Raise the Economy Threat to "High"

I scribbled a note on my calendar: "Bush lost re-election today."

Baring a major gaff by the opposing team, today's bombshell job report has exposed once and for all the fraudulent claim that the U.S. economy is in recovery. Wall Streeters headed for the bomb shelters this morning after learning that U.S. employers were only able to add a paltry 32,000 workers to payrolls in July — just a bit short of the 215,000 to 240,000 the administration had projected would be created last month.

As you try to grapple with the significance of these numbers keep in mind that the economy has to create 150,000 new jobs each month just to keep up with natural population growth. And, if you want to keep the economy from slumping into recession employers have to create 200,000 new jobs each and every month.

The bad July news now makes three months running that the administration has failed to produce the robust job growth promised its $1.6 trillion in tax cuts. Trickle-down has, as it did under Reagan, only produced chuck-full reservoirs at the top and drought at bottom. If anything should trickle down it's only because someone's reservoir sprung a leak.

I have warned for months that we should not to confuse the spurt of economic activity created last year by the Bush tax cuts with a sustainable recovery. Mailing refund checks to a hundred million consumers will always spark a round of spending. But, unless we are ready to keep mailing those checks that spending will disappear quickly. We didn't, and it did.

So, the trickle-down chickens have once again come home to roost.

This morning news included the following other indicators:

* The New York Stock Exchange index, American Stock Exchange index and the Russell 2000 index of smaller-company stocks all tumbled. Declining issues outnumbered advancing ones by 8 to 3 on the NYSE.

* The price of the Treasury's 10-year note rose sharply marking a flight to safety by savvy investors. And the already nervous precious metals investors rushed out to buy more gold which now stands near $400 an ounce.

* And rising energy prices will further dampen economic growth. Oil for September delivery settled at $44.41, up $1.58 a barrel.

Earlier this week I published a complete explanation why I thought the administration was wrong when they claimed we were enjoying a robust recovery. Several readers wrote complaining that I took it down before they could read it, so what better time than today – the day Bush lost re-election – to reprint it.

("Repurposed" From August 3)

I think it may be time to adopt a second color-coded warning system, so I will. I am hereby unveiling the Economic Threat Level System. So as not to reinvent the wheel we will use the same colors as the Terrorism Threat Level System already in place. That indicator was recently bumped from "Elevated" (Yellow,) to "High" (Orange.) Here at the new Economic Threat Agency we scanned this morning's financial news and have decided to kick things off with a burnt orange – a threat level somewhere between Elevated and High. The intelligence reports that contributed to this decision were fresh from this morning's business headlines:

U.S. stocks opened lower on Wednesday after crude oil hit a new high on worries of scarce supplies.

Analysis: Both US oil companies and the world's largest oil source, Saudi Arabia, have been cooking their books, though for different reasons. Shell Oil recently got caught inflating its oil reserves by a staggering 5 billion barrels in order to bolster the company's stock price. The Saudis have been lying about how much oil they still have underground in order to maintain its political leverage over the oil-addicted US. The fact is that we all knew that someday demand for oil would outstrip supply, and that day has arrived. Both China and India are industrializing and are demanding their fair share of the black stuff. In the old days the US could ring up a prince in the Sandpile Kingdom and ask they turn the spigot up a bit to ease prices. But the Saudis are now hoarding what oil they have left. Which explains the next headline.