No panic on
Wall Street – yet. Gold still over $1,600.

But watch out.
Our hunch is that when people come to their sensesÂ…they will
run for the exits.

EuropeÂ’s
shifting from austerity to “growth”…which really
means more debt.

AmericaÂ’s
growth is phony – with fewer jobs today than when the ’08
recession began.

More people
are below the poverty line. More people on food stamps. And more
people so broke they canÂ’t even go broke. CNN Money reports:

This year,
hundreds of thousands of Americans are expected to be too broke
to file for bankruptcy.

The average
cost to file for Chapter 7 bankruptcy protection, the most common
form of consumer bankruptcy, is more than $1,500, according to recent
research submitted to the National Bureau of Economic Research.

As a result,
anywhere between 200,000 and one million consumers are estimated
to be unable to afford that steep cost this year.

The research,
conducted by a group of professors from Columbia University, the
University of Chicago and Washington University in St. Louis, examined
how bankruptcy filings spiked after people received their tax rebates
in previous years. They estimate that another 200,000 consumers,
who would otherwise not have enough money to file, will use their
tax refunds to pay for bankruptcy this year.

“For lots
of people, bankruptcy has been taken off the table as an option
because of the severe fees involved,” said Jialan Wang, co-author
of the report.

And here comes
the critical insight:

“It becomes
harder and harder to pay off the debt as interest payments get higher,
so your debt grows larger and larger,” she said.

Hey, somebody
should mention this to the worldÂ’s central banks. And to Paul
Krugman. And Larry Summers. And Ben Bernanke himself.

They think
the key to solving the worldÂ’s financial problems is more spendingÂ…more
debt and more “growth.” But you know they can’t really
give the world more growth. Real growth requires real investment,
real output, real risk, skillsÂ…customers with moneyÂ…and
all the rest. All they can really give the world for sure is more
debt. Which is exactly what the plan is.

More debt is
certain. Growth is unlikelyÂ…except in the ersatz version.

Thanks to LTRO,
QE and the Twist the feds are really not borrowing money at all.
TheyÂ’re printing it. So, you might say that printing money
is a debt-free approach to growth. Except that even dollar bills
are debt instruments. They are “notes” from a bank of
zero maturity. You can cash them in at any time. Of course, all
youÂ’ll get are more paper notes. Which just goes to show how
silly the whole system is.

The trouble
with the folks who are too broke to go broke is that they donÂ’t
have enough of those paper notes. If they were a major bankÂ…or
a national governmentÂ…they could get more of them, just by
asking. The Fed would print them up “out of thin air.”

They might
as well do the same for the small deadbeats too. Why not? The paper
money doesnÂ’t cost them anything.

But today weÂ’ve
got more important things on our mind that the problems of AmericaÂ’s
poor people. WeÂ’re thinking about growth itselfÂ…

The guy who
drives out to the neighborhood bar, spends all night drinking, and
then drives back homeÂ…stimulates GDP. Better yet, he crashes
his car on the way home. Then, he is a real hero to the economy.
He has to buy another car.

The poor sap
who stays at home is a drag on growth.

The fellow
who goes to McDonaldÂ’s night after night rather than cooking
his own burgersÂ…the fellow who leaves his window open with
the air-conditioning runningÂ…the fellow who hires a lawn service
company rather than cutting his own grassÂ…the man who borrows
money to finance a house or a vacation – all of them add to
the GDP.

Want to increase
GDP? Want growth? LetÂ’s cut each otherÂ’s lawns. LetÂ’s
get others to wash our clothesÂ…and clean our houses. LetÂ’s
make gadgets, geegaws and other worthless paraphernalia and sell
them to each other! Get the housewives into the labor force. Give
jobs to teenagers. DonÂ’t do anything for yourself.

The guy who
plants his own gardenÂ…who cuts his own firewoodÂ…who fixes
his own roof – he is a traitor to the economy. He needs to
get another jobÂ…borrow moneyÂ…burn more gasolineÂ…to
buy more stuffÂ…!

DoesnÂ’t
he know the US needs growth?

The trouble
with GDP growth is that it only tells you how fast the wheels are
spinning. It doesnÂ’t tell you if youÂ’re getting anywhere.

Turns out,
more and more people are shirking their patriotic duty to waste
money; theyÂ’re betraying the economy that supports them.

A report a
few weeks ago told us that young people have fallen out of love
with the automobile. They buy fewer of them. They drive less. They
consume less fuel, less oil, less gasoline.

That certainly
wonÂ’t help growth. And neither will people without jobs. There
are, officially, 13.3 million of them. And 29% of them have been
unemployed for a year or more. CanÂ’t get much growth that way.

And what happens
after youÂ’ve been jobless for a year or more?

The Washington
Post calls it the “incredible shrinking labor force.”
People in the work pool are drowning before they are rescued.

If the same
percentage of adults were in the workforce today as when Barack
Obama took office, the unemployment rate would be 11.1 percent.
If the percentage was where it was when George W. Bush took office,
the unemployment rate would be 13.1 percent.

That helps
explain a seeming contradiction in the unemployment numbers –
the rate keeps dropping even though job creation has been soft.

In April, the
US economy added a mere 115,000 jobs, according to Bureau of Labor
Statistics data released Friday. In a normal month, that would not
even be enough to keep up with new entrants into the labor market.
But in this economy, it was enough to drive unemployment from 8.2
percent down to 8.1 percent, the lowest point since January 2009.

The explanation
is a little-watched measure known as the “labor force participation
rate.” That tracks the number of working-age Americans who
are holding a job or looking for one. Between March and April, it
dropped by 342,000. But because the official unemployment rate counts
only those workers who are actively seeking work, that actually
made the unemployment rate go down.

In February,
the Republican National Committee released a research note on “The
Missing Worker,” arguing that “over 3 million unemployed
workers have called it quits due to Obamanomics.”

Economists
say the story is considerably more complicated. For one thing, the
trend predates President Obama. And while part of the story is clearly
that the labor force is shrinking because the bad economy is driving
workers out, another significant factor is that baby boomers are
beginning to retire early – a trend that has worrying implications
for future growth.

A smaller workforce
means less growth!

We added the
exclamation point. Less growth. The wheels are slowing down. This
could be a disaster, right?

So, fewer people
working means less GDPÂ…less growth. So what?

More tomorrowÂ…and
more on the Pentagon going rogue, too.

May
12,
2012

Bill
Bonner is the author, with Addison Wiggin, of Financial
Reckoning Day: Surviving the Soft Depression of The 21^st
Century and
The New Empire of Debt: The Rise Of An Epic Financial Crisis
and the co-author with Lila Rajiva of Mobs,
Messiahs and Markets (Wiley, 2007). His
latest book is Dice
Have No Memory.
Since 1999, Bill has been a daily contributor and the driving force
behind The Daily Reckoning.

Copyright
© 2012 Daily Reckoning

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