The unemployed who don’t even count as unemployed

Until now I have only heard statements like these umpteen times from people like Peter Schiff, visionvictory channel on YouTube, etc –

‘What about the people who haven’t found a job for so long that they no longer qualify for unemployment benefits?  They are not counted in these unemployment numbers”.

Today I read an article here where such an unemployed person, who hasn’t found a job for 3 years, says this -

“They don’t count me as unemployed ’cause I ain’t drawing a check. It’s like I don’t even exist. But I do. Look around. There’s thousands … millions of us.”

Gross underestimation of the problems in India

This is not the first time that people seem to be ignorant of the grave problems that India faces, but its the first time that I am realizing a serious problem which hardly anyone seems to appreciate – Water.

Mumbai had 30% water cut about a month ago. Pune was even worse. The situation eased a bit after there were rains for some time. Here in Hyderabad I am completely dependent on bore water for everything except drinking & cooking.

I have seen fields alongside the NH9 near Sholapur that are completely dry. They have been tilled, but there is no water to sow the seeds.

I remember the legendary P. L. Deshpande’s line in one of his works – translated from marathi – ‘The average resident of Mumbai believes that cotton grows inside pillows and eventually comes out of it’. Such is the state of our people. They don’t know how the entire pyramid of dependence of goods & services is so fragile and so heavily dependent on the monsoon that a 50% decrease in monsoon would cause the situation in India to be more explosive than what is expected in the USA due to imminent inflation & high unemployment.

Hardly anyone seems to realize the gravity of the situation. They seem to think – ‘Everything will be fine, just as it has been before’.

And then there are those poor people who pray to God for rains without realizing that no amount of prayers can bring rain if the weather patterns have changed.

Yet another way to draw laughter from the audience

Here is an article from BBC News titled – Geithner assures China investors. US Treasury secretary Timothy Geithner is on a visit to Beijing. The article says that in a speech at Beijing university Geithner said “Chinese financial assets are very safe” drawing laughter from the audience.

US States with highest unemployment in April 2009

Take a look at this link – http://www.bls.gov/opub/ted/

The graph on that page is inserted here -

The mislead country

The USA’s (and many other developed countries) current economy is built on a phony foundation of borrowing and debt. The economy should not have grown so much in the first place. In fact, the growth in the USA’s GDP has largely been contributed by borrowing more; its not due to production and savings. And this is not sustainable. No amount of government spending is going to rectify the situation. It will only lead to inflation. The government is already in deep debt and has no savings from which it is stimulating the economy. It is doing so by taking more debt and assuming that the economy will stimulate enough to get more revenue from future taxes in order to pay off the debt.

It is generally assumed that the future will always be larger than the present and that there will be capability to pay for the current debts in the future. This is an extremely flawed assumption given the crisis that we face due to the inevitable depletion of the fuel with the most ‘surplus energy’, crude oil.

The right thing for the USA to do right now is to take the pill of recession, cut the huge government spending and let the private, more efficient companies use the capital to produce goods.

‘Systemic Risk’ is all nonsense

“The failure of big companies causes Systemic Risk” is all nonsense. There are a lot of companies who did the Right Thing & who should be allowed to benefit from the collapse of the big companies. But the government is not allowing this to happen by supporting people who behaved recklessly. Companies which have taken too much risk & have made bad decisions must be removed from our system.

This is of course not the end of our system.  Other companies who have been waiting for this to happen will come in and will have the chance to increase their market share and recruit people.

Prediction of the US economic collapse

Recently I came across this article – http://www.naturalnews.com/019659.html. If the date on this article is to be believed then, the author has amazing predicted the many events that have already occurred. Others like Peter Schiff had also predicted the current collapse.

The article talks about the Fed buying the Treasury bills when no one else is willing to buy it. This is what exactly happened about 2 or 3 months ago when the Fed declared that it will be buying $1.2 trillion worth of T-bills.

According to the article, hyperinflation is the most probable exit taken by such crisis since printing money to pay off debt is the easiest way for the greedy governments. This is what happened in Germany in 1923 and this is what will happen in the USA now.

A movie on USA’s huge debt

I strongly recommend this 30 minute movie on the growing debt of the USA which stands at $53 trillion as on now -

http://www.youtube.com/watch?v=O_TjBNjc9Bo

In the movie, a list of all countries arranged with decreasing trade surpluses is shown. The data is from the year 2007. In that list, China is at the top with a huge trade surplus, and at the bottom is USA with huge trade deficit! India stands 5th from the bottom!

The USA’s direct debt is $11 trillion. Add the medicare and social security obligations of the government and it balloons to $53 trillion.

This point has also been explained very well in Chris Martenson’s crash course at – http://www.chrismartenson.com/crashcourse

Optimism

Image from “The Big Picture” blog.

Horrible Economics

The USA and many other countries are practicing horrible economics. The US of A bailed out AIG which is an insurance company. The very purpose of the existence of insurance companies is to mitigate risk for others. And AIG has miserably failed at it. They themselves don’t know how to handle risk. How are they going to manage risk for others?

The US government’s pretext for bailing out AIG was that “it is too big to let it fall”. Agreed that it would have devastating consequences on all the people affected by it. But at least the people who had signed papers accepting the contracts (and the risk associated with it) would be affected. These are the people who knew that there was risk, however small it might be. And it is perfectly fair. Now, the people who took risk have been bailed out & they have not lost anything. But the people who bailed them out have to now pay the price for it – may not be directly from their pocket – but through inflation.

Some people argue that if AIG was not bailed out there would be tons of job losses. According to me they are looking at only the first level cascading effect. The second level cascading effect is the people who are competent will come forward and be able to start new companies providing insurance services. That is how the free market has worked all the time.

Why should the incompetent folks at AIG make mistakes & get bailed out, while the competent folks outside not even get a chance to use their skills?