Things Are Less Than They Seem

type="html" xml:lang="en-US" xml:base="http://www.financialarmageddon.com/">

The bulls say that the U.S. economy is on the mend. Superficially, at least, that seems to be true. The unemployment rate shows signs of having topped out. Household finances appear to be in better shape than they were. Americans are surviving and spending despite everything that has occurred.

However, when you dig down below the surface, you notice things are somewhat less than they seem.

Here's one article, for example, that suggests Americans' personal balance sheets are not necessarily getting better:

"Decrease In Credit Card Debt All Down To Write-Offs, Report Says" (Huffington Post)

Credit card debt fell last year only because of consumer defaults and bank write-offs, a new study argues.

In 2010, U.S. credit card debt dropped to the lowest level in eight years, according to credit reporting agency TransUnion. But there is more evidence http://education.cardhub.com/q4-2010-credit-card-debt-study/ Americans may have taken on more credit card debt than they paid off.

A study by Cardhub.com of Federal Reserve data found that last year, while banks wrote off a total of $75 billion in credit card debt, the level of the debt only declined by around $67 billion. This, according to Cardhub, suggests that the "entire decrease [in overall debt] is the direct result of Americans defaulting on their debt."

And here's a report that calls the official data on unemployment into question:

"Hidden Jobless Live Behind the Numbers" (The Journal Gazette)

Overshadowing the nation’s economic recovery is not only the number of Americans who have lost their jobs, but also those who have stopped looking for new ones.

These workers are not counted in the Labor Department’s monthly unemployment rate, yet they say they are willing to work. Since the recession began, their numbers have grown by 30 percent, to more than 6.4 million, amounting to a hidden labor force that could stymie the turnaround.

Adding these workers to February’s jobless rate pushes it up to 10.5 percent, well above the more commonly cited 8.9 percent rate. An even broader measure of unemployment, which includes people forced to work part time, stands at nearly 16 percent.

Economists say the longer these workers stay out of the job market, the harder it will be for them to find employment, creating a vicious circle that can spiral for months or longer. Meanwhile, their delayed entry into the job market means smaller paychecks in the future. And if these ranks remain high, economists worry that it will signal a much deeper and more troubling problem for the country: Workers’ skills don’t match the jobs available.

“It can be a self-reinforcing problem, where it just gets worse over time,” said Burt Barnow, an economist and professor at George Washington University.

And finally, here's a story that goes some way towards explaining why spending has remained resilient in the face of large job losses and compensation cutbacks:

"Food Stamps and Tax Aid Kept Poverty Rate in Check" (New York Times)

Without a flood of food stamps and tax benefits for low-income families, about 250,000 more New Yorkers would have slipped into poverty at the height of the recession, according to calculations to be released Monday by city officials.

As it was, while the federal poverty rate for the city remained about the same from 2008 to 2009, 17.3 percent, by a measure developed by the city it rose to 19.9 percent. The city takes into account factors the federal standard does not — higher local costs of living and expenses for health care, commuting and day care, or the value of benefits like food stamps, housing allowances and tax credits that can supplement cash income.

“To a large degree, economic stimulus programs and policy initiatives aimed at bolstering family income succeeded in preventing a rise in poverty in New York City,” according to the report by the mayor’s Center for Economic Opportunity.

In other words, perhaps the best explanation for why the economy appears to be recovering is that the so-called experts are suffering from ignorance or delusion, or are guilty of deception.

View the original article here