Category: zerohedge

Submitted by David Howden via the Ludwig von Mises Institute of Canada,

Standard microeconomic theory shows that deviations of a price from its natural level bring forth bad results. In my experience, students most easily grasp the pernicious effects of price controls when phrased in terms of the minimum wage.

Long story short, the minimum wage acts as a price floor which stops people from selling labour services at a price below the mandated level. The final result is an increase in unemployment, partly from existing workers who lose their jobs and partly from new entrants to the labour market looking for a job but unable to get hired.

It’s really not a very difficult theory to comprehend.

 

 

Yet I’m always surprised at how few are able to apply this basic lesson. Take the recent protests in Thunder Bay in support of increasing Ontario’s minimum wage from $10.25 to $14 an hour as a case in point.

Amongst the arguments the protestors put forward, two stood out to me for their weakness in justification.

First, some protestors seemed to think that $14 was inherently “more fair” or “just” than $10.25. Prices are not about justness or fairness, they are about reflecting underlying conditions. A price doesn’t just come out of nowhere. Instead it is the result of the subjective demand someone has for an object, the resource constraints available, the substitute goods that the person could resort to instead, or the potential purchaser’s income level. Changing these general determinants of demand into the specific ones that affect the labour market, we can see that wages are the result of: 1) the productivity of workers, 2) the number of workers available, 3) the price of labour substitutes, like machinery or automated production processes, and 4) the incomes of the employers. (There are lots of other determinants, but this short list will suffice.)

Changing the price of labour does absolutely nothing to alter these determinants. Advocates of alterations to the minimum wage confuse cause with effect. The wage one earns is the effect of all of these aforementioned causes. Changing the wage will not have a positive effect because unless one of these determinants changes there is no reason why the wage should change.

The second prevalent argument at the protests was that higher wages would stimulate the economy. One protestor claimed that the increase in the minimum wage to $14 would stimulate the Thunder Bay economy by $5.1 billion!

Economist Livio Di Matteo did a little digging, and it turns out the “stimulus” in question is the sum of all Thunder Bay residents earning an extra $3.75 an hour. Unfortunately this doesn’t amount to stimulus; it just changes the distribution of income. Minimum wage earners, if they manage to keep their jobs, will end up a little wealthier and businesses will lose some money.

One of the best lessons from economics is that one should pay attention to the unseen effects of a policy. Often times this will be more important than those results which are obvious.

In minimum wage discussions, the unseen effects are two-fold. First are those people who are going to lose their job because of the increase in the minimum wage. If you thought it was hard to survive on $10.25 an hour, wait until you are earning nothing. Second, even those who keep their jobs are not stimulating the economy through their increased wages. To the extent that businesses will have to pay more money to workers there will be less money to invest. This means less growth, and fewer opportunities for people in the future.

Wages, like all prices, are not randomly created. They signal underlying conditions and as such are not inherently just or unjust; they just are. Changing the wage rate without doing anything to alter one of the underlying variables creating it cannot achieve anything positive, and will more than likely make people worse off. If these protestors are successful in achieving an increase in Ontario’s minimum wage, at the very least some of them will gain time to think about this simple lesson after they lose their job.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MeUp9oNh6hk/story01.htm Tyler Durden

The following chart from Bloomberg showing official Chinese NPL data has its pros and cons.

The pros: it shows that the trend in improving NPLs has dramatically inverted in the past ten quarters and has risen to the highest in at least three years.

The cons: the chart, which again is based on official data, is woefully misrepresenting and underestimating just how profound the bad debt situation is in a country in which each month pseudo-nationalized banks issue loans amounting to the same or more in new liquidity as the Fed and BOJ do combined!

That the Chinese reality “on the ground” is far worse than what is represented was known to Zero Hedge readers over a year ago. For those who may have forgotten, on November 5, 2012 we showed “The Chinese Credit Bubble – Full Frontal” and specifically this chart.

And of course  “The True Chinese Credit Bubble: 240% Of GDP And Soaring” from April:

What is even more concerning is that in order to maintain its breakneck economic “growth” of ~8% per year, China has to continue injecting massive amounts of debt, the so called “credit impulse” or “flow” which according to assorted views, is what is the true driver of an economy, and where GDP growth is merely a reflection of how much credit is entering (or leaving) the system.

 

The chart below shows that total Chinese social financing flow just hit a record for the month of March.

 

Completing the picture is the estimated economic response to a surge
in credit. As the last chart shows, in China the biggest benefit to a surge in flow is felt in the quarter immediately following the credit injection, as one would expect, with the effect tapering off and even going negative in future quarters, thus requiring even more debt creation to offset the adverse impacts of prior such injections.

 

 

What should become obvious is that in order to maintain its unprecedented (if declining) growth rate, China has to inject ever greater amounts of credit into its economy, amounts which will push its total credit pile ever higher into the stratosphere, until one day it pulls a Europe and finds itself in a situation where there are no further encumberable assets (for secured loans), and where ever-deteriorating cash flows are no longer sufficient to satisfy the interest payments on unsecured debt, leading to what the Chinese government has been desperate to avoid: mass corporate defaults.

But while China’s debt – an arcane mixture of public, private, and pseudo-government backstopped credit – is among the biggest in the world, the one outstanding question was how much longer can China keep sweeping the hundreds of billions if not trillions of discharged, bad loans under the carpet and pretend everything is fine.

Today we get some much needed perspective on this topic courtesy of Bloomberg, which has some very disturbing revelations.

Such as this:

An unidentified local bank reported a 33 percent nonperforming-loan ratio for the solar-panel industry, compared with 2 percent at the beginning of the year, with the increase due to Wuxi Suntech, China Business News reported in September.

And this:

China’s lending spree has created a debt burden similar in magnitude to the one that pushed Asian nations into crisis in the late 1990s, according to Fitch Ratings.

As companies take on more debt, the efficiency of credit use has deteriorated. Since 2009, for every yuan of credit issued, China’s GDP grew by an average 0.4 yuan, while the pre-2009 average was 0.8 yuan, according to Mike Werner, a Hong Kong-based analyst at Sanford C. Bernstein & Co.

And this:

“The real situation is much worse than the data showed” after talking to chief financial officers at industrial manufacturers, said Wendy Tang, a Shanghai-based analyst at Northeast Securities Co., who estimates the actual nonperforming-loan ratio to be as high as 3 percent. “It will take at least one year or longer for these NPLs to appear on banks’ books, and I haven’t seen the bottom of deterioration in Jiangsu and Zhejiang yet.”

And this:

China’s credit quality started to deteriorate in late 2011 as borrowers took on more debt to serve their obligations amid a slowing economy and weaker income. Interest owed by borrowers rose to an estimated 12.5 percent of China’s economy from 7 percent in 2008, Fitch Ratings estimated in September. By the end of 2017, it may climb to as much as 22 percent and “ultimately overwhelm borrowers.”

 

Meanwhile, China’s total credit will be pushed to almost 250 percent of gross domestic product by then, almost double the 130 percent of 2008, according to Fitch.

And this:

Based on current valuations, investors are pricing in a scenario where nonperforming loans at the largest Chinese banks will make up more than 15 percent of their loan books, according to Werner, who forecasts a 2.5 percent to 3.5 percent bad-loan ratio by the end of 2015. A further decline in GDP growth would lead to more soured loans and weaker earnings, he said.

 

Lenders so far haven’t reported significant deterioration in loan quality. Bank of China said it had 251.3 billion yuan of loans to industries suffering from overcapacity as of the end of June, accounting for 3 percent of the total. Its nonperforming-loan ratio for those businesses stood at 0.93 percent, the same level reported for the entire bank.

All of the above is driven by one main factor – a relentless desire to fund C
hina’s epic scramble into record overcapacity – after all gotta keep that goalseeked GDP above 7% somehow – which in turn has resulted in the producers competing themselves right out of solvency:

Shipbuilding isn’t the only industry affected by overcapacity. Also in Jiangsu, about 130 kilometers (80 miles) southwest of Nantong, Wuxi Suntech Power Co., the main unit of the industry’s once-biggest supplier, went bankrupt with 9 billion yuan of debt to China’s largest banks, according to a Nov. 12 report by Communist Party-owned Legal Daily. Suntech Power Holdings Co. (STPFQ), the parent firm, defaulted on $541 million of offshore bonds to Wall Street investors.

…

 

Shang Fulin, China’s top banking regulator, this month urged lenders to “seek channels to clean up bad loans by industries with overcapacity to prevent new risks from brewing” and refrain from dragging their feet in dealing with the issue.

…

 

Government and banks’ support for the solar industry since late 2008 has resulted in at least one factory producing sun-powered products in half of China’s 600 cities, according to the China Renewable Energy Society in Beijing. China Development Bank, the world’s largest policy lender, alone lent more than 50 billion yuan to solar-panel makers as of August 2012, data from the China Banking Association showed.

 

China accounts for seven of every 10 solar panels produced worldwide. If they ran at full speed, the factories could produce 49 gigawatts of solar panels a year, 10 times more than in 2008, according to data compiled by Bloomberg. Overcapacity has driven down prices to about 84 cents a watt, compared with $2 at the end of 2010. The slump forced dozens of producers like Wuxi Suntech into bankruptcy.

The downside is well-known: should the people not get paid, riots inevitably ensue. Which is why the government will keep on bailing out and pretending the local loans are viable, until it no longer can.

“The central government is hawkish in its tone, but when it comes to execution by local governments, the enforcement will be much softer,” Bank of Communications’ Lian said. “Many of these firms are major job providers and taxpayers, so the local government will try all means to save them and help them repay bank loans.”

 

When hundreds of unpaid Mingde Heavy workers took to the streets for a second time last November, the local government stepped in by lining up other firms to vouch for Mingde so banks would renew its loans. Mingde Heavy avoided failure by entering into an alliance with a shipping unit of government-controlled Jiangsu Sainty Corp., which also imports and exports apparel.

As for the CNY64 trillion question of how much long the government can pretend all is well, the following may be useful.

The nation might face credit losses of as much as $3 trillion as defaults ensue from the expansion of the past four years, particularly by non-bank lenders such as trusts, exceeding that seen prior to other credit crises, Goldman Sachs Group Inc. estimated in August.

In summary: enjoy the relative calm we currently have thanks to Bernanke’s, Kuroda’s (and soon: Draghi’s) epic liquidity tsunami which is rising all leaking boats. The invoice amounting to trillions in bad and non-performing loans around the entire world, and not just in China, is in the mail.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_OQl4kq6uYU/story01.htm Tyler Durden

The following chart from Bloomberg showing official Chinese NPL data has its pros and cons.

The pros: it shows that the trend in improving NPLs has dramatically inverted in the past ten quarters and has risen to the highest in at least three years.

The cons: the chart, which again is based on official data, is woefully misrepresenting and underestimating just how profound the bad debt situation is in a country in which each month pseudo-nationalized banks issue loans amounting to the same or more in new liquidity as the Fed and BOJ do combined!

That the Chinese reality “on the ground” is far worse than what is represented was known to Zero Hedge readers over a year ago. For those who may have forgotten, on November 5, 2012 we showed “The Chinese Credit Bubble – Full Frontal” and specifically this chart.

And of course  “The True Chinese Credit Bubble: 240% Of GDP And Soaring” from April:

What is even more concerning is that in order to maintain its breakneck economic “growth” of ~8% per year, China has to continue injecting massive amounts of debt, the so called “credit impulse” or “flow” which according to assorted views, is what is the true driver of an economy, and where GDP growth is merely a reflection of how much credit is entering (or leaving) the system.

 

The chart below shows that total Chinese social financing flow just hit a record for the month of March.

 

Completing the picture is the estimated economic response to a surge
in credit. As the last chart shows, in China the biggest benefit to a surge in flow is felt in the quarter immediately following the credit injection, as one would expect, with the effect tapering off and even going negative in future quarters, thus requiring even more debt creation to offset the adverse impacts of prior such injections.

 

 

What should become obvious is that in order to maintain its unprecedented (if declining) growth rate, China has to inject ever greater amounts of credit into its economy, amounts which will push its total credit pile ever higher into the stratosphere, until one day it pulls a Europe and finds itself in a situation where there are no further encumberable assets (for secured loans), and where ever-deteriorating cash flows are no longer sufficient to satisfy the interest payments on unsecured debt, leading to what the Chinese government has been desperate to avoid: mass corporate defaults.

But while China’s debt – an arcane mixture of public, private, and pseudo-government backstopped credit – is among the biggest in the world, the one outstanding question was how much longer can China keep sweeping the hundreds of billions if not trillions of discharged, bad loans under the carpet and pretend everything is fine.

Today we get some much needed perspective on this topic courtesy of Bloomberg, which has some very disturbing revelations.

Such as this:

An unidentified local bank reported a 33 percent nonperforming-loan ratio for the solar-panel industry, compared with 2 percent at the beginning of the year, with the increase due to Wuxi Suntech, China Business News reported in September.

And this:

China’s lending spree has created a debt burden similar in magnitude to the one that pushed Asian nations into crisis in the late 1990s, according to Fitch Ratings.

As companies take on more debt, the efficiency of credit use has deteriorated. Since 2009, for every yuan of credit issued, China’s GDP grew by an average 0.4 yuan, while the pre-2009 average was 0.8 yuan, according to Mike Werner, a Hong Kong-based analyst at Sanford C. Bernstein & Co.

And this:

“The real situation is much worse than the data showed” after talking to chief financial officers at industrial manufacturers, said Wendy Tang, a Shanghai-based analyst at Northeast Securities Co., who estimates the actual nonperforming-loan ratio to be as high as 3 percent. “It will take at least one year or longer for these NPLs to appear on banks’ books, and I haven’t seen the bottom of deterioration in Jiangsu and Zhejiang yet.”

And this:

China’s credit quality started to deteriorate in late 2011 as borrowers took on more debt to serve their obligations amid a slowing economy and weaker income. Interest owed by borrowers rose to an estimated 12.5 percent of China’s economy from 7 percent in 2008, Fitch Ratings estimated in September. By the end of 2017, it may climb to as much as 22 percent and “ultimately overwhelm borrowers.”

 

Meanwhile, China’s total credit will be pushed to almost 250 percent of gross domestic product by then, almost double the 130 percent of 2008, according to Fitch.

And this:

Based on current valuations, investors are pricing in a scenario where nonperforming loans at the largest Chinese banks will make up more than 15 percent of their loan books, according to Werner, who forecasts a 2.5 percent to 3.5 percent bad-loan ratio by the end of 2015. A further decline in GDP growth would lead to more soured loans and weaker earnings, he said.

 

Lenders so far haven’t reported significant deterioration in loan quality. Bank of China said it had 251.3 billion yuan of loans to industries suffering from overcapacity as of the end of June, accounting for 3 percent of the total. Its nonperforming-loan ratio for those businesses stood at 0.93 percent, the same level reported for the entire bank.

All of the above is driven by one main factor – a relentless desire to fund China’s epic scramble into record overcapacity – after all gotta keep that goalseeked GDP above 7% somehow – which in turn has resulted in the producers competing themselves right out of solvency:

Shipbuilding isn’t the only industry affected by overcapacity. Also in Jiangsu, about 130 kilometers (80 miles) southwest of Nantong, Wuxi Suntech Power Co., the main unit of the industry’s once-biggest supplier, went bankrupt with 9 billion yuan of debt to China’s largest banks, according to a Nov. 12 report by Communist Party-owned Legal Daily. Suntech Power Holdings Co. (STPFQ), the parent firm, defaulted on $541 million of offshore bonds to Wall Street investors.

…

 

Shang Fulin, China’s top banking regulator, this month urged lenders to “seek channels to clean up bad loans by industries with overcapacity to prevent new risks from brewing” and refrain from dragging their feet in dealing with the issue.

…

 

Government and banks’ support for the solar industry since late 2008 has resulted in at least one factory producing sun-powered products in half of China’s 600 cities, according to the China Renewable Energy Society in Beijing. China Development Bank, the world’s largest policy lender, alone lent more than 50 billion yuan to solar-panel makers as of August 2012, data from the China Banking Association showed.

 

China accounts for seven of every 10 solar panels produced worldwide. If they ran at full speed, the factories could produce 49 gigawatts of solar panels a year, 10 times more than in 2008, according to data compiled by Bloomberg. Overcapacity has driven down prices to about 84 cents a watt, compared with $2 at the end of 2010. The slump forced dozens of producers like Wuxi Suntech into bankruptcy.

The downside is well-known: should the people not get paid, riots inevitably ensue. Which is why the government will keep on bailing out and pretending the local loans are viable, until it no longer can.

“The central government is hawkish in its tone, but when it comes to execution by local governments, the enforcement will be much softer,” Bank of Communications’ Lian said. “Many of these firms are major job providers and taxpayers, so the local government will try all means to save them and help them repay bank loans.”

 

When hundreds of unpaid Mingde Heavy workers took to the streets for a second time last November, the local government stepped in by lining up other firms to vouch for Mingde so banks would renew its loans. Mingde Heavy avoided failure by entering into an alliance with a shipping unit of government-controlled Jiangsu Sainty Corp., which also imports and exports apparel.

As for the CNY64 trillion question of how much long the government can pretend all is well, the following may be useful.

The nation might face credit losses of as much as $3 trillion as defaults ensue from the expansion of the past four years, particularly by non-bank lenders such as trusts, exceeding that seen prior to other credit crises, Goldman Sachs Group Inc. estimated in August.

In summary: enjoy the relative calm we currently have thanks to Bernanke’s, Kuroda’s (and soon: Draghi’s) epic liquidity tsunami which is rising all leaking boats. The invoice amounting to trillions in bad and non-performing loans around the entire world, and not just in China, is in the mail.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_OQl4kq6uYU/story01.htm Tyler Durden

Along with Zero Hedge and Jack Welch, CNBC's Rick Santelli was among the most vocal "jobs truther" in the run-up to last year's election – and suffered the same snark from the mainstream media at such conspiracy theories as to suggest the most important number in the world could be (or would be) manipulated. One year on, we now know the truth and as Santelli rages "if we knew then, what we know now," the world could be a very different place, as "all outcomes could have changed." Santelli raged at the time, "things just didn't feel right," and he was right, perhaps, as he concludes in the brief clip below, the American media "must do better."

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/SOb9yO3ABws/story01.htm Tyler Durden

Along with Zero Hedge and Jack Welch, CNBC's Rick Santelli was among the most vocal "jobs truther" in the run-up to last year's election – and suffered the same snark from the mainstream media at such conspiracy theories as to suggest the most important number in the world could be (or would be) manipulated. One year on, we now know the truth and as Santelli rages "if we knew then, what we know now," the world could be a very different place, as "all outcomes could have changed." Santelli raged at the time, "things just didn't feel right," and he was right, perhaps, as he concludes in the brief clip below, the American media "must do better."

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/SOb9yO3ABws/story01.htm Tyler Durden

 

“TO BIT OR NOT TO BIT”
WilliamBanzaiShakespeare

To Bit, or not to Bit: that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fiat distortions,
Or to take arms against a sea of endless bubbles,
And by opposing end them? To die: to sweep;
No more; and by a sweep to say we end
The heart-ache and the thousand Wall Street schtupps
That insolvent flesh is heir to, ’tis a con-flagellation
Devoutly to be dish’d. To die, to sweep;
To sweep: perchance to scream: ay, there’s the hubub;
For aft that sweep of bankster dregs what new reams may come?
When we have shuffled off the immoral coinage,
Must give us pause: there’s the hazard of moral neglect
That makes calamity of sound money life;
For who would bear the whips and scorns of fiat debasement ,
The oppressor’s wrong, the borrowing idiot’s contumely,
The pangs of despised austerity, the law of gravity’s delay,
The insolence of central banking office and the spurns
That impatient murmur of money changing snakes,
When he himself might his quietus make
With a Benjamin Bernankin? who would QE fardels bear,
To grunt and sweat under a weary life of indebtured servitude,
But that the dread of something after redemption prior to maturity,
The undiscovered monetary wasteland from whose bourn
Are no asset returns, puzzles the will
And makes us rather bear those monetary ills we have
Than fly to others that we know not much of?
Thus risk avoidance does make cowards of us all;
And thus the creative hue of fiscal revolution
Is sicklied o’er with the pale cast of doubt,
And genius enterprises of great pith and moment
With this regard alternative currencies turn awry,
And lose the name of action.–Soft you now!
And now the Bitcoin hysteria…
While Banksta pimps ‘r in thy orfices
Be all our financial sins and cowardices priced in.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/y4y6vrrhVSo/story01.htm williambanzai7

Yesterday it was Carl Icahn explaining some uncomfortable truths to the mainstream media (who rapidly turned their cognitively dissonant backs on his status quo defying statements). Today, it is uber-bull Larry Fink’s turn to unleash truth-hell…

• *FINK SAYS PENSION FUNDS TO START SELLING STOCKS TO REBALANCE
• *FINK SAYS STRUCTURAL UNEMPLOYMENT GROWING
• *FINK SAYS QE NOT HELPING WITH STRUCTURAL UNEMPLOYMENT
• *FINK SAYS CENTRAL BANKS’ POWERS TO CREATE JOBS LIMITED

His remarks – coinciding with Europe’s close and the end of POMO (and this EURJPY’s levitation) has knocked half of this morning’s gains off stocks…

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/RCmkMfugV58/story01.htm Tyler Durden

Yesterday it was Carl Icahn explaining some uncomfortable truths to the mainstream media (who rapidly turned their cognitively dissonant backs on his status quo defying statements). Today, it is uber-bull Larry Fink’s turn to unleash truth-hell…

• *FINK SAYS PENSION FUNDS TO START SELLING STOCKS TO REBALANCE
• *FINK SAYS STRUCTURAL UNEMPLOYMENT GROWING
• *FINK SAYS QE NOT HELPING WITH STRUCTURAL UNEMPLOYMENT
• *FINK SAYS CENTRAL BANKS’ POWERS TO CREATE JOBS LIMITED

His remarks – coinciding with Europe’s close and the end of POMO (and this EURJPY’s levitation) has knocked half of this morning’s gains off stocks…

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/RCmkMfugV58/story01.htm Tyler Durden

The Foreign Office has summoned the Spanish Ambassador amid a standoff over a ship that entered Gibraltar waters.

• *U.K. CITES `ONGOING INCURSION' INTO BRITISH GIBRALTAR WATERS
• *U.K. SUMMONS SPANISH AMBASSADOR OVER `CONCERNS' ABOUT GIBRALTAR

Sky reports, the Spanish survey ship has been in Gibraltar waters for more than 18 hours and repeatedly refused direct orders from the Royal Navy to leave. As a result, the Foreign Office has summoned Spanish Ambassador Federico Trillo to try and resolve the situation.

 

 

One can't help but wonder if this is Rajoy's cunning plan to get the youth back to work… conscription?

 

(h/t @chamioncapua)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3hQFpOGjbAQ/story01.htm Tyler Durden

Submitted by Michael Snyder of The Economic Collapse blog,

You may find what is happening at one Wal-Mart in Ohio very hard to believe.  At the Wal-mart on Atlantic Boulevard in Canton, Ohio employees are being asked to donate food items so that other employees that cannot afford to buy Thanksgiving dinner will be able to enjoy one too.  You can see a photo of the donation bins that has been posted on Twitter right here.  On the one hand, it is commendable that someone at that Wal-Mart is deeply concerned about the employees that are so poor that they cannot afford to buy the food that they need for Thanksgiving.  On the other hand, this is a perfect example that shows how the quality of the jobs in this country has gone down the toilet. 

Wal-Mart is the largest employer in the United States and it had operating income of 26.5 billion dollars last year.  Wal-Mart is not required to pay their employees a decent wage, and it is very unlikely that anyone will force them to.  But they should.  Because Wal-Mart does not pay decent wages to their employees, the rest of us end up with the bill.  As you will see below, huge numbers of Wal-Mart employees end up on Medicaid and other government assistance programs.  Meanwhile, those that control Wal-Mart continue to enjoy absolutely massive profits.

The following is a short excerpt from a local news story about the donation bins that have been set out at the Wal-Mart in Canton, Ohio.  As the story notes, this does not appear to be a nationwide program, and the donation bins are only available in an employee-only area…

The storage containers are attractively displayed at the Walmart on Atlantic Boulevard in Canton. The bins are lined up in alternating colors of purple and orange. Some sit on tables covered with golden yellow tablecloths. Others peer out from under the tables.

 

This isn't a merchandise display. It's a food drive – not for the community, but for needy workers.

 

"Please Donate Food Items Here, so Associates in Need Can Enjoy Thanksgiving Dinner," read signs affixed to the tablecloths.

It just seems really crazy that the largest employer in the country pays so little that some of their employees cannot even afford to eat Thanksgiving dinner.

Is this what the future of America is going to look like?

According to official Wal-Mart numbers, more than half of their hourly workers make less than $25,000 a year.

That breaks down to about $2,000 a month before taxes.

Could you survive on that?

Could you afford to support a family on that?

It turns out that a lot of Wal-Mart employees simply cannot get by without financial help from the government, and the numbers are staggering.  A recent Businessweek article discussed one study that found that 300 employees at just one Wal-Mart in Wisconsin actually receive a combined total of nearly a million dollars a year in public assistance…

“A decent wage is their demand—a livable wage, of all things,” said Representative George Miller (D-Calif.). The problem with companies like Wal-Mart is their “unwillingness, not their inability, to pay that wage,” he said. “They hand off the difference to taxpayers.” Miller was referring to a congressional report (PDF) released in May that calculated how much Walmart workers rely on public assistance. The study found that the 300 employees at one Supercenter in Wisconsin required some $900,000 worth of public assistance a year.

And according to Politifact, in many states Wal-Mart employees represent the largest single group of people enrolled in the Medicaid program…

In Florida, Wal-Mart topped all companies operating in Florida with the largest number of employees and family members (12,300) eligible for Medicaid, according to a 2005 Tampa Bay Times story. Wal-Mart also ranked highly (No. 2) for dependents enrolled in Florida Healthy Kids or KidCare, trailing Miami-Dade County employees.

 

In Missouri, where Wal-Mart is the largest employer behind state government, the state’s social services department determined Walmart employees outnumbered all others with employees and family members enrolled in MO HealthNet, the state’s Medicaid plan, in the first quarter of 2011. However, at almost 14 percent, it did not represent the highest percentage of workers enrolled or responsible for an enrollee (Dollar General, for instance, was much higher at 42 percent).

 

And in Pennsylvania, a 2006 Philadelphia Inquirer investigation revealed the company had the highest percentage of employees enrolled in Medicaid. One in six of Walmart’s 48,000 Pennsylvania employees were enrolled in Medicaid, costing the state about $15 million a year (it’s likely higher because the Inquirer’s story did not cover employees’ dependents on Medicaid, or any other public assistance such as food stamps).

This is a disgrace.

Your taxes and my taxes are going to subsidize Wal-Mart.

The government has to take more money from all the rest of us because Wal-Mart will not pay their workers a decent wage.  Because Wal-Mart will not support them, we end up supporting them.

Meanwhile, the six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.

So why do people still work there?

Well, because there is a huge shortage of jobs in this country.  As I noted yesterday, the total number of working age Americans without a
job has increased by 27 million since the year 2000.

Right now we have a growing unemployment crisis in this country that is being seriously downplayed by the mainstream media.

According to John Williams of shadowstats.com, if long-term discouraged workers were still included in the official government employment figures like they were back in 1994, then the broadest measure of unemployment would now be approaching 25 percent.  In fact, according to his charts unemployment in the U.S. is now worse than it was at any point during the last recession.

And even the New York Times is admitting that long-term unemployment in America is up by 213 percent since 2007.

At this point, there are millions upon millions of desperate Americans that will take just about any job that they can get.

Meanwhile, the quality of the jobs in this country continues to go downhill very rapidly.

For example, did you know that about 40 percent of all U.S. workers actually make less than what a full-time minimum wage worker made back in 1968?

And did you know that 65 percent of all American workers make less than $40,000 a year before taxes?

For much more on this, please see my previous article entitled "15 Signs That The Quality Of Jobs In America Is Going Downhill Really Fast".

At the same time, the good paying high tech jobs that our politicians have been promising us continue to disappear.  For instance, 19,507 biopharma jobs were eliminated between January 1, 2013 and October 31, 2013.  That is a 68 percent increase over the pace of biopharma job losses during the same period last year.

So are there any areas of the country that are actually doing well right now?

Well, yes there is.  In fact, the Washington D.C. region has added more "1 percent households" over the past decade than anyone else has…

The winners in the new Washington are not just the former senators, party consiglieri and four-star generals who have always profited from their connections. Now they are also the former bureaucrats, accountants and staff officers for whom unimagined riches are suddenly possible. They are the entrepreneurs attracted to the capital by its aura of prosperity and its super-educated workforce. They are the lawyers, lobbyists and executives who work for companies that barely had a presence in Washington before the boom.

 

During the past decade, the region added 21,000 households in the nation's top 1 percent. No other metro area came close.

I used to live in the D.C. area, and I can tell you that the folks out there are living the high life at your expense.

In one recent article, I noted that the average federal employee living in the Washington D.C. area received total compensation worth more than $126,000 in one recent year.

Of course you and I are paying the bill for this too.  The U.S. national debt is on pace to more than double during the eight years of the Obama administration, and our politicians seem to have no trouble continuing to steal about 100 million dollars from our children and our grandchildren every single hour of every single day.

Meanwhile, thousands of other communities all over the nation are slowly being transformed into rotting, festering hellholes.  The following is an excerpt from a recent CNBC article that discussed what is happening to Trenton, New Jersey…

When a city is badly broken, it can be very tough to fix.

 

Just ask Darren Green, president of a coalition of community groups in Trenton, N.J., where deep budget cuts in 2011 forced the city to lay off a third of its police force.

 

"We're at a place now where it's very dangerous to walk the streets," he said, his thoughts periodically interrupted by the distant sound of passing sirens. "The school system is dysfunctional and not working. You have young people who are robbing elders. Young people who are destroying communities. With no leadership and the community in disarray, there's a lot of bad here."

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/fP9EraDqC80/story01.htm Tyler Durden