Friday, 4 September 2009

US economic reality yet to sink in

The leading sign that Keynesian economics is alive and well are the ubiquitous references by the Obama administration, parroted by their acolytes in the media, about the effectiveness of the stimulus program and the so-called 'green shoots' that are turning the economy around.

The US, and the rest of the world, which is not devoid of Keynesian nonsense itself, will pay a heavy price for the policies currently in place.

New jobs data has been released for August showing yet another decline in employment. How will this information by spun? Probably by saying that the rate of decrease is slowing.

Consider the following from the indespensible Chart of the Day:
Today, the Labor Department reported that nonfarm payrolls (jobs) decreased by 216,000 in August. 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 1950-2006 (dashed blue line). As today's chart illustrates, the current job market has suffered losses that are more than six times as much as average (20 months after the beginning of a recession). In fact, if this were an average recession/job loss cycle, the number of jobs would have begun to increase five months ago.

Hands up all of the people who think that this is nothing more than a normal recession?

Does anybody really think that the recession has ended, as has been trumpeted by a number of leading media commentators?

Folks, the US is not out of the woods by any stretch of the imagination.

There is another real estate shock to come in 2010 when commercial property mortgages reset, which at the very least will retard growth.

Then there is the massive issue of banks falsifying their balance sheets by not marking asset values to the market in order to stave off insolvency.

I would be surprised if the majority of banks in the US today are not technically insolvent.

The problem is that the FDIC doesn't have the funding to deal with a large scale bank collapse.

Into this environment the Obama administration wants to introduce its healthcare bill, which is nothing more than an outrageous takeover of 16% of the US economy, and cap and trade legislation, which will have no effect on global climate - ever - but will definitely transfer wealth from the ordinary, hard working, tax paying folk to enviro-scammers on Wall Street.

We live in interesting times, that's for sure.

(Nothing Follows)


Badboy Recovered said...

How are ya! Its been a while since i posted here. Visit your blog almost every day though.

I live just outside Chicago and things are getting bad here. Real bad. Contractors that have been in business for 30 or 40 years are going out of business. Hotels only half full - they are actually closing off entire floors to save money on electricity.

But most people i talk to are still aloof. They have no idea whats coming. They bought into the media that the worst is over when in fact the worst hasn't even begun. Wait till the dollar crashes.

In one month im going on a month log vacation to 5 countries and through the panama canal. When i return im gonna make my priority stocking food. And buying silver - which i can kick myself in the ass for because it was as low as 10 an ounce when i was first thinking of buying, now it's at 16.

Hope things are ok down under.

Ellen K said...

Here in Dallas things are moderately bad. Jobs can be had, but nobody feels comfortable. Personally, I am the only one bringing home a regular paycheck. My husband works for straight commission in sales and frankly, the market isn't too hot right now. My kids who graduated from college are working part time jobs and looking for full time in anything. My youngest is working part time for a retail chain and seeking another job since his hours were cut. What is worse is that while we in the middle class are treading water, Obama is waiting on the boat to throw us an anchor. The double whammy of the costly boondoggles of healthcare and cap and trade could take twice as much out of every single person's paycheck without giving us anything other than the UN's good will to show for it. I say screw the UN let them take a hike and give us back our country. There will be a march on Washington next week. Many are going. I can't afford to, but I will be there in spirit. There's a reason why all these town hall meetings are filled with angry people-we've been betrayed. Revolutions were built on less than this.