Thursday, September 15, 2011

12 Signs That The American Economy Is In Deep Trouble

American business and consumers alike should be wary. There are at least twelve shocking signs that the American economy is in deep trouble. Here's some of the most unsettling trends that should send a cold chill up your spine:

1.Manufacturing jobs have declined to just 9 million American workers out of a nation of 311.8 million. No society has ever survived with less than 3% of all persons productive, producing some sort of goods. Even the most primitive of societies in remote parts of the world managed to produce baskets, tools or other essential goods by more than 3% of their population. This tiny figure of workers who produce goods is a sure sign of a dying economy. During the last Bush Administration, Secretary Of Labor, Elaine Chou, who is the wife of current Senate Minority leader Mitch McConnell-KY) sought to have service workers at McDonald's who "assemble' hamburgers reclassified as manufacturing workers in order to make it appear though the manufacturing job loss in the United States wasn't as serious as it really is.

2. Closely related to the decline in manufacturing jobs is the decline of labor unions and their clout in the American economy. As union membership and clout declines, especially in manufacturing areas, it is like a canary in a coal mine indication that higher paying jobs with security and benefits are disappearing from the American economy, replaced with lower wage jobs with less security such as service industry jobs.

3. Home prices remain greatly depressed from their high levels of only a few years ago before the housing market crashed. Home equity is one of the most important assets that most Americans have. Now some homes are nearly worthless. In some areas of Detroit, for example, homes that should sell for a few hundred thousand are now only worth around $6-8 thousand dollars. Many Americans suffered the loss of their net worth when their real estate values crashed, reducing their ability to borrow against their home's value or to sell a property and retire.

4. The overuse and abuse of debit cards. New federal banking rules will put the brakes on debit cards starting October 1. Many Americans began to overuse debit cards, costing small merchants huge fees for small transactions, actually putting many small retailers into financial difficulty as their profit margins shrank to nearly nothing as a result of the overuse of debit cards sometimes approached 40% or better of their total daily sales. Banks encouraged consumers to use debit cards, offering cheap prizes and points rewards. Instead, all it did was create an epidemic of small business failures as consumers disproportionately hit small transactions at these small retailers with the big fees associated with debit cards. If small retailers had to pay 10-25% of a transaction to some bank in debit card fees, then it sometimes completely wiped out ant profit margin for some businesses such as groceries, which are sold on slender profit margins. Even some large grocery retailers only claim about a 3% profit margin after all expenses. Less consumers carrying cash in their pockets is a sign of the economic decline of a society. Credit cards are entirely different than debit cards, and prove that the person is credit worthy. Debit cards only prove that some bank users are willing to pay a bunch of fees t o use their own money, such as paying for $2-3 ATM withdrawals. New account maintenance fees or other new fees will hit debit cards starting Oct. 1, as a result of the new Federal Reserve rules on this debit card problem which has grown out of control.

5. The decline of newspapers and print media in the United States. On average many persons in Europe may read as many as three different newspapers each day, compared to the U.S. where the average American now no longer even reads one newspaper each day. As a result many newspapers have now folded, where a few larger American cities are now without a daily paper. Without a daily paper to inform a citizen of the news, which they don't always get from electronic media, many citizens of cities stop voting in elections and drop out of the process about caring about their community, accelerating the decline of some American cities into waste and poverty.

6. Despite some jobs gained, many big employers continue to downsize their workforce or lay off workers. Bank Of America recently announced 30,000 new job cuts. This continued loss of jobs makes it very difficult to new quality jobs to be developed fast enough to match the pace of lost better paying jobs.

7. America's automobile industry has suffered a terrible shrinkage for a nation that's supposed to be an industrial powerhouse. Part of the reason the U.S. won WWII was that big automobile production companies could easily be switched over to war goods production. In 2010, the entire GM company sold just 2,215,227 cars and trucks, which is way down from just 1980 when just the Chevrolet Division alone sold 2,288,745 cars and trucks, and the other 4 GM divisions sold another 2,764,445 units. There's an old saying that "So goes GM, so goes the nation". GM's total production and sales have slipped by over 50% since 1980. What does that say for this nation's economy?

8. American retailing is fast becoming just an outlet for foreign made good from China and other countries. More and more, retailing in the United States has been downgraded from and integral part of the sale of domestic made American products to becoming a service based economy that sells goods for foreign nations. Only in the area of agriculture products produced and sold in the United States, have domestically produced products continued to show a dominant market strength. But, even parts of agriculture are becoming threatened. Some companies like Dole long ago switched most of their pineapple production from Hawaii to places like the Philippines. And many other agriculture jobs have slipped away to foreign lands.

9. Just about the biggest export that the United States has right now is entertainment. That strength would be a good thing, except that it also means that it brings few jobs with it, and also means that a relatively small group of entertainers, producers and executives will share in whatever profits that American films or music will produce overseas. This is unfortunately quite similar to the days when British music sensations such as The Beatles and Rolling Stones became the UKs largest source of exports at the same time that the British automobile industry and manufacturing was beginning to decline. It is also a sign that both the UK and the US have largely become post-industrial societies.

10. The steep increase in bicycle use among adults in American society isn't a sign of a new awareness of the environment, or a health kick or a way to deal with lack of parking spaces. It's a sign of the economic decline of the US where many persons can no longer afford automobiles, gas, insurance, etc. It's a sign of increasing poverty in the United States where now over 15% of Americans are living below the poverty level and the demand for Food Stamps and other government services is only increasing. In places like China, people are getting off bicycles into Buicks and other automobiles. In the US, people are rapidly getting out of automobiles onto bicycles.

11. Cash strapped governments seek outrageous new taxes to bail out their problems. Local governments, states governments and the federal government continue to seek outrageous new taxes as a way to bail out their spending for services and salaries. In Oregon, for example voters approved an outrageous new tax proposal put on the ballot by legislators that levied a minimum tax of $40,000 on any incorporated business, even if the business was losing money. Some states like Texas are even charging some new tax on strip clubs they claim is an "entrance fee" tax.

12. Rapid inflation of prices during a bad economy is a phenomenon never before witnessed by the US economy. It is possible that many grocery prices could increase by as mush as one third over a year's time. Oil is partially responsible for these increases, but also a strange phenomenon where financially strapped business are raising prices to remain in business to cover their business costs because taxes only continue to increase and profits margins have fallen due to weaken sales in the bad economy. Normally, prices will fall during a bad economy. During the Great Depression, 78 rpm record prices dropped from $1 each to 10 cents as record companies reduced the quality of records and lowered prices to maintain sales in the industry and to remain in business. your depression era records were some of the worst quality ever made, but these lower priced records kept the industry alive until better times.

A variety of serious factors are endangering American business in this country, making it difficult for business to provide the jobs necessary to maintain the national economy. In addition, some American companies have resorted to outsourcing of goods to lower costs and increase profits, only accelerating the overall decline of the American economy as a whole, while making their own companies more profitable.

Can the American economy recover these serious conditions, which are now unfortunately fully institutionalized problems for the economy unlike the more normal transitory problems related to other past economic problems such as normal recessions over the years? This is a huge question with no easy answers or solutions.


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