind you, it’s because THEY won’t allow things to go back to normal. The “great reset”, as the World Economic Forum calls it, is meant to go on for many years. And, the globalists intend that every aspect of our lives be changed into something almost unrecognizable.

First I want to make it clear that I don’t expect the reset agenda to be successful. In fact, I think it’s going to fail miserably. The globalists have reached too far too fast and exposed themselves, and millions upon millions of people around the world and in America are not buying the pandemic narrative. But here is the problem; the pandemic is a distraction from a much greater threat, namely the economic collapse that is developing right now.

The financial downturn has been created by international banks and central banks through massive debt creation and inflationary stimulus measures. The initial spark for the wildfire took place in 2008, the economic threat has been under the noses of the public for quite some time. Now, however, the establishment has some perfect scapegoats, including the Trump Administration as well as the coronavirus. The globalists are hoping that people will become so mesmerized by the pandemic crisis and the election fight that they will rest all blame for the collapse on those two ready-made targets.

Make no mistake, the economy was put on life support long before Trump ever entered office and long before anyone ever heard of COVID-19. The globalists are simply pulling the plug right now and letting it die.

Of course, stock markets remain high, but the stock market does NOT represent the economy. It does not reflect financial health or the stability on main street. The stock market is an artificially propped up Pavlovian bell designed to make the public salivate every time the tickers go green. A majority of people tend to associate stock prices with economic improvement (mainly people who know nothing about economics or stocks). The extent of their research is 15 minutes of mainstream news a day along with 30-second reports on the Dow rising or falling, that is all. A rising Dow is enough to keep a large percentage of the population believing that things are going to get better.

Eventually stocks will crash along with almost everything else, just as they did in the hyperinflated markets of Weimar, Germany. But, what the public should be focused on is small business closures, including U-6 measurements, retail spending while stimulus is cut off, eviction notices, etc. This will tell you what the actual story is behind the economy.

There are certain events that could also expedite the downturn, and we must be wary of black swans right now. The financial system has been made so fragile over the past decade that any single major shock could bring it down (remember 2008?). Let’s not mistake stimulus for resilience. Stimulus has its limits and I believe we are hitting those limits as we enter 2021.

Here are some of the events I predict will happen next year, along with the effects they will have on the stability of America and many other parts of the world…

Contested Election Continues into January

State electors are supposed to finalize the presidential election results a week from now, but I suspect legal battles may prevent the electoral college from completing the tally. This could lead to electoral college results being ignored, and the fight for the White House continuing into next year (unless the Supreme Court can hear all arguments and come to a decision in record time).

Growing evidence of election fraud specifically in Georgia, Pennsylvania, and Michigan has led many conservatives to question the outcome of the presidential election. I don’t think the majority of the doubters will accept a Biden presidency even if Trump decided to concede.

What I think is more likely is that Trump will stay in office beyond the January inauguration day, and that the political left will suddenly realize that the election was not as absolute as they originally assumed.

The contested election would not cause economic instability directly, but it would mean that the public will be knocked out of their stupor and that their faith in the future will be shaken. Overvalued, fragile financial systems rely on the “greater fool” to support prices and need the blind faith of the population in order to continue lurching forward. That faith is about to be tested.

Mass Protests, Riots, Possibly Armed Conflict

I have become rather suspicious of the behavior of the mainstream media these days, even more so than usual. Why? Well, every time a hard fact on election fraud is released, the media has chosen to lie outright about it. And I’m not talking about clever spin in an attempt to diminish the effect of the news, I’m talking about outright lying that could easily be checked and debunked by anyone.

This kind of disinformation would never convince conservatives or even intelligent moderates because we double-check the sources. People on the political left, though, are more inclined to believe whatever the MSM says without doing their own research. I’m beginning to wonder if the media is pulling the same stunt they did in 2016: giving leftists false hope through misinformation, so that when things don’t go their way, they will become enraged as if something was stolen from them.

Is the media setting up the left for an epic shock by refusing to report any of the legitimate election fraud evidence and making them think there is no case? Is the goal to hit leftists so hard with Trump staying in office that they riot viciously in response?

Maybe I’m wrong and Biden goes into office without any obstructions as many expect. Let’s be honest, though, there are only two ways the election situation can go at this point:

In light of election fraud evidence, Trump stays in office. Leftists riot en masse claiming the presidency has been stolen. Conservatives will be asked to support martial law measures to “stop the insanity.” By supporting martial law, conservatives would sacrifice the very constitutional protections and liberties they claim to defend.

Biden enters the White House under heavy suspicion of fraud. He then tries to institute a Level 4 national lockdown in the name of stopping the pandemic. With the death rate for the virus well under 1% for anyone not living in a nursing home with preexisting conditions, and no evidence that mask mandates do anything to stop the virus spread, millions of American refuse to comply. The states and communities that do comply will suffer even more small-business closures and unemployment.

Biden would then try to initiate martial law measures, erasing civil liberties and possibly triggering a civil war.

Medical Passports and Vaccination Blackmail

Government officials are constantly in the media these days claiming that vaccinations will not be made mandatory. What they don’t mention is that they are already trying to legislate that anyone without a vaccination or medical passport will be unable to participate in normal society or even be allowed to work in their job. This program is moving at an incredibly fast pace, which makes me think the globalists realize they are losing the battle for the minds of the citizenry and they need to rush their agenda before it’s too late.

Here is what will happen in 2021 in terms of the pandemic:

  1. The media and elitist organizations will continue to pump up the infection numbers to frighten the public, even though the death rate is so low it makes the infection rate meaningless.
  2. If Biden is in office, mandates will be made into a federal issue and will be federally enforced.
  3. If Trump is in office, state governments will try to enforce mandates and major corporations will help them.
  4. There will then be a major push to require medical passports proving a person is not infected to enter into any public place. This means submission to 24/7 contact tracing or getting a new vaccine whenever ordered to. Basically, your life will be under the total control of state or federal governments if you want to have any semblance of returning to your normal life.
  5. If this process does not work and does not intimidate enough people into compliance, governments will seek to offer stimulus checks or a form of Universal Basic Income, but only for those people who agree to tracking through their cell phones and to vaccination.
  6. New mutations of COVID-19 will be conveniently found every year from now on, meaning the public will have to get new vaccinations constantly, and medical tyranny will never go away unless people take an aggressive stand.

It Gets Worse From Here On…

2021 will be far worse that 2020, but at least the lines will be drawn and the fight will be more clear to everyone. The economic crisis is what concerns me the most. The events listed above will complete the final downturn in the global system and America in particular. Such a financial crash would cause far more chaos and death than the coronavirus ever could.

Ultimately, I believe the public will respond badly to pandemic mandates. Many conservative states and counties will simply refuse to enforce them. However, the question is, will people end up fighting each other and forget all about the globalists that created the problem in the first place? Will mass poverty succeed where the pandemic failed in convincing Americans to give up their liberties in exchange for some stability?

Distractions abound, and the reset agenda looms, but I don’t see the globalists coming out of this unscathed. Too many people now know who they are and what they are up to.

Mises Institute: New Lockdowns and More Regulations Are Disastrous for US Jobs

Economist and fund manager Dr. Daniel Lacalle at the Mises Institute writes New Lockdowns and More Regulations Are Disastrous for US Jobs

United States jobless claims have picked up, since the elections and the second wave of coronavirus have slowed down the economic recovery. Uncertainty about tax increases and changes in labor laws, including an increase in the minimum wage, add to the fear of new lockdowns, as employers see the devastating effects of these lockdowns in European employment.

While the United States has been able to recover fast and reduce unemployment to 6.8 percent, the eurozone jobless rate has risen to 8.3 percent before we consider the large number of furloughed employees who remain idle. The second wave of coronavirus in Europe has seen new government-imposed lockdowns and the impact on the economy is already severe. Estimates for the fourth-quarter gross domestic product assume a double-dip recession and another increase in unemployment.

Misguided lockdowns have created a deep and long-lasting impact on the economy and a dramatic social crisis, proving again that the response to the pandemic should have been similar that of Asian countries, which have successfully preserved health and the economy.

Employers all over the United States fear that a Biden administration will impose lockdowns, following the example of some European countries and thus generating a new decline in the economy and a wave of bankruptcies and job losses. Instead of giving simple and effective protocols for business to endure the crisis, some governments, whose members are completely disconnected from the day-to-day problems of small businesses and employers, resort to the drastic and ineffective measure of lockdowns, because it gives more power to governments and because the large corporations do not feel the impact as much as small enterprises. Governments like the idea of lockdowns, because it gives the impression of taking drastic measures to control the pandemic when, in reality, lockdowns simply destroy the business fabric and have proven to be extremely ineffective at reducing the mortality or hospitalization rates. The concerns about a Biden-enforced nationwide lockdown are not exaggerated. Dr. Michael Osterholm, a coronavirus advisor to Joe Biden, said a nationwide lockdown of four to six weeks would help bring the virus under control in the US and revive the economy. I am sorry to say that experience has shown us that none of those two things will happen. Massive lockdowns did not help European countries control the virus, rather the opposite, and have destroyed the economy with long-lasting implications for jobs, bankruptcies, and wages. Meanwhile, countries that have not implemented lockdowns and have provided simple and effective protocols have achieved better results in health and the economy.

Many citizens in the United States ask themselves if the country will recover its record level of employment and its low unemployment rate of 3.5 percent seen in March 2020, before the pandemic. Even if the United States avoids government-imposed lockdowns, which would delay the job recovery for at least another eighteen months, there is grave concern about the likelihood of more regulation, union control, and higher taxes that will make it more expensive to hire personnel and more burdensome both in terms of hiring as well as reducing payroll.

The United States has been an example of job creation during the growth period but, more importantly, rapid job recovery in a complex crisis like the covid-19 one. Adding rigidity to the labor market and increasing taxes will prove disastrous for small and newly created business, which are the largest job creators in the United States.

It is as simple as this. The United States cannot have the wage growth and low unemployment it deserves by copying the labor market legislation of Greece, Spain, or France, countries with extremely rigid job markets and high union intervention…and historically high unemployment.

The European Union used to have the same unemployment rate as the United States. Massive disincentives, a misguided excess of regulation, and heavy taxes have created a divergence by which unemployment in Europe stands at almost twice the rate as in the United States.

The fallacy of “protecting workers” with high taxes to employers and heavy intervention in the labor market only protects governments. Unemployment is higher, wage growth is weaker, and the flexibility loss means lower opportunities for youth employment. Youth unemployment in the eurozone and European Union is simply unacceptably high even in growth periods, and it is due to the barriers to employment created through aggressive intervention in the job market and government control. Incentives to hire are poor while disincentives to work are high.

If anything has been proven by the past two decades, it is that more government, higher taxes, and union intervention do not protect workers, they perpetuate unemployment and reduce wage growth and opportunities.

Lockdowns added to higher taxes and labor rigidity would likely prove very negative for the United States recovery. You cannot recover if you impose the burdens that some European countries have imposed. Labor market interventionism does not protect workers, it empowers politicians.

Alt-Market: America’s Economy Cannot Survive Another Lockdown

Brandon Smith at Alt-Market writes America’s Economy Cannot Survive Another Lockdown, And The Cult Of The Reset Knows It

The U.S. economy has been on the verge of collapse for at least a decade, ever since the crash of 2008 and the subsequent explosion in fiat stimulus from the Federal Reserve. While the mainstream media has always claimed that central bankers “saved” us from another Great Depression, what they actually did was set us up for a far worse scenario — a stagflationary implosion of our society.

Here is the primary problem: By injecting trillions of bailout dollars into the system, the Federal Reserve prevented the economy from going through its natural purging cycle. This cycle would have been painful for many, but survivable, and it would have removed large amounts of excess debt, parasitic corporations that produce little or nothing of use, as well as numerous toxic assets with no legitimate value. For a real free market to function, weak or corrupt elements must be allowed to fail and die. Instead, central banks around the world and most prominently the Fed kept all of those destructive elements on life support.

This has created what amounts to a “zombie economy:” a system that needs constant outside support (stimulus) in order to continue moving forward. In the process of keeping zombie corporations and other parts of the body alive, healthy parts of the economy, like the small business sector, get devoured.

The zombie economy is, however, highly fragile. All it takes is one or two major shocks to bring it down, and the moment this happens the whole facade will disintegrate, leaving the public in panic and disarray. This is what is happening right now in 2020, and it will get much worse in 2021.

Bailouts encourage and reward unhealthy financial behavior, and this is why national debt, corporate debt and consumer debt have recently hit historic highs. When every pillar of the economy is encumbered with the weight of debt, any instability has the possibility of bringing all those pillars down at once. The Federal Reserve turned the U.S. into an economic time bomb, and the Fed is itself more like a suicide bomber than some kind of fiscal savior.

The “Great Reset”

I first heard the term “global reset” or “great reset” back in 2014/2015. I wrote an article about how the reset was actually a long term process in my article The Global Economic Reset Has Begun. Christine Lagarde was the head of the IMF back then, and she mentioned it briefly in multiple interviews.

I made a mental note of it because it seemed planted into the discussion very awkwardly, as if it was scripted. I rarely heard it mentioned for years after that. In 2020, as we descend into social and economic chaos, I’m seeing the phrase used everywhere in the media and by globalists.

Over the past decade, globalist institutions have come up with numerous phrases that seem to refer to a worldwide planned and dramatic shift in human society sometime in the near future. The “great reset” is just another phrase for “the new world order.” It is important to understand that the reset these people are talking about has actually been engineered and staged for many years. This is not something that just popped up in 2020 — they have been talking about it since at least 2014. And before that, they talked about the new world order, and “multilateralism,” and the “multi-polar world order,” and Agenda 2030, etc.

The reset is the catalyst phase of an agenda that has been in the works for a long time now. The goal, as they have openly admitted many times, is to centralize the entire globe into one monetary structure, one highly interdependent and socialized economy, and eventually one faceless and unaccountable governing body.

One of the biggest obstacles to the finalization of the reset and the formation of the new world order has been liberty-minded populations across the planet — most of all, the liberty-minded people within America. The U.S. has to be destabilized or eliminated; the old world order has to be brought down before the new world order can be introduced. The people have to be beaten down and desperate, so that when the globalists offer their “reset” as the solution, the people will gladly accept it without question — simply because they want the economic pain and uncertainty to stop.

A common statement made by globalists from Klaus Shwab at the World Economic Forum to the current Prime Minister of Canada, Justin Trudeau, is that the coronavirus pandemic is the “perfect opportunity” to trigger the “great reset.” As globalist Rahm Emanuel is famous for admitting, in crisis there is opportunity to do things you were not able to do before.

In other words, when people panic in the face of crisis, they become easy to manipulate. And, if a crisis doesn’t happen naturally, then why not create a crisis from thin air and use that to cause panic?

Enter the economic lockdowns…

The lockdowns have not only been proven to do nothing to stop the spread of the coronavirus, but they are also a clear attack on what’s left of our economic system. The small business sector in particular is being gutted as more than 60% of those that shut down during the first lockdown were unable to reopen. Small businesses provide more than half of all employment in the U.S.. When they collapse, the U.S. economy will have nothing left except the big-box corporations that the Fed put on life support over a decade ago.

Real unemployment, which is already at 26%, will skyrocket even further if a second national lockdown is initiated. The speedy collapse of the U.S. economy will be assured, and the “great reset” can commence. At least, that is what the globalists want to happen…

With the U.S. presidential election currently being contested, it is hard to say how the next few months will play out in detail. As I have been pointing out since July, a contested election is the best possible scenario for the globalists because it creates a Catch-22 situation:

  1. If Trump stays in office, the political left will accuse him of usurping the presidency and there will be mass riots in the streets. Conservatives will be tempted with the idea of bringing in martial law to suppress rioters, and such measures will undermine the flow of the U.S. economy, causing its fragile structure to implode.
  2. If Biden enters the White House, then he will attempt a Level 4 lockdown similar to the lockdowns we have seen in Australia, France, Germany and the UK; perhaps even worse. Our economy will crumble, conservatives will revolt, and Biden will attempt martial law measures.

Either way, the globalists get their crisis, and therein their opportunity.

Surviving the lockdowns and deterring the globalists

But here is where things get less certain for the elites. If liberty-minded Americans organize immediately for security and mutual aid, we can defuse the Catch-22. If we provide for our own security within our own communities, there will be no rationale for Trump to institute martial law. Community security is an awesome deterrent against leftist rioting and looting, and basic economic trade can continue.

By extension, if we organize our own community security as well as localize our economies with barter and trade, we also act as a deterrent to Biden and any ideas he might have of enforcing national lockdowns. The point is, we can’t allow the globalists to dictate the terms of the crisis. We must act to change the rules of the game.

The reset is not a natural inevitability, it is a con, a trap. No matter how bad the crisis in our nation becomes, it is the people — namely the liberty-minded people — who will determine the future, not the globalists. Their plan relies on our panic. Instead of panic, let’s show them a unified front and a plan of our own.

Of Two Minds: Pandemic Accelerating Trends That Disrupt Foundations of Economy

From Charles Hugh Smith at the Of Two Minds blog, The Pandemic Is Accelerating Trends That Are Disrupting the Foundations of the Economy

The problem is the economy that’s left has no means of creating tens of millions of jobs to replace those lost as the 1959 economic model collapses.

Fundamentally, the economy of 2019 was not very different from the economy of 1959: people went shopping at retail stores, were educated at sprawling college campuses, went to work downtown, drove to the doctor’s office or hospital, caught a flight at the airport, and so on.

The daily routine of the vast majority of the workforce was no different from 1959. In 2019, the commutes were longer, white-collar workers stared at screens rather than typewriters, factory workers tended robots and so on, but the fundamentals of everyday life and the nature of work were pretty much the same.

Beneath the surface, the fundamental change in the economy was financialization, the commodification of everything into a financial asset or income stream that could then be leveraged, bundled and sold globally at an immense profit by Wall Street financiers.

This layer of speculative asset-income mining had no relation to the actual work being done; it existed in its own derealized realm.

For decades, these two realmsthe structure of everyday life (to borrow Braudel’s apt term) and the abstract, derealized but oh so profitable realm of financialization–co-existed in an uneasy state of loosely bound systems.

If you squinted hard enough and repeated the mantras often enough, you could persuade yourself there was still some connection between the everyday-life economy and the realm of financialization.

The two realms have now disconnected, and the real-world economy has been ripped from its moorings, as patterns of work and every-day life that stretch back 70 years to the emergence of the postwar era unravel and dissolve.

The trends that are currently fatally disrupting retail, education, office work and healthcare have been in place for years. When I wrote my 2013 book about the digitized future of higher education in a low-cost union of high-touch and low-touch learning, The Nearly Free University, all these trends were already clearly visible to those willing to look beyond the models embedded in the economy for decades or even centuries.

Visionaries like Peter Drucker foresaw the complete disruption of the education and healthcare sectors as far back as 1994. Post-Capitalist Society.

The problem with this disruption is it eliminates tens of millions of jobs–not just the low-paying jobs in retail and dining-out, but high-paying jobs in university administration, healthcare, and other core service sectors.

The last real-world connection between everyday life and financialization was the over-supply of everything that could be financialized: the way to reap the big profits was expand whatever could be leveraged and sold. So retail and commercial space ballooned, colleges proliferated, cafes sprang up on every corner, etc.

Meanwhile, financialization’s unquenchable thirst for higher profits stripped everything of the redundancy and buffers required to stabilize the system in times of crisis. So hospitals no longer kept inventory because by the logic of financialization, all that mattered was maximizing the return on capital–nothing else could possibly matter in the derealized realm of speculative profiteering.

Now healthcare finds itself trapped between the pincers of financialization’s stripmining and the collapse of retail in-person demand–the financial foundation of the entire system. Under the relentless pressure of financialization’s stripmining and profteering, healthcare only survives if it can bill somebody somewhere a staggering amount for everything from office visits to procedures to hospital stays to medications.

Once that avalanche of billing dries up, the entire sector implodes: a sector that accounts for almost 20% of the U.S. economy.

Higher education is also imploding, and for the same reason: its output no longer justified its enormous cost structure. The same can be said of overbuilt retail and commercial space: the financial justification for sky-high rents have imploded and will never come back. The over-supply is so monumental and the collapse of demand so permanent, the gigantic pyramid of debt and speculative excess piled on all these excesses is collapsing.

A bailout by the Federal Reserve won’t change the fundamentals of the collapse of financialization; all the Fed can do is reserve scarce lifeboat seats for its billionaire banker-financier pals. (Warren, you know Bill, have you met Jamie, Jeff, Tim and the rest of the Zillionaire Rat-Pack?)

Despite the record highs in the stock market–the ultimate expression of financialization disconnected from the real-world economy–financialization is also imploding. Financialization still claimed a connection to the real world of income streams and the value of the collateral underlying all the speculative profiteering: the high rents paid by the restaurants on the ground floor and the businesses for office space above justified the high value of the collateral, the commercial building.

Foundational swaths of the real-world economy have been swept away, and so the collateral is largely worthless. Lots of people want their employer to start paying for business-class airline seats again so they can jet around the country on somebody else’s dime, staying in pricey hotels and attending conferences, but these activities no longer have any financial justification.

The economy of 1959 is finally expiring. The enormous time and money sinks of transporting humans hither and yon no longer have any financial justification.

The problem is the economy that’s left has no means of creating tens of millions of jobs to replace those lost as the 1959 economic model collapses. We all know that automation is replacing human labor, but the real change is the collapse of the financial justification for the enormously costly systems we now depend on to generate jobs: healthcare, retail, tourism, dining out, education, working downtown, and all the professions dependent on managing all this complexity.

While the elimination of low-skill jobs–a longstanding trend–is attracting attention, the implosion of the 1959 economic model and financialization will soon sweep away millions of high-paying professional jobs that no longer have any financial justification.

As the 1959 economy implodes, so does the tax system based on payroll taxes and property taxes. This article sketches out the perverse incentives for employers to invest in automation rather than hire workers: Covid-19 Is Dividing the American Worker (WSJ.com)

There are alternatives, but they require accepting the implosion of both the 1959 economic model and its evil offspring, financialization.

I sketched out an alternative way of organizing work, everyday life and finance in my book A Radically Beneficial World. There are alternative ways of organizing civilization other than the insanely wasteful and exploitive system we now inhabit.

 

Alt-Market: The Delusion Of A Seamless Reopening Is About To Be Obliterated

From Brandon Smith at Alt-Market, The Delusion Of A Seamless Reopening Is About To Be Obliterated

During the first wave of pandemic lockdowns, America became a rather surreal place. The initial shock that I witnessed in average people in my area was disturbing. Half the businesses in the region closed and a third of the grocery store shelves were empty. The look in people’s faces was one of bewilderment and fear; their eyes were like saucers, no one was staring into their cell phones as they usually do, and people huddled over their shopping carts like wild dogs protecting a carcass.

Luckily, this tension has subsided, but only because the majority of Americans have been assuming for the past couple months that the pandemic was going to fade away in the summer and that the “reopening” was permanent. Sadly, this is a delusion that is going to bite people in the ass in the next month or two.

In “The Economic Reopening Is A Fake-Out”, published at the end of May, I stated:

“The restrictions will continue in major US population centers while rural areas have mostly opened with much fanfare. The end result of this will be a flood of city dwellers into rural towns looking for relief from more strict lockdown conditions. In about a month, we should expect new viral clusters in places where there was limited transmission. I suggest that before the 4th of July holiday, state governments and the Federal government will be talking about new lockdowns, using the predictable infection spike as an excuse.”

I also noted:

Certainly, it appears that most Americans hate the lockdowns. But will they be fooled by the “reopening” into complacency for the next several weeks while the government gets ready to hit them with the next round of restrictions? Will they be so caught off guard they won’t know how to react? Imagine the economic devastation of just one more nationwide lockdown event? It will be carnage, and a lot of hope within the population will be lost.

In “Pandemic And Economic Collapse: The Next 60 Days”, published in April, I predicted:

The extent of the crisis will become much more clear in the next two months to the majority. The result will be civil unrest in the summer, likely followed by extreme poverty levels in the winter. No measure of “reopening” is going to do much to stop the avalanche that has already been started.

My position at the time, on secondary infection spikes in the summer as well as renewed lockdown restrictions, appears to have proven correct. Currently, daily reported infections in the U.S. are at a record 50,000 per day or more and cases are rising in 40 out of 50 states. Many of the new infection clusters are in more rural areas and states that a lot of people thought had dodged the initial wave, including California. There has been a massive rush of home buyers moving to rural and suburban America away from the cities. The great migration has begun.

Subsequently, public anxiety is rising yet again. Protests such as those in Michigan over the lockdowns were overwhelmingly peaceful, yet liberty movement activists were demonized and accused of “inciting violence” and “spreading the virus”. Some groups with left-leaning political agendas used the death of George Floyd to create civil unrest. The mainstream media mostly lavished these groups with praise and refused to acknowledge that they might be spreading the virus.

The double standard is clear, but this is just the beginning.

As I have argued for the past few months, the REAL public crisis will strike when the secondary lockdowns are enforced, either by state governments or the federal government. Make no mistake, these orders are coming. We can already see restriction in some states being implemented, though they refuse yet to call the situation a “lockdown”.

California has recently added 24 counties to its “Covid watchlist”, and most of these counties have added new restrictions, including many non-essential businesses being ordered to remain closed.

The governor of Arizona announced statewide restrictions including business shutdowns, suggesting there may be a reopening at the end of July. If the previous lockdown is any indication, this means the next reopening will probably not happen until early September.

Similar restrictions have been announced in Texas, Florida, Georgia, etc. This is essentially a new shutdown that has not yet been officially labeled a “shutdown”.

So what does this mean for the U.S. economy going forward?

Well, the first lockdowns caused an explosion in unemployment, with 40 million jobs lost on top of around 11 million existing jobless. Beyond that, you can add the 95 million people without work that are no longer counted on the rolls by the Bureau of Labor Statistics. Only a portion of these jobs were regained when the reopening occurred. According to Shadowstats.com, the real unemployment rate including U-6 measurements is 31% – around the same level as it was during the Great Depression.

So far in 2020 there have been 4,300 major retail store closings, added onto the thousands of businesses already hit in 2019 in what many are calling “The Retail Apocalypse”. Small business closings are harder to gauge at this time, but according to Yelp, over 41% of their listed participants are announcing they are closing for good.

This outcome was easy to predict when it became clear that only 13% to 18% of businesses applying for the small business bailout loans received aid, and half of those businesses were actually large corporations

What happens next? The companies that did survive the first phase lockdowns are now going to get hit again, hard. I expect another 50% of small businesses to either close permanently or announce bankruptcy over this summer and fall. This means a second huge surge in job losses in the service sector.

It’s important to remember that the U.S. economy is 70% service based, and around 50% of total jobs are provided by small businesses. The lockdowns hit both these areas of our system mercilessly. And, with most of the aid from the government bailouts being diverted to major corporations, it’s as if someone was trying to deliberately crush the small business pillar of support for our economy. If you were attempting to drag the U.S. into an economic collapse, the Covid lockdowns are a perfect cover to make this happen.

Another economic threat is the slowdown in the supply chain. There will be renewed shortages in many goods. I have received numerous emails from readers who work in manufacturing, repair and acquisitions of vital parts for major companies who have told me that simple components, such as electronic and industrial parts that are required for factories to produce goods and repair goods, are almost gone. Meaning they are not being produced overseas in places like China, either due to the pandemic or geopolitical conflict. They tell me there is a maximum of two months before these components are completely gone.

The greater danger, however, is the higher likelihood of civil unrest. I’ve heard many people suggest that Americans will “never” put up with another round of shutdowns. I think it depends on the state you live in. If you live in places like California, Illinois, New York, or even Florida, the majority of people are going to conform to lockdowns even in the face of financial calamity. Interior states with more conservatives are not as certain. Regardless, I expect at least half the country to be shut down in the next few weeks, and those places that don’t shut down will be accused of “selfishly endangering others”.

As I have said many times since this crisis began, it does not matter how dangerous or deadly a virus is; shutting down the economy is assured destruction and is not an acceptable response.

Of course, certain special interest groups benefit greatly from the increased fear and chaos that economic instability brings. Right now, states like Georgia are pushing to stage the national guard to quell unrest, and I think this will spread to many places in the U.S. over the summer. They know what is coming, and they are worried about people hitting the wall of poverty that is ahead and reacting angrily.

As the globalist Imperial College of London published in March, the plan is for lockdowns to continue on and off for the next 18 months or more. This is not going away, and after the next wave of lockdowns, most Americans are finally going to realize it.

Rather than promoting localized production, independent economies and self-sufficiency, the establishment is going to suggest martial law and medical tyranny as the solution to the pandemic problem. In other words, they will demand total control over the population and the erasure of constitutional liberties in the name of “the greater good”.

These are the same people that downplayed the pandemic at the beginning of the year and refused to stop travel from China until it was too late. They are also the same people (including Dr. Anthony Fauci) who gave the Chinese millions of dollars to play around with the coronavirus at the Level 4 lab in Wuhan, which is the likely source of the current outbreak. I’m not sure why ANYONE would want to give more power to the people that caused the crisis in the first place.

Three factors are working hand-in-hand to undermine U.S. stability and create a rationale for totalitarian controls including the economic crash, civil unrest and the pandemic itself. Understand that preparations to protect yourself and your family must be finalized NOW. There will not be even a minor recovery after the next shutdown.

Mises Institute: COVID Lockdowns Crippled the Division of Labor, Setting the Stage for Civil Unrest

Photo courtesy Associated Press

Associate Professor Jonathan Newman of Bryan College writes for the Mises Institute about how the breakdown of voluntary participation in the economy created fuel for social disturbance in COVID Lockdowns Crippled the Division of Labor, Setting the Stage for Civil Unrest.

In his podcast, Dave Smith has likened the lockdowns to gasoline and the murder of George Floyd to a spark.

But why were the lockdowns fuel for social unrest? One of the reasons the lockdowns paved the way for social unrest is that they led to a widespread breakdown in the division of labor. This could only result in more conflict and social unrest.

Economist Ludwig von Mises has explained why this is so. In Human Action, Mises presents the division of labor as more than a purely economic concept. Although he certainly expounds the increased productivity attributable to the division of labor, he also heralds it as civilization itself. It is social cooperation and mutuality. He presents it in opposition to conflict and violence. The division of labor is predicated on and also results in peaceful relations between individuals.

Here, I want to discuss the gasoline, and not the spark. Mises.org writers have discussed the spark and the related issues of institutional problems with police departments, police brutality, a breakdown in trust in the police, and police militarization.

What Is the Division of Labor?

The division of labor is just what it sounds like: one person does one job while another person does a different job. In a market economy, these jobs are not assigned randomly, but are purposefully chosen by each individual according to his or her own skills and values. Instead of trying to produce everything we want to consume on our own, we produce one good and offer it in exchange for a variety of goods we prefer.

The ability to consume a larger variety of goods is not the only benefit of the division of labor. Total production increases enormously, such that each individual who participates in the division of labor enjoys a massive increase in his standard of living. The division of labor allows us to emerge from bare subsistence and flourish as a civilization, producing art, writing philosophy, celebrating holidays, and exploring space. These things are impossible for man in economic isolation.

One of the greatest laws of economics is the law of association, which Mises proves mathematically (uncharacteristically) in Human Action. The law of association shows that everyone who participates in the division of labor gains as a result. No one is excluded from this opportunity. Thus,

The law of association makes us comprehend the tendencies which resulted in the progressive intensification of human cooperation. We conceive what incentive induced people not to consider themselves simply as rivals in a struggle for the appropriation of the limited supply of means of subsistence made available by nature. We realize what has impelled them and permanently impels them to consort with one another for the sake of cooperation. Every step forward on the way to a more developed mode of the division of labor serves the interests of all participants. (p. 159)

Unraveling the Division of Labor

The undoing of the division of labor and the social cooperation that it both requires and entails is social conflict.

The market economy involves peaceful cooperation. It bursts asunder when the citizens turn into warriors and, instead of exchanging commodities and services, fight one another. (p. 817)

During the months of government-imposed lockdowns, everybody was prevented from participating in the division of labor as they were accustomed to. Even those who kept their jobs could not exchange goods with those who did not keep their jobs. The entire social nexus was reduced to a small list of government-defined “essential” services. The increase in unemployment is really only a part of the picture of the economic harm caused by the lockdowns. Everybody who relied on the goods and services produced by the so-called nonessential businesses was harmed: consumers, employees, and proximate businesses in the structure of production alike.

Man shall not live by government-defined essential services alone, however. For a short time, and where possible, citizens resorted to black markets and self-sufficiency (which, as we have seen, is hardly sufficient). But a spark and the cover of protests in the streets gave some a chance to acquire goods by theft. These opportunists are aided by additional mayhem like vandalism, violent assault, and arson. Unfortunately, both insufficient and over-the-top responses by police also add to the mayhem, giving violent rioters more opportunity and also poorly reasoned, two-wrongs-make-a-right self-justification for their aggression.

We only have three options for getting what we want: we can produce it, we can take from somebody who has produced it, or we can exchange peacefully with somebody who has produced it. The third option is the division of labor, and it is the only one that involves peaceful cooperation with others. It is also the only option that sustains civilization. Looting, vandalism, assault, and arson are regressive—they are not a means to advance society. They are the unraveling of society and the social harmony brought about by the division of labor…

Peace can only resume when entrepreneurs find it profitable to reopen their businesses. Government lockdowns and violent mobs are data for the entrepreneur’s decision-making process. Mises warns that it can get so bad that civilization crumbles…(continues)

SchiffGold: Nearly Half of Small Business Owners Expect to Close Down Permanently

An article at SchiffGold says that Nearly Half of Small Business Owners Expect to Close Down Permanently because of the pandemic shut down. This echoes previous studies. Datapro Research Company found that 43 percent of companies hit by a severe crisis never re-opened, and 29 percent more failed within two years. The American Red Cross has estimated that up to 40% of small businesses that experience a disaster never reopen. And a FEMA report after the 1992 Hurricane Andrew landing found that 80% of businesses which did not have a Business Continuity Plan failed within two years of the storm. We should expect similar numbers.

The economy was booming. The stock market was setting records. Then coronavirus came along and governments shut things down to minimize the pandemic. That led to massive layoffs and a nasty recession. But once states open up, things will spring back to life and the economy will go back to being great again.

That’s the mainstream narrative. But it’s not based on reality.

In truth, the economy was a Fed-induced bubble before the pandemic. The central bank has managed to reinflate the stock market bubble despite the economic destruction, but it is nothing but a Fed-induced sugar high. And the economy won’t likely rebound quickly, even after things open up.

There are all kinds of reasons to doubt the quick economic recovery narrative. We’ve reported on the number of over-leveraged zombie companies, skyrocketing household debt, the battered labor market, and a potential cash-flow crisis even after the economy gets moving.

Now we have another sign of long-term economic trouble. A survey conducted by financial services company Azlo found that nearly half of small business owners think they will eventually have to close their businesses for good.

Forty-seven percent of the small business owners surveyed said they anticipate shutting down, and 41% said they are looking for full-time work elsewhere.

This is on top of the small businesses that have already shut down and will never reopen.

The survey also asked questions about the Paycheck Protection Program (PPP) instituted through the CARES Act. The results were less than stellar, as Newsweek reports.

Less than half of participants—38 percent—involved in Azlo’s recent survey applied for PPP loans. Of those who did apply, 37% said the program was slow to distribute funds and 20% described the process as ‘painful,’ the company reported.”

It’s absurd to think the economy is going to come roaring back when nearly half of small business owners expect to shut down. Small businesses employ 58.9 million Americans, making up 47.5% of the country’s total employee workforce.

The economy would struggle to recover from the shutdown even if it was healthy before the pandemic. And it wasn’t.

Our Finite World: Economies Won’t Be Able to Recover After Shutdowns

Gail Tverberg of Our Finite World writes about the difficulties of recovering our businesses in Economies Won’t Be Able to Recover After Shutdowns. It’s much easier to close businesses than to start them up again.

Citizens seem to be clamoring for shutdowns to prevent the spread of COVID-19. There is one major difficulty, however. Once an economy has been shut down, it is extremely difficult for the economy to recover back to the level it had reached previously. In fact, the longer the shutdown lasts, the more critical the problem is likely to be. China can shut down its economy for two weeks over the Chinese New Year, each year, without much damage. But, if the outage is longer and more widespread, damaging effects are likely.

A major reason why economies around the world will have difficulty restarting is because the world economy was in very poor shape before COVID-19 hit; shutting down major parts of the economy for a time leads to even more people with low wages or without any job. It will be very difficult and time-consuming to replace the failed businesses that provided these jobs.

When an outbreak of COVID-19 hit, epidemiologists recommended social distancing approaches that seemed to be helpful back in 1918-1919. The issue, however, is that the world economy has changed. Social distancing rules have a much more adverse impact on today’s economy than on the economy of 100 years ago.

Governments that wanted to push back found themselves up against a wall of citizen expectations. A common belief, even among economists, was that any shutdown would be short, and the recovery would be V-shaped. False information (really propaganda) published by China tended to reinforce the expectation that shutdowns could truly be helpful. But if we look at the real situation, Chinese workers are finding themselves newly laid off as they attempt to return to work. This is leading to protests in the Hubei area.

My analysis indicates that now, in 2020, the world economy cannot withstand long shutdowns. One very serious problem is the fact that the prices of many commodities (including oil, copper and lithium) will fall far too low for producers, leading to disruption in supplies. Broken supply chains can be expected to lead to the loss of many products previously available. Ultimately, the world economy may be headed for collapse.

In this post, I explain some of the reasons for my concerns.

[1] An economy is a self-organizing system that can grow only under the right conditions. Removing a large number of businesses and the corresponding jobs for an extended shutdown will clearly have a detrimental effect on the economy. 

Figure 1. Chart by author, using photo of building toy “Leonardo Sticks,” with notes showing a few types of elements the world economy.

An economy is a self-organizing networked system that grows, under the right circumstances. I have attempted to give an idea of how this happens in Figure 1. This is an image of a child’s building toy. The growth of an economy is somewhat like building a structure with many layers using such a toy…

Click here to read the entire article at Our Finite World.

 

FFF: Republicans Are Now Good for Exactly…Nothing!

The Future of Freedom Foundation writes about how the Republicans no longer understand the economy in Republicans Are Now Good for Exactly…Nothing!

Nancy Pelosi, Chuckles Schumer and the rest of the Dem wrecking crew surely have the Trumpified GOP by the short hairs.

The latter are clueless about the real imperative, which is to halt the senseless shutdown of the US economy ASAP. So like deer caught in the headlights of public fear, outrage and hurt by the Covid Quarantines, they have blindly succumbed to bailing out one and all; and that, in turn, has opened the US Treasury to a congressional feeding frenzy that would make the New Deal porkers, the LBJ spenders and the Obama shovel-ready folks green with envy.

In less than a month, they have passed the $8.3 billion vaccine bill, the $100 billion relief and paid leave package and the $2.2 trillion Everything Bailout, and are now racing toward another $1.0 trillion interim CARES 2 funding bill to essentially double- down on all the outrageous pork and Free Stuff that was contained in CARES 1, which the House did not bother to even debate or approve by recorded vote.

And, alas, all of this is preliminary to the impending “stimulus/infrastructure” bill where the bidding starts at $2 trillion, meaning that the Imperial City is in the throes of a fiscal bacchanalia that defies imagination. It will leave America with unspeakable debts, political dysfunction and economic debilitation for years, if not decades, to come.

And exactly what is being loaded on the budgetary wagon while the denizens of the political party which is supposed to be the watchdog of the Treasury have their collective snouts buried in the public trough so deep that they too will need a respirator before long?

Well, it’s bad enough that Republicans voted for $1200 per person for upwards of 130 million workers who have not and will not loose their jobs and incomes owing to the covid shutdown, even if an unfortunate 30 million do become unemployed for a few weeks at the peak of the shutdown.

But if you ask what possible reason of policy or equity could justify this $300 billion eruption of Free Stuff, the best you can get is some kind of convoluted Keynesian asininity that is even more absurd than the old standby of hiring people to dig holes with teaspoons and then fill them back up with the same tools.

To wit, we are apparently giving the 130 million workers who are and will still be earning the same paycheck but spending far less because everything is closed (you can only spend about $25 per day on Netflix even if you watch movies dawn till dusk) another $1200 to spend on top of their normal income. Then, assuming they can find a place which is open to spend their extra loot, it is hoped such places will hire the 30 million covoid-layoffs so that they too will get back to living hand-to-mouth just like before.

Folks, once upon a time—even in the 1970’s when your editor arrived bright-eyed and bushy tailed on Capitol Hill—Republicans understood fundamental capitalist economics. They did not even have to be told there are no free lunches and that Uncle Sam cannot create production and income (i.e. wealth), but only shuffle it among citizens by taxation currently or by extracting it in the bye-and-bye from future taxpayers via piling up the public debt.

Click here to read the entire article at FFF.org.

See also Mises Institute: Why Keynesians Don’t Want You to Save Your Money

The Trumpet: Financial Reckoning – Here’s What You Can Do Right Now

Timothy Oostendarp of The Trumpet has an article up on the many people facing difficult financial times as a result of the pandemic and some basic things that you can do to regain your financial footing and stay sane – Financial Reckoning Now Confronts Millions

Whether you live in America or somewhere else, right now the biggest problem you’re likely facing is paying your monthly bills. The forced shutdown of the global economy has pulverized national and family budgets. In Canada, it is reported that federal unemployment insurance claims have rocketed to Great Depression levels.

Ding-dong, Dorothy, the economy is dead.

Last month, many Americans were living paycheck-to-paycheck. This month has seen that paycheck taken away.

There is no sense citing endless statistics. Tens of millions of Americans can’t even handle a $400 emergency. Banks and credit card companies are preparing for a tsunami of payment deferrals and loan defaults as consumers buckle.

Like boozy wastrels drunk on prosperity, millions have squandered precious time and money in the face of mounting evidence a crash was coming. Instead of having savings for a rainy day, Americans are now facing a financial reckoning that’s going to burn. The toll isn’t only financial; it’s physical, emotional and spiritual. And authorities are seeing a corresponding spike in suicides and substance and domestic abuse.

The fiscal grim reaper is here. In all fairness, he did send us many notices of his impending arrival, like the Great Recession in the late 2000s. That financial bloodbath was as long as Wall Street and up to the businessman’s belt.

Since that tender time, federal reserve banks have made themselves hoarse yelling into deaf ears. They have repeatedly warned about gross government and corporate debt, the perils of endless quantitive easing (printing money), and escalating household debt.

More than 10 long years have lapsed since the Great Recession. What did we learn? What is this latest economic jolt teaching us? We learned that we are thoroughly addicted to materialism. We learned that decadence defines our daily living. We learned we lack character. Even the poor among us live like feudal kings, yet millions are now beyond broke.

Prosperity is bankrupting us in more ways than we think. If you are suffering financially, the good news is that, if you are willing to correct your living, there is a little time left to set your financial house in order.

Here is what you can do right now.

The first step is to understand God has set basic financial laws into motion. When those laws are broken, penalties result. The penalty is a sign that laws are being broken—and signs are meant to be heeded! God has put penalties in place for broken law to help correct our thinking and our living. When God’s laws are obeyed, great material and spiritual blessings result—including freedom from anxiety, worry and fear.

When someone becomes physically sick with a cold or the flu, the body begins to immediately discharge poisons through mucus production, the eliminative system and by rest. That is the human body trying to bring itself back into alignment with God’s laws governing health. Likewise, financial poison comes in the form of debt, budget deficits (not enough money to cover your bills), and burdensome interest payments. These poisons must be ejected! This is the second step!

Without jeopardizing your health or that of your family, reduce your standard of living to pay off your debts and balance your budget as soon as possible! This means doing everything practically possible to avoid consumer and business debt. A well-considered loan will produce above its principle and interest—meaning it should profit! The wise earn interest while the foolish pay it.

Right now, many governments are offering no-strings-attached money to help small businesses and citizens. If you need to, you might have to take advantage of the assistance your taxes have already helped to pay for or will help to pay for later. God is not against accepting help in time of need. In certain well-advised circumstances, it is the prudent thing to do. There is no shame in taking a handout in a time of need—especially when we are determined to go on and use that help to correct the cause of the problem.

Consider seeking wise counsel before taking on long-term debt or loans for what could be a short-term employment problem. A bad loan will be a poison, which will seriously aggravate your financial problems! Get creative—use drive and initiative. These are some of the laws of personal and financial success. Talk to a rich uncle who might be willing to give you a hand (not handout) during these difficult times. Offer to work for the help. Take odd jobs doing handiwork. The point is, make your opportunities.

The next principle is to set a budget and track your spending. Herein we see another basic law of God: Don’t spend more than you make. Budget! Our financial problems don’t usually revolve around not having enough money but not managing it properly. Slipshod financial management is a reflection of a breakdown in character. We all have to learn to manage our prosperity—especially those who haven’t learned the first principle of working hard.

Examine your attitude toward materialism. God’s law forbids lust and coveting, but coveting drives the world economy. Is it driving your spending? God’s Word says a person trying to get the best of his employer or trying to get riches will not prosper in the end. It often leads to owning substandard possessions and always leads to substandard character.

We all must come to learn the first lesson of life: Seek God’s Kingdom and His character above riches. That is the only way to financial prosperity. Strive to better yourself in an effort to give to your employer, your family and to God—but also strive to learn to be content in your circumstances.

Get creative. Housing, transportation and food are major line items in personal budgets. Excessive car loans that stretch into five to seven years are financial folly. Maybe it’s time to evaluate cutting these areas without jeopardizing your ability to work, and without jeopardizing your health and your family’s well-being.

Another financial law of success is persistence. Don’t throw in the towel! If you’ve recently been laid off, realize many hundreds of thousands have been laid off too. Most of them will begin to waste time. Don’t waste time.

Sloth is stealing, even if it’s only stealing time that can’t be recovered. Put your time to profitable use. Stay productive. Read a good book; improve your skills; refinish some old furniture; play games with your children; go for a walk; breathe in fresh air.

“Chomp at the bit” to get back to work. A robust work ethic is at the heart of building righteous character. Begin calling prospective employers. Line up interviews. Make a job out of getting a job.

This can be a time to advance your career! Employers will start hiring again. Make sure your name is at the top of the list. God is a producer. He expects the same from us. He doesn’t waste a moment or an opportunity. Hiring may be at a momentary freeze, but you don’t have to be frozen in time or frozen in one spot. Be zealous and work hard!

Next, when you get back to a solid financial footing, start saving for a rainy day. There are two types of savings to aim for: operational savings and reserve savings. Operational savings are for emergency repairs and other out-of-the-blue expenses. Reserve savings should equal three times your monthly net income—or at least enough to cover your expenses for three months. If need be, put your budget on a diet, because austerity may be the order of the day to achieve the results you need. The old saying applies: Make hay while the sun shines. Time is fast running out.

When tragedy strikes this world, God is often accused of loafing on the job. Mankind shakes his collective fist at God. He is accused of being heartless, unwilling to lend humanity a helping hand. God gets blamed for nearly all tragedy, pain and suffering. But if He were to stop you from chasing your pleasures that lead to such destruction, you’d soon accuse Him of interfering in your life. When the tragedy strikes, who is to blame? We can’t have it both ways.

Related:

Motley Fool: What to Do If Coronavirus Cuts Your Income

CNBC: How to Build a Cash Reserve If Coronavirus Causes You to Miss Work

USA Today: How to pay the bills during the coronavirus pandemic

Fox: Coronavirus financial concerns: What to do if you can’t pay your bills

James Kunstler: Forced Liquidation

Author of The Long Emergency and many other books dealing with energy and financial predicaments of our society James Howard Kunstler gives a few thoughts on the direction of the economy in Forced Liquidation.

Historians of the future, pan-roasting fresh-caught June bugs over their campfires, may wonder when, exactly, was the moment when the financial world broke with reality. Was it when Nixon slammed the “gold window” shut? When “maestro” Alan Greenspan first bamboozled a Senate finance committee? When Pets.com face-planted 268 days after its IPO? When Ben Bernanke declared the housing bubble “contained?”

If our reality is a world of human activity, then finance is now completely divorced from it for the obvious reason that, for now, there is no human activity. Everyone, except the doctors and nurses, and some government officials, is locked down. So, the only other thing actually still out there spinning its wheels is finance and, to those of us watching from solitary confinement, it is looking more and more like an IMAX-scale hallucination with Dolby sound.

How many mortals can even pretend to understand the transactions now taking place among treasury and banking officials? On their own terms ­­­– TALFs, Special Purpose Vehicles, Commercial Paper Funding Facilities, Repo Rescue Operations, “Helicopter Money” ­– stand as increasingly empty jargon phrases that signify increasingly futile efforts to paper over the essence of the situation: the world is bankrupt. It’s that simple.

The world is locked down and in hock up to its eyeballs. It faces what the bankers euphemistically call, ahem, a “work-out,” which is to say, a restructuring. The folks in charge are resisting that work-out with all their might, because it will change many of the conditions of everyday life (especially theirs), but it is coming anyway. When debt can’t be paid back, money vanishes. Money isn’t capital, but it represents capital when it is functioning. When it isn’t functioning, it stops being money. Now the whole world realizes that the debt can’t be paid back, will never be paid back… and that’s the jig that’s up.

The Federal Reserve’s balance sheet is the black hole in the financial universe where money goes to die. Money is rushing in there at a fantastic rate these days, and the Fed is trying to spew out new money at an equal rate to replace it ­– raising the question: is it even money anymore, or just a figment in the larger hallucination? Kind of seems that way, a little bit. They brought out their biggest money-launching bazookas only a few days ago, and it may only be few days more before that gigantic salvo proves inadequate. What then?

Perhaps the key is how long the ordinary folk agree to their orderly confinement, even in the face of the corona virus. That moment may be a bit further out, with the melodrama mounting especially in New York City right now, numbers of sick people going all hockey-stick, and frightful scenes in the hospitals. But then, whether it’s a week from now, or Easter Sunday, or sometime after that, what will the ordinary folk do when they decide en masse to de-confine and come roaring out in the streets?

I must imagine that one vignette will feature a mob of inflamed formerly middle-class Long Islanders swarming into the Hamptons with blood in their eyes for the hedge funders cringing in their majestic show-places, who will discover with maximum chagrin that privet hedge is no hedge at all against the wrath of the plebes. There has never been a bigger swindle in history than the aggregate shenanigans on Wall Street lo these years of the new millennium, and we all know it, even if it’s hard to explain just how they did it. The money boyz should be taking a haircut-and-a-half now instead of wailing for bail-outs, but such is the perversity of human greed that they made one last desperate attempt to nail down their fortunes when everybody else was losing…everything.

You understand that banking and finance was headed firmly south long before corona virus stole onto the scene. The tremors started back in September with the Fed jamming untold trillions into the black hole that had opened in overnight lending between banks. That was an infection, too, and boy did it spread — as fast as corona virus! This is indeed a most unfortunate convergence of events, but it should tell you that the banking and finance system, and the global economic arrangements that evolved with it, had already passed their event horizon. History had punched our ticket and was embarking us on a journey whether we were ready or not.

Is it a comfort to know that Joe Biden waits patiently on the sidelines to wave his aviator glasses and make everything normal again? I didn’t think so. Mr. Trump, for all the awe of his office, is not much better positioned to turn about the ship we’re now sailing on. Rough seas ahead, in uncharted waters, as we seek landfall in the next new world.

Northman Trader: The Lesson

Sven Henrich of Northman Trader has a post up about the fragility of the US economy, the fickleness of politicians, and other lessons –The Lesson.

The lesson of it all? The lesson is that lessons are not being learned. Of course the human species has an ingrained problem: We are all born with a blank sheet and have to learn everything from scratch. It would be helpful though if the elders could pass lessons from past mistakes on to the new generation.

But no. So we keep making the same stupid mistakes.

And here we are. Just four weeks after all time highs in markets America is again turning into bailout nation.

Yes coronavirus is an unforeseen shock. So what?

We’re supposed to handle a shock. We’re supposed to be prepared. We’re supposed to have savings and great balance sheets. After an 11 year recovery and market bull run based on cheap and easy money shouldn’t things be great and shouldn’t we be well prepared for the next downturn?

Is that really too much to ask?

Apparently.

We can’t even go 4 weeks without the Fed going apeshit on cutting rates to zero, launching $700B in QE, making discount windows available and launching $500B, even trillion dollar repos.

We can’t even go 4 weeks without the government launching a proposed $850B stimulus package, tax cuts, free money checks of $1,000 to Americans and suggesting bailouts for $BA and $GE.

That’s how fragile things are. They must be, otherwise the system would be able to handle a temporary shock.

But it can’t. Why?

Well for one our supposed great economy ever has the vast majority of Americans live paycheck to paycheck:

That’s a systemic problem. Sure you can blame people for living beyond their means, but in general most people just don’t have the income power to keep abreast with rising medial costs, home prices and all the other fun inflationary items that the Fed simply doesn’t count as inflation. How ignorant they are. PCE deflator. Please.

And then of course the same lesson again not learned that keeps repeating ahead of every bust: Greed and more greed.

When has it ever been a good idea to chase stocks to 150% market cap to GDP or even higher?

The answer is never. Yet they convinced themselves and others that it’s different this time. New flash: It wasn’t.

A lesson not learned and yet they did it. The chart was screaming unsutainability. And here we are 4 weeks later, yesterday closing at 109.5% market cap to GDP:

Reversion to the mean. And it could eventually get much worse.

I showed this chart in Bull Cliff in February and I stated:

“Investors keep piling money into this historically priced market….Central banks can deny all they want that they are not responsible for asset price inflation, but everybody knows better. The denials are not only hollow they are straight out lies.

And having created the Pavlovian effect we now see in the investment community they are leading investors to abandon all sense of risk when risks are mounting ever more around us as valuations and earnings multiples keep expanding as a result of monetary policy. And hence it may be said that central bankers may be leading investors off the cliff.”

Well done. Did anyone listen? I can’t say, but most haven’t. And now they are all in major pain…(continues)

Click here to read the entire article at Northman Trader.

Alt-Market: How Long Will It Take for the US to Collapse

Brandon Smith at Alt-Market has written on what a collapse looks like and how long it usually takes.

There are a multitude of false assumptions out there on what the collapse of a nation or “empire” looks like. Modern day Americans have never experienced this type of event, only peripheral crises and crashes. Thanks to Hollywood, many in the public are under the delusion that a collapse is an overnight affair. They think that such a thing is impossible in their lifetimes, and if it did happen, it would happen as it does in the movies – They would simply wake up one morning and find the world on fire. Historically speaking, this is not how it works. The collapse of an empire is a process, not an event.

This is not to say that there are not moments of shock and awe; there certainly are. As we witnessed during the Great Depression, or in 2008, the system can only be propped up artificially for so long before the bubble pops. In past instances of central bank intervention, the window for manipulation is around ten years between events, give or take a couple of years. For the average person, a decade might seem like a long time. For the banking elites behind the degradation of our society and economy, a decade is a blink of an eye.

In the meantime, danger signals abound as those analysts aware of the situation try to warn the populace of the underlying decay of the system and where it will inevitably lead. Economists like Ludwig Von Mises foresaw the collapse of the German Mark and predicted the Great Depression; almost no one listened until it was too late. Multiple alternative economists predicted the credit crisis and derivatives crash of 2008; and almost no one listened until it was too late. People refused to listen because their normalcy bias took control of their ability to reason and accept the facts in front of them.

There are a number factors that cause mass blindness to economic and social reality. First and foremost, establishment elites deliberately create the illusion of prosperity by rigging economic data to the upside. In almost every case of economic crisis or geopolitical disaster, the public is conditioned to believe they are in the midst of a financial “boom” or era of “peace”. They are encouraged to ignore fundamental warning signs in favor of foolish faith in the system. Those people that try to break the apathy and expose the truth are called “chicken little” and “doom monger”.

In the minds of the cheerful lemmings a “collapse” is something very obvious; they think they would know it when they saw it. It’s like trying to teach a blind person about colors; it’s not impossible, but it’s very difficult to get all these Helen Kellers to understand that what they perceive is not the whole reality. There’s a vast world hidden from them and they have no concept of how to observe it.

Crash events are like stages in the process of collapse; they create moments of clarity for the blind. However, they are also often engineered to benefit the establishment. There’s a reason why the elites put so much energy into hiding the real data on the state of the economy, and it’s not because they are trying to keep the system from faltering by using sheer public ignorance. Rather, a crash event is a tool, a means to an end. As Congressman Charles Lindbergh Sr. warned after the panic of 1920:

“Under the Federal Reserve Act, panics are scientifically created; the present panic is the first scientifically created one, worked out as we figure a mathematical problem…”

Central bankers and their cohorts manipulate economic data and promote the false notion of a boom before almost every major crash because they WANT to ambush the populace. They WANT to create panic, and then use it to their advantage as they rebuild and mutate the system into something unrecognizable only decades ago. Each consecutive crash contributes to the collapse of the whole, until eventually the society we once had is barely a distant memory.

This process can take decades, and the US has been subject to it for quite some time now. Once again in 2019 we are seeing the lie of an “economic boom” being perpetuated in the mainstream. The public was growing too aware of the danger and had to be subdued. More specifically, conservatives were growing too aware. The sad thing is that the boom propaganda is most prominent today among conservatives, who are desperately trying to ignore the fundamentals in an attempt to defend the Trump Administration…

Click here to read the entire article at Alt-Market.com.

James Kunstler: Forecast 2020

In this somewhat lengthy article, author James Howard Kunstler makes some predictions for 2020 — political, economic and other. Kunstler’s main works have been on peak-oil and what that means to society and also urban and suburban development issues. It may or may not be of relevance, but Kunstler is a Democrat, though he has been described as “an angry, disaffected one.” That is mentioned here only because some read his acidic commentary on the impeachment charade and think that he is conservative, Republican, or pro-Trump — of which he is none.

…These diseases of mind and culture are synergized by an aroused political ethos that says the ends justify the means, so that bad faith and knowing dishonesty become the main tools of political endeavor. Hence, a venerable institution such as The New York Times can turn from its mission of strictly pursuing news and be enlisted as the public relations service for rogue government agencies seeking to overthrow a president under false pretenses. The overall effect is of a march into a new totalitarianism, garnished with epic mendacity and malevolence. Since when in the USA was it okay for political “radicals” to team up with government surveillance jocks to persecute their political enemies?

This naturally leads to the question: what drove the American thinking class insane? I maintain that it comes from the massive anxiety generated by the long emergency we’ve entered — the free-floating fear that we’ve run out the clock on our current way of life, that the systems we depend on for our high standard of living have entered the failure zone; specifically, the fears over our energy supply, dwindling natural resources, broken resource supply lines, runaway debt, population overshoot, the collapsing middle-class, the closing of horizons and prospects for young people, the stolen autonomy of people crushed by out-of-scale organizations (government, WalMart, ConAgra), the corrosion of relations between men and women (and of family life especially), the frequent mass murders in schools, churches, and public places, the destruction of ecosystems and species, the uncertainty about climate change, and the pervasive, entropic ugliness of the suburban human habitat that drives so much social dysfunction. You get it? There’s a lot to worry about, much of it quite existential. The more strenuously we fail to confront and engage with these problems, the crazier we get…

There’s an excellent chance that the Democratic Party will be in such disarray by summertime, that it may break apart into a radical-Wokester faction and a rump “moderate” faction. That would make the election somewhat like the 1860 contest on the eve of the first Civil War. The current crop of leading candidates — Biden, Sanders, Warren, Buttigieg — all look to me like horses that ain’t gonna finish. Michael Bloomberg could end up leader of the rump moderates, propelled by his inexhaustible bank account, but I doubt his appeal to the racial minorities and the new millennial voters Democrats depend on. I’m not sure he’s left with much else.

I’m convinced that Joe Biden is in still in the contest solely to avoid investigation. He’s already obviously not wholly sound of mind, and he’s not even in the White House yet…

the attempts at impeachment have a peevish Lilliputian flavor. Keeping it up —bringing a threatened second or third bill of impeachment with extra charges — will only reinforce Mr. Trump’s anti-fragility. Second to the economic issues is the question whether the firm of Barr & Durham will manage to pin some criminal responsibility on the people who undertook the RussiaGate coup against Mr. Trump — a ghastly mis-use of government power now celebrated by Democrats, who, you might recall, used to be against police states. A series of perp walks by the likes of Brennan, Comey, Clapper, and others could finally burst the bubble of credulity that the Mueller face-plant and the damning Horowitz report failed to achieve among the True Believers of Rachel Maddow…