Economic Collapse?

“…the leftists in important economic positions would do what they could to collapse the system in 2017 or 2018…because the American leftists are willing and ready to launch their own violent revolution while we are financially down.” http://canadafreepress.com/article/democrats-prepare-for-violent-revolution

This is probably true for many on the left, but certainly every middle-of-the-roader who Trump rubbed the wrong way and voted for Clinton isn’t about to encourage civil disorder.  But how would they behave in harder times? When I look around Amador County and consider political opponents, many of whom I’ve known for years, I find the thought of violence and intentional disruption of ongoing institutions incomprehensible. But what I do see is a chasm in cognition. When I have stated that the Wild & Scenic designation for parts of the Mokelumne River is selfish, I am met by disbelief.  While they are free to disagree, my concern is that they seem unable to understand my point of view. To my face at a public meeting, I was called insane because I didn’t accept the human induced global warming scam. On Facebook I have been called deluded and worse, because I couldn’t swallow as truth some established doctrine. And most likely the inventive yellow journalism of Eric Winslow and the rumors spread by others contributed to the result of our last supervisorial election.  So how will people across the nation respond to an economic collapse?

Trump was elected to get the economy going. The stock market has soared. Better trade deals, needed infrastructure spending and regulatory sanity all sound workable, but what is the economic backdrop given eight years of Obama’s magic aided by some policies of his predecessors? What capital resources does our now debtor nation have left? The benchmark Barclays U.S. Aggregate Bond Index is now 60% government debt. Last March Standard & Poor’s noted that corporate bond ratings are the lowest in almost 15 years. As of April, only two US corporations - Microsoft and Johnson & Johnson - had AAA ratings.

Household wealth has taken the same turn. The rate of home ownership, as of 2015, was the same as 50 years ago. Last year’s first time home buyers were the lowest since 1987. The number of homeowners under 35 years of age is at the lowest ever recorded.  Among middle income earners, the percent of income devoted to basic expenses has risen from 54% in the early 1970’s to 75% in the early 1990’s even before the Obamacare confiscation. Much of this was caused by environmental land use policies inducing housing scarcity. 

The same no-growth policies, often implemented via just a lawsuit threat, affect our industry. We import cement because our demand exceeds domestic production. Will infrastructure spending become a subsidy to Mexico? As of 2015, only one waste to energy plant has been built since the 1990’s despite growth in population and consumption while some people dare to complain about landfills. The twin sister of the environmental boondoggle, over regulation, has caused the number of community banks to skink by 1,524 between 2010 and 2015. This is our capital leaving our communities and being invested by those with interests often opposed to ours. Adding to middle class shrinkage are new rules preventing options trading in self directed retirement accounts. The overall cost per employee of Federal regulation, according to the National Association of Manufacturers, is $19,564; but for smaller manufacturers the cost per employee soars to $34,671.

The number of IPO’s, initial public offerings of stock to finance new businesses, has fallen 75% since 2002. Independent new car dealers have declined by 30% since 1987. Small businesses create seven out of ten new jobs.  Those under 500 employees created 63% of net new jobs from 1992 to 2013. The number of self-employed has declined to 10% in 2014 from 12.2% in 1994. Without scrappy new competitors the big have gotten bigger. US stock exchanges as of 2012 listed 56% fewer companies than they did in the exuberant year of 1997.  A study by a leading bank of 1,700 public companies found that almost 2/3 had increased their market share.  Yet their capital spending has fallen from over a thirty year average of almost 120% of internal funds (profits + raised capital) to a current 80%.The average age of equipment is the greatest it’s been since 1964. Not surprisingly productivity, the real basis for higher wages, has steadied at less than 1% since 2010.

A parallel and probably not unrelated trend has been the political tangents of our schools along with the deskilling of our labor force. Apple’s Tim Cook stated that they manufacture in China because of the skilled labor there. Republic Airways has reduced their flight schedule due to a pilot shortage. A survey by the National Federation of Independent Business reports a 20% increase in skilled worker shortage complaints since 2010. The manufacturing workers that have declined by 1.4 million since 2007 have been replaced by 1.4 million bartenders and restaurant workers. These low wage and often dead end jobs take an economic and emotional toll. Why bother, when 34 states and the District of Columbia pay more to not work and get welfare? The median welfare package equals $28,500 for the 50 states. Every 1.65 private sector worker pays for 1 person receiving some type of welfare assistance.  If you add in the government workers which includes those administering these programs the ratio drops to 1.25 private sector workers. Both sides of this equation–the overtaxed worker and the person not seeing opportunity beyond the dole–have reasons to be cynical. This fuels the recipe for social explosion.

Sufficient kindling abounds as we have seen with mall bawls, Black Lives Matter events, anti-Trump extravaganzas, children raised in fatherless homes or brought into the world only to increase one’s welfare check. Add in increasing drug addiction, and our best and brightest getting college degrees in fields like gender studies and the possibilities for collapse increase. While some will argue that a gender studies degree adds to understanding, the employment possibilities are primarily limited to teaching and perhaps human resources departments. In both these possibilities they are consuming wealth but not creating it. While these same people often preach diversity dozens of small colleges are going under and our religious institutions are under attack. This is the real diversity that we cherish because it sustains us, not the faux diversity of skin color or some other derisive tactic.

The aggregate statistics emanating from Washington paper over the deteriorating fundamentals. How much news coverage does the ongoing danger of our trade deficit receive? Or the Chinese banking crisis? Do the Europeans have time to consider this while running away from Muslim rape gangs or protecting their houses of worship from attack? Or is all this irrelevant since a few key strokes could create a derivatives trading cataclysm and bring down the banking system?

No one, be they globalists against Trump or any other possible villain, needs to engineer an economic collapse. All they have to do is push it over.  And while I don’t know what will happen, nor am I making any predictions, I can’t forget the words of Rudiger Dornbusch regarding economic behavior: “The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.”

Happy New Year!                                                

Copyright 2017, Mark L. Bennett