About Me 0066: People Making Money Net

Next time you hear an economist or denizen of Wall Street talk about how the "American economy" is doing these days, watch your wallet.

There are two American economies. One is on the mend. The other is still coming apart.

The one that's mending is America's Big Money economy. It's comprised of Wall Street traders, big investors, and top professionals and corporate executives.

The Big Money economy is doing well these days. That's partly thanks to Ben Bernanke, whose Fed is keeping interest rates near zero by printing money as fast as it dare. It's essentially free money to America's Big Money economy.

Free money can almost always be put to uses that create more of it. Big corporations are buying back their shares of stock, thereby boosting corporate earnings. They're merging and acquiring other companies.

And they're going abroad in search of customers.

Thanks to fast-growing China, India, and Brazil, giant American corporations are racking up sales. They're selling Asian and Latin American consumers everything from cars and cell phones to fancy Internet software and iPads. Forty percent of the S&P 500 biggest corporations are now doing more than 60 percent of their business abroad. And America's biggest investors are also going abroad to get a nice return on their money.

So don't worry about America's Big Money economy. According to a Wall Street Journal survey released Thursday, overall compensation in financial services will rise 5 percent this year, and employees in some businesses like asset management will get increases of 15 percent.

The Dow Jones Industrial Average is back to where it was before the Lehman bankruptcy filing triggered the financial collapse. And profits at America's largest corporations are heading upward.

But there's another American economy, and it's not on the mend. Call it the Average Worker economy.

Last Friday's jobs report showed 159,000 new private-sector jobs in October. That's better than previous months. But 125,000 net new jobs are needed just to keep up with the growth of the American labor force. So another way of expressing what happened to jobs in October is to say 24,000 were added over what we need just to stay even.

Yet the American economy has lost 15 million jobs since the start of the Great Recession. And if you add in the growth of the labor force -- including everyone too discouraged to look for a job -- we're down about 22 million.

Or to put it another way, we're still getting nowhere on jobs.

One out of eight breadwinners is still out of work. Most families in the Average Worker economy rely on two breadwinners. So if one out of eight isn't working, chances are high that family incomes are down compared to what they were three years ago.

And that means the bills aren't getting paid.

According to a recent Washington Post poll, more than half of all Americans -- 53 percent -- are worried about making their mortgage payments. This is many more than were worried two years ago, when the Great Recession hit bottom. Then, 37 percent expressed worry.

Delinquency rates on home loans are rising. Distressed sales are up as a percent of total sales.

Most people in the Average Worker economy own few shares of stock, if any. Their equity is in their homes. But with all the delinquencies and distressed sales, the housing market has a glut of homes for sale. As a result, home prices are still dropping. So the net worth of most Americans is still dropping.

And even though interest rates are falling, most people in the Average Worker economy can't refinance their homes. They can't get home equity loans. Banks don't want to lend to the Average Worker economy because people in it are considered bad credit risks. They still owe lots of money, their family incomes are down, and their net worth has fallen.

And according to the Reuters/University of Michigan survey of American consumers, expectations about personal finances are at an all time low.

Inhabitants of the Big Money economy are celebrating Republican wins last week. They figure financial regulations will be rolled back, environmental regulations will be canned, the Bush tax cut will be extended to the top 1 percent, and it will be harder for workers to form unions.

Inhabitants of the Average Worker economy aren't so sure. The economy has been so bad they're angry at politicians. They showed their anger at the ballot box. They took it out on incumbents.

But if nothing changes in the Average Worker economy, there will be hell to pay.

Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.

Good evening. Through the magic of Claritin, my favorite drug, I’m able to bring you tonight’s edition. On the Net Neutrality front, the progressive left is getting delusional. They’re pretending that it matters what their members of Congress think when their President has done not one thing to stop his FCC from going off on its own to break the law, defy the courts, and go ahead with Title II Reclassification. This is not Sparta. This is madness.

Of course, the online petition? Meaningless of course except as a trap to build mailing lists. And it’s not me who says that, it’s Clay Johnson who says that, founder of Blue State Digital and the New Media Director of Barack Obama’s Presidential campaign. The Progressive Change Campaign Committee’s petition is nonsense upon stilts.

Yeah I’m forced to conclude that the radical Net Neutrality fringe is going insane. Just look at Free Press. Even the FCC is making fun of them for “handing out waffles and making posters.”

Meanwhile there’s a lot of really bad coverage of the issue out there. David Lumb at SCPR links to me, which is great, except that his coverage of the issue is high on racism and low on context. Any article about Net Neutrality that doesn’t mention that the FCC plans to treat ISPs like phone companies, that doesn’t mention how the FCC plans to go against the bipartisan Telecommunications Act to do so, and how the FCC’s plans would give it the authority to regulate content (that is, free speech) online is a biased, incomplete article. Nevermind the fact that he doesn’t even mention I was all for the Waxman bill that would have shut down the FCC on this issue.

And don’t think they won’t institute speech codes online For The Children. They already plan them in public schools.

And we’ll close off with a pair of notes about Google, which has still taken no action against Daily Kos for its planned, concerted manipulation of the Google search rankings, a clear demonstration of partisan political bias on the part of that firm. Kay Bailey Hutchison? Fair game. Daily Kos? Untouchable. Google is the opponent of the right, and the ally of the most hateful, extreme leftist Democrats around.

Google raises money for Democrats, too? And what do you know? Even as Net Neutrality continues to be fought out at the FCC, The FTC has suddenly dropped its investigation of the Street View spy program getting Google in hot water in a number of other countries whose Presidents Eric Schmidt, Google CEO, didn’t advise.

Oh, and remember when Eric Schmidt insisted that anyone worried about Google Street View infringing on their privacy should just move? I dare him to face these women and tell them that personally, these women whose secret shelter protecting them from abusive husbands has been exposed by Google.

Google is out of control, actively seeking to destroy the privacy of anyone they can reach, all in the name of making more profits to put into the pockets of the most extreme Democrats around. It boggles my mind that so many Republicans and conservatives store so much confidential information on Google’s servers. These people are reckless when they’re not outright malicious. They can’t be trusted.

Friday, November 19, 2010

People Making Money Net

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