So let’s just pretend that the government’s numbers and statistics are right and assume that the U.S. economy has been recovering from the financial crisis since April 2009. That means that for the last five years the U.S. economy has technically been growing. Even with the contracting labor supply, the high U6 unemployment rate, and the Federal Reserves seemingly endless policy of monetary stimulus, we can just suspend our belief in reality and say that the recession ended five years ago. If that’s the case then one could argue that the recovery was actually worse than the recession. But let’s say that that’s what happened.
Wouldn’t that mean that the U.S. economy is due for another correction? But it seems like politicians and Fed officials and pundits on financial networks are all convinced that the U.S. economy is just fine. It’s as if the idea of the U.S. economy entering into a recession ever again was virtually impossible, if you were to go by what the supposed “experts” believe.
And another cause for concern should be why the Fed’s policies of QE and minuscule interest rates for the foreseeable future are still occurring so far removed from the onset of the crisis. Even when the Fed began to taper they announced that interest rates would not see a hike until at the earliest late 2015. Another issue is why in the hell the Fed is still walking on eggshells when it comes to discussing policy moves over the next few years? Could it be that the Fed knows how fragile the U.S. economy is a full five years after the financial crisis? What happens when the U.S. economy enters recession when interest rates are already at 0%? What does, or a better question to ask would be, what can the Fed do at that point? The timing of all of this could not be worse for the central planners. Janet Yellen has to figure out a way to unwind this massive monetary experiment to avoid a market correction at the exact same time as the U.S. economy is due for a new correction.
Market intervention begets marking intervention. The Fed has created this frankenstein economy that provides the illusion of economic recovery by inflating asset markets in stocks, bonds and real estate. But when you look at fundamentals like labor force participation, rising consumer prices, savings and investment the U.S. economy looks anemic at best. President Obama’s economic track record can be summarized as a trillion dollar bond and stock stimulus program which disproportionately benefits the upper income earners like Wall Street execs and other politically connected bankers. Meanwhile real wages are stagnant, consumer prices are rising faster and faster, incentives to save are destroyed while people take on more and more debt just to survive.
If the last five years have been the recovery what in the hell is the next recession going to look like? And how are the economic engineers going to save face when it finally arrives?
4:50 pm • 24 July 2014 • 22 notes
What’s Lurking Beneath The Glossy Veneer Of The Jobs Report?
On the surface, last week’s jobs report was glossy good news: the U.S. economy added 288,000 non-farm jobs. Beneath the glossy veneer, however, the news wasn’t quite as good as advertised: full-time jobs declined by 523,000 and part-time jobs surged 840,000.
And the U6 unemployment rate is up to 12.1% mostly as a result of the lowest labor force participation rate since the late 70s.
1:53 pm • 7 July 2014 • 30 notes
GDP Disaster: Final Q1 GDP Crashes To -2.9%, Lowest Since 2009, Far Below The Worst Expectations
And while a bad GDP print was largely expected, the driver wasn’t: personal consumption expenditures somehow crashed from 3.1% to just 1.0%, far below the 2.4% expected, meaning that all hope of a consumer recovery is dead. Finally, as a reminder, US GDP has never fallen more than 1.5% except during or just before an NBER-defined recession since quarterly GDP records began in 1947. Good luck department of truth propaganda machine, because even assuming 3% growth every other quarter in 2014 means 2014 GDP will be 1.5% at best!
If Q2 GDP is also negative then the US economy will officially be in recession.
12:44 pm • 25 June 2014 • 35 notes
Graphs of the Day
The labor force participation rate is at its lowest rate in 36 years, back when Jimmy Carter was president.
3:16 pm • 6 June 2014 • 102 notes
Don’t Mention the “R” Word
The word “recession” is being used less and less in news stories as the world becomes complacently confident that the central planners have ‘fixed’ the business cycle. Of course, the unpopularity of the R-word was matched only by the pre-recession lows in 2007/8 before the last collapse in the US economy. In the same way that there can be no bubble when everyone is talking about bubbles… when no one is talking about recessions, we wonder what that means?
2:14 pm • 30 May 2014 • 15 notes
A Tax Day Reminder: Inequality Looks Different If You Look after Taxes
Contrary to popular belief, the richest 1 percent of Americans have not gotten richer during the past decade — as the chart below, showing after-tax income changes, shows. In fact, by Burtless’s calculations, the richest 1 percent of Americans are the only group whose incomes shrunk, falling by an average of 4 percent.
The incomes of all other groups have grown during this same period, and in fact the incomes of the lowest quintile have actually grown the most, at 20 percent. All other income quintiles or percentiles grew by 8 to 13 percent during the first decade of the new millennium. According to Burtless, this can be explained by the fact that, while everyone was affected by the 2008 recession, the richest 1 percent of Americans were hit the most (mostly because they derived a larger share of their incomes from investments than other income groups).
Looking at the 1979 to 2010 period, one does see inequality rise, but only between the 1 percent and the rest. The average incomes of all other quintiles did grow healthily (by between 36 and 49 percent):
One reason why so many Americans believe that the average incomes of middle- and low-income Americans have stagnated and that the average incomes of the top 1 percent always rise is the commonly cited income statistics from the Census Bureau – which only consider before-tax income. This approach understates the well-being of Americans who receive income-tax subsidies and overstates the well-being of Americans whose incomes are taxed at higher rates. Analyzing after-tax income levels provides a clearer picture of income trends in the United States, particularly as the tax code is frequently employed to redistribute income as a matter of policy.
I <3 Veronique de Rugy
1:48 pm • 16 April 2014 • 10 notes
5 Years Later - What Did Obama’s “American Recovery & Reinvestment Act” Achieve?
Nearly $30 of government intervention to create $1 of economic growth.
"The failure of the stimulus was a failure of the neo-Keynesian belief that economies can be jolted into action by a wave of government spending. In fact, people are smart enough to realize that every dollar poured into the economy via government spending must eventually be taken out of the productive economy in the form of taxes. The way to jolt an economy to life and to sustain long-term growth is to create more incentives for people to work, save and invest. Let’s hope Washington’s next stimulus plan is aimed at reducing the tax and regulatory burden on American job creators."
10:59 am • 18 February 2014 • 68 notes
Worst February Start for Stocks in 32 Years
Since the announcement of the Fed’s taper, all major equity indices are negative.
I bet Janet Yellen is feeling the heat right about now.
4:27 pm • 3 February 2014 • 5 notes