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Monday, January 5, 2015

Economic Realities

Obama supporters are promoting the idea of the Obama boom.

But is there really an economic boom?

Please see the following graphs, which seem to indicate that the Obama boom consists of smoke and mirrors (hat tip to The Flying Camel; click directly on the graphs to enlarge them):






So, what do the above graphs mean for each of us and for America as a whole? According to The Flying Camel, citing Charles Hugh Smith:
Why will Christmas 2014 be the last Christmas in America? It’s simple: declining wages cannot support an ever-expanding mountain of debt.

The Federal Reserve has played a game for six long years of lowering the cost of debt (i.e. the rate of interest borrowers must pay), which has enabled stagnating wages to support ever heavier debt loads.

There is an endgame in sight to this financial trickery, a point of diminishing returns to lower interest rates: the Fed can’t drop rates lower than 0%. Borrowers simply can’t qualify for more debt, regardless of interest rates.

The extreme fragility of an economy based on ever-expanding mountains of debt piled on declining incomes is apparent: if the Fed can’t raise interest rates even a tiny quarter point without threatening to collapse the unstable pyramid of debt-based affluence/ consumption, what does that say about the fragility of the “growth” (supposedly running at a hot 5% annually) and “prosperity”?

Claiming that a few hundred dollars in lower gasoline costs per household will enable a desert of declining income to bloom is the equivalent of claiming that an inch of rain in Death Valley will transform the desert into a lush tropical rain forest.

Remember the lackluster Christmas of 2014 well; the endgame of expanding debt will play out as every endgame does: furious moves by central bankers will prolong checkmate but not transform the inevitable loss into a win. Media sound and fury are no substitute for rising real household wages and incomes.
Read the entire essay HERE. Your thoughts on this topic?

39 comments:

  1. Just waiting until they take my pension since it is now possible thanks to Omnibus. Until we get a press that reports this farcical GOP I will keeping building my prep plans.

    ReplyDelete
    Replies
    1. Bunk - Check out this lady. http://ellenbrown.com/

      Her site is called Web of Debt

      Delete
    2. Yeah, the Omnibus.
      Ain't the right great until yours is the arse getting bit?

      Delete
    3. Ducky,

      To take George Washington's famous observation one step further, our feral government is a fire raging out of control. Anyone who thinks it is their friend, or that they can control it is crazy.

      Or, as someone else observed, a government big enough to give you everything is also big enough to take it all away.

      I know you Big Daddy Government worshipers don't like to hear that, but its cold, hard reality.

      Delete
    4. Adrienne- thanks for the lift. The site is swell. Just for the record, my pension is NOT from the government. Private pensions are at risk with this Omnibus fiasco. The laws ERISA governing pensions are being changed for the first time in 40 years. Instead of companies being required to meet their obligations they are letting them off the hook.

      Delete
  2. "Obama boom" ?

    Well if you think that:

    1) A skyrocketing National Debt of >$ 18,100,000,000,000

    2) The household portion @ $146,867

    3) The per person portion @ $56,705

    4) A declining household income @< $51,413 (see chart)

    5) A declining Labor Force Participation Rate:
    https://www.youtube.com/watch?v=UFmbuPDR_HY

    signals a "boom" then [we] are going just 'Gang Busters'; aren't we!

    I believe that the American Dollar is in grave danger of remaining the World's Reserve Currency. If and when we lose that distinction I fear that we will be in very deep $#!t


    @ Bunker,

    Did you mean GDP?

    ReplyDelete
  3. I agree with Charles Hugh Smith. Due to the Federal Reserve policies, the rise of the stock market has been totally decoupled from the real economy. Think about this. Oil prices are crashing. That should be good news for the stock market. So, why are stocks falling with oil price? Ir on and copper are also falling. The world is entering a recession!

    ReplyDelete
    Replies
    1. The entire banking system has been detached from anything but generating profit for a small economic class.
      This has been going on for some time ever since St. Ronnie Raygun fell for the Laffer Curve hucksterism.
      Here's the deal. You bought into supply side now live with it.

      Is there a way back to a financial system which functions for the benefit of the wider population? Not as things stand.

      So we are entering a recession. Austerity is just swell, huh?

      Delete
    2. Actually, finance for finance's sake resumed bigtime during the Clinton years when they repealed Glass-Steagall.

      Government blowing money with no sense whatsoever of responsibility or the future has nothing to do with 'supply side,' (whatever that is.)

      Delete
    3. I agree, government blowing cash to the tune of the banksters and Wall St. brokers goes nowhere.
      However, the myth that the wealthy create jobs and should be enriched in order to create wider growth is part and parcel with the Laffer Curve/supply side fraud.

      Enjoy the austerity.

      Delete
    4. @ Ducky: "However, the myth that the wealthy create jobs and should be enriched in order to create wider growth is part and parcel with the Laffer Curve/supply side fraud."

      You're kidding right? Or has your cheese slipped of your cracker?

      Please to provide us a quote from anyone on Reagan's economic team where they said the wealthy should be enriched by the government? Or please to shut up your quacking nonsense.

      Secondly, the wealthy do create jobs. Since time immemorial, rich people have been paying poorer people to do things for them. Do you read?

      Final question: Have you ever been given a job by a poor man?

      Didn't think so.

      You're quacking out unusually-nonsensical nonsense today. Been at the hash pipe?

      Delete
  4. The economic fundamentals of the article are sound, but the "Last Christmas in America" it a bit alarmist.

    Europe and the US are stuck in a trap, and the article describes it well.

    The global oligarchs, Soros types, and Davos Men must be discussing this behind the scenes.

    I wonder what they will cook up?

    ReplyDelete
    Replies
    1. Stuck in a trap?

      I thought you denied equity traps?

      Delete
    2. What I mean is they've brought the interest rate down to almost zero, it hasn't stimulated the economy, so there is nowhere left to go. They've used up their bag of tricks.

      Delete
    3. Also, as you are fond of pointing out, the government is borrowing money cheap.

      When interest rates go up, the cost of financing all the debt the demicans and republicrats have run up will be crushing.

      Delete
    4. The current debt will cost more to service?
      Nonsense.

      However, if the expansion were distributing income more equitably there would be reason to reduce social spending.
      I say do it through tax policy.

      Delete
    5. You do know they continually borrow money to pay off previous debt, right?

      Delete
    6. Ducky,
      I'll somewhat agree with this statement...

      "if the expansion were distributing income more equitably there would be reason to reduce social spending."

      ...albeit in a less Marxian formulation: Yes, our governments at all levels need to expand economic opportunity so more people can fulfill their dreams and join in to expand the economy.

      Redistribution results in a permanent underclass. Economic liberty is the answer.

      Also, taxes alone mathematically cannot solve the federal government's ongoing fiscal swirl down the toilet.

      Delete
  5. If anyone wants to know how we end up, read about Argentina in the 20th century.

    The parallels are amazing:

    Economic stagnation due to arrogance and government flat-footedness and stunted thinking.

    Politicians pitting lower class urban dwellers against those rich bastard landowners, which has now morphed into leftists scolding farmers for 'unsustainable' farming.

    A burgeoning political class and bureaucratic state gobbling ever more money.

    ReplyDelete
  6. The "Zero Waste" economy dreamed of by the Environmental Left is rapidly becoming translated into the "Zero Growth" economy longed for by the "Stalinist" Left.

    ReplyDelete
  7. "Obama Boom".. what a joke. Talk to folks on the street.
    I guess he'll take credit for oil being down, too, until all Americans see how the stock market's reacted.

    ReplyDelete
    Replies
    1. Just how is Obama responsible for the markets reaction to falling oil prices?

      For that matter, how many of us understand squat about what is driving the price drop? Hint: Our Saudi Arabian "allies" have a lot to do with it.

      Delete
    2. Ducky,
      You act like its a big secret that the Saudis are behind the drop in oil prices. Starve the Russians and Iranians while also making sure the frackers and tar sands extractors can't make a profit. Three birds with one stone.

      Delete
    3. Oil is being produced much quicker and in much larger quantities, from what I read this morning, Ducky.

      And who suggested that he's responsible for the market falling? I sure didn't. I didn't say he'll take credit for oil being down, either, if you'll notice...I suggested it because liberals are sneaking that in while raving about the fantastic Obama economy's point.

      Delete
  8. Ducky,

    I will give you credit for not engaging in Trickle Down Ignorance, although you got pretty darn close with your Supply Side comments.

    ReplyDelete
    Replies
    1. You know silverfiddle, I would enjoy getting to the core of your theories. I think there are some worthwhile ideas.

      But when you cover them with puking of a mercenary hack like Sowell, there's no possibility of common understanding.

      Delete
    2. I notice that hack starts out with economic ephemera and immediately slips into bashing public schools for indoctrination.

      The pure stinky cheese.
      He's all over the place and doesn't offer much solid theory, if any.

      Just a shill and a poor one at that.

      Delete
    3. Ducky, what are unrelenting and awful attacks on Sowell about? Just because he doesn't talk like liberal Black Americans, actually putting Black feet to the fire, not in love with Sharpton, sorry for the economic mess near-socialism has got us into?
      Seriously....do you ever bother to read with a mind not closed by your own ideology?

      Delete
    4. SF, thanks for linking that article...Sowell gets it so right after years of study and experience. Thanks.

      Delete
    5. Z: Ducky is obviously a racist, attacking a black scholar like that.

      Ducky: He writes columns for the non-economist. His published papers and books go into great detail. His column made a simple point and made it well: There is no such theory as 'trickle down' other than in the fevered minds of leftwingers.

      Delete
    6. z, if you can find anything in my post that even alludes to the hack Sowell being black, have at it.
      Really, it's your own projection but let's see what you come up with.

      Silverfiddle, we've gone through the supply side shenanigans for a few decades and only true believers like yourself and Sowell see value in continuing.
      Difference is that Sowell is a paid mercenary and you just get screwed. It baffles me.

      Delete
    7. Ducky, I'm sorry; I don't even get your point? I ask you specifically; does it bother you because he's a Black man who doesn't regurgitate the liberal mantra? Is that what bugs you about him?

      Delete
    8. Why do you even bring it up.
      He's wrong. He's a shill.

      The fact that he's black is irrelevant.
      Ted Cruz is Hispanic and he's an idiot.
      Louie Gohmert is white and he's and idiot.

      What I object to about Sowell is that he's shallow in addition to being wrong.
      Or not exactly wrong. His goals are reasonably consistent with his ideas. He wants to make sure that the working class gets stiffed and that's being done while they ask for another.

      He's trite like a Faux Snooze shill talking about liberals who don't care about black on black crime.
      Yeah, we want something done about gun control, wages and those things that will increase crime.

      It's all so very sad.

      Delete
    9. Ducky

      Shallow? Sowell? You've obviously never read any of his books.

      He is a PhD, published professor of economics and social science.

      What are your credentials again? How many books have you written on economics and the social sciences?

      Delete
    10. Ducky,

      Allow me to clarify: Supply Side Economic and the Laffer Curve are related.

      The Laffer Curve is a back of the cocktail napkin (literally!) conception of how to maximize revenue flowing into the federal coffers by finding the ideal tax rate. It's downside is that it is a conception and cannot be mathematically quantified because economic models are always complicated by factors outside the models ken.

      Marxists who hate the rich (while having millions of their own investments and possessing firearms lockered three states away) can't stand the Laffer Curve because it expresses the reality that you get more tax money out of people by setting the rate somewhere south of confiscatory. Kennedy proved it. It just doesn't satisfy because it doesn't bludgeon the rich bloody with IRS ball bats.

      Now, I will agree with you that too many people are like the carpenter with the hammer, believing that tax cuts are always the answer. They are not.

      Kennedy's tax cuts, as well as Reagans (more of a mixed bag there. Some taxes were increased) were efficacious because they cut down a rate that was too high, which was proven after the fact because they spurred economic growth and increased revenue flowing into government coffers.

      In the Reagan example, where they went wrong, was that they increased spending over and above the increase in federal revenue.

      I don't know who Dr. May is, but I agree with this short post by him on Supply-Side v. Demand Side

      http://www.cavemannews.com/Supplysidevsdemandsideeconomics.htm

      But, I know I will get argument from you over this WSJ article, which demonstrates that the Demand Side incentives have demonstrably failed:

      http://www.wsj.com/articles/SB10001424052702304418404579467141423574578

      Delete
    11. IRRELEVANT? Do you even READ the comments to you, Ducky? It's totally relevant. I'm asking YOU if your resentment comes from his going off the idiot liberal plantation. GET IT?
      SF..I'm with you; I've always respected and admired Thomas Sowell.

      Delete
  9. More info on the Demand Side failures since 2008:

    European Austerity is a Myth

    The chart is damning. Government spending/GDP has increased in all but a few European countries, so when the Krugman types moan about European "austerity" what they really mean is European governments haven't increased spending enough, by their lights.

    See also:

    Austerity In Europe: It Will Work If It's Ever Tried

    It all add up to Demand Side Failure

    ReplyDelete
  10. Well, companies are doing well because they've purged every possible 'extra' employee using obamacare and obama regs as the cause. They've also raised prices and reduced portion sizes. Translation: They've Screwed the middle class with the head imbecile obama leading the front.

    And that's just a snowflake on the tip of the iceberg.

    The after effects? Why the kaka for brains Libtards Squeal with delight at their masters 'economic boom'.

    ReplyDelete

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