I find it quite interesting that our president is currently on a “victory lap tour” both here and abroad. He actually gave David Cameron “advice” on how to “run” the British economy. He also scolded the British people to vote “stay” on the Brexit vote, something the Brits I talked to were very resentful of (good for them…they saw through him big time). I find the notion that a head of state can actually think he or she “runs” the economy insightful into today’s elite ruling class dominated global politics. The truth is you and I run the economy. The best one can hope for is that the global elite ruling class doesn’t screw it up too much during their tenure. Sadly, I don’t think that is the case for the US.
Expanding on this, let me explain what has happened over the last 7 1/2 years in relatable terms. On his first day as president, Barack Obama walks into the oval office and finds the rarest of credit cards: it has no credit limit, no monthly payment required and the accumulated interest rate is near zero percent. WOW, what an opportunity! The question is: When do the minimum monthly payments start to kick in? What will the rate of interest be? No one actually knows…that was not in the credit card agreement. In fact, there is no agreement, there is just debt.
This is what you hear on the victory lap tour:
Unemployment has been cut in half
The economy measured as GDP has expanded
The stock market and home values have risen greatly
Everyone is happy, right? Not exactly. If they were, there would be overwhelming support for Obama’s anointed successor. Instead there is the “Bern” and “The Donald”…why? Maybe the numbers just aint what they appear to be.
Here is what you don’t hear and but what I focus on:
The Federal debt will more than doubled from 9 Trillion to over 20T by the time Obama’s term is done. As I pointed out in my prior writings, is “economic growth” based entirely on debt, real growth? Trust me, we are going to find out and you will not like the results.
What are the key issues as I see them?
Do you know Obama is the FIRST President in our history to have sub 3% growth in the economy every year of his tenure? Government tax receipts are actually down this year…how can this be if the economy is “expanding” as he claims on his victory tour?
Average household income is down 8% over the last 7 1/2 years. Amazing, isn’t it? We don’t hear this on the victory lap, do we? Any wonder the average American is not happy…not feeling it? Here is the ugly truth: Most of the money printing that Obama has happily supported through zero percent interest rates has gone to the wealthy. Anyone who owns assets, has done well. The problem is, the average American doesn’t have much in the way of assets, particularly after the housing market imploded in 2007/2008. There was a recent Federal Reserve survey ( http://swtimes.com/business/fed-study-nearly-half-us-households-would-struggle-unexpected-400-expense) asking if the survey taker could afford a “surprise” expense of $400 out of cash reserves. Nearly half said no…think about that, HALF could not handle a $400 outlay. The survey was aimed at the middle class.
So, why is household income down? I believe there is a new “class” that has been created that I call LMUP, which stands for Lower Middle/Upper Poor. Who or what created it? Obama along with Nancy Pelosi (who famously said we need to pass it so we know what is in it: https://www.youtube.com/watch?v=hV-05TLiiLU ) who proudly pushed and forced “Obama Care” on the American people. LMUP was created by the 30 hour per week provision which states an employer is not mandated to provide health insurance for anyone who works 30 hours per week or less. The millions of full-time jobs that were lost during the Great Recession have been replaced by lower paying and lower hour jobs that have no benefits. Want to know why the unemployment rate is so “low” (at least on the victory lap speeches)? It’s because that one full-time job has been replaced by two or three jobs for the same person…get it? One person, three jobs…that unemployment rate really looks great, right? We know many people dealing with this…they are not happy and we are not happy for them either.
Obama’s zero interest rate policy has destroyed the business cycle, in other words Capitalism is on the ropes. Driven by this policy, massive mal-investments have taken place. One (of many) examples is the borrowing by the largest corporations in America: Nine trillion since 2009…with far more being spent on stock buybacks and dividend increases than new Research & Development and build out of plant and equipment. New jobs depend on the latter, not the former. Another example is savers have been severely punished. There is no rate of interest on savings anymore. If you are retired and dependent on some rate of return, you have to dramatically increase the risk profile of your savings. So those savings are now at risk in order to generate at least a bit of return. When the cost of capital is free (amazingly in some countries their sovereign debt has NEGATIVE interest rates where you pay the government to borrow from you!) the natural “gravity” of Capitalism is completely lost. Smart, productive investment is replaced by bad, bad ones.
Here is another example, no words needed:
Many (most) of these cars were purchased with debt.
The ultimate death knoll for free market capitalism was this: http://beforeitsnews.com/opinion-conservative/2016/05/obama-you-cant-build-that-and-if-you-succeed-its-because-youre-lucky-3136005.html Our very own President declaring you cant do it without government. I happen to disagree…strongly. Next blog, I will get into some ideas on what we can do to change all of this. Note: Hillary is NOT the answer. Also, this is an amazing article written by Peggy Noonan, I hope you read it: http://www.peggynoonan.com/trump-and-the-rise-of-the-unprotected/
Until Next Time….