Faltering Economy in China Dims Job Prospects for Graduates

China's FIRST McDonald's (Photo credit: flickr.Marcus)

A record seven million students will graduate from universities and colleges across China in the coming weeks, but their job prospects appear bleak — the latest sign of a troubled Chinese economy.

Businesses say they are swamped with job applications but have few positions to offer as economic growth has begun to falter. Twitter-like microblogging sites in China are full of laments from graduates with dim prospects.

The Chinese government is worried, saying that the problem could affect social stability, and it has ordered schools, government agencies and state-owned enterprises to hire more graduates at least temporarily to help relieve joblessness. “The only thing that worries them more than an unemployed low-skilled person is an unemployed educated person,” said Shang-Jin Wei, a Columbia Business School economist.

Lu Mai, the secretary general of the elite, government-backed China Development Research Foundation, acknowledged in a speech this month that less than half of this year’s graduates had found jobs so far. Read more >>

Stagflation in Extremis & The Explosive Rise of Gold

Stagflation is where economic growth slows, unemployment is high and prices rise. Stagflation’s appearance in the 1970s was like an outbreak of three-headed children. It wasn’t supposed to happen. Prevailing wisdom - an oxymoron among economists - held that high employment and rising prices were economic handmaidens; and that, conversely, slowing economies and inflation were mutually exclusive.

In the 1970s, for the first time in capitalism’s history stagflation appeared, i.e. prices rose and economic growth stagnated; and, while economists would search for reasons to explain the apparently inexplicable, it was only because they avoided the obvious that they did not find the answer.

In August 1971, President Nixon upon the advice of Milton Friedman - the same Milton Friedman who erroneously taught Ben Bernanke economic contractions can be reversed by monetary expansion - ended the convertibility of the US dollar to gold.

The consequences of cutting ties between paper money and gold were not what Friedman expected. Friedman believed - belief is the operant word here - that ‘free-market forces’ would bring floating currencies into orderly market-driven valuations. Friedman was wrong - again. Read more >>

Pessimism About Economy Grows

Two major surveys of corporate financial executives this week show a stark contrast hiring outlook but are in agreement that optimism about economic growth is dropping. The American Institute of Certified Public Accountants, which maintains an office in Durham, found only 12 percent of chief executive officers, chief financial officers and other financial executives surveyed planned to expand payrolls over the next 12 months.

On Wednesday, a survey of CFOs from Duke University and CFO Magazine found that 60 percent of companies were planning to hire. Like the Duke-CFO survey, however, the AICPA report found a drop in optimism about economic growth. Its overall CPA Outlook Index declined by two points to 67 on a scale of 0-100 with 50 considered neutral. The index dropped for the first time after two quarters of growth.

“What we're seeing is the same ‘two steps forward, one step back’ cycle we encountered last year,” said Arleen Thomas, the AICPA’s senior vice president for management accounting. “There's no question survey takers have grown more pessimistic about the U.S. economy, and with expectations muted for profit, revenue and employment growth, there appear to be few catalysts to change that view.” Read more >>

Forget All The Hype - US Consumers Are Not Spending

The Commerce Department said retail sales rose only 0.1 percent last month. Consumers cut spending sharply at department stores and clothing stores. And sales dropped 1.8 percent at hardware stores.

In the January-March quarter, overall economic growth slowed to an annual pace of 2.2 percent. That's down from the 3 percent increase in the October-December period. And job growth has slowed from the start of the year, where the average fell to just 135,000 jobs per month in March and April.

Excepted from Source.

Guaranteed mayhem, riots, violent protests in 2012

Image by Friends of the Earth International via FlickrIn order to have an understanding of what could happen in the coming year, it is essential to keep the big picture in focus. As we enter the fifth year of this twenty year Crisis period, there is absolutely no chance that 2012 will see an improvement in our economy, political atmosphere or world situation. Fourth Turnings never de-intensify. They exhaust themselves after years of chaos, conflict and turmoil. I can guarantee you that 2012 will see increased mayhem, riots, violent protests, recessions, bear markets, and a presidential election that will confound the establishment. All the episodes which will occur in 2012 will have at their core one of the three elements described by Strauss & Howe in 1997: Debt, Civic Decay, or Global Disorder.

In order to have an understanding of what could happen in the coming year, it is essential to keep the big picture in focus. As we enter the fifth year of this twenty year Crisis period, there is absolutely no chance that 2012 will see an improvement in our economy, political atmosphere or world situation. Fourth Turnings never de-intensify. They exhaust themselves after years of chaos, conflict and turmoil. I can guarantee you that 2012 will see increased mayhem, riots, violent protests, recessions, bear markets, and a presidential election that will confound the establishment. All the episodes which will occur in 2012 will have at their core one of the three elements described by Strauss & Howe in 1997: Debt, Civic Decay, or Global Disorder.

Any critical thinking person can look at the chart above and realize that creating more debt out of thin air to solve a debt problem is foolish, dangerous, and self serving to only bankers and politicians. The debt crisis took decades of terrible choices and bogus promises to produce. The world is now in the midst of a debt driven catastrophe. At best, the excessive levels of sovereign debt will slow economic growth to zero or below in 2012. At worst, interest rates will soar as counties attempt to rollover their debt and rolling defaults across Europe will plunge the continent into a depression. The largest banks in Europe are leveraged 40 to 1, therefore a 3% reduction in their capital will cause bankruptcy. Once you pass 90% debt to GDP, your fate is sealed. More...

Greece Falls Into 'Death Spiral': Rising Debt, No Growth

Image by rad(ish)labs via FlickrDrowning in red ink, Greece has nowhere to turn to revive the economic growth that might put its debt on a sustainable trajectory, reassure angry foreign creditors and offer hope to its recession-weary citizens.

Instead, the country finds itself in a vicious circle—a death spiral, some would say—in which it is borrowing ever more to keep up on its existing debts, crushing growth in the process and thereby worsening its all-important ratio of debt-to-gross domestic product.

Springing the debt trap would not be a miracle cure either: a manageable level of borrowing is a necessary but not a sufficient condition for Greece to start restoring competitiveness and resume growth after three years of economic contraction. More...

India, Indonesia, China And Wider Asia Buy Physical Gold And Silver On Dip As Stagflation Threatens

Stagflation or low economic growth, high unemployment and rising inflation is a clear and present danger to the UK, EU and U.S. economies and other economies internationally.

This is especially the case in the UK where house prices have begun to fall again and may be set for sharp falls. Internationally, we are seeing significant debt deflation where the value of goods and assets bought with debt are falling (cars, property etc) while the value of finite, essential goods such as food and energy are rising.

Safe haven and inflation hedging diversification into gold is likely to continue as inflation is deepening and there is a distinct whiff of stagflation in the air. More...

No economic growth for years to come

Roubini's problem is he can't shake off the notion of growth, in this case posing as "lackluster growth". And everything he says, and presumably thinks, falls in that light. Maybe he’s so happy to be invited and celebrated everywhere in the world as Dr. Doom that he doesn't want to take the risk of scaring his benefactors away. "Doom" thus comes to mean low growth, while flat-out contraction is off the agenda.

But how realistic is that? Even allowing for the fact that the GDP is "not a very accurate" way to measure growth, it's already "officially" at 1.6% and heading down short term (a correction to 1.2% is in the works). So what are the short to mid-term prospects? Well, 70% of GDP is the American consumer, so there's where to look. The 91-day trailing Growth Index of the Consumer Metrics Institute has gone all the way down to -5.79%, while official GDP remains at 1.6% for the moment. That’s a difference of 7.39% that will have to be explained away somehow. More...

Despite a 24/7 campaign of carefully managed "good news," 76% do not believe the U.S. "recovery

oftwominds.com
Suppressing the Cognitive Dissonance of a Bogus Recovery
A massive outbreak of economic cognitive dissonance is being suppressed with wave after wave of manufactured "good news." Every visibly negative bit of data is run through a media and Central State assembly line to refashion it as "good news" and "evidence" that the "nascent recovery is taking hold." Whatever cannot be rejiggered is simply buried or suppressed.

The fact that five corporations control the the vast majority of the U.S. mainstream media certainly aids that manufacturing process.

Let's run through a few of the most blatant examples of suppressed dissonance:

1. If the economy is recovering so strongly ( +3% GDP growth in the first quarter!) then why are tax revenues down? Federal budget deficit hits April record: The April deficit soared to $82.7 billion. Total revenues for April were down 7.9 percent from a year ago. In the seven months of this year, corporate tax receipts are up 8.9% to $77.1 billion. The same cannot be said of individual income tax revenue, which is down 11.6% in the first seven months to $500.8 billion.

Through the first seven months of the current budget year, which began on Oct. 1, the deficit totals nearly $800 billion. That is down only slightly from last year's deficit during the same period of $802 billion. Revenues total $1.2 trillion in those seven months, down 4.5 percent from the same period last year.

How can tax revenues be falling when the economy is "growing strongly"? As for those corporate profits: corporate profits register biggest year-over-year gain in 25 years.

As this chart from the Federal Reserve shows, non-financial corporate profits were almost 14% of GDP before the global meltdown. In a $13 trillion economy, that's $1.8 trillion.

But much of the "good news" in Corporate America is not quite as rosy as presented.

2. Rising corporate profits mask falling sales. Consider Walmart's last report, which caused the financial media to quiver in ecstasy because the retailer logged a 10% increase in profits. But behind the hype, (profits rose $0.3 billion on $99 billion in sales, whoopie), Walmart same-store sales drop; gross margins decline.

You have to read to the very last line to get to the sobering reality: same-store sales dropped in the U.S. and gross margins declined. Both are bad news, yet you'd never know it from the lead paragraphs and talking heads.

3. Corporate profits are boosted with special charges and other accounting trickery. It takes a forensic accounting analysis of corporate filings to discern what's real and what's been juiced to boost quarterly "earnings."

Meanwhile, corporations are loading up on debt again: Junk bonds-- essentially risky bets on future corporate earnings--made up the biggest share of corporate debt sales on record last year. That hardly suggests prudence on the part of the companies loading up on tens of billions of dollars of high-interest debt. Load the company with debt, goose profits, cash out the big bonuses and then let the balance sheet implode. More...

Many Developing Crisis Ahead

The Next Crisis
And the next…and havens
Christopher Laird, PrudentSquirrel.com
With the Asian stock markets stalling, and the US markets insisting on rallying a suspicious 25 points a day with nary a correction in over a year, something is definitely wrong out there. What gives? I cannot believe the US economic prospects are that good right now.

But then again, with the EU markets and the EU itself looking like it’s about to disintegrate, with a new bailout story on Greece that never pans out, and what a failure to bail out Greece will do to the Euro – a Euro crisis alone can tank all markets and cause massive social unrest in the EU with nations starting to bolt as they find staying with the huge budget cuts are politically impossible.

But there are many developing crises right now. What then is the next crisis that will lead to panicky markets again? Surely one is due again. The VIX is at low levels similar to just before the Bear crisis in 2007 and Lehman mega crisis in Fall 2008.

Gold-

The relentless rise in the US stock market is either a head in the sand routine by Funds who have nowhere else to put money, or the central banks are unilaterally supporting the markets with these rather suspicious 25 point rises in the Dow day after day for a year…(a bit of exaggeration but you get the idea). It’s as if some great power has made an edict to relentlessly make the Dow (or your favorite index) rise no matter what to scare financial bears out of the market.

There is a much larger issue here

But there is something much bigger out there driving all this, and unfolding right in front of our eyes – the deconstruction of the entire world economy from its post WW2 US centric consumer model – combined with relentless employment shrinkage and labor arbitrage with Asia. That combination is leaving the Western economies and their accustomed standard of living in tatters, with a very bleak outlook henceforth. Europe especially is vulnerable to depression level forces with youth unemployment age 16 to 24 in Spain for example at 42%! In short, meaningful austerity measures are impossible for the weaker EU countries.

The only outcome must be chaos in the West – economically and socially. That chaos is going to begin soon. It is already showing a few stirs.

Serial crises unavoidable

What the world is presently going through are serial crises each year, roughly two a year since 2007, which rocks currency markets and ultimately rallies gold, which is the one market that seems to prosper in these uncertain times. The commodity markets are more like speculator zones, and I don’t feel these are very good havens because of that.

We did some brief price studies on prices back in 1908 to the present. Even with the gold ‘Manipulation story’ (which is true) gold actually does reflect the price changes of real goods since 1980 and even all the way back to 1908. I picked 1908 because I have data from then on prices and its pre US Federal Reserve. (Example a loaf of bread was 10 cents in 1908-1930 roughly and now is $3. That is 30 times higher. Gold is also roughly 30 times higher).

So even with manipulation, gold is still reflecting the price changes of real goods in the economy pretty accurately. Now of course if gold were to spike it would then start reflecting the massive world central bank public bailouts of all and sundry markets which are on the verge of total collapse (banking, sovereign bonds, and so on). That phase will yet appear when it’s ready.

But getting back to the theme – that of serial crises on the horizon as far as the eye can see…

China has a major problem ahead

And then there is China – and its gigantic construction bubble which is alive and well (way too well) and – is going to be popped by a determined Chinese government. And Even so China certainly is well aware that 60% of their economic growth in recent years is construction related. Did you know that? If China is popping a huge construction bubble that is 60% of their economy then why is everyone talking about using basic commodities as an investment haven? There is a difference between a haven and a speculation. Commodity markets are speculation markets right now. That makes them subject to wild price swings.

All this crisis list is because of one major theme

Everything that is happening in the world – market dangers, sovereign debt crises, labor arbitrage of West to East, government budget overruns of a huge magnitude, currency instability (Euro situation as one example), pressure on China to let the Yuan rise, looming trade wars, and especially social chaos in the West if austerity measures are implemented, falling tax revenues on a nothing less than disastrous scale worldwide (except in China for the moment but that is going to change rapidly) – are all derivatives of the changing of the economic guard from West to East.

So, all the crises we are facing also represent this larger picture – of a changing economic world order from West to East – Asia is rising.

The problems are all compounded in the West and Asia by an age gap (aging gap) of huge magnitude. This age gap is all the baby boomers retiring not only in the West but in Asia too – especially Japan which is on deflationary legs and needs government stimulus – again- to try and replace what all the aging boomers earned and bought. Which isn’t going to work; it hasn’t worked for the last 20 years even when things were pretty good for Japan since 1990…

We can list more looming crises but I think you get the idea.

How do we get from here to there?

Now, the world will transition to some state where Asia takes over the economic engine, and if labor arbitrage keeps up, the West is going to be left out cold in any economic rebound.

If that is so, how do we get from here to there? I certainly have doubts that the commodity sector is not vulnerable for the second coming economic downleg, particularly when China is trying to pop their construction boom/bubble. Which is probably going to happen later this year.

In order to safely navigate through your retirement years, you are going to have to find ways to protect your savings – and that will probably involve not only gold and silver stocks for example to hedge against a falling USD, but also some mix of currencies during the turmoil that is to come for liquid assets like cash.

The recent favorite havens do not have a good track record except gold

6 years ago the Euro was bandied about as being the solution to the USD. Now the Euro appears fatally flawed. I also get concerned that commodities are constantly being promoted as the safe haven, especially after witnessing the horrendous commodity crash in Summer 2008. We warned subscribers of that pending crash two months ahead of time that the USD was due to rally.

In any case, the only way to safely preserve your savings will involve closely tracking developments in sovereign bond markets and careful choices of a batch of currencies, gold stocks (or coins) and possible well chosen commodities, but not ones being turned into speculation markets, which many are now.

Sprott Discusses The Global Ecoonomy

Tyler Durden
Eric Sprott was discussing the global macro picture earlier in an interview with Bartiromo. Here are his key observations:

I still have a deep, deep concern about the leverage in the banking system. I look at the inability of governments who are spending vast amounts of money to generate much growth in GDP. I can give the example of running a $1.5 trillion deficit last year and GDP goes up $200 billion. So we are not getting much bang for the buck but we still owe the buck at the end of the year. I also worry about what's going on in China. The Chinese government has asked the banks to cool down their lending, the latest data in March show that lending has gone down from $300 billion per month to $100 billion. That's $2.4 trillion a year less. And obviously it has to have an effect on their economy as the lending of $2 trillion did positively last year. When you look back at China in 2009, they had a $4 trillion economy, they lent $2 trillion to people, they had a $600 billion stimulus: those should generate some GDP growth. I am not even convinced that 10% growth which would be $400 billion is a good response to all the measures that were taken.

Sprott then goes on to discuss something very dear to gold holders: physical gold and specifically his gold trust, the PHYS (Sprott Physical Gold Trust) which competes with SPDR's GLD. The main difference, as most people know, is the PHYS actually has real, auditable physical gold to back the underlying, not to mention the 15% vs 28% tax differential. Sprott goes on to defend why gold, which has been the investment of the decade, looks even better today than it has ever looked:"We have sovereign risk on the economic risk today, that we didn't have before. As I look at the problems in Greece and I see poeple take $4-8 billion out of the banks, where do the people put that currency? It is obvious that lots of them putting it into gold."

Sprott also loves silver, which he thinks will act better than gold as there is not as much silver inventory in the world as there is gold inventory.

The ultimate catalyst for PM price explosion "We'll just see how long those governments' people will continue to buy their sovereign debt. When they stop buying that sovereign debt, then the reason why we are liking gold will become more and more apparent." More...

Underemployment Hits 20% in Mid-March

Dennis Jacobe, Chief Economist

PRINCETON, NJ -- Gallup's underemployment measure hit 20.0% on March 15 -- up from 19.7% two weeks earlier and 19.5% at the start of the year. Gallup Daily tracking makes it possible to monitor the underemployment rate throughout the month, rather than just once per month, making it the best and most timely way to measure the U.S. jobs situation.

The findings underscore why Americans say the most important problem facing the nation today is jobs and unemployment. Gallup's underemployment measure is based on more than 20,000 phone interviews collected over a 30-day period and reported daily. Gallup's results are not seasonally adjusted and tend to be a precursor of government reports by approximately two weeks.

More Part-Time Employees Seeking Full-Time Work

Gallup classifies Americans as underemployed if they are unemployed or working part-time but wanting full-time work. On March 15, Gallup's unemployment rate was 10.3% -- essentially the same as the 10.4% of March 1, but down from 10.8% in mid-February. However, this decline in the percentage of unemployed Americans was more than offset over the past 30 days by an increase in the percentage of those working part-time but wanting full-time work, from 9.0% in mid-February to 9.7% in mid-March.

Gallup's data suggest that while the U.S. unemployment rate has declined over the past month, the employment gains may be largely taking the form of new part-time jobs. Many of those acquiring these new jobs may be Americans who find that, although they would prefer to be working full-time, only part-time work is available.

Focus on Underemployment, Not Unemployment

Even with historic healthcare legislation under consideration, Congress passed and the president signed a new jobs creation bill on March 18. No doubt, national attention will shortly shift to unemployment and anticipation of the government's April 2 report of the March unemployment rate. In this regard, Gallup's mid-March unemployment rate is likely indicative of the not-seasonally adjusted unemployment rate the government will release in April, as is Gallup's broader underemployment rate.

The danger associated with focusing on unemployment is reflected by the recent statement of Morgan Stanley economists suggesting that the U.S. may add as many as 300,000 jobs in March owing to an improvement in the weather, economic growth, and the government's hiring of temporary census workers. If anything close to this number of new jobs is announced by the government in early April, there is likely to be an enthusiastic, possibly even celebratory, response. Government officials are liable to tout the continued benefits of last year's stimulus and the future benefits of the new jobs bill. Many Wall Streeters will likely argue that the surge in jobs is simply another confirmation of the strength of the overall economic recovery.

However, before policymakers celebrate too much, they should note Gallup's recent findings involving its new, more inclusive measure of underemployment. To be sure, there are some benefits associated with the unemployed getting part-time jobs, no matter the source. For example, Gallup's self-reported spending data show that part-time workers who want full-time work spent on average 24% more per day ($51) during the past 30 days than did the unemployed ($41). While this represents an improvement and is good for the economy, it is not nearly as good as the 85% higher daily spending of those having full-time jobs ($76).

It is also often suggested that a growth in part-time jobs may indicate future growth in full-time work -- that companies hire part-time workers before committing to hiring new full-time employees. While this is sometimes the case, it may not be so at this point in the U.S. economy: Gallup data show that one in three part-time employees who are wanting full-time work are currently "hopeful" about finding a full-time job in the next 30 days -- not much of an endorsement of the idea that today's new part-time work will progress to full-time jobs.

Regardless of how one interprets the shifts taking place between part-time and full-time jobs, it is important that policymakers focus on the broader goal of reducing underemployment, not just unemployment. Part-time, temporary jobs like those associated with census-taking are far better than no job and may reduce the unemployment rate, but they do not represent the kind of job creation needed for a sustainable economic recovery.

How a New Jobless Era Will Transform America

Don Peck
The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.

Late last year, the average duration of unemployment surpassed six months, the first time that has happened since 1948, when the Bureau of Labor Statistics began tracking that number. As of this writing, for every open job in the U.S., six people are actively looking for work.

All of these figures understate the magnitude of the jobs crisis. The broadest measure of unemployment and underemployment (which includes people who want to work but have stopped actively searching for a job, along with those who want full-time jobs but can find only part-time work) reached 17.4 percent in October, which appears to be the highest figure since the 1930s. And for large swaths of society—young adults, men, minorities—that figure was much higher (among teenagers, for instance, even the narrowest measure of unemployment stood at roughly 27 percent). One recent survey showed that 44 percent of families had experienced a job loss, a reduction in hours, or a pay cut in the past year.

There is unemployment, a brief and relatively routine transitional state that results from the rise and fall of companies in any economy, and there is unemployment—chronic, all-consuming. The former is a necessary lubricant in any engine of economic growth. The latter is a pestilence that slowly eats away at people, families, and, if it spreads widely enough, the fabric of society. Indeed, history suggests that it is perhaps society’s most noxious ill.

The worst effects of pervasive joblessness—on family, politics, society—take time to incubate, and they show themselves only slowly. But ultimately, they leave deep marks that endure long after boom times have returned. Some of these marks are just now becoming visible, and even if the economy magically and fully recovers tomorrow, new ones will continue to appear. The longer our economic slump lasts, the deeper they’ll be.

If it persists much longer, this era of high joblessness will likely change the life course and character of a generation of young adults—and quite possibly those of the children behind them as well. It will leave an indelible imprint on many blue-collar white men—and on white culture. It could change the nature of modern marriage, and also cripple marriage as an institution in many communities. It may already be plunging many inner cities into a kind of despair and dysfunction not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years. More...

The depressed state of the American public seems to be a surprise to the government

John Crudele
Hey Washington! Economy has us very worried

Come real close to the page. I want to whisper a secret in your ear.

Pssst . . . Americans are not happy.

You already know that, of course, because you are a regular, communicative human being who lives in the real world.

You go to the supermarket and hear other shoppers complain about the cost of putting food on the table. And you listen to neighbors bitch about job prospects.

You even notice that the price of gasoline and home heating oil hasn't gone down despite all that's wrong with the economy. The laws of supply and demand, which would have you believe we'd be paying about $1 a gallon for gasoline right now, have been repealed by Wall Street's speculators.

Your kids are getting an expensive education that you fear will be worthless because they'll never be employed anywhere, much less in their chosen field.

And you are probably avoiding the doctor because even if you are lucky enough to be covered by insurance, the co-payment on the prescription will mess up the family budget for a month.

You know all this. It has you worried.

Yet the depressed state of the American public seems to be a surprise to people who run the country. Not a total surprise, mind you, because politicians are clearly worried about being kicked out of office, which would mean they'd have to find a real job in a weak economy.

But these politicians and the Wall Street folks still happily pulling down the big bonuses were clearly not ready for the news last week about the complete, utter, total, absolute and unqualified miserableness of the public.

To recap: the Conference Board, a private, unbiased research organization, reported that its consumer confidence index fell horribly to 46.0 in February from 56.5 last month. And I checked -- there was no statistical fluke that could have caused such a startling drop.

Some fools even tried to dismiss that figure as a reaction to the weather, meaning the lack of blizzards in the months ahead should make everything alright again.

Then, ABC News reported that its Consumer Comfort Index plunged to the minus-50 mark and now hovers just four points from its record low.

The Conference Board survey is particularly interesting because it's broken up into two components.

The "Present Situation Index" -- meaning, how's your life today? -- dropped nearly six points to 19.4. But the "Expectations Index" of how those surveyed believe the economy will be six months from now declined a whopping 13.5 points.

Holy crisis!

Even with the stock market still bubbling and media trying its damnedest to convince us at least a million times a day that there's an economic recovery, the American public isn't buying it.

Worse, we've become a clinically depressed nation that doesn't think the situation will ever get better.

OK, so what's really going on?

Well, this is what you get when the government lies to people and when those in elected office believe their own fibs.

At this point in my rant I have to go back over a lot of things I've already written about -- like government reports on economic growth that mislead, and employment surveys from Washington that fudge the truth and inflation claims that insult the intelligence of even the most dim-witted among us.

But the public's bad mood also has to do with expectations. Promise people improvement and they expect you to deliver. Deliver too little and they are going to be angry.

Has the economic situation improved over the past year? Sure.

In late 2008, politicians of both parties with their eyes on winning (or in the case of the Republicans, keeping) the White House managed to bring the nation's banking system to the brink of failure. That'll happen when you utter the words 'brink of failure' enough.

It is one of those statements that's self-fulfilling.

The economy has stabilized since then, helped greatly by the fact that some wealthy people feel wealthier because of an unbelievable snap back by the stock market during 2009. (And by unbelievable in this context I mean that what happened shouldn't be believed as either legitimate or sustainable.)

But the economic data that is being cheered hasn't really been that great.

For instance, as I've said before, the growth in the nation's gross domestic product in the fourth quarter, which was widely described as impressive, really wasn't. Most of the 5.9 percent an nualized gain came from a re building of inventories by companies and a make-be lieve drop in inflation.

It's been estimated that just 1.7 percent of the increase came from consumer spending, the biggest factor in the economy. Most of the rest of what was manufactured is sitting in warehouses.

And if you understand what the word annualized means in this context, there's less to cheer about.

When you divide that annualized 1.7 percent consumer spending into the four quarters of the year, you see there was only slightly more than an 0.4 percent expansion in the final four months of 2009.

So, Americans aren't happy. What a surprise!

Social Unrest Explodes in China

Shirong Chen
BBC News China analyst

Social unrest is on the rise in China, according to an analysis by a Chinese think-tank.

The country is grappling with more acute social problems than ever before, according to a report from the Chinese Academy of Social Sciences. Crime is also up, despite a nationwide campaign to shore up social stability. Although continued economic growth has provided a greater number of jobs, China has seen more social conflict in 2009 than before.

The report on China's social trends sounds a stark warning to policy makers. The authors believe deep resentment has been accumulating over the past few decades against unfairness and power abuses by government officials at various levels. They quote six large-scale popular protests - from taxi strikes to unrest in central China in June - involving tens of thousands of people.

This does not include the rioting in the north-western region of Xinjiang, where nearly 200 people were killed in early July.

Urban-rural gap

There has been more crime too - official figures for January to October 2009 show more than four million recorded criminal cases, an increase of about 15% above last year. The report admits some of China's policies have prevented more people from sharing the benefits of the economic development.

The urban-rural income gap, for example, has become even bigger and the country's phenomenal GDP growth has been achieved at the expense of the rural population, the environment and overall social cohesion.

The report is a damning indictment on the authorities' slogan of building a harmonious society. But there is one ray of hope in the report - while the Chinese authorities are taking tighter control over the media, people are turning more and more to the internet to expose official failings and abuses. In the past 12 months, nearly a third of the top stories originated from the internet, pushing the boundaries of press freedom.

Celente: They're printing paper money backed by nothing

Director of the Trends Research Institute Gerald Celente believes the unexpected annual US GDP growth of 3.5 percent over the last three months isn't proof of a long-term recovery. The GDP rise is a result of the trillions of dollars between the Bush administrations top program and President Obamas $787 billion stimulus package temporarily juicing the economy, he said. They are printing paper money backed by nothing.

Consumer Spending Plunges

Martin Crutsinger
Consumer spending plunged in September by the largest amount in nine months, reflecting the end of the government’s Cash for Clunkers auto sales program. Incomes, the fuel for future spending, were flat.

While the government reported that the overall economy grew in the July-September period, signaling the end of the worst recession in seven decades, the weakness in spending and incomes as the quarter ended underscores the fragility of the recovery.

The Commerce Department said Friday that spending dropped 0.5 percent in September, matching economists’ expectations. Personal incomes were unchanged as workers contend with rising unemployment and a squeeze on wages.

Economists worry that the recovery could falter in coming months if households cut back on spending to cope with rising unemployment, heavy debt loads and tight credit conditions.

The concern is that much of third-quarter growth stemmed from temporary government programs such as the clunkers sales incentives that ended in August.

The government said Thursday the gross domestic product, the broadest measure of economic health, expanded at an annual rate of 3.5 percent in the third quarter, the first increase after a record four straight declines. A 3.4 percent rise in consumer spending, which accounts for 70 percent of total economic activity, powered the gain.

And consumers appear willing to pay a little more for Colgate toothpaste, Kellogg’s Frosted Flakes and Gillette Fusion shavers, according to earnings released Thursday. Procter & Gamble Co., Colgate-Palmolive Co. and Kellogg Co. all gave upbeat reports and even stronger outlooks for next year.

However, some economists believe that consumer spending will slow sharply in the current quarter, lowering GDP growth to perhaps 1.5 percent. Analysts said the risk of a double-dip recession cannot be ruled out over the next year.

The 0.5 percent drop in consumer spending in September followed a 1.4 percent surge in August which was propelled by the big jump in car sales that month as consumers rushed to take advantage of the clunkers’ incentives.

Last month’s drop in spending resulted in a boost in the savings rate to 3.3 percent of after-tax incomes, up from 2.8 percent in August. Many analysts believe households will keep striving to increase savings in the months ahead to replenish nest eggs that were crushed by last year’s stock market crash. That also would hold back spending in the months ahead, weakening the recovery.

The Obama administration is being encouraged to extend some of the elements of the $787 billion economic stimulus package that Congress passed last February to jump-start the economy, but the White House has been cautious in endorsing various proposals being advanced by Democratic lawmakers for fear of pushing the federal budget deficit even higher. The deficit hit an all-time high of $1.42 trillion for the budget year ending Sept. 30.

But inflation remains in check. An inflation gauge tied to consumer spending edged up just 0.1 percent in September, after a 0.3 percent August rise. Excluding food and energy, the gauge rose 1.3 percent over the past year, well within the Federal Reserve’s comfort zone.

Fed officials meet next week and economists believe they will again keep a key interest rate at a record low in an effort to support the economy given that inflation is not a threat.