With today’s employment report showing only 96,000 non-farm jobs added in September, well below the 148,000 that had been expected, Wall Street ”experts” were once again blindsided by the “unforeseen” weakness in the job market. In addition, August’s gains were revised downward by 16,000 jobs. The now meaningless unemployment rate once again held steady at 5.4%.
As I have written repeatedly, an economy in which consumers borrow money to buy imported products is an economy incapable of producing significant job growth. America’s beleaguered manufacturing sector, once the source of its industrial might, shed another 18,000 jobs. It is worth noting that the mostly low-paying jobs added in the over-bloated service sector should be considered temporary as they are completely dependent on the American consumer/borrower, who intern depend on the continued irrational behavior of the foreign producer/lender.
Today, with December Dollar Index futures falling to new contract lows, with the cash index trading within 10% of its all-time record low, the willingness of foreigners to indefinitely hold low-yielding, ever-weakening dollars may be nearing an end. When that time comes, the dollar will collapse, taking with it all those service sector jobs that its artificially high value helped create. The conceit that has gained traction on Wall Street is that America’s foreign creditors cannot afford to let this happen. The truth, however, is just the opposite. Those who point to the enormous losses foreigners will suffer in the event the dollar collapses ignore the even greater loss of purchasing power foreigners are losing on their own currencies, which they hold in far greater abundance, as a result of their continued efforts to prop up the dollar.
In order for foreigners to continue exporting products to America, they must continue importing inflation from America. This one-sided game is nearing its end, as foreigners will soon tire of paying higher and higher prices for oil and other commodities while watching Americans indulging on the fruits of their labor. Soon they will tire of sacrificing current consumption by lending to Americans, while watching the value of their savings vanish as a result of their efforts to support the dollar.
What is often overlooked is that by subsidizing American’s standard of living, foreigners suppress their own. When they finally come to their collective senses, and allow the dollar to collapse, all of those consumer goods which poorer Americans will no longer be able to afford will be theirs to enjoy. The American standard of living, once the envy of the world, will belong to the world. The only thing standing between the world and increased prosperity is its foolhardy subsidy of America. The American bubble-economy, and the service sector jobs that dominate it,will last only as long as the world remains ignorant of this basic fact.