US Economy…Easing on Down?

While the entire political structure of the US Government has wrangled numbingly on over the inadequacy of its $14 trillion debt-ceiling, little attention is being paid to the fact that America’s number one problem is still jobs, jobs, jobs. Contrary to universally believed recovery expectations, the problem is recently growing. June numbers tell us that the current 58% employed population is actually below the level of two years ago. Well over 20 million of us need a job, or a better-paying one.
Jobs are not just another four-letter statistical word. Nor are jobs a mantle to be worn by politicians who are uniformly powerless to create them. Instead, jobs are the lifeblood of all developed societies. Rather than merely an additive, each job in a capitalist society is a powerful economic multiplier. Sadly, because the world’s leading jobs-engine has been sputtering for almost three years and its current outlook is still soft, the volume of per capita global business transactions may actually be shrinking.

It’s about the property

Other than sworn dedication to the Jobs-Cause by politicians, what must happen that will prime the complex US economic pump? There seems to be a fairly simple answer: the heavy, overhanging inventory of unsold, repossessed, mortgaged-up residential housing must go away in order to unlock consumption and job creation… a classic chicken-and-egg dilemma. It will happen in due course, but can the gaggle of global, debt-riddled societies that depend on its relief wait for it to unwind? We think there are two likely answers: (1) No, they can’t wait. The recession among world trading partners will compound, forcing another round of business (jobs) cutbacks, or (2) Yes, they can wait, but the disposal of unsold debt-ridden housing should be accelerated, via (more) aggressive mortgage write-downs and perhaps drastic means, such as condemnation and  destruction of ruined and mostly-ruined buildings.

QE3 anyone?

IF, there is a market Armageddon, or something that appears headed in that direction for whatever reason, we assume that big daddy Ben Bernanke will once again become Money-Printer-in-Chief. Although the Fed’s Open Markets Committee publishes concerns of some of its members about pending inflation, a new, general economic rescue operation (QE3) would logically take place, despite its twin, negative side effects: (1) further devaluation of the US Dollar and (2) continued commodity price inflation. Actually, a moderate round of US inflation would not be unintended. The Fed recognizes that recent circumstances have properly turned its normal garden-tending job… killing off the sprouting weeds of inflation… into a hairy DeflationBusters role. The country could surely use a horse-dose injection of housing price inflation in order to reverse the persistent tidal wave of underwater mortgages. Now would not be too soon. But the Fed is understandably circumspect about starting another dollar-printing exercise, probably because its recent QE and QE2 periods seem to have jolted the US stock market, but little else… not bank lending, and certainly not job creation. In fact, not even Wall Street jobs are safe; a fresh round of layoffs in that sector was recently announced, despite The Street’s generally robust earnings and a budding, bubble-looking investor appetite for tech IPOs that looks a lot like a mini-1999.

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