Monday, October 05, 2009
Living On Borrowed Time
Russia Today interviews American economist Max Wolf on the perilous state of economy in spite of the so-called recovery. Unlike many in the financial sector who have confused a "stock recovery" with a real recovery he points out the impact on the American consumer and worker is not likely to be repaired anytime soon:
"“We are all waiting to see the private sector – that is 80% of the US economy – pick up and start growing again. It has not done that yet,” Max Wolf explains.
He also indicates that there is a common belief in America’s powerful circles and media that if the top 20% of the population is doing better, then the whole of America is doing better.
“The problem with that story is that we don’t know if it’ll last, and it’s left 80% of the public behind, and this is a big problem,” he said.
“And so, we don’t know how long the bottom 80% will be okay with this, we don’t know how long the government can keep spending, and we don’t know how long we have to wait until our private sector basically kicks back into high gear, starts hiring, starts growing and starts being more profitable,” the economist clarified.....
As a result of the cumulative mistakes in the government policies, another serious letdown in the US and global economy will definitely happen soon, Max Wolf says:
“The question is when. We’ve done a lot of things that are dangerous, so we could have it quite soon.”
“We have done absolutely nothing to basically change the root causes of those problems in the economy, which means we’re living on borrowed time,” he added...
So what are the roots of the problem? The economist names the wage of an average American, which has stayed flat for too long:
“For 35 years the average American’s wages has gone nowhere. They’ve been flat… And the problem we have now is that they cannot borrow that much again. And if Americans do not borrow, and their wages don’t go up… this becomes a problem, because 70% of the US GDP is private consumption.”
Moreover, 15% of the economic activity in the world, Wolf says, is American private consumption:
“If that turns down, which it has, and if it stays down, which it likely will, this means we basically push down economic activity for all 6.2 billion people on Earth.”
Harsh words are directed to the media's coverage which predictably reflects the upper 20% of the population:
"“What we’ve been celebrating for the last four months is that life is getting worse for the average American more slowly than it was getting for the average American last year. The bottom 80% of people in this country are continuing to struggle,” he added.
The coverage of the crisis in the United States represents another problem. The country’s media seem to be trying to distract common Americans from reality by following the two-part rule, the economist says: “exaggerate and simplify.”