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Fed’s Ivory Tower Just Got Smaller

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Photo Credit: fbobolasToday’s weaker than expected GDP report shows just how out of touch most professional economists remain with respect to the fundamental weakness of the US economy. After more than four years of nearly never ending monetary stimulus and more than $5 trillion worth of new federal debt, the economy remains stuck in a serious recession.

The report shows that federal stimulus and deficit spending can’t create sustainable economic growth.

Although the tepid data shocked many economists, I was not surprised. I believe zero growth is consistent with the state of the real economy. The stronger growth numbers that we saw in the second half of 2012 were likely inflated due to pre-election hopes.

The disappointing economic data takes on an even gloomier tone when considered against factors that will make recovery that much more difficult. Interest rates are making their first strong upward move in nine months. Yields on 10 year Treasury bonds are up 60 basis points since the end of July, and are over 2.00% for the first time since April 2012.

The dollar is falling against most currencies except the Japanese yen (it is down more than 11% against the Euro since July), and energy prices are rising (crude oil is approaching $100 per barrel). Although these conditions are not promising, the stock market seems blissfully out of touch. As of yesterday, the S&P 500 had advanced for 8 days in a row, its longest daily winning streak in eight years.

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Holiday Sales Growth Tanks Amid Economic Fears, Hits Lowest Level Since 2008

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WASHINGTON (AP) — U.S. shoppers spent cautiously this holiday season, a disappointment for retailers who slashed prices to lure people into stores and now must hope for a post-Christmas burst of spending.

Sales of electronics, clothing, jewelry and home goods in the two months before Christmas increased 0.7 percent compared with last year, according to the MasterCard Advisors SpendingPulse report.

That was below the healthy 3 to 4 percent growth that analysts had expected — and it was the worst year-over-year performance since 2008, when spending shrank sharply during the Great Recession. In 2011, retail sales climbed 4 to 5 percent during November and December, according to ShopperTrak.

This year’s shopping season was marred by bad weather and rising uncertainty about the economy in the face of possible tax hikes and spending cuts early next year. Some analysts say the massacre of schoolchildren in Newtown, Conn., earlier this month may also have chipped away at shoppers’ enthusiasm.

Retailers still have time to make up lost ground. The final week of December accounts for about 15 percent of the month’s sales, said Michael McNamara, vice president for research and analysis at MasterCard Advisors SpendingPulse.

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New Study Confirms ‘Beyond Question’ That Democrats – Not GOP – Destroyed Economy

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A new study from the widely respected National Bureau of Economic Research released this week has confirmed beyond question that the left’s race-baiting attacks on the housing market (the Community Reinvestment Act–enacted under Carter, made shockingly more aggressive under Clinton) is directly responsible for imploding the housing market and destroying the economy.

Again, let’s review:

-President Bush went to Congress repeatedly for years warning them that Fannie Mae and Freddie Mac were going to destroy the economy (17 times in 2008 alone). Democrats continuously ignored him, shut down his proposals along party lines and continued raiding the institutions for campaign contributions on their way down.

-John McCain also co-sponsored urgently critical reforms that would have prevented the housing market collapse, but Democrats shut that down as well, along party lines, and even openly ridiculed anyone who suggested reforms were necessary…to protect their taxpayer-funded campaign contributions as the economy raced uncontrollably toward the cliff.

-No one was making bad loans to unqualified people until Democrats came along and threatened to drag banks into court and have them fined and branded as racists if they didn’t go along with the left’s Affirmative Action lending policies…all while federally insuring their losses. Even the New York Times warned in the late 1990s that Democrats continuing to force banks into lowering their standards would lead to this exact catastrophe.

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Obama Wrong Again: Unemployment Now Even Higher Than What He Predicted Without $800 Billion Stimulus

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Remember those halcyon days early in 2009 when some people believed all things seemed possible with the Messiah to lead the United States?

Remember when the White House, via their economists Christina Romer and Jared Bernstein, sold the $800 billion stimulus by saying that if it were passed, the unemployment rate would be 5.2% in October 2012?

Now those days are gone. The October 2012 unemployment rate was 7.9%, up from 7.8% in September, and the same number as when Barack Obama took office. Romer and Bernstein’s projection even had unemployment under 6% by now — without the stimulus.

23 million people out of work. 8% or higher unemployment for 42 months – 3 ½ years.

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US Financial Collapse Likely if Obama Wins Reelection

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As it loses its sovereignty, Spain finds itself in a vortex from which it cannot escape. It has entered into a second recession within three years. It has no money to combat this dilemma, as the private sector is collapsing, and so, as a result, are tax revenues, and the government is stuck with massive social programs. The national unemployment rate as of August 2012 is 24.6%, but for the young (16-24 years of age) it is now 52.9%. For those between the ages of 20 and 29, the rate is 39%. People are withdrawing and hoarding what cash they have, and many are moving to other countries. Tax revenues thus continue to decline, and few businesses will contemplate a start-up or move to Spain under these circumstances. The nation cannot cut spending beyond a certain point without fomenting a national upheaval, and it cannot promote programs to grow the economy. A financial and societal collapse is thus inevitable.

The United States is on the same path.

Since 2008, the nation’s debt has increased by 75% and will, per Obama’s own budget proposal, more than double (up 130%) by the end of an Obama second term, just four years away. The unfunded liabilities of the U.S. are now 14 times larger than the nation’s annual economic output (GDP). Government at all levels (federal, state, and local) is now spending the equivalent of 40% of the nation’s annual GDP. It will increase to 46-plus percent when ObamaCare and other programs are fully implemented.

The real unemployment rate today (counting all who dropped out of the labor force) is approaching 19%, and over 50% of recent college graduates are unemployed or grossly under-employed, with no hope in sight. There has been a concerted effort by this administration to centralize economic control in Washington through onerous mandates, regulations, and proposed taxes, thus discouraging wealth- and job-creation and forcing many businesses to contemplate a move overseas. The result of all the above is little or no economic growth, thus diminishing tax revenues and forcing more reliance on borrowing to fund the promised spending.

Borrowing that will one day in the not too distant future cost the United States an exorbitant interest rate, combined with a demand for real austerity and a de facto loss of sovereignty, would cement in stone an inevitable collapse.

For those who are maybe undecided or enamored of the Obama cult of personality, there is no need to listen to any of the political speeches and the distortions inevitably contained therein or to read green eye-shade economic reports. Just look across the Atlantic Ocean for a reality check and see the future if the Obama team is given four more years.

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Video: Obama, In His Own Words: “I’ll Be a One-Term President” & “$4 Trillion in Debt is Unpatriotic”

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After suffering through three years of economic malaise and the most debt accumulated by any president in history, no one should vote for Obama. In fact, Obama himself said in 2008 that you should never vote for such a failure.

Here’s Obama in 2008 stating that, if he doesn’t turn things around, he’ll be a “one term president”:

And here’s another video where Obama says that $4 trillion of debt is “unpatriotic”:

I suppose Americans have grown numb to DC politicians and their hypocrisy. Nevertheless, Romney should be hammering Obama on this, nonstop.

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.

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Video: Although Obama Aide Refuses to Answer, “Are you better off now than 4 years ago?”, Dem Governor Does

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Although one of Obama’s top aides, David Axelrod, refused to answer the question of whether Americans are better off now than they were four years ago, a potential 2016 presidential contender, Maryland Democratic Governor Martin O’Malley, did. Here’s a very short clip of his interview on Face the Nation today:

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.

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