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Deflationary Worldwide Vortex: 2015 Projected to be Lowest Inflation Year Since Great Depression

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Photo Credit: Bloomberg Business WeekBy Peter Coy. Deflation is like a black hole, sucking seemingly everything into itself. Switzerland succumbed to the vortex on Jan. 15 when the central bank gave up trying to keep its currency from rising—a defeat that will punish the Swiss economy by making the nation’s goods more expensive on world markets.

Could the U.S. be next? The U.S. dollar is up about 11 percent since last summer by the Bloomberg Dollar Spot Index, a rise that makes American-made goods less competitive. And there is a whiff of deflation in the air this morning with the news that the U.S. Consumer Price Index fell 0.4 percent in December from the previous month, the biggest decline since the economy was in free fall six years ago. “Deflationary pressures continue to build,” Scott Anderson, chief economist at Bank of the West, wrote in a report today, Jan. 16, that cited a drop in import prices and came out before the news about the Consumer Price Index.

The bottom line is that the U.S. is probably safe. The economy is strong enough that it’s likely to withstand the deflationary drag emanating from Europe. The U.S. should expand a little more than 3.1 percent in 2015, better than the estimated 2.4 percent this past year, according to the median forecast of economists surveyed by Bloomberg. (Read more about the deflationary worldwide vortex HERE)

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Why U.S. Inflation is not Here to Stay

By Mehreen Khan. The world economy is in the grip of a deflationary crisis. Or at least that’s what most headlines seem to scream.

In fact, it’s probably more accurate to say there are two types of deflation going on in the developed world right now – the good type and the bad type.

It’s hard to discern which dynamics are at play where, but plummeting oil prices are undoubtedly part of the benign deflation that has helped push down price indices over the past months.

There are other types of beneficial deflation too. This includes when enhanced productivity leads to a better supply of goods and services and results in prices falling.

But if 2015 is likely to be the first year since the Great Depression that every major world economy will see inflation fall below 2pc, what does this mean for our longer-term prospects? (Read more from this story HERE)

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Celebrating Labor Day: A ‘Jobless Recovery’ On Earth, And The Future Of Workers On Mars

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Photo credit: Robert Couse-Baker

Happy Labor Day! And what better time than this annual celebration of America’s working stiffs to draw attention to our national economic recovery?

As those attached to the Dow Jones Average can attest, the economy is now perking along quite nicely, with the Dow up 57 percent since the dark days of 2009, presently soaring above 13,000. Also, the nation’s pile of wealth has grown impressively, executive paychecks have zoomed back up to Zip-a-Dee-Doo-Dah levels, and sales at stores like Neiman Marcus and Saks Fifth Avenue are absolutely crackerjack!

The only little cloud over this otherwise sunshiny recovery is … well, you. You people for whom Labor Day is named, that is.

Not only did Wall Street’s crash knock jobs, wages, benefits, homeownership and middle-class opportunities into the ditch, but they’re still stuck there — and even sinking lower. Yet the financial elites, political establishment and media powers remain rapturously focused on the Dow, uncaring about the precipitous decline in the Doug Jones Average.

If Doug and Donna aren’t prospering, neither is America, no matter how much wealth the privileged few are lavishing on luxury goods or socking away in offshore tax havens.

Read more from this story HERE.

Fed’s Driving Youth Unemployment to Record Levels while GDP Stagnates

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Photo credit: clementine gallot

Last week, the U.S. Department of Labor released its Employment and Unemployment Among Youth—Summer 2012 report. While many youths (ages 16-24) found a summer job this year, many did not even try. Fully 39.5 percent of the youth population neither worked nor looked for work this summer. This number has trended upward over time—it is almost double the rate (22.5 percent) from July 1989.

Of those who looked for work, many could not find it. The youth unemployment rate in July 2012 was 17.1 percent. By comparison, it was only 12.4 percent in July 2000 and 10.8 percent in July 2007. For men, blacks, and Hispanics, the youth unemployment rates in July 2012 were worse—at 17.9 percent, 28.6 percent, and 18.5 percent respectively.

Why are fewer youth participating in the labor force, and even fewer working? In part, because a bad economy always hits younger workers harder. The central problem with the labor market right now is a dramatic slowdown in job creation. While job losses rose at the start of the recession, they have since returned to pre-recession levels.

Hiring, meanwhile, has not recovered. Unemployment remains high because employers are creating fewer new jobs. This makes it much harder for those without jobs—like the youth—to find them. It also allows employers to become more selective in the people they do hire. That often means hiring older and more experienced workers.

Government policies have made this difficult labor market even worse for younger Americans. In 2007, Congress voted to raise the federal minimum wage to $7.25 an hour. Half of minimum wage earners are between the ages of 16 and 24. Raising the minimum wage, in addition to employer paid Social Security, workers compensation, and unemployment insurance prices many young workers out of the job market. An inexperienced high school student may not produce enough to be paid $7.25 per hour plus Social Security, workers comp, and unemployment insurance. As a result, since an employer is not allowed to pay her less by law, she is not hired and misses out on the job experience she needs to get a higher paying job: two-thirds of minimum wage workers earn a raise within a year.

Read more from this story HERE.

Click HERE for article regarding GDP’s 1.7% growth.

It’s Not Getting Better: GDP Slows to Sluggish 1.7 Percent Rate

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This morning’s update from the Department of Commerce on economic activity in the second quarter shows that the economy grew at an anemic 1.7 percent annual rate. This follows a nearly equally weak first quarter growth rate of 2.0 percent.

How weak is this? In terms of economic output, the current recovery is the weakest of any since 1945: Total output is only 6.8 percent higher than when the recession ended in 2009, which was about 12 quarters ago. Compare that to the other really big post-war recession: 1981. After 12 quarters, economic output stood 18.5 percent higher than the end of that recession. Even the really slow recovery from the 2001 recession outdoes the current one: By 12 quarters following the end of the 2001 recession, economic output was 8.9 percent higher.

The weak spots in the current recovery stand out in today’s economic growth report. The Bureau of Economic Analysis traces the sluggish growth rate to slowdowns in the spending of households and businesses and shrinking inventories.

While the media will highlight the weak household spending numbers, the real focus of concern should be on business investment. When businesses hold back on improving and growing their productive capacity, that inaction directly affects hiring decisions and, thus, household incomes. And that’s what businesses appear to be doing this year: They are sitting this economy out.

Very few economic actions testify more strongly to the failure of current economic policy—especially the threats of tax increases next year—than what businesses are doing. Well before voters head to the polling booth in November, American business has apparently voted against the near-term prospects of the economy. Imagine the economy today if better economic policy had been the norm over the past several years.

Read more from this story HERE.

US on the Brink of the Greatest Depression Ever via Fox News

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Photo credit: Mike Licht

Everywhere from FoxNews.com to CNBC.com, I suddenly see commentators warning of pending doom, economic collapse, and a new Great Depression. Welcome to my club. Perhaps America’s politicians and economists should have paid attention to an entrepreneur and small businessman that has been warning of economic collapse and a new Great Depression publicly for over two years.

More importantly, none of the current commentaries mention the “why’s” of this slow motion economic collapse…beyond the obvious — mountains of deficit and debt. None of them mention the dysfunctional structure of the current U.S. economy and the massive changes in the work ethic and mindset of the average American.

I am a successful small businessman and a patriot who loves America and always sees its greatness. I am also an optimistic, positive thinker who always sees the glass half full. But not this time.

This time we are in such deep trouble, the only solution is a radical restructuring of the politicians, the economy, and the way we view personal responsibility versus government handouts. If those changes don’t come then we are facing a long decline and the eventual end of America.

This time the results are going to be dramatically worse than 1929. This time we are facing The Greatest Depression ever.

Read more from this story HERE.

Video: The question is not “if,” it’s “when” our nation collapses from insolvency

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This new “Government Gone Wild” video explains in simple terms that both parties are selling this country out. Collapse is inevitable absent fundamental change.

Heritage: Another Recession Is Imminent

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Photo credit: Ed Yourdon

Yesterday, the Congressional Budget Office (CBO) reported that without a doubt, America will have a fresh recession next year unless Congress and the President prevent it.

We are facing the largest tax increase in history—Taxmageddon, scheduled to take effect January 1—and what experts are calling a “fiscal cliff” of sharp and unforgiving budget changes that will send the country spiraling downward. Congress and the President have the power to prevent this, and when the August congressional recess is over, that is exactly what they should do.

In its new report, the CBO said that if Congress does not act, it’s not economic growth we should be worried about, because the economy will actually shrink next year. It will shrink by 0.5 percent, and the unemployment rate will spike to 9.1 percent. As Heritage’s J.D. Foster explains: “Forget percentages—what does this mean in actual jobs lost if President Obama and Congress fail to act? It means roughly 1.6 million more Americans will be out of work—on top of the 12.8 million who already want to work but can’t find jobs.”

Preventing Taxmageddon and the fiscal cliff are necessary just to keep the economy from taking a nosedive. The status quo isn’t attractive, but Congress certainly shouldn’t make things worse. If Congress moves to prevent the nosedive, the CBO projects that the economy will grow only slightly next year, at an anemic 1.7 percent, and the unemployment rate will remain stuck around 8 percent.

Why? The CBO report makes it clear: Our spending problem continues, and it’s driven mainly by the three major entitlements: Medicare, Medicaid, and Social Security. Spending on these programs will outpace tax revenue over the next decade.

Read more from this story HERE.

Top Investor Warns of “Financial Armageddon” as Billionaires Dump Stocks, Buy Gold

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In what analysts say is another indication that the economy will get worse in the not-too-distant future, recent filings by billionaire financier George Soros show he dumped virtually all his holdings in major financial companies like JP Morgan, Goldman Sachs, and Citigroup. His multi-billion-dollar U.S. fund also loaded up on gold, with the portfolio now holding more than $130 million worth of the precious metal.

Data compiled by analysts based on Soros’ most recent 13F filing with the Securities and Exchange Commission (SEC) showed that during the last quarter, his American fund sold more than a million shares of the big financial companies with a value of almost $50 million. During that period, Soros Fund Management also more than doubled its position in the SPDR Gold Trust to nearly 900,000 shares.

“When a major global player with direct ties to the White House, Wall Street, and the banking system starts off-loading stocks and starts stacking gold, it suggests a very serious market move is set to happen,” observed commentator Mac Slavo, a generally pessimistic analyst who follows financial news closely and has long predicted unprecedented economic chaos.

Despite his far-left political agenda, Soros has a solid track record of making wise financial moves. Americans should pay attention. “Soros is getting out of those companies which are most at risk should the financial system buckle like it did in 2008 and he’s shifting his assets into what may be the only asset class left standing when it’s all said and done,” Slavo concluded.

Major banks have already started drawing up plans for a potential financial calamity, news reports in recent weeks revealed. But Soros was hardly the only heavyweight investor whose recent actions foreshadow potential economic trouble to come.

Another billionaire investment legend, John Paulson, who successfully predicted the sub-prime meltdown and made a fortune in the process, also added a significant amount of gold to his already-gold heavy hedge fund portfolio — an increase of more than 25 percent in the last quarter worth some $700 million, regulatory filings show. Paulson’s largest holdings are in the SPDR Gold Trust, and Bloomberg reported that almost half of his U.S.-traded equities are now tied to bullion.

Read more from this story HERE.

Obama Admin: “Proud” that stimulus produced jobs at $738k each (+video)

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Photo credit: merfam

Secretary of Transportation Ray LaHood told The Daily Caller that he is “very proud” of the Economic Recovery Act of 2009 that put 65,000 people to work with $48 billion in federal funds for the Department of Transportation, amounting to $738,461 per job.

The Recovery Act of 2009, which in total cost taxpayers $825 billion, has been criticized because it did not prevent the unemployment rate from rising above 8 percent, contrary to what the Obama administration predicted.

“Yeah, we spent $48 billion and we put 65,000 people to work in 15,000 projects in two years with no problems,” LaHood told The Daily Caller in a video interview in Alexandria, Va., on Friday. “I’m very proud of that. I know that the governors can spend this money because over two years we gave them $48 billion, they created 65,000 jobs in 15,000 projects. This is doable. We’re going to get the money out and get people to work.”

TheDC also asked LaHood about the Obama administration’s decision to send an additional $473 million in unspent earmarks to states.

“You know what? These are old earmarks. There are earmarks that were set aside by members of Congress going back several years,” LaHood said. “We’re in the no earmark era. There are no more earmarks. This money needs to be spent because we need to get people to work.”

General Motors headed for bankruptcy . . . again

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President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.

Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.

Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.

It’s doubtful that the Obama administration would attempt to sell off the government’s massive position in GM while the stock price is falling. It would be too embarrassing politically. Accordingly, if GM shares continue to decline, it is likely that Obama would ride the stock down to zero.

GM is unlikely to hit the wall before the election, but, given current trends, the company could easily do so again before the end of a second Obama term.

Read more from this story HERE.