After the Fall

Written by William Michael

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In the sixth year of the reign of Obama, the Dow Jones Industrial Average broke the 17,000 mark. When he took office in After the FallJanuary 2009, the DJIA was in the low 8,000s. As there is any time the stock market hits a new high, there is rampant speculation that this newest bubble is about to pop - see this article on the WSJ's MarketWatch, for example. Writes the columnist, succinctly:

"Before you jump on the bulls’ bandwagon, let me call to your attention a couple of salient statistics. At today’s level, the Dow industrials are up 5% since the beginning of this year. This is on top of a 35% leap in 2013. And in case you are keeping score, the Dow is now a whopping 155% above its low back in March 2009... All that said, there are a number of warning signs out there that suggest the party may soon be over. .. For one thing the economy has not grown anywhere near as much as stocks over the past 5-1/3 years; neither have corporate profits... Robert Shiller, the noted Yale professor, economist and author, thinks that the market today is about at the valuation it was running at in 2008, just before stocks plunged. "

While there are several reasons for this bubble, the single largest contributor is the Federal Reserve's easy money policies. Since the crash in 2008, the Fed has kept interest rates exceptionally low (which is why your savings account doesn't appreciate in value anymore), and has done so through a policy of ceaseless "quantitative easing." In the days before electronic cash, this was called printing money, but such straightforward terminology is unbecoming to these new age cyber technocrats. Instead of running the printing presses all day and all night, they simply press the ZERO key a few more times per day, and magically banks find themselves with more cash on their balance sheets. If this sounds too simplistic, it's only because there's no need to make it more complicated. Going through the actual money creation process step-by-step, using the bureaucrat's terminology, gives it an air of respectability it does not deserve. The Fed's creation of new electronic cash, by and large, is the reason why the markets are up 155%.

It is the opinion of this author that the best measure of the health of an economy in a free society is not the stock market but unemployment, or more broadly, labor force participation. While the stock market is overinflated, unemployment remains dangerously elevated. The government Bureau of Labor and Statistics touts an (U-3) unemployment rate of 6.5%, a reasonable number, but the BLS U-6 unemployment figure still stands at an unacceptably high 12.1%. John Williams at ShadowStats, using alternative statistical methods, estimates the true unemployment rate is closer to 23% and on the rise. Moreover, the government BLS admits that there are a record 92 million Americans who do not participate in the labor force. Yet perhaps the most startling statistics is this - in 20% of American families, not one person is employed.

Costs Measured in Lives

These are cold figures, detached from life, so it helps to think in human terms. Nearly one in five individuals cannot find work. One in five families does not have any income, other than (presumably) welfare. Nearly one in three, 92 million, do not have any real connection to the economy, for they are not involved in the labor force.

The psychological effect this will have on the next generation is impossible to quantify, but it is hard to overstate. As anyone who has been laid off and/or unemployed will tell you, an individual's self-worth is correlated to their productivity and ability to earn a living. Not only that, but social ethics are developed in those who work and produce for their neighbors, while those who do not participate in society are deprived of this ethical and social education. Having a paid job implies that you are creating something of value that another can use, and you are compensated precisely because of this contribution. As long as 20% of families remain outside the workforce, subsequent generations will not know what it means to serve the greater good by being a part of the market economy.

For those with investments whose portfolios are inflated, the Fed is giving them a false and deadly sense of security. The reality of this bull market is that it does not match the underlying economy. In Q1, 2014, the economy actually SHRANK, down -2.9%. At the same time, inflation - the devaluation of the dollar and the cost of regulation - was palpable to consumers. Food prices are up anywhere from 2%-6.5% from a year ago, while national gasoline prices are up 20 cents to $3.67, just shy of their 2008 record high.

In other words, if you're lucky enough to still have a job, it is getting harder to make ends meet. The average American is struggling mightily. The wealth inequality gap, the main talking point of the Democrats, really has reached critical juncture - under the tutelage of Barack Obama's regulatory czars. According to a University of Michigan study, from 2003-2013, the wealth gap nearly doubled. In 2003, the top 5th percentile of households had 13x more wealth than the median household; by 2013, that number had risen to 24. Meanwhile, in Obama's America, almost one-third of the population lacks access to basic banking services, and one in nine households doesn't even have a checking account. (More information on Unbanked and Underbanked Households can be found here.)

Looking at the unemployment numbers, along with the growing wealth gap and the lack of access to banking and financial services, it is fair to say that Obama's economic policies over the last five years have created an underclass of American citizens. These people, sadly, are largely forgotten by both political parties. The Democrats benefit from their dependence, nurturing a block of voters who cannot afford to see any cuts to the welfare system, $17.5 trillion national debt and inflation be damned. The Republicans, who appear to be deaf, dumb, and blind - or perhaps just bought off by corporate interests - see “lower taxes” as the answer to these complex problems. Hey, we're all for lower taxes, but unless the case is articulated to the people who are otherwise disaffected, they'll only shrug their shoulders. And rightfully so. If you're not in the game, if you don't have a 401k, hell if you don't even have a bank account or a job, what do you care if taxes, corporate or otherwise, are lowered? You are worried about feeding your family, and not much else.

Into the Shadows

In 2014, illegal immigration has spiked from countries south of the border. This influx of undocumented residents promises to add another, you might say a shadowy, dimension to this underclass. Just at a time when the American government is building a new serf class of legal Americans, many who cannot find work and/or lack access to the financial system, Obama appears determined to add to this pool of workers by importing illegals. Fears of assimilation, political loyalties, and disease aside, the fact is that in countries like El Salvador, Honduras, and Mexico, the way out of abject poverty for many adolescents is to join a gang. Gangs offer camaraderie, action, excitement, a common credo, and most importantly a paycheck! (Though believe me, you’ve got to “work” for it: shaking down businesses, killing, peddling drugs, etc.) Is any surprise, then, that the most corrupt governments generally have gang problems among the citizenry? Just look at El Salvador, where MS13 is backing the current party in political power. Or Mexico, where the police are on the payroll of the cartels to the tune of (at least) $100 million per month.

It's axiomatic: an America with little opportunity is one that will be ripe for gang recruitment. That's "decline" folks, that's "fall."

These cartels/gangs have an unlikely partner, half a world away. Al Qaeda and other Islamist cartels have a substantial footprint in Latin America. African al Qaeda groups (like AQIM, Boko Haram) transport South American cocaine across the Sahara and into Europe. (In case you were wondering, this trans-Atlantic business is rather agnostic... Insha'Allah!, Vaya con Dios!... whatever.) But like any trade, it goes two ways. It is not be surprising, then, to learn that Qatar, whose involvement with the international drug traffic is undeniable (see below), actually funds educational projects in the American Southwest with groups like La Raza. Yes, Tucson Unified School District, who implemented a curriculum of "Race Studies," in 2008, as per La Raza, was also awarded at $465,000 grant by the Qatar Foundation to teach students Arabic in 2013. Of all school districts in the country to give money, Qatar chose the one in Arizona who has an alliance with an activist organization for illegal immigrants.

A Cloudy Crystal Ball

What happens with this market collapses? Let's take a quick survey around the globe, with political considerations. A few trends stand out.

What will be left, post-stock market crash, post-Obama, post-Arab Spring? These are timely questions to consider. This conclusion is meant to say what could happen, not what is inevitable.

How can the worst of this be avoided? Whistle blowers, impeachment, and investigations. Trials, and sentences when appropriate. Should the status quo be allowed to continue for another 2.5 years, the above scenarios, and many derivatives, very well may play out to the great chagrin of the world.

Right Side News Contributing Writer William Michael

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