In Case You Were Starting To Feel Good About The Economy...More Bad News

Earlier this week we discussed how the economy was still in very bad shape even though there had been a smattering of good economic news recently (http://www.loathemygovernment.blogspot.com/2012/03/in-case-you-were-feeling-good-about.html). Unfortunately, it appears that we did not cover all of the bad news, trends, and economic scenarios that are going on right now:


1) Federal reserve Board Charmian Ben Bernanke spoke recently at George Washington University. Highlights/low lights of his perspectives include the following:

• According to Bernanke, there is still not enough spending and investment to sustain the economic recovery.
• He said consumer demand still remains weak relative to its level before the Great Recession.
• He also noted that major contributors to economic growth, borrowing and trade, have declined.
• He feels that consumer spending, the major driver in our economy, has not recovered and is still very weak relative to where it was before the Great Recession. As a result,  "We lack a source of demand to keep the economy growing."
• In his view, household income growth is barely keeping up with inflation and that trend is being aggravated by high gas prices.
• And finally, he owned up to the fact that the Fed was a major enabler of the Great Recession, stating he believes the central bank made mistakes in supervision and regulation that did play a role in banks making unsound mortgage loans.

Oh boy. Bad news on the horizon from what is supposed to be the head of the biggest and most powerful government organization the world, the Fed. Demand is weak, trade is down, spending is down, income growth anemic. This from the person with the most power to make the economy strong but who just admitted the Fed was a contributor to the situation we are in today. Nice job, Mr.Chairman.

2) Yesterday, the government announced that just under 350,000 Americans filed for unemployment benefits last WEEK, a typical volume over the past six months or so. Since the economy has averaged only about 245,000 jobs created per MONTH over the past few months, the math for an economic recovery is still looking bad.

3) According to David Rosenberg, an economist at Gluskin Sheff, this post recession recovery is the weakest recovery ever. Among his other conclusions:

• The current recovery is being driven by warm weather, not by fundamental improvements taking place in the economy.
• In his view, deficit spending and the Fed's loose monetary policies have propped up the economy, which is much weaker than otherwise improving economic indicators would suggest: "We've got four years of trillion-dollar-plus deficits, we have a Fed balance sheet that's tripled in size, zero policy rates for three years. Of course you're going to get some growth."
• As with other analysts, he believes it is an artificial or illusion of economic growth, not real, sustainable economic growth.
• His analysis shows that a lot of the recent favorable economic statistics are due solely to the good weather enjoyed across the country this winter since construction jobs started up sooner rather than later and consumer spending on heating fuel was less than average, which provided more disposable income for other economic activity.

4) Federal Reserve Bank of Chicago President Charles Evans recently told Bloomberg News that the Fed "needs to further ease monetary policy to fuel the U.S. economic expansion." In other words, keeping interest rates at record lows for years and adding about a TRILLION dollars into the banking system via two previous "quantitative easing" programs, (i.e. also known as printing money) did not work. This would seem to indicate that the Fed really has no clue on how to get the economy moving again, not very reassuring.

5) Famed international investor Jim Rogers warns that investors should enjoy 2012, as economic stimulus measures and illusions will prop up markets for this election year. However, he believes that world economies will tank in 2013 and in 2014 when they can no longer grow on ultra-loose monetary policies and government borrowing and government debt burdens will weigh heavily on economic growth.

6) The February 27, 2012 issue of Business Week magazine had a depressing article regarding student loans. Apparently recent college graduate are coming into the workforce, assuming they can find a job, with very high student loan balances, averaging about $25,000.

This debt load makes it difficult for them to attain a home mortgage which in turn depresses the already depressed real estate market which depresses the already depressed economy. According to the article, a Federal Reserve Board study found that only about 9% of 29-34 year olds obtained a home mortgage from 2009 to 2011. This compares to 17% who had obtained a mortgage by this age ten years earlier.

Also depressing, the article reports that 25 to 34 year olds made up 27% of all home buyers in 2011, the lowest share in the past ten years. This 27% is six percentage points less than the same measure in 2001, according to the National Association of Realtors.

Without a higher influx of first time, younger buyers into the home ownership market, those families that currently own a home but want to move into a bigger home cannot since they are having a harder time selling their smaller, current home which normally would have been easier to sell to younger workers. A vicious cycle that will not go away until the current crop of college graduates significantly work down their student loan debt in order to qualify for a mortgage. Since this cycle will not be broken soon, help for the housing market will not be immediate.

7) The average price for a gallon of gas this past week was still very high $3.88, double what it was at the start of the Obama administration.

Not a pretty picture, esepcially when you combine this new bad news with the old bad news from our post earlier this week. Our economic hole is even deeper than we thought just a few days ago. However, the recommendations on how to fix this mess are still the same:

1. This November, vote out all incumbents. They are only as good as their lousy fiscal and economic record and it is time to start anew with fresh people in Washington. New faces could at least give us a hope of true economic change, a reality we will not get with the incumbents who are "only as good as their abysmal record."


2. Longer term, we need to implement Step 39 from "Love My Country, Loathe My Government." Step 39 would implement term limits for all Federal politicians. Allowing our current politicians to stay in Washington ten, twenty, thirty years or more is obviously not working. (note: please visit the following site and sign our petition demanding term limits for all Federally elected politicians:
http://www.unitedstatesofpurple.com/united_states_of_purple_015.htm)


3. We also need to implement Step 1 from "Love My Country, Loathe My Government." This step would reduce government spending by 10% a year for five years in order to quickly reduce out of control government spending in an orderly way. We have previously shown how to get $9 TRILLION (see the following link for the details: http://www.loathemygovernment.blogspot.com/2012/02/united-states-of-purple-presidency-plan.html) of debt out of our lives so 10% reduction a year is very doable. Unless we get our economic and fiscal affairs in order and reduce our debt, the country's demise is all but determined. (what could happen under this plan already happened after World War II and it was prosperity, details at http://loathemygovernment.blogspot.com/2012/03/why-obamas-economic-policies-are-dead.html)


4. And finally, we need to implement an independent audit of the Federal Reserve Board. The Fed is basically accountable to no one, a situation that could certainly be abusive to the concept of freedom, a government agency answerable to no one. We need to more fully understand the workings and secrets of the Fed since their actions probably have the most potential for disaster, especially in the area of inflation.

Have a nice weekend.

We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/