Trickle down poverty

Today the Bloomberg News released an article about the impact of people moving from six figure high powered job to working menial jobs for low pay. This trend has been going on for years, but only once it started to hit the big earners did it get any attention. Back when the factories were being moved to Mexico by GM and Ford in the Eighties the talking heads in the media said it would be a blessing for the American consumer to have cheaper cars. Well first came the cars, then every manufactured good, and suddenly there is no need to financial workers here because all of the wealth is leaving the country. Shocker of the year, I know. Of course these same people who move their addresses to Switzerland and the Cayman Islands to avoid paying taxes sure don't renounce their citizenship to also stop enjoying the protection of the military that everyone else's tax are paying for.

Thought from a trip to the grocery store

I have been employed in a precarious industry, so going to the grocery store meant looking for non perishable staples such as rice, pastas, sardines, etc. Well I went and noticed that every one of these things had high traffic in their areas. Sardines were almost all gone when I had taken my share, the pasta aisle was thinned, and basic goods seemed to be the majority of everyone's carts.

What does it mean? It means that, like me, most people are having to adjust to having less purchasing power and uncertainty about employment. Why would people spend extra money on groceries that will go bad in a few days if they are worried about their next paycheck? If you want to read it from CNBC instead of me, check here. I am a big believer in the most obvious things being the best economic indicators. When you see that parking lots are empty and people are buying only staple goods, things are bad no matter what the government statistics tell you.

Helicopter Ben Says Recession Possible, "Sun Could Rise in East"

Today the Fed Chairman says that a recession is possible. This is news because Uncle Ben has been the main cheerleader for the printing press industry, and even he is going negative. Here's a checklist of economic indicators and their effect on the likelihood of a recession.

GDP growth-Barely, not statistically significant, not really bad until negative
Inflation-Increasing, very bad
Dollar Value-Decreasing, feeds inflation in an import-based economy, bad
Unemployment-Rising a bit, bad, but we are still at full employment levels
Consumer spending-Down, not necessarily bad because it means personal debt is probably being paid off instead of shopping as much


Things are not going well on the economic side, but it could be worse. When unemployment shoots up, that is the time to be worried. When that happens either the interest rates fly upwards to reduce inflation or government subsidizes hiring of new workers to increase emplyoment. Either situation does not bode well for the economy and leads to social problemms in addition to the economic impact.