Economic Update - Continuing Our Fiscal and Economic Death Spiral

A little while ago we did a series of posts on the economic condition of the country. We looked at a bunch of statistics and trends combined with the opinions of a wide range of expert people who are connected to the world of finance, the government, and the economy in different ways.

Our conclusion coming out of those posts is that the country is really in dire financial shape. From runaway debt to embedded high unemployment to failed government programs, we certainly seemed to be in a death spiral from an economic perspective.

We thought it might be a good idea to update those posts by looking at the latest statistics, trends, and expert opinions to see if things had gotten any better, anywhere, anyhow. The following is the results of our research, it is not for the weak of heart or weak of stomach:

- According to an Associated Press report from June 14, 2012:

• The country's weekly first time unemployment benefit applications volume rose 6,000 to 386,000, an increase from an upwardly revised 380,000 the previous week.
• The four week moving average of this statistic also rose and is at its highest level over the past six weeks.
• Only 96,000 jobs per month, on average, were created in the past three months, down from an average of 252,000 in the previous three months.
• GDP was only up 1.9% in the first quarter of 2011 and is not expected to do much better int he second quarter, down from 3.0% in late 2011.
• Retail sales fell .2% in May, the same amount they fell in April and the first back-to-back drops in two years.

- According to another June 14, 2012 Associated Press report, this one on the nation's housing market:

• Mortgage lenders increased the number of homeowners they initiated foreclosure actions on, a total of  109,051 homes in May.
• The 109,051 is an increase of 12% over April and up 16% versus May, 2011 according to foreclosure listing firm RealtyTrac Inc.
• The concern is that as more and more foreclosed home come onto the market, the glut of available home options will continue to bog down the housing industry into the foreseeable future.
• Over the past twelve months, the number of homes being foreclosed rose on an annual basis, the first time this has happened since January, 2010.
• 33 states saw their annual rate of foreclosures go up last month.
• In all, 8.7 million American homes have entered foreclosure proceedings since 2007.

A June 8, 2012 Moneynews interview with Martin Feldstein, a Harvard economist and head of the Council of Economic Advisers under President Ronald Reagan, talked about his views on the economy:

• The chance of the country slipping into another recession is about one in three.
• Any further action by the Fed such as quantitative easy, dropping interest rates, or the so-called Operation twist is high unlikely to have any impact on the economy.
• The Fed as already printed and injected $2.3 TRILLION worth of false wealth into the economy with no positive results so a third quantitative easing is unlikely to help either.
• Mr. Feldstein feels the economy is actually weaker than most economists say it is.
• The Euro crisis and the sad economic shape of many European countries along with the weakening economies in Asia will lead to a drop in U.S. exports, a further drain on the economy and what had been a bright spot earlier in the year.

- The Economic Advisory Committee of the American Bankers Association recently put forth their economic views: 

• GDP growth will be only about 2.2% in 2012.
• Unemployment will not get below 8% any time soon.
• Economic conditions could deteriorate if the political class does not handle the year end tax rate and spending issues or if the Euro crisis gets worse than expected. 

- Steve Forbes recently opined that while the recent $125 billion going to bail out Spain's banks will provide some temporary relief to their crisis, it does not solve the long term Euro problems. 

- In  a June 9, 2012 Reuters article: 

• The credit rating agency Fitch warned that the U.S. risks another credit downgrade, this one by Fitch, if the country does not get its fiscal house in order and implement a "coherent" plan.
• Specifically, the rating agency stated: "The United States is the only country (of four major AAA-rated countries) which does not have a credible fiscal consolidation plan."
• Another credit agency downgrade would increase our nation's borrowing costs which would increase our national debt which would lead to further credit downgrades which would further increase our borrowing costs....
• Additionally, Fitch announced it would immediately reduce the credit ratings on Cyprus, Ireland, Italy, Spain and Portugal if Greece were to exit the Eurozone.
• Also, Fitch stated that other European nations would have all of their ratings put on a negative ratings watch list, setting a six-month time frame for a potential downgrade.

- The Associated Press reported on June 12, 2012 that the country's budget deficit through the first eight months of this fiscal year is $844.5 billion. This puts the Obama administration and Congress on track to incur over a TRILLION in additional debt this year. This would make it four years in a row that over a TRILLION in deficit spending was incurred. Consider what $844.5 billion really means:

• This $844.5 billion put an additional $7,200 worth of debt on every American household.
• The government's end of year deficit of $1.17 TRILLION will add $10,000 in debt burden on every American household.
• This $844.5 billion deficit was incurred by having the Federal government overspend $5.1 billion it never had EVER DAY since January 1, 2012.
• This $844.5 billion deficit was incurred by having the Federal government spend $213 million it never had EVERY HOUR since January 1, 2012. Disgraceful fiscal irresponsibility by every Washington politician, especially since we have already identified hundreds of billions of dollars the federal government loses, misspends, or loses to criminal fraud every hour of every day every year.

As a side note, the $844.5 billion deficit incurred in only eight months of fiscal 2012 is double what the Bush administration incurred in its worst YEAR of deficit spending.

- Speaking of disgraces, the Associated Press reported on June 12, 2012 that seven out of every ten teenagers will not be able to find a job this summer. This is the lowest level since the second world war. Unbelievable that about 500 or so politicians in Washington could screw things up so much in the economy that kids cannot even find a summer job in this country. Not surprisingly, it is easiest to get a teenage job in the Washington D.C. metro area.

- The Washington Post reported on June 11, 2012 that the recent recession wiped out nearly two decades of Americans’ wealth, according to recently released Federal Reserve analyses. The Federal Reserve said the median net worth of families plunged by 39% in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on par with where they were in 1992.

Please note that from 2007 through 2010, the time period when the Fed estimated Americans families lost 39% of their wealth:

1. The Democrats controlled the House of Representatives all four years.
2. The Democrats controlled the Senate all four years.
3. The Democrats controlled the White House for two years.
4. The Republicans controlled the White House for only two years and never had control of the Senate or House.

Thus, during this devastating period of wealth being lost, Democrats controlled the major branches of government 83% of the time. While they would probably still blame Bush for reports like this, and Bush is responsible to some degree, the Democrats certainly had the power and position to improve every family's lot and wealth status over the past six years, given their control of government functions, but failed to deliver.

- According to a recent article by famous New York University economist, Nouriel Roubini:

• A global economic storm is set to unleash in 2013 and there are no safe harbors to ride it out.
• The European debt crisis continues to get worse.
• Asian economies are slowing.
• Middle East tensions relative to Iran's nuclear ambitions are likely to get worse.
• The United States has its own major economic problems including weakening economic performance (only 1.9% GDP growth last quarter), tax breaks are set to expire at the end of this year along with automatic spending reductions, a combination that could send the country into recession in 2013.
• "Worse, the risk of a double-dip recession next year is rising: even if what looks like a looming U.S. fiscal cliff turns out to be only a smaller source of drag, the likely increase in some taxes and reduction of some transfer payments will reduce growth in disposable income and consumption. Moreover, political gridlock over fiscal adjustment is likely to persist, regardless of whether Barack Obama or Mitt Romney wins November’s presidential election. Thus, new fights on the debt ceiling, risks of a government shutdown, and rating downgrades."

- According to a June 19, 2012 Associated Press report:

• According to the Labor Department, employers in April, 2012 posted the fewest job openings in five months, not a good signing for hiring trends in the next few months.
• Job openings fell to a seasonally adjusted 3.4 million in April, down from 3.7 million in March.
• The continuing soft economy has resulted in 12.5 million unemployed Americans in April.
• 12.5 million means there was an average of 3.7 people competing for each open job, almost double what the competition for jobs is in a healthy economy, around 2 to 1.
• While job openings are up by almost a third since the Great Recession ended in June 2009, they are still below pre-recession levels of about 5 million per month.
• Fewer people also quit their current jobs according to the report, another negative sign, since less people quitting their job is evidence that workers are not confident that they can find new jobs elsewhere.
• While companies are posting more job openings, they are not filling them all of them since while openings have increased by 13% in the past year, while gross hiring has increased only 4%.

- And finally, consider the recent words of Congressman Paul Ryan, one of the few people in Washington who understands how dire our fiscal situation is: "What is going to happen is, just like Europe, politicians made all of these empty promises, which turned into broken promises. The bond markets turn on and you have a debt crisis, cranking up taxes, cutting benefits for current seniors, slowing down the economy, having a lost decade. I had a hearing with the CBO just today. They are saying that the path we are on, with the debt levels we are incurring, they don’t know how to measure the economy going forward after the mid-20s, -30s because the debt will crash the economy."

Devastating national debt, ridiculous deficit spending, tax and spending crises, incompetent politicians, incompetent politicians' economic programs and intelligence, hard core and persistent unemployment, a moribund housing industry, and a crumbing Euro market. Have a good day!

Oh, also give some thought to voting out every incumbent Washington politician that you can in November, from Obama down to every freshman Congress member. They do not deserve another chance at anything remotely connected to our economy, given their pathetic results listed above.


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/

Economic Update - Part 4: Taxmageddon, Bank Runs, Bankrupt Students, and More

Okay, this time I really promise this will be the last post for a while regarding our nation's economic condition. I know I promised to stop talking about the situation yesterday but additional bad news continues to brought to my attention. I will cut off the news after today, and tomorrow I will present a series of ideas on what could and should be done to finally start turning the economy around in this country.

However, if I have not scared you enough about our financial and economic plight over the past three days, consider the following, additional bad news:

- In an article from http://www.theatlantic.com/, that was summarized in the May 25, 2012 issue of The Week magazine: "Europe is about to experience the mother of all bank runs. If Greece exits the Euro, depositors in Ireland, Portugal, Spain, and Italy will transfer their cash to safe countries like Germany. That capital flight will encourage international investors to start betting on a breakup, causing borrowing costs to soar and making the Euro's collapse even more likely."

- In that same issue of The Week magazine, a summary of an Associated Press article predicted that the pain of a Euro breakup would extend to the U.S. The article claims that Wall Street has trillions of dollars tied up in European banks, and it the Euro goes kaput, those American banks are likely to curtail their lending due to the resultant cash squeeze.

- Speaking of banks, an article that appeared at http://www.theatlantic.com/, which was summarized, you guessed it, in the May 25, 2012 issue of The Week magazine, reported that the five largest banks in the country control $8.5 TRILLION in assets, which is equivalent to about 56% of the nation's economy. These are both bigger numbers than in 2008 when the rallying cry "too big to fail" resulted in the despised, ineffective, and very expensive taxpayer funded bank bailouts.

Obviously, Washington and the political class never figured out how to make the big banks not be too big to fail. If the Euro crisis smacks these big banks, will the taxpayers put up with another round of bailouts for Wall Street? And if not, what would happen to our economy if one be of the big five goes down the tubes?

- A Huffington Post article that was also summarized in the May 25, 2012 issue of The Week, reported that less than half of the U.S. graduates since 2009 have found a job within a year of leaving school. Those in the other half that did find a job have an average starting salary of about $27,000, 10% lower than the graduating classes of 2006 and 2007.

- From that same issue of The Week (a busy week of bad economic news to appear in just one issue!), a summarized New York Times article reported that 94% of college students borrow money to pay for their education, double the percentage from twenty years ago. The heavy debt load their incur restricts their ability to buy cars, rent an apartment, and conduct other economy growing activities due to the diversion of their income to paying off their debt.

- A recent Gallup poll, reported int he May 18, 2012 issue of The Week magazine, found that Americans' "personal financial comfort" is at the lowest level since Gallup began tracking the measure ten years ago. 39% of those polled said they do not have enough money to live comfortably, up from 34% last year and 24% in 2002.

- A recent Associated Press article reported that the Organization For Economic Cooperation and Development warned the 17 countries in the Euro zone that they risked falling into a severe recession, and bringing the rest of the world into a recession with them, unless more was done to stem the debt crisis.

- We have already talked about the so-called "taxmageddon," the economic doomsday scenario that will occur in early 2013 unless the political class can get together beforehand and agree on how to effectively handle a multitude of tax issues and spending issues beforehand.

According to a recent Washington Post article (and it too was summarized in the May 25, 2012 issue of The Week magazine), the lack of leadership and effective planning from Washington is resulting in defense contractors already slowing their hiring plans and hospitals cutting costs in anticipation of the end of year deadline. Neither of these actions, and probably thousands of other,similar  actions by thousands of companies across hundreds of industries, will help the state of the economy in 2012.

- And one last blast of bad, the Dow Jones Industrial Average closed last Friday down over 9% from its 52 week high. I believe that we are considered in a bear stock market environment when the market drops more than 20% below is annual high. Thus, we are almost half way to a bear market and the trend is not good.

Really scary stuff. That is why we wanted to get all of the bad news out so that people would begin to realize how dangerous a time we are in from a debt, financial, and economic perspective. Starting tomorrow, and probably going for at least two days, we will present our recommendations for getting this situation under control and moving forward in a positive direction.

It is obvious that the political class in Washington has no clue on what to do. Otherwise, I would have thought they would have done it already and we would not be in this economic death spiral. The information shared over the past three days should be reason enough to 1) dump out all incumbents in November, from the President through the first term members of Congress, 2) start the process of implementing term limits, and 3) start the implementation of the economic salvation plan we will propose in the next few days.

I will leave you with two quotes to ponder in the light of the dire economic news we have shared over the past four posts:

Albert Einstein: "The definition of insanity is doing the same thing over and over again and expecting different results." We have continually allowed the same tired politicians with the same tired ideas to continually get reelected. As a result, we find ourselves in the dire economic straits we are in today.

The second quote comes from Eric Bonse, writing for the German publication, Die Tagezeitung. Mr. Bonse summarized the recent meeting of the leaders from Canada, Russia, France, Germany, Italy, Japan, the U.K. and the U.S. who got together at Camp David in mid-May to try and figure out how to fix the broken economies around the world. Mr. Bonse found Barack Obama to be "a fine host" but not much of a leader or facilitator.

The outcome form the meeting resulted in only a tepid statement that all of the leaders were "in favor of growth." That's about as deep, inspiring, and effective as saying I would rather have a cupcake than a root canal. But Mr; Bonse had a much better observation: "Which proves that they don't have the slightest idea how to get about solving the Euro crisis. The summit produced on a general sense of bewilderment." Well said.


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/

Economic Update - Part 2: An Imploding Euro, Nancy Pelosi School Of Economics, And More

Yesterday, we started our periodic review on the state of the economy. Unfortunately, bad news and expected economic downturns, based on various experts' opinions, seems to be the prevailing trend. Even more unfortunate, we could not finish reviewing all of the bad news yesterday and needed another day for the other dire economic news in today's post.

- Relative to the housing industry, as measured by the Case-Shiller housing price index, even though 12 of 20 metro areas showed housing price gains in March, a good sign for the housing industry, the pricing trends in the other eight metro areas were so bad the overall price index edged down to its lowest level since the housing bubble burst four years ago. Thus, while the housing market might be starting to bottom out, the industry is probably very far away from really contributing to a growing economy.

- According to a report from Bloomberg News on May 23, 2012, Hewlett-Packard recently announced that it will reduce its workforce by 27,000 positions over the next year or so. Not a good sign for the economy when a large U.S. company is reducing its workforce by 8%.

- Economist and fund manager John Hussman says we are entering a recession now, according to an interview he gave to Moneynews on May 14, 2012: "The joint deterioration in the growth of real personal income, real personal consumption, real final sales, and employment, coupled with our inference of leading economic pressures from 'unobserved components' methods, creates not only the concern but the expectation that the U.S. economy is entering a recession — not a quarter or two from today, but most likely at present. Indeed, Europe already appears to be in a broadening recession, which the U.K. has now joined, and the confluence of economic weakness and already strained government debt conditions in Europe is likely to produce disruptive outcomes in the coming quarters."

- In a May 21, 2012 CNBC sponsored article in USA Today, New York University economist Nouriel Roubini stated that the U.S. economy is not growing close to what it should be in a healthy environment, barely hitting the 2% level: "We have positive economic growth, but it's below trend — barely 2 percent."

- We have already covered the following economic story under our recent Political Class Insanity posts but it is worthwhile going through it again. White House Senior Advisor Valerie Jarrett recently spoke at the Student Summit at North Carolina Central University where she hilariously claimed unemployment benefits stimulate the economy: "Let's face it, even though we had a terrible economic crisis three years ago, throughout our country many people were suffering before the last three years, particularly in the black community. And so we need to make sure that we continue to support that important safety net. It not only is good for the family, but it's good for the economy. People who receive that unemployment check go out and spend it and help stimulate the economy, so that's healthy as well."

Valarie Jarrett is one of President Obama's closest and most trusted advisor. Given that, it should come as no surprise that the vast majority of his economic policies and programs have failed if they are based on this type of inane economic theory. If Ms. Jarrett's theory is correct, then we should strive to ensure that every American DOES NOT have a job and is collecting unemployment checks, which they can then spend to create jobs. Stupid logic and theory.

Since we have been sending out record setting numbers of unemployment checks over the past four years, and there are still about 14 million Americans who are unemployed or under employed, this does not look like a good stimulus program if after four years we are in this type of dire situation. Obviously Ms. Jarrett a graduate of the Nancy Pelosi School Of Economics.

- One of the biggest economic time bombs waiting to go off is the mess in Europe and the Euro currency. This should be one of the biggest economic disasters we will see in our lifetime unless someone over there comes up with a plan, the likes of which no one has come close to formulating so far.

For those of you that are not too familiar of what is about to happen, I recommend you read the handful of lead articles in the most recent issue of Business Week for the week of May 28, 2012. The articles go into enough detail of what is pending, from various perspectives, without overwhelming the reader with financial minutiae.

The following facts will give you an idea of what the black clouds in Europe are all about, black clouds that will eventually rain some bad news on our economy:

• UBS has told it customers that the chance of Greece leaving or being kicked out of the Euro currency is about 20% within the next six months while Citigroup has stated their opinion that the likelihood of this happening within the next 18 months is between 50 and 75%.
• If Greece does go back to its drachma and gets out of the Euro, UBS predicts that the new drachma would devalue to about 25% of the Euro's value, making every Greek citizen and business about 75% poorer. Greek citizens have already started to take money out of Greece banks, in case they should fail, with Greek banks showing that their deposits are down about 33% since 2009.
• The bigger concern is that investors might start to believe that Greece is just the first domino and make a rush to withdrawal money from the banks of the other weak economies, Portugal, Spain, Ireland, and Italy. These banks have seen their deposits shrink by 3.2% over the past 15 months.
• France's Societe' Generale forecasts that a Greek exit from the Euro could result in about $1.1 TRILLION worth of currency and loan losses in the U.S. and Europe.
• The value of the Euro vs. the dollar is at it slowest level since five months ago. This means that the hundreds of billions of Euros support the rest of Europe has put forth in the past six months to prop up the Greek economy is not building up investor confidence in the value of the Euro.
• Spain is already in a recession, with unemployment at 24% and the number of bad loans currently on the books in Spain standing at 8.4%, the highest level in eighteen years. Thus, at least in Spain, there is not a dynamic and growing economy that might be able to lift that country out of its economic abyss.
• In Greece, the unemployment rate is about 20% and the unemployment rate for young adults is about 50%. Both figures are causing young Greeks to leave their country for a better life and better chance for employment elsewhere in the world, further weakening the chances for a Greece economic revival anytime soon.

Not a pretty sight. If the dominoes do fall, then even Germany might fall into recession since a lot of the exports their companies ship out end up in Spain, Greece, Italy, and Ireland. If those countries continue with their recessions and high unemployment, they will not be buying as many products from German businesses and factories. Remember, England is already officially in a recession.

If Germany goes into a recession, the whole Euro zone will fall into a recession and a major market for U.S. imports will dry up, probably forcing the U.S. economy into a recession, if we are not already in one. And if the entire Euro currency should collapse, I do not think anyone has a clue how bad the economic damage would be throughout the world, just not Europe. And history teaches us that when the economic damage is that bad, the political consequences can be bad and lengthy, e.g. the hyperinflation and German economic malaise that led to Hitler and the Nazis.

That is more than enough economic news, views, opinions, and statistics for one month. An imploding currency, ignorant economic advisers, 27,000 more Americans about to lose their jobs in one fell swoop, low economic growth, an impending return to recession, almost $16 TRILLION in debt, and a housing market that is getting worse at a slower pace. Have a good day!

Oh, by the way, Monday I promise we will be done with the bad economic news since a whole raft of new bad news showed up yesterday!


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/