Todd M. Siebert: The ‘recovery’ is not going to happen

There are a few stories that, when put together, give you a good indication of where the national and global economies are headed. And it’s looking like the rich get richer while the rest of us make due with less.

A study released by non-partisan Pew Research says that in 25 percent of the major cities in the U.S., the middle class no longer makes up the majority. In 2000, that number was less than 10 percent.

What is marketed by the Obama administration and the mainstream media mouthpieces as great jobs recovery and record-low unemployment in the U.S. is in reality a shift in the entire economy from well-paid professionals to lower-priced labor.

Yes, many people have jobs, but they pay far less than the jobs they were forced out of because of the bankster-induced financial crisis. So, what we have is someone who used to bring home $70,000 now making half that in some job that offers no real advancement or opportunity.

The real unemployment rate is far worse than we have been told. ShadowStats.com states that the April 2016 unemployment rate was really 22.9 percent. Even CNN has been forced to acknowledge that around a quarter of white men with only a high school diploma aren’t working. Many men ages 25 to 64 aren’t even looking for a job, according to federal data.

This is why the U.S. electorate is rising up to support candidates like Donald Trump and Bernie Sanders. People know they’re hurting and yet we continue to be told that everything is fine.

Americans are being told everything is fine because it helps keep individuals’ frustrations down and keep us obsessing over paying bills rather than seeking justice.

America has been pacified by the great push to consumerism — and debt — for decades now. After the tumult of the 1960s and early 1970s, big business and establishment government decided it was time to wrest control of liberty and justice from the “all” into the hands of the few.

And the insidious strategy was to begin the shift from a “building”’ economy, underpinned by manufacturing and then consuming what we built, to a “financial” economy, where we were encouraged to get credit cards and equity lines and leverage all our assets.

I was watching the documentary “Requiem For The American Dream” this weekend and there were some pretty stunning stats to back up our transition from a building economy to a financial one. And it didn’t happen because individuals wanted it that way; it was put on them.

And one of the most prominent declarations of the establishment over individuals was put out by none other than Supreme Court Justice Lewis Powell, just months before his nomination to the court.

He wrote a letter to his friend who was the head of the U.S. Chamber of Commerce. In what has been named the The Powell Memo, or Powell Manifesto, he sets out to encourage corporations to take back control of the state, using the power of the U.S. Chamber of Commerce, from the agitators that had gained ground in the 1960s. Essentially he is promoting the idea that corporations should become more involved in government so as to control the agenda.

And this would certainly have a significant impact on how corporate issues were viewed in Congress and the White House. It helped usher in the transition from a manufacturing-based economy to finance-based one.

It was the rise of the new corporate funding of democracy. There was a similar wave during the dotcom boom. I remember reading an article about how lobbyists went to Silicon Valley to encourage the growing tech firms that they needed “representation” in Washington as their sector grew.

These were people who were used to spending billions for chip manufacturing plants and building fiber optic networks. The Silicon Valley execs were concerned with how much Congressmen and Senators cost, given the amount of money that these firms were used to spending just on production facilities.

They were shocked. Senators and Congressmen were bargains, one CEO noted. Why not buy more than one or two?

In 1950, manufacturing was 28 percent of GDP. Financials were 11 percent of GDP. By 2010, those numbers had almost reversed. By 2007, 40 percent of corporate profits were from the financial sector.

Basically, they all create debt instruments and derivatives and move numbers around without building a darn thing.

So now a guy who loses his tool-and-dye job is forced into the service sector, answering phones for a telemarketing firm. This is no way to grow the middle class and no way to treat the skilled, loyal workers who were simply trying to live the American dream.

What does all this mean going forward?

It means this economic recovery is a sham. It’s not going to happen. The booming oil industry is still reeling — major shale energy producer LINN Energy just filed for Chapter 11 bankruptcy (the stock is off 98 percent in the past year) with nearly $10 billion in debt. Drilling equipment maker Weatherford just laid off another 2,000 workers. BP cut back drilling in Alaska.

The point is, banks have been handing out lines of credit like candy to these energy firms, so it’s not only the drillers that are in trouble. As the old saying goes, “Owe the bank $ 1,000 and it’s your problem; owe the bank $1 million and it’s the bank’s problem.” There are a lot of banking problems today.

The list of economic headwinds goes on, but the point is, stay away from buying fire sale priced stocks in any sector right now. And as I continue to say, gold and silver are your best investments right now because there’s no other market that has any real store of value in the current financial castle built in the sky.

And avoid any debt instruments that have a variable rate. If the bottom falls out, you want to be locked into the lowest interest rates possible and not getting whipsawed by a falling dollar and rising interest rates.

— GS Early

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