EIR November 22, 2013
Matthew Ogden
The Collapse of
The Physical Economy
At the regular Friday LaRouchePAC webcast on Nov.
15, Matthew Ogden presented the documentation excerpted
here, to complement Lyndon LaRouche’s
“Worse than Weimar” article (above).
What we intend to do, is to illustrate the collapse of
the physical economy of the United States, and the
growth of a hyperinflationary, worse than Weimar,
bubble since the repeal of Glass-Steagall in 1999, and
the election of Barack Obama in 2008.
There are different estimates for the magnitude of
the world financial aggregates presented in Figure 1.
Financial aggregates are made up of, on this slide, three
different categories: so-called stocks; debt; and then,
derivatives. And you see, the derivatives are the vast
November 22, 2013 EIR Feature 7
majority of the world financial aggregates that are presented
here. According to Bank for International Settlements
(BIS) statistics, derivatives total around $700
trillion. However, according to other estimates, including
estimates by EIR, they could very well be double
that number.
What you see here, is that starting in 1980, there was
already growth of the derivatives bubble, going into
1999, which was the year of the official repeal of Glass-
Steagall; however, remember during those two decades
prior to the repeal, Glass-Steagall was being continuously
eroded by the actions of Alan Greenspan at the Federal
Reserve. But after 1999, after the official repeal, the derivatives
bubble exploded. That goes all the way up to
that slight dip there that you see, the crash of 2007-08.
Now what should have happened at that point, is
that the entire derivatives bubble, that entire fictitious
monetary bubble, should have collapsed. The entire
thing should have disappeared. But instead, beginning
with the George W. Bush Administration, continuing
with the Obama Administration, the policy of quantitative
easing [QE] was adopted, and that led into the support
and continuation, the perpetuation of that derivatives
bubble.
Figure 2 shows that starting in 2008, with the
growth of QE (the top line), cumulatively, we’ve
reached the point that, because of the asset-purchasing
program of the Federal Reserve, there has been almost
$4 trillion in fictitious money pushed into the United
States economy. What you see in conjunction with that,
is that bank deposits, indeed, have skyrocketed in parallel
to the quantitative easing spending; however, those
bank deposits have in no way been reflected into the
real economy. There has been no growth in activity in
the real economy during the quantitative easing regime,
during the five years of the Obama Administration. Instead,
what you’ve seen is that bank lending into the
real economy crashed beginning in 2008, bottomed out
in 2010, and has remained at that level ever since.
Figure 3 shows what has actually happened in the
real economy. While the regime of quantitative easing
has reigned since 2008, and even going back to 1999,
which was the repeal of Glass-Steagall, you’ve seen a
constant decrease in the labor participation rate—the
percentage of the eligible workforce who are actually
either employed, or are actively seeking employment.
You saw a slight decrease beginning in 1999, but look
at what happens when Barack Obama is elected in
Source: U.S. Bureau of Labor Statistics
FIGURE 3
Source: Bank for International Settlements, EIR
FIGURE 1
Source: Federal Reserve Bank
FIGURE 2
8 Feature EIR November 22, 2013
2008: It crashes precipitously and continues to crash.
This is significant, because if you look at the number of
people actually in what’s called the civilian labor
force—those who are either working or are actively
looking for work—that number hasn’t changed at all.
Those are the so-called “employment numbers” that
Obama is always trumpeting about.
But the point is, there has been actually no growth in
the active labor force since Obama was elected. It was
155 million people in January 2009, and it’s 155 million
people now. However, the working-age population has
grown over that period by close to 12 million people.
So where did all of those potential workers go?
Where did that 12 million person increase
in the labor force go? They never
appeared in the labor force. So while
the total number of the civilian labor
force stayed exactly the same, the
number of working-age adults who
either dropped off the rolls because
they’ve been out of work too long, or
who have never entered the labor force
in the first place—those who graduated
from school and never actually went
into the labor force—that number grew
from 80 million people at the end of
2008, to 91.4 million people now. In
other words, you have an invisible 12
million people out there, who essentially
do not exist as a part of the United
States labor force.
So what you see here, is a declining
proportion, with that proportion taking a
nosedive as soon as Obama entered office, and then
falling continuously every year since. And, what we
know from the studies, is that real unemployment in the
United States during the Obama Administration has
reached nearly 26 million people: That’s the 22 million
people who are officially unemployed—unemployed,
underemployed, or “discouraged from seeking work”—
plus another 4 million who never entered the workforce
in the first place, during the last five years. And that is
increasingly becoming what you could call a “lost generation”
of youth.
Figure 4 shows youth unemployment in Europe.
Everybody has heard about the dramatic numbers of
unemployed youth in Greece, in Spain, in other countries
in Europe. This chart shows that since 2008—
again, the beginning of the Obama Administration, and
the beginning of the bailout-austerity regime of
Europe—you had the percentages of real youth unemployment
doubling if not tripling in these countries.
This is calculated for those between the ages of 16 and
24. Cyprus has doubled from 9% to 18%. Ireland has
gone from 10% to 20%. Italy and Portugal have gone
from 20% to almost 40%. And then you’ve got Greece
and Spain tripling from 20% to almost 60%.
These numbers do not even include those who are
discouraged from finding work, who are forced to be
part-time underemployed, nor does it include the massive
exodus of young people who are emigrating from
these countries, in a desperate search for work.
Figure 5 is a representation of the same data in a
Source: Eurostat
FIGURE 4
Source: Eurostat
FIGURE 5
November 22, 2013 EIR Feature 9
map. You can see here, in 2008, the first year of the
Obama Administration—you have six countries in
Europe that had greater than 20% youth unemployment.
Figure 6 shows youth unemployment in Europe in
the year 2012. Eleven countries have youth unemployment
of 20 to 30%. Five countries
have youth unemployment of
30 to 40%. And three countries have
youth unemployment greater than
40%.
So, lest anybody say, “Yeah,
well, that’s Europe, that’s over there,
that’s across the ocean. That could
never happen here,” take a look at
the same period of time, the five
years since the beginning of the
Obama Administration, in the United
States (Figure 7). This is the year
2008, and you have three states that
had greater than 30% real unemployment,
and by “real” I mean in
this case, including those who are
forcibly underemployed and those
who are marginally employed, or
marginally connected to the labor
force, including those who are discouraged
from finding work. Those
states are Michigan with 34%;
Rhode Island with 31%; and California
with 30%.
Now, in 2013—five years into the
Obama Presidency (Figure 8)—30
states in the United States have
greater than 30% youth unemployment
or underemployment, so-called
“real” youth unemployment. Fourteen
are between 30% and 35%; 10
are between 35% and 40%; and 5 are
greater than 40%: Nevada, Illinois,
Mississippi, California, and North
Carolina.
So you can see that the picture on
both sides of the Atlantic really reveals
what is becoming a lost generation
of young people, very similar
to what we saw before the Great
Depression, in the years before
Franklin Roosevelt took office, just looking at the collapse
in employment alone.
But if you take a look at Figure 9, showing the type
of work that those who are still employed are engaged
in, as a percentage of the total labor force employed,
you see that the situation now is even worse than what
Source: Bureau of Labor Statistics, EIR
FIGURE 7
Source: Eurostat
FIGURE 6
10 Feature EIR November 22, 2013
Franklin Roosevelt confronted then.
Right there at the beginning of the
graph, 1940, during Roosevelt’s
third term, the number of workers
that were engaged in productive
work was increasing as a percentage
of the workforce as a whole. And of
course, this was during the war mobilization,
the [building of the] “Arsenal
of Democracy.”
However, as soon as Roosevelt
died, and Truman took over, that increase
began to reverse itself, and instead
of blue-collar, skilled productive
work, you had an increase in
white-collar and unskilled servicesector
work.
And the ratios between those two
types of employment began to reverse
themselves until after President
Kennedy and Robert Kennedy
were assassinated, going right into the beginning of the
1970s. Ironically, in 1971, which was the very year that
Mr. LaRouche had uniquely forecast the crisis that hit
the financial system and the economy at that time,
under Nixon, you see right there—1970, 1971—the
percentage of people employed in the service sector
surpassed the number of people, for the first time, employed
in producing goods. And ever since, you’ve had
a steady decline in the real economy, a net decline
which has never reversed itself, while services, socalled,
including financial services, have steadily increased
and all but taken over the entire U.S. labor
force.
So, this is the picture of the post-Glass-Steagall financial
speculation, all-about-money, Wall Street economy
that’s taken over this country today, and which Mr.
LaRouche has characterized in this newest report as
being, truthfully, worse than Weimar, by far.
Source: Bureau of Labor Statistics, EIR
FIGURE 8
Source: Federal Reserve Bank
FIGURE 9
Source: U.S. Department of Agriculture, U.S. Bureau of Labor Statistics
FIGURE 10
Matthew Ogden
The Collapse of
The Physical Economy
At the regular Friday LaRouchePAC webcast on Nov.
15, Matthew Ogden presented the documentation excerpted
here, to complement Lyndon LaRouche’s
“Worse than Weimar” article (above).
What we intend to do, is to illustrate the collapse of
the physical economy of the United States, and the
growth of a hyperinflationary, worse than Weimar,
bubble since the repeal of Glass-Steagall in 1999, and
the election of Barack Obama in 2008.
There are different estimates for the magnitude of
the world financial aggregates presented in Figure 1.
Financial aggregates are made up of, on this slide, three
different categories: so-called stocks; debt; and then,
derivatives. And you see, the derivatives are the vast
November 22, 2013 EIR Feature 7
majority of the world financial aggregates that are presented
here. According to Bank for International Settlements
(BIS) statistics, derivatives total around $700
trillion. However, according to other estimates, including
estimates by EIR, they could very well be double
that number.
What you see here, is that starting in 1980, there was
already growth of the derivatives bubble, going into
1999, which was the year of the official repeal of Glass-
Steagall; however, remember during those two decades
prior to the repeal, Glass-Steagall was being continuously
eroded by the actions of Alan Greenspan at the Federal
Reserve. But after 1999, after the official repeal, the derivatives
bubble exploded. That goes all the way up to
that slight dip there that you see, the crash of 2007-08.
Now what should have happened at that point, is
that the entire derivatives bubble, that entire fictitious
monetary bubble, should have collapsed. The entire
thing should have disappeared. But instead, beginning
with the George W. Bush Administration, continuing
with the Obama Administration, the policy of quantitative
easing [QE] was adopted, and that led into the support
and continuation, the perpetuation of that derivatives
bubble.
Figure 2 shows that starting in 2008, with the
growth of QE (the top line), cumulatively, we’ve
reached the point that, because of the asset-purchasing
program of the Federal Reserve, there has been almost
$4 trillion in fictitious money pushed into the United
States economy. What you see in conjunction with that,
is that bank deposits, indeed, have skyrocketed in parallel
to the quantitative easing spending; however, those
bank deposits have in no way been reflected into the
real economy. There has been no growth in activity in
the real economy during the quantitative easing regime,
during the five years of the Obama Administration. Instead,
what you’ve seen is that bank lending into the
real economy crashed beginning in 2008, bottomed out
in 2010, and has remained at that level ever since.
Figure 3 shows what has actually happened in the
real economy. While the regime of quantitative easing
has reigned since 2008, and even going back to 1999,
which was the repeal of Glass-Steagall, you’ve seen a
constant decrease in the labor participation rate—the
percentage of the eligible workforce who are actually
either employed, or are actively seeking employment.
You saw a slight decrease beginning in 1999, but look
at what happens when Barack Obama is elected in
Source: U.S. Bureau of Labor Statistics
FIGURE 3
Source: Bank for International Settlements, EIR
FIGURE 1
Source: Federal Reserve Bank
FIGURE 2
8 Feature EIR November 22, 2013
2008: It crashes precipitously and continues to crash.
This is significant, because if you look at the number of
people actually in what’s called the civilian labor
force—those who are either working or are actively
looking for work—that number hasn’t changed at all.
Those are the so-called “employment numbers” that
Obama is always trumpeting about.
But the point is, there has been actually no growth in
the active labor force since Obama was elected. It was
155 million people in January 2009, and it’s 155 million
people now. However, the working-age population has
grown over that period by close to 12 million people.
So where did all of those potential workers go?
Where did that 12 million person increase
in the labor force go? They never
appeared in the labor force. So while
the total number of the civilian labor
force stayed exactly the same, the
number of working-age adults who
either dropped off the rolls because
they’ve been out of work too long, or
who have never entered the labor force
in the first place—those who graduated
from school and never actually went
into the labor force—that number grew
from 80 million people at the end of
2008, to 91.4 million people now. In
other words, you have an invisible 12
million people out there, who essentially
do not exist as a part of the United
States labor force.
So what you see here, is a declining
proportion, with that proportion taking a
nosedive as soon as Obama entered office, and then
falling continuously every year since. And, what we
know from the studies, is that real unemployment in the
United States during the Obama Administration has
reached nearly 26 million people: That’s the 22 million
people who are officially unemployed—unemployed,
underemployed, or “discouraged from seeking work”—
plus another 4 million who never entered the workforce
in the first place, during the last five years. And that is
increasingly becoming what you could call a “lost generation”
of youth.
Figure 4 shows youth unemployment in Europe.
Everybody has heard about the dramatic numbers of
unemployed youth in Greece, in Spain, in other countries
in Europe. This chart shows that since 2008—
again, the beginning of the Obama Administration, and
the beginning of the bailout-austerity regime of
Europe—you had the percentages of real youth unemployment
doubling if not tripling in these countries.
This is calculated for those between the ages of 16 and
24. Cyprus has doubled from 9% to 18%. Ireland has
gone from 10% to 20%. Italy and Portugal have gone
from 20% to almost 40%. And then you’ve got Greece
and Spain tripling from 20% to almost 60%.
These numbers do not even include those who are
discouraged from finding work, who are forced to be
part-time underemployed, nor does it include the massive
exodus of young people who are emigrating from
these countries, in a desperate search for work.
Figure 5 is a representation of the same data in a
Source: Eurostat
FIGURE 4
Source: Eurostat
FIGURE 5
November 22, 2013 EIR Feature 9
map. You can see here, in 2008, the first year of the
Obama Administration—you have six countries in
Europe that had greater than 20% youth unemployment.
Figure 6 shows youth unemployment in Europe in
the year 2012. Eleven countries have youth unemployment
of 20 to 30%. Five countries
have youth unemployment of
30 to 40%. And three countries have
youth unemployment greater than
40%.
So, lest anybody say, “Yeah,
well, that’s Europe, that’s over there,
that’s across the ocean. That could
never happen here,” take a look at
the same period of time, the five
years since the beginning of the
Obama Administration, in the United
States (Figure 7). This is the year
2008, and you have three states that
had greater than 30% real unemployment,
and by “real” I mean in
this case, including those who are
forcibly underemployed and those
who are marginally employed, or
marginally connected to the labor
force, including those who are discouraged
from finding work. Those
states are Michigan with 34%;
Rhode Island with 31%; and California
with 30%.
Now, in 2013—five years into the
Obama Presidency (Figure 8)—30
states in the United States have
greater than 30% youth unemployment
or underemployment, so-called
“real” youth unemployment. Fourteen
are between 30% and 35%; 10
are between 35% and 40%; and 5 are
greater than 40%: Nevada, Illinois,
Mississippi, California, and North
Carolina.
So you can see that the picture on
both sides of the Atlantic really reveals
what is becoming a lost generation
of young people, very similar
to what we saw before the Great
Depression, in the years before
Franklin Roosevelt took office, just looking at the collapse
in employment alone.
But if you take a look at Figure 9, showing the type
of work that those who are still employed are engaged
in, as a percentage of the total labor force employed,
you see that the situation now is even worse than what
Source: Bureau of Labor Statistics, EIR
FIGURE 7
Source: Eurostat
FIGURE 6
10 Feature EIR November 22, 2013
Franklin Roosevelt confronted then.
Right there at the beginning of the
graph, 1940, during Roosevelt’s
third term, the number of workers
that were engaged in productive
work was increasing as a percentage
of the workforce as a whole. And of
course, this was during the war mobilization,
the [building of the] “Arsenal
of Democracy.”
However, as soon as Roosevelt
died, and Truman took over, that increase
began to reverse itself, and instead
of blue-collar, skilled productive
work, you had an increase in
white-collar and unskilled servicesector
work.
And the ratios between those two
types of employment began to reverse
themselves until after President
Kennedy and Robert Kennedy
were assassinated, going right into the beginning of the
1970s. Ironically, in 1971, which was the very year that
Mr. LaRouche had uniquely forecast the crisis that hit
the financial system and the economy at that time,
under Nixon, you see right there—1970, 1971—the
percentage of people employed in the service sector
surpassed the number of people, for the first time, employed
in producing goods. And ever since, you’ve had
a steady decline in the real economy, a net decline
which has never reversed itself, while services, socalled,
including financial services, have steadily increased
and all but taken over the entire U.S. labor
force.
So, this is the picture of the post-Glass-Steagall financial
speculation, all-about-money, Wall Street economy
that’s taken over this country today, and which Mr.
LaRouche has characterized in this newest report as
being, truthfully, worse than Weimar, by far.
Source: Bureau of Labor Statistics, EIR
FIGURE 8
Source: Federal Reserve Bank
FIGURE 9
Source: U.S. Department of Agriculture, U.S. Bureau of Labor Statistics
FIGURE 10
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