How can bills be paid when we are losing jobs by the hundreds of thousands
Surely if unemployment continues to increase, there will come a time when there will be so many unemployed people that the economy as we know it will not function.
However, don't you think it is a bit too early to worry about such an implosion, considering that unemployment in the US as at Feb '04 is 5.6%? I don't have latest figures in front of me, but a quick look at the Bear Stearns monthly report tells me that compares quite favorably with year-end figures of 7.4% in Canada and 8.8% in Eurozone. The comparable year-end figure for the US stood at 5.7%, down from 6.1% at end-3Q03. In my humble opinion, that does not suggest an unemployment number that is about to implode, taking the economy with it.
In fact, from what I remember of Econ classes, isn't there supposed to be 5-10% (don't hold me to the exact figures) unemployed portion of the population in working age for capitalist economies to work with optimum wages?
A more interesting number would be the ratio of interest+mortgage obligations/disposable income. I had seen a similar study for the UK market last year that showed the market could sustain the housing boom despite historically high levels of indebtedness. I would be interested to see what the graphs on that show for the US...
The only thing holding this economy together is easy credit and that is why Greenspan can not hike
What about inflation? If for one moment we take our eyes off the "core inflation" number and look at the more widely accepted indicators such as CPI and PPI, we can see that we are nowhere near deflation but in fact going towards inflation.
Consumer credit problem can be handled with an unusual law or two that lets the state take over part of the load of the burden from off of consumers' shoulders. It would perhaps look funny on the federal budget, but who really cares if US debt increases by another hundred billion, given that certain central banks are all too willing to buy US government paper? I do not know if these measures were ever taken in the US, but they (and more) have been taken in other countries. And I am fairly certain that the state would go to extreme measures in order to prevent the collapse that you are describing.
If and when we reach the tipping point on jobs, it will not matter what hapeens. I think we are close if not there.
What do you feel is the unemployment (%) figure that could possibly mark this "tipping point"? I cannot make this guess. But I doubt if it is anywhere near 6%. |
