One of the many victims of politicizing by the George Dubya Administration was how the Employment Rate of the US is calculated and reported. The old U3 (Official Unemployment Rate) has been manipulated to show only the number of people who are currently receiving a weekly unemployment check and those who recently applied for Unemployment Benefits. It does not include those who have stopped receiving Unemployment Benefits even though they are still looking for work, those who have given up hope of finding work, those who have taken part-time jobs to survive, those who are under-employed and those who have taken temporary work to survive. The new rate reported today by the government of 6.5% (U3) is not comparable to the unemployment rates that have been reported in prior Recessions

To get comparable unemployment information one must go and look at the U6 Unemployment Report of the government. That is now at an Unemployment Rate of 11.3%. Now that is a really serious but accurate report of what is really going on in the US economy in terms of real unemployment.

U6 is the broadest measure of Unemployment: It includes those people counted by U3, plus marginally attached workers (not looking, but want and are available for a job and have looked for work sometime in the recent past), as well as Persons employed part time for economic reasons (they want and are available for full-time work but have had to settle for a part-time schedule).

When former Senator Phil Graham (Republican - Texas) recently pontificated that the unemployment rate was nothing more than a mental figment in the minds of the American public when the official rate was at 6.1% he was actually lying and knew he was lying because he holds a PhD in Economics and knows the difference between the U3 and the U6 reports and that the U6 report is the one that credentialed economists study and from which they draw their conclusions. Phil Graham is demonstrably a better politician than he is an honest economist.

Fred

A Bleak Future

The house across the street from my house that was foreclosed on had a first and second mortgage of over $400,000 on it. It is now for sale for $229,000 by the bank. It looks like the holder of the 2nd mortgage took a direct hit on that loan. The bank that held the 1st mortgage also is taking a cleaning on their loan.

I never thought of my home as an investment but more as nothing more than housing that was being subsidized by the tax deductions the IRS allowed me to take for the interest I was paying on the loan on it. I paid $38,000 for my home when I bought it over 30 years ago and the loan on it has been completely paid off. My house turns out to be the best investment I ever made in my life compared to all my other investments and it still continues to be the best investment I've ever made.

When the US digs out of the economic mess it created for itself, the economy of the US just might not look like it did before our economic crash. I suspect that the economy of the US will resemble more the economies of Europe. There is a very good chance that homeownership for most Americans will become an untenable goal just like it is for most Europeans. Homeownership will become an advantage of a new privileged class made up of us old geezers who bought our homes when they were affordable and held on to them through good and bad times. Everyone else will be tenants like most Europeans are.

We are going to be living in very trying and "interesting" times for the rest of the time I have left to live. I hope things will be better for our grandchildren.

Fred

Wall Street Bailout Won’t Do Much to Help Ailing Economy

Excellent paper from The Center for Economic and Policy Research. It's a paper that should be read and studied by all of our elected representatives. But alas, most of them are very deficient in their intellectual skills and too proficient in their skills of persuasion, deceit and blatant fabrication of alleged facts.

Fred

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Wall Street Bailout Won’t Do Much to Help Ailing Economy

by Mark Weisbrot

October 9, 2008, Modesto Bee (CA)
October 9, 2008, Lake Wylie Pilot (SC)
October 9, 2008, Tri-City Herald (WA)
October 9, 2008, Bellingham Herald (WA)

It is now clear the approval by Congress of President Bush’s $700 bailout package on Friday October 3rd has done nothing to ease the current financial crisis. Credit markets have worsened for several days after the bill passed the Congress. The stock market also plummeted to nearly ten-year lows.

So much for dire warnings from the Bush Administration that Congress was risking a Great Depression if it did not quickly fork over the dough. The bailout’s supporters said Congress had to do something to unfreeze the credit markets. It didn’t work.

There is a basic misunderstanding of the current financial crisis and economic recession that is widespread. Most people think that the current economic downturn – which will be officially designated a recession some time in the near future – is the result of the financial crisis. But this is not true. The current recession is mainly the result of a collapsing housing bubble. This bubble of more than $8 trillion dollars accumulated between 1996-2006, and it is only about 60 percent deflated so far. This means that even if all the problems in the financial system were miraculously solved tomorrow, the United States would still be facing a serious recession.

Of course the financial crisis can make this worse, as financial institutions cut back on lending and short-term interest rates for commercial borrowing rise. And we are indeed facing a serious financial crisis. But the bailout package is a wasteful and inefficient way of dealing with the problem of banks holding bad debt, mostly related to mortgages gone sour in the housing bust. It enables the U.S. Treasury Department to buy up “troubled assets” – mostly mortgage-related securities – from financial institutions, at prices that will likely be much higher than they are worth.

Economists across the political spectrum saw this as a wasteful and inefficient way to fill holes in banks’ balance sheets. Ordinary citizens and taxpayers saw the bailout as an enormous rip-off, and flooded Congress with phone calls, defeating the bailout on its first vote.

Indeed, the most important ways that our government is currently holding the financial crisis in check do not involve overpaying banks for bad assets. The Federal Reserve and U.S. Treasury have intervened repeatedly to pour liquidity into the banking system. They have agreed to federally insure $3.4 trillion of money market mutual funds held by millions of Americans. This week the Fed created a new facility to buy commercial paper, the short-term debt issued by banks and corporations, where lending has been shrinking. The Federal takeover of Fannie Mae and Freddie Mac, and the nation’s largest insurer, were also necessary to preserve the stability of the financial system.

All this is just the beginning of cleaning up the mess that has resulted from a de-regulated and un-regulated financial system gone wild. The government will have to take over more insolvent financial institutions and provide capital to others. It will have to take steps to help homeowners, to minimize foreclosures and evictions. And it will need to provide the largest fiscal stimulus package since the Great Depression, to prevent this recession from dragging on for years. The worst part about the bailout is that some politicians will say we can’t afford the necessary stimulus because we just added $700 billion to the national debt.

Americans will have to fight for measures that protect the public interest, not the interests of those who made this mess. Treasury Secretary Henry Paulson made $163 million as CEO of Goldman Sachs in 2006. Now he and his former colleagues at Goldman are running the Wall Street bailout.

During the Asian financial crisis ten years ago, there was an expression for this kind of system: “crony capitalism.”

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. He received his Ph.D. in economics from the University of Michigan. He is co-author, with Dean Baker, of Social Security: The Phony Crisis (University of Chicago Press, 2000), and has written numerous research papers on economic policy. He is also president of Just Foreign Policy.