For instance, this measure of unemployment does not account for those Americans that have become so discouraged from their job hunting that they dropped out of the workforce or take into account Americans that are underemployed relative to what they want to do. That measure is almost 15% and is higher now than when Obama took office and since the recession ended.
There were other stats and trends we covered yesterday from these two sources that were also trending down or poorly. Today, we will focus on the opinions and views of those in the economic and financial industries to see what they are forecasting and touch on some other sources of economic dodata:
- Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland confirmed some of our discussion points we made yesterday regarding the latest unemployment results. While the economy added a net 114,000 jobs in September and the Bureau of Labor Statistics reported that total employment rose by 873,000 in September, much of that increase was because 582,000 Americans took part-time positions because of slack business conditions or those jobs were the only work they could find.
He also reported that if the same number of Americans were still in the job market today vs. January, 2009 rather than having dropped out of the job market because of discouraging job hunt results, we would be at 9.7-9.8% unemployment, not 7.8%.
- According to a Moneynews October 5, 2012 article, BlackRock CEO Larry Fink does not expect a full blown real estate housing recovery until later in 2013 despite the latest small, but encouraging signs in the industry. However, the fast approaching fiscal cliff and other economic maladies could delay the recovery even more.
- An October 3, 2012 Bloomberg news article quoted Nobel laureate Paul Krugman’s assessment “the United States and the European Union are “nowhere close to ending” the financial crisis and German-led austerity efforts may lead to a 1930s-style economic depression.”
- In an October 3, 2012 Moneynews article, John Berlau a senior fellow for finance and access to capital at the Competitive Enterprises Group, asserted his opinion that the third round of the Fed’s quantitative easing effort is very dangerous and could lead to higher unemployment and soaring inflation. As you may know, the first two rounds of quantitative easing, the equivalent of printing money out of thin air, injected $2.3 TRILLION into the economy without making much of a dent in unemployment or economic conditions.
The Fed is now pumping upwards of $40 billion a month into the economy with its latest easing program. Berlau believes that even if money is available to lend by the banks as a result of the easing efforts, it will not find a home since there is not $40 billion worth of loans and mortgages to be found each month. As a result, the money stays in the banks’ reserves.
He attributes a lot of this lack of demand to the fact that legislation like Dodd-Frank, Sarbannes-Oxley, and Obama Care have injected so much uncertainty and over regulation into the market that people are not sure what the future holds and are holding back from spending, investing, opening new businesses, etc.
He worries that these TRILLIONS of dollars could spike inflation and weaken the dollar so much that investment and economic growth, and the related employment picture could all hit us at the same time, resulting in the stagflation scenario of the Carter era: high inflation AND high unemployment. His remedy: delay or repeal Obama Care, Dodd-Frank, and other regulations to allow the economy to have some certainty and some freedom to grow on its own.
- In a Bloomberg news article from October 3, 2012, also related to the Fed’s quantitative easy, Lawrence Goodman, president of the center for Financial Stability, stated that “the Federal Reserve’s promise to hold borrowing costs at record lows into 2015 risks a loss of its credibility and a downward spiral in financial markets.”
He went on to say: "If rates edge higher due to factors such as inflation or credit issues, then the Fed will suffer a loss of its reputational state and that could have complications all across the yield curve. That can happen quickly and can unleash a forceful slide in the market and could thrust the economy back into recession.”
Seems there is a whole lot of downside to this third round of quantitative easing with little or no long term upside being espoused by anyone. It comes off as a desperation move by the Fed in the absence of the political class doing their job of managing our economic policies and affairs.
- In an October 3, 2012 article from Reuters, the world economy will take at least 10 years to emerge from the financial crisis that began in 2008, according to an International Monetary Fund Chief Economist Olivier Blanchard interview. He probably correctly pointed out that Japan’s economy will need decades to heal, the United States has serious fiscal problems, the Chinese economy is slowing, and in order for Europe to get out of its economic funk, Germany and its citizens will have to make some serious sacrifices on inflation and bailouts, not necessarily a guaranteed outcome.
- In an October 2, 2012 Moneynews interview, real estate billionaire Sam Zell asserted that the stock market, as measured by the Dow, should really be at the 9,000 level, not the current 13,000+ level because of the following negative factors:
- The Fed’s quantitative easing is giving stocks a temporary boost, as expected, but that effect will wear off shortly.
- The Fed’s printing of money is stoking inflation fears, causing potential home owners purchases and business expansion efforts to be delayed.
- The uncertainty about future tax levels and the so-called fiscal cliff are giving consumers and business no confidence in the future, restricting spending and investment.
- Investors are chasing a small number of stocks, e.g. Apple, which is driving up the overall stock market indices, but that limited range of stock options is also risky and could result in a significant drop if and when enthusiasm for those stocks wavers.
- Too many regulations, both now, and planned by the Obama administration if it stays in place, are also stifling business and economic growth.
- In an October 2, 2012 Reuters article, Bill Gross, founder and co-chief investment officer of bond giant Pimco, stated that he believes that the United States could soon look like Greece in a few years if it does not get its fiscal house in order.
By his estimation, the U.S. must cut spending or raise taxes by 11 percent of gross domestic product over the next five to 10 years in order to preserve its role as financial safe haven or suffer some dire financial pains and anguish: "If we continue to close our eyes to existing 8 percent of GDP deficits, which, when including Social Security, Medicaid and Medicare liabilities, compose an average estimated 11 percent annual 'fiscal gap,' then we will begin to resemble Greece before the turn of the next decade.
While he feels that the U.S. is the best of the bad investment options in the world today, he did have two good visuals to represent where we are today and where we might be going from an economic perspective. Regarding today’s investment environment, the U.S. is the “cleanest dirtiest” shirt on the investment rack. We may not be good, but we are at least temporarily the best.
However, is we continue with our “crystal meth-like” addiction to out of control spending, someone, somewhere is eventually going to clean their shirts and leave the U.S. for better investment opportunities elsewhere in the world.
- In a September 28, 2012 Reuters article, Dallas Fed President Richard Fisher stated: "We've had a recovery that is quite disappointing.” The man is good at stating the obvious but went on to say why the recovery from the recession has been so bad. He attributed the bad economic news and recovery to the uncertainty on tax policy and regulation, "All the monetary accommodation in the world" will not get businesses hiring again.
Are we really starting to see a trend here among the experts? Too much uncertainty. Too little confidence in our economic, financial, and political leadership. Too many taxes. Too little clarity on taxes. Too many regulations. Is it any surprise that most of our economic performance, outlook, and confidence is so sour?
- The website, Bankrupting America, correctly reported on October 2, 2012, that the Federal government should have passed the standard, annual twelve appropriations bills that are needed to fund the Federal government by October 1. October 1 is important because that begins the government’s fiscal year.
Unfortunately, Congress fell a little short of that mandated goal of twelve, having passed exactly none. The House of Representatives, under Republican control, managed to pass six of the twelve. The Senate, under Democratic control, managed to pass none. Thus, the government will continue to limp along with a “continuing spending resolution” but without a budget for the next six months.
Is it any wonder that American citizens and American businesses have so little confidence in our political leadership of today, a group of people that cannot even pass a budget? And with little confidence comes little spending and investment and less economic growth.
Pathetic bunch of so-called leaders. No wonder we have a national debt of over $16 TRILLION, the politicians in Washington cannot even agree on a budget, never mind living within one.
That’s enough bad news for now. Despicably bad economic behavior and performance from everyone in Washington. Three steps from “Love My Country, Loathe My Government are needed to get this fiscal house in order:
Step 1
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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 our times.
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http://www.repealamendment
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