Deepening crisis traps America's have-nots
By Ambrose Evans-Pritchard
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The US is drifting from a financial crisis to a deeper and more insidious social crisis. Self-congratulation by the US authorities that they have this time avoided a repeat of the 1930s is premature.
There is a telling detail in the US retail chain store data for December. Stephen Lewis from Monument Securities points out that luxury outlets saw an 8.1pc rise from a year ago, but discount stores catering to America’s poorer half rose just 1.2pc.
Tiffany’s, Nordstrom, and Saks Fifth Avenue are booming. Sales of Cadillac cars have jumped 35pc, while Porsche’s US sales are up 29pc.
Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50pc since October. Yet Best Buy, Target, and Walmart have languished.
Such is the blighted fruit of Federal Reserve policy. The Fed no longer even denies that the purpose of its latest blast of bond purchases, or QE2, is to drive up Wall Street, perhaps because it has so signally failed to achieve its other purpose of driving down borrowing costs.
Yet surely Ben Bernanke’s `trickle down’ strategy risks corroding America’s ethic of solidarity long before it does much to help America’s poor.
The retail data can be quirky but it fits in with everything else we know. The numbers of people on food stamps have reached 43.2m, an all time-high of 14pc of the population. Recipients receive debit cards – not stamps -- currently worth about $140 a month under President Obama’s stimulus package.
The US Conference of Mayors said visits to soup kitchens are up 24pc this year. There are 643,000 people needing shelter each night.
Jobs data released on Friday was again shocking. The only the reason that headline unemployment fell to 9.4pc was that so many people dropped out of the system altogether.
The actual number of jobs contracted by 260,000 to 153,690,000. The “labour participation rate” for working-age men over 20 dropped to 73.6pc, the lowest the since the data series began in 1948. My guess is that this figure exceeds the average for the Great Depression (minus the cruellest year of 1932).
“Corporate America is in a V-shaped recovery,” said Robert Reich, a former labour secretary. “That’s great news for investors whose savings are mainly in stocks and bonds, and for executives and Wall Street traders. But most American workers are trapped in an L-shaped recovery.”
It is no surprise that America’s armed dissident movement has resurfaced. For a glimpse into this sub-culture, read Time Magazine’s “Locked and Loaded: The Secret World of Extreme Militias”.
Time’s reporters went underground with the 300-strong `Ohio Defence Force’, an eclectic posse of citizens who spend weekends with M16 assault rifles and an M60 machine gun training to defend their constitutional rights by guerrilla warfare.
As it happens, I spent some time with militia groups across the US at the tail end of the recession in the early 1990s. While the rallying cry then was gun control and encroachments on freedom, the movement was at root a primordial scream by blue-collar Americans left behind in the new global dispensation. That grievance is surely worse today.
The long-term unemployed (more than six months) have reached 42pc of the total, twice the peak of the early 1990s. Nothing like this has been seen since the World War Two. Continue Reading