Peak Oil is You
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Page added on June 15, 2015
Our Phantom Economy
Those who believe that phantom recoveries and phantom metrics can be substituted for reality are in for a shock in the next downturn.
Stripped of artifice, there are only two kinds of media stories: those that support the status quo narrative, and those that are skeptical of that narrative.
What is the status quo narrative? Simply this: not only is this the best possible arrangement of labor, assets and money, it is the only possible arrangement of labor, assets and money.
It is impossible to challenge a system that is the only possible arrangement; the only option is to accept it.
In effect, the mainstream media is a vast Psychological Operation (PSYOPS) aimed at persuading the American public that the status quo Imperial system of predatory, debt-based crony-capitalism that benefits the few at the expense of the many is not just beneficial to all its debt-serfs and welfare recipients, but it is the only possible system–there is no alternative(TINA).
One of the greatest and most important PSYOPS of the Imperial State (U.S. Government) and its faithful lapdog the mainstream media is the unemployment rate. As I will show tomorrow, the real unemployment rate is between 20% and 40%, depending on whether you think someone earning $1,500 a year selling stuff on eBay and Etsy should be counted as “employed.”
The federal government is delighted to count everyone earning $100 a year as employed, and equally delighted to label everyone without a job (even one paying $100/year) who doesn’t qualify for unemployment insurance a job market zombie–a once living person who is no longer counted as among the living.
These zombies are non-participants in the labor market, i.e. not in the labor force. They might be able to work, and want to work, but they’re considered zombies once they’re no longer “actively seeking work.” But is this the proper metric for measuring the unemployment rate? It is obvious that the unemployment rate should be calculated on the total work force (those of working age 18 – 65 who are not institutionalized or permanently disabled) and those with real jobs, i.e. ones that generate enough income to get close to the poverty line.
Here is our phantom economy on display: 93 million people are no longer counted as being in the work force. They are officially declared zombies, and that’s how the federal government can claim an “official” employment rate of 5.6%.
And here’s the work force with full-time jobs, i.e. jobs that might support a household (or half a household) and that might pay substantial payroll and income taxes (unlike the forms of marginal employment that earn a few hundred or few thousand bucks annually).
Just as we have a phantom work force–the 93 million not in labor force almost equals the 120 million with full-time jobs–Imperial Rome in its final days had phantom legions. There were no longer any active-duty soldiers in the legions, but the officers and paymasters filed their payroll chits and collected the legion’s pay from the out-of-touch remnants of the Imperial Core in Rome.
Just as Rome in terminal decline had its phantom legions, we have a phantom “recovery,” phantom democracy, phantom GDP and phantom unemployment rate.Those who believe that phantom recoveries and phantom metrics can be substituted for reality are in for a shock in the next downturn.
by Charles Hugh Smith | Of Two Minds
24 Comments on "Our Phantom Economy"
pennsyguy on Mon, 15th Jun 2015 9:40 pm
I know many well-meaning, educated people who believe that NPR, etc. is telling them the truth. I’m rather proud of being a skeptical crackpot.
Makati1 on Mon, 15th Jun 2015 9:57 pm
Pennsyguy, I am one also, it appears and I am proud of the fact. Six men control 90+% of the media in the US including movies and magazines.
I just read an interesting article similar to this one …
http://www.theautomaticearth.com/2015/06/snowden-putin-greece-its-all-the-same-story/
The UK is just as bad, if not worse. signs of the end times I suppose. Desperation does bad things to empires in decline.
HARM on Mon, 15th Jun 2015 11:03 pm
I like Charles Hugh Smith, but… sometimes he gets his tin foil hat on, and this is one of them. The “true” unemployment rate is indeed higher than the much-touted U-3 metric –it’s more like 11.6%, which is the U-6 metric the BLS publishes right alongside U-3.
http://www.bls.gov/lau/stalt.htm
Incumbent politicians invariably prefer to cite U-3 for obvious reasons. U-6 is a lot more inclusive (total unemployed, plus discouraged workers, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers).
HARM on Mon, 15th Jun 2015 11:12 pm
93 million adults are not “unemployed” in the U.S. Most of them are simply retired, disabled, stay-at-home spouses or college students. Unless you believe 80 and 90 year-olds *should* be working.
hiruitnguyse on Mon, 15th Jun 2015 11:28 pm
I like to use a metric of “Number of people riding in buggy (including Gvt workers) vs number pulling it”
Apneaman on Mon, 15th Jun 2015 11:42 pm
Harm, he already factored out everyone over 65 and the disabled.
“It is obvious that the unemployment rate should be calculated on the total work force (those of working age 18 – 65 who are not institutionalized or permanently disabled) and those with real jobs, i.e. ones that generate enough income to get close to the poverty line.”
Rodster on Tue, 16th Jun 2015 2:25 am
“The “true” unemployment rate is indeed higher than the much-touted U-3 metric –it’s more like 11.6%, which is the U-6 metric the BLS publishes right alongside U-3.”
According to John Williams from shadowstats.com our real unemployment rate is between 24-26%.
harm on Tue, 16th Jun 2015 3:13 am
Apbeaman, CHS most definitely did NOT exclude people over 65 in that 93 million figure. Re-read what he actually said and compare them to national employment statistics. 93 million includes elderly retirees.
marmico on Tue, 16th Jun 2015 8:48 am
Much ado about nothing. If you divide “employed, usually work full time”, into “not in labor force” you will discover that the result (call it the dependency ratio) was 1.29% in 1980 and 1.32% in 2015.
Guitar playing Hughes-Smith is a demographically-challenged doofus.
GregT on Tue, 16th Jun 2015 9:10 am
We now have a growing percentage of citizens often referred to as the ‘working poor’. Many are employed at 2 or more jobs, yet they must still rely on social assistance to put food on their tables. Those who are gainfully employed won’t pay them much attention, until they have joined their ranks. We are witnessing the greatest redistribution of wealth, in the history of mankind. The middle class is being decimated.
Davy on Tue, 16th Jun 2015 9:14 am
Marm, anyone that does not see the world as you do is a baffoon and doofus. What a drivel spewing lowlife moron who thinks he knows it all.
I admit to being a doomer nutter but that is far better than an arrogant asshole cornucopian numb-nutter. What is so special out being the Freddy chart king? Is your greedy little brain unable to understand a complex system beyond a Fred chart?
I think what is most hilarious is you are a small investor wanting to be a big investor IOW a wanna-be bullshiter talking big with a chip on his shoulder because he is a small timer.
Northwest Resident on Tue, 16th Jun 2015 9:50 am
Wealth transfer to the 0.1%? Moving good paying American jobs overseas to take advantage of miniscule wage and slave labor?
It is all part of the plan. Or should be, if there is a plan.
Just think how bad global resource depletion is already. Think of how much waste the human population is producing every year — waste that goes into the air, the sea, into fresh water, into land fills, oozes into the farm land and comes back to us in the produce and meat that they sell.
Now think how much worse consumption (and resource depletion) would be if there was no wealth transfer and the American middle class was rolling in excess money. Think of all the bigger houses, bigger cars and SUVs, all the meat and sushi, all the plastic shit, all the appliances and granite and all the other resources that Americans would just suck out of the world like one giant vacuum cleaner.
Sorry boys. That wealth transfer to the 0.1% is for your own good. For the good of everybody actually. Four tasting medicine to be sure. But it still isn’t even close to being enough. We have a long, long ways to go before Americans especially and all the rest of the world brings their consumption down to a sustainable level.
Hubbert on Tue, 16th Jun 2015 1:14 pm
America is a bankrupt 3D world that’s 18 trillion dollars in debt, and 100 trillion dollars in unfunded liability. Any idiot who has problem believing that is living in a la-la world.
Davy on Tue, 16th Jun 2015 1:46 pm
Come on Hubert with the agenda. The whole friggen global system is in the same boat. The 20th century use of developed and developing nations is also flawed. The U.S. Is a continental size country that is a blend of 1st and 3rd world. China is likewise a blend. If you can’t see the strengths of the U.S. Then you are just an anti-American with an agenda.
penury on Tue, 16th Jun 2015 2:48 pm
” If you can’t see the strengths of the U.S. Then you are just an anti-American with an agenda.” Being able to see the strengths of the USA is easy. Discussing the weakness is what causes people to become upset. I personally have a aversion to listing at least one positive for each negative. If you would like a list of positives fine. If on the other hand you would prefer to acknowledge that the U.S. is less than perfect then you must accept that a minority of us are more concerned with [ointing out problems in the vague hope that maybe change could be made. (forlorn hope I know)
HARM on Tue, 16th Jun 2015 3:34 pm
“Sorry boys. That wealth transfer to the 0.1% is for your own good. For the good of everybody actually. Fou(l) tasting medicine to be sure. But it still isn’t even close to being enough. We have a long, long ways to go before Americans especially and all the rest of the world brings their consumption down to a sustainable level.”
That’s an interesting take. Not a very good way to achieve the goal of sustainability, though. Without ending the BAU growth-based economy, all it ends up doing is concentrating power into fewer hands (bad), creating a permanent underclass (also bad) as well as more political instability in formerly stable nation-states (worse).
Also, any drop in middles-class consumption is more than being offset by the additional 700-800 million people added PER DECADE (mostly Third World) thanks to uncheck population growth. Even if 1 American = 50 Nigerians in terms of resource consumption, there is just no way to counter that scale of population growth –even if most Americans are reduced to street beggars.
GregT on Tue, 16th Jun 2015 3:47 pm
“Without ending the BAU growth-based economy, all it ends up doing is concentrating power into fewer hands (bad), creating a permanent underclass (also bad) as well as more political instability in formerly stable nation-states (worse).”
I think that sums up our situation fairly well. You forgot the most important part though. A drastic reduction in our populations. Sustainability cannot be achieved with current population numbers. Our species is in overshoot to the natural carrying capacity of the planet Earth.
Northwest Resident on Tue, 16th Jun 2015 4:09 pm
HARM — Good points.
But I think one sure way to end the BAU growth-based economy is to eliminate over-consumption. BAU is dependent on over-consumption and can’t long endure without it.
BAU is doomed anyway sooner or later because over-consumption is in turn dependent on fossil fuels and we all know where that’s going.
The privileged positions of the industrialists and high flying financiers who have been milking BAU all along won’t endure once BAU crashes and burns.
But short term, to stretch BAU out a little longer, putting the brakes on American consumption was one of the measures that had to be enacted, just one of many. Definitely not a long term solution of any kind, but a step in the right direction toward self-sustainability even though that probably wasn’t the main intent.
Just IMO
DMyers on Tue, 16th Jun 2015 7:53 pm
The numbers are contrived, bogus, exaggerated, and manipulated. Smith is correct. And this all happens in plain view, so there isn’t a case to be made against Smith.
The reality of a jobless population is making itself known as we speak. It is called economic collapse. The collapse will gain momentum as its presence becomes more blatantly visible (e.g.,closed store fronts and empty office buildings).
All registered economic growth at this point is nothing more than an artifact of discounted inflation. Treat your GDP to the +/- key.
Makati1 on Tue, 16th Jun 2015 10:08 pm
The US is 3rd world, with few, if any, positives at this point. If you know one real, provable positive let me know. There is no rule of law, no real democracy, no signs of recovery, no effort at peace, kingdom of debt, and on and on.
I live in what is considered a 3rd world country and I can tell you after 7+ years, that there is more of the old American positives here than exists in the real America today. They still have the energy to protest and make changes by popular demand, low debt of all kinds, and the freedoms lost long ago in the US.
Life expectancy for the Ps is only ~5 years less than the US, but the US is slipping closer to the Ps level everyday, while the expectancy for Filipinos is growing. The US is #53, after places like Bosnia (#46) and Singapore (#3). (out of 228 countries)
http://www.geoba.se/population.php?pc=world&type=015&year=2015&st=rank&asde=&page=3
Apneaman on Tue, 16th Jun 2015 11:00 pm
Third world standards in the US depend on where you live, income and minority status, but the fact of the matter is that the underclass is growing daily and the system of checks and balances has been gutted. Next bubble pop and the smoke blows away and the mirror gets shattered. IMO, it’s a when not an if. The elite have the money power and means of control, so will they use them when the time comes? History says they will try, but who knows what will happen once it begins. I’m flipping a coin, because decades of reading history shows that things can turn on a dime. Apes are fickle people. In the end it is usually comes down to the police and military – whether they are willing to kill their fellow citizens en mass when ordered to after the mobs hit the streets. They refused to in East Germany and the wall came crashing down and no one expected or predicted that. Or how about the civil rights in the US? Rosa Parks was not the first person to refuse to give up her seat, so why her and why that day? No one knows. Lots of examples like that and even more where the troops follow orders or panic.
Northwest Resident on Wed, 17th Jun 2015 11:34 am
Peak Oil manifests itself in the (Phantom) economy. At the core of our modern economies is energy, and any distortions in energy reverberate throughout the economy, warping and twisting what used to be considered solid fundamentals. Don’t take my word for it, read the following by a “Fed Insider” — who, like David Stockman and other excellent financial analysts, fail to connect the issues we are having with energy to the dramatic corruption of our economic systems — but the reading is good nonetheless.
Another Fed “Insider” Quits, Tells The Truth
“The insult added to the economic injury is the players who are compelled to underwrite the not-so-virtuous cycle. Broken pension accounting and incentives continue to force the hands of the individuals tasked with allocating the portfolios underlying the nation’s $18 trillion in public pension obligations. One of the least discussed consequences of easy monetary policy is the damage wrought on the nation’s pension system. Not only have low interest rates compounded underfunded statuses, they have driven pension assets into riskier and less liquid investments (i.e., shale junk bonds) than anything prudence would dictate. The catalyst is the perverse rate of return assumptions that are wholly disconnected from reality. Averaging 7.75 percent, these bogeys have forced allocations into credit plays, many of which are caged in the least liquid corners of the debt markets. The irony is that many pensions have sought to diversify away from their bloated equity holdings by seeking out what they perceive to be the traditional safe harbor of fixed income investments, much of which flows straight back into the stock market via debt-financed share buybacks and M&A.”
http://www.zerohedge.com/news/2015-06-17/another-fed-insider-quits-tells-truth
Outcast_Searcher on Wed, 17th Jun 2015 2:19 pm
It’s completely arbitrary and sometimes wrong to state that EVERYONE who is not disabled or institutionalized between 18 and 65 should be counted as the workforce.
I worked my ass off and saved lots of money until I was 48. Then I retired of my own volition. Since then I have done any “work” based on my personal interests and NOT for a salary — thus I should NOT be counted as in the workforce. (If I wanted a job and could’t find it, that would be different).
Flat assertions like that, and ignoring the demographics that reflect an aging population as a “problem” with the economy is strictly tinfoil hat territory.
Makati1 on Thu, 18th Jun 2015 1:13 am
Outcast, pre WW2, women only worked in a few professions. It was the ‘war’ that put them into the other areas of employment in a big way. Unfortunately, they stayed and worked to buy those ‘extras’. Then the corporations/elite saw that they liked the profits those ‘extras’ brought in and made it impossible for that second wage earner to quit because of the debt racked up to by that bigger home, that second car, etc.
If only able males between the ages of 17 and 65 were counted as ’employable’, the current number of employed are about right for the population.