Something even uglier this way cometh… (government employment)

You’ve heard me screech that as the inflationary time line progresses government becomes progressively a larger actor in the economy. You’ve heard me wail that at the end of the inflationary dynamic, tax revenue dwindles forcing government to curtail public spending. You’ve heard me lament that as unemployment rises but social expenditure is curtailed, we would reach a flash-point making civil disorder very likely … and you’ve heard me howl that persistent and widespread civil disorder will be further fueled by rising scandals implicating politicians and the power elite leading eventually to the fall of governments across the West…. but that before that would happen, Western governments will engineer a war of global proportions….

Now read this courtesy of the team at Financial Sense (hat tip to Jasper on the VOY forum):

http://www.financialsense.com/Market/wrapup.htm

Significant excerpts:

As the chart shows us, the current year over year rate of [government payroll] contraction has no equal until we reach back to 1982

Although this may not be common knowledge, the bulk of government employees are found at the State and local levels of government. In fact, Federal government employment only accounts for 12.6% of total aggregate government employment as of September 2009-month end. That’s pocket change compared to State and local levels of employment. And of course the current cycle irony is that it’s the State and local governments that are hurting big time under the duress of not only infrastructure, maintenance and support, but pension issues, loss of Federal support payments, etc.

And then, this pearl with an accompanying chart

As of now, unfortunately for the US economy as a whole, government employees outnumber US manufacturing sector employees literally just shy of two to one. Now is the rhythm of government payrolls important enough for you?

This is a pearl because Western economies are largely service based economies. As I never tire to ask, in an economy that is 80% consumption, how much real wealth is being generated?

Essentially, when credit creation outpaces GDP progression by a wide margin (remember that even without considering corporate debt, household and government debt combined since 1980 has expanded 1200%  but GDP has only expanded by 100%) how much intrinsic value is there left in the economy to sustain those people that are losing their jobs?

This is not a question borne of idle curiosity. This is a question the answer to which is vital to understanding why I think we will be thrown into a world war by our “leaders”.

The research published recently indicates that we have entered and are fairly well into a deflationary cycle. I understand that opinions may diverge on whether we have or we haven’t and that’s fine.

However, what I feel is imperative is that all proponents of one type of “flation” or the other sit together and thrash out a hypothetical scenario of what would happen in case the “de” flationists should be right. Only once the perils and dangers of a deflationary outcome are identified and understood can we sit down with unions and economic actors and put forward a coherent argument as to what should be done at personal, household, corporate, union and government level in order to mitigate the repercussions of deflation.

But, for as long as government is hell bent on denying reality, then a world war is pretty much dialed-in.

When I say world war I don’t mean a war as we’ve had for the past forty years in remote backwaters against tin pot governments run exclusively by the armed forces without any sacrifice of the civilian population in the West. I mean a real war where the human and material resources of the West along with Western civilian industry will be marshaled and employed towards the war effort complete with rationing of food and electricity. That sort of war.

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One Response to “Something even uglier this way cometh… (government employment)”

  1. David W. Lincoln Says:

    Guido, I thought you should see this: http://network.nationalpost.com/np/blogs/fpcomment/archive/2009/11/04/eric-sprott-and-david-franklin-u-s-risks-default.aspx

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