Thursday, 2 July 2009

Green shoots precede black economic hole

Ben Bernanke's so-called 'green shoots' are little more than the temporary result of a massive injection of money into the market that can only have the effect of ensuring that the economy of the United States contracts quickly and painfully in the near term and remains moribund for at least a decade after that.

Markets always find their mark and the US government's and Fed's interference are disrupting this natural process.

US employers are voting with their chequebooks with the consequence that unemployment is up significantly more than economists expected in June. Parenthentically, economists' predictions over the last 12-18 months have been about as accurate as James Hansen's or Tim Flannery's climate predictions.

From Chart of the Day:
Today, the Labor Department reported that nonfarm payrolls (jobs) decreased by 467,000 in June. The stock market declined sharply on the news. Today's chart puts that decline into perspective by comparing job losses during the current economic recession (solid red line) to that of the last recession (dashed gold line) and the average recession from 1954-2006 (dashed blue line). As today's chart illustrates, the current job market has suffered losses that are nearly three times as much as the average. In fact, if this were an average recession/job loss cycle, the number of jobs would have begun to increase three months ago

Based on just this information would you take a guess that the green shoots are working or not having any effect?

Does this data give any credibility to President Obama's statement that the stimulus package is designed to 'save or create' jobs?

Australian economist Gerard Jackson on the situation:
The Institute for Supply Management reports that May was the "16th consecutive month of contraction in the manufacturing sector". Even though the contraction appears to be slowing the demand for capital goods continues to drop with no sign of a reversal in sight as of yet. Of course, this fall in demand has hit the producers of capital goods. In the meantime unemployment continues to rise with some commentators expecting it to reach 11 per cent before the year is out and maybe even climb to 12 per cent next year. Therefore the current signs suggest the US could be sliding into an actual depression, if it isn't there already.

It seems that Obama's borrow, spend and inflate policy is proving to be a complete failure. The idea that government borrowing is counter to recession was always a myth. The notion that transferring purchasing power from individuals to bureaucrats and politicians would expand aggregate demand is so stupid that — as George Orwell said with respect to another matter — only the intelligentsia could "believe a thing like that: no ordinary man could be such a fool". And Keynes was no fool. When he spoke of deficits and borrowing it was always with reference to monetary expansion. It's his disciples who keep getting it wrong.
Regardless of your political affiliation do you think that:

A deepening economic crisis

plus cap and trade

plus socialised health care

will help the economy, harm the economy or have no effect on the economy?

The answer can only be one of the three.

(Nothing Follows)

1 comment:

Anonymous said...

If it was his intention to cage the animal spirits of the private markets, you couldn't do a better job than The Messiah. Those with capital are going to continue to sit on it....or find more hospitable climes for it.....until this assault on free enterprise and our liberties abates.

One would begin to dare think that this is all intentional so that in the ensuing chaos, he can jam home his looselugnut lib agenda.

Never let a good crisis go to waste -- Rahm Emanuel