The Politics Within The Federal Reserve

In 1910 a group of political, industrial, and financial leaders met in secret on Jekyll Island in Georgia to lay the foundation for the Federal Reserve. The people in attendance included Nelson W. Aldrich, Republic Whip in the Senate, Abraham Piatt Andrew, Assistant Secretary of the U.S. Treasure, Frank A. Vanderlip, president of the National City Bank of New York (representing William Rockefeller), Henry P. Davison, senior partner of the J.P. Morgan Company, Benjamin Strong, head of J.P. Morgan’s Bankers Trust Company, and Paul M. Warburg (partner in Kuhn, Loeb & Company, a representative of the Rothschild banking dynasty in  England and France). (This information is from The Creature from Jekyll Island by G. Edward Griffin.) This meeting set up the cartel we now know as the Federal Reserve. It is a cartel because it is a small group of people not accountable to the government who control the flood of money in America. They have traditionally used that power politically and will continue to do that in the future. Although some members of Congress have called for a thorough audit of the Federal Reserve, but because of the power the fed has, that will never happen.

Yesterday The Gateway Pundit posted a story about recent actions by the Federal Reserve. During the eight years of the Obama Administration, President Obama continually used executive orders to put roadblocks in the way of economic growth–over-regulation, increases taxes on successful people, and generally doing things that made it more difficult for small businesses (the backbone of our economy) to grow. During this time, the Federal Reserve kept the economy from feeling the impact of President Obama’s actions by not raising interest rates. Now we have a President who understands economics and is doing things to help the economy grow. So what is the Federal Reserve doing–trying to undercut his success.

The article at The Gateway Pundit reports:

No Fed Funds Rate increases took place between June 2006 and December 2015. CNBC reported in December 2015 that President Obama oversaw “seven years of the most accommodative monetary policy in U.S. history” (from the Fed). Finally, in December 2015 after the Fed announced its first increase in the Fed Funds rate during the Obama Presidency, it was reported that:

“Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic conditions, the committee decided to raise the target range for the federal funds rate to ¼ to ½ percent,” the FOMC’s post-meeting statement said. “The stance of monetary policy remains accommodative after this increase, thereby supporting further improvements in labor Premarket conditions and a return to 2 percent inflation.”

The only other Fed Funds Rate increases since 2016 were after President Trump was elected President. The Fed Funds Rate increased on December 14, 2016, on March 15th, 2017  and yesterday June 14th, 2017 by .25%.

The article further notes:

The Fed Funds Rate greatly impacts the economy:

“Lower interest rates usually spur the economy by making corporate and consumer borrowing easier. Higher interest rates are intended to slow down the economy by making borrowing harder.”

So again the question is whether the Fed is trying to negatively impact President Trump’s economic recovery from the abysmal Obama years (Obama was the only President where the GDP growth rate never broke 3%) or is the economy just so much better now that President Trump has taken office?

We suspect both.

Stay tuned.

The ADP National Employment Report Was Released Today

The ADP National Employment Report was released today.  Yahoo News posted a story about the report.

The report includes the following:

The Report states:

“May proved to be a very strong month for job growth,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Professional and business services had the strongest monthly increase since 2014. This may be an indicator of broader strength in the workforce since these services are relied on by many industries.”

I am waiting for the workforce participation rate numbers for May to come out. Those numbers will provide more insight into what is happening with the American economy.

While You Were Watching The Political Circus…

Yesterday The Washington Examiner reported that at the beginning of May the total continuing claims for unemployment benefits ran at the lowest level in 28 years. The workforce participation rate in April was 62.9 percent (in March it was 63.0). That number has been hovering at 62 and 63 percent since January of 2012.

The article reports:

Over the past month, the average number of continuing claims per week has clocked in at 1.95 million, the lowest number in 43 years.

Those numbers were released as part of the department’s weekly jobless claims report, which is valued by investors and government officials because it provides a frequently-updated indication of new claims for unemployment benefits, a proxy for layoffs. Fewer layoffs means more job creation.

Thursday’s report showed just 232,000 new claims, adjusted for seasonal variations, for the week ending on May 13. That was the lowest number in nearly three months, and an extremely low mark by historical standards.

…At 4.4 percent in April, the unemployment rate is already below where Federal Reserve officials thought it could sustainably go if the economy were fully healthy.

Jobless claims below 300,000, economists calculate, go along with steady or declining unemployment, meaning that the unemployment rate could fall further still.

Deregulation, efforts to repeal ObamaCare, and the development of America’s energy resources have a lot to do with the economic growth that has begun under President Trump. Note that all three of these things involve an undoing of President Obama’s policies. Elections do have consequences, and the 2016 election has had very positive economic consequences.

Taking Steps To Improve America’s Economy

Yesterday Investor’s Business Daily posted an article about a bill that was recently approved by the House Financial Services Committee.

The article reports:

With little fanfare and even less media coverage, the House Financial Services Committee recently approved along party lines a bill that would significantly reform the economy-deadening Dodd-Frank law. It’s a good first step toward restoring our financial freedom.

The fact is, the 2010 Dodd-Frank law has been a disaster, responsible for killing hundreds of thousands of U.S. jobs and putting a damper on economic growth by making credit harder to come by for those who need it most.

In a recent interview with NPR, House Financial Services Chairman Jeb Hensarling of Texas made a succinct case for getting rid of Dodd-Frank: “Free checking at banks has been cut in half. Banking fees have gone up. Working people are finding it more difficult to get mortgages,” he said.

He could have gone further. Small- to medium-size banks — the traditional sources of working capital for small business — have been hurt worst by Dodd-Frank’s extensive regulations that impose billions of dollars in unnecessary costs each year. And rather than repealing too-big-to-fail for big banks, Dodd-Frank actually makes it all but certain that taxpayers will be asked to bailout big banks during the next downturn.

Dodd-Frank was passed with the idea that the banks and Wall Street were responsible for the financial meltdown of 2008. Actually, the government and government policy were much more to blame.

The best explanation I have seen of the cause of the financial crisis can be found in a YouTube video called “Burning Down the House.”

Here is that video:

The article at Investor’s Business Daily further explains:

Under regulatory threat from the government, banks made loans they knew were bad, then the government bought them back. When the Fed went too far in raising interest rates in the mid-2000s, the housing market cratered, banks’ balance sheets were destroyed, and a massive credit crunch and the “Great Recession” ensued. The government caused this crisis — not Wall Street.

As we’ve written repeatedly in the past, Dodd-Frank should have been shut down long ago. It has strangled entrepreneurial activity and dampened economic growth, and made it impossible for millions of Americans to get home loans. It’s a major reason why GDP during the Obama years grew at a pathetic 1.9% rate, rather than the more normal rate of 3% or more.

We hope the House will move quickly to end Dodd-Frank, one of the worst financial regulatory laws in modern history.

It is going to take a while, but the damage done to the American economy by the policies of Congress and the misdirected efforts to correct something that did not cause the problem can be corrected. We need both political parties to work together to make that happen. Unfortunately, I don’t think that is likely. Hopefully the Republicans have enough votes to pass this legislation without any Democratic votes.

What Tax Reform Can Do

President Truman is quoted as saying, “It’s amazing what you can accomplish if you do not care who gets the credit.” He also said, “You can’t get rich in politics unless you’re a crook.” We are seeing the truth in both of those observations in the current tax debate.

This is a picture of America‘s Gross Domestic Product (GDP) in recent years from the balance:

You might remember that 2012 was the year the tax increases to pay for ObamaCare began. In 2013 the Capital Gains tax increased for high income earners, and the increase in the medicare payroll tax also began in 2013. Obviously raising taxes did not help the economy.

This is the laffer curve:

As you can see, there is a point where tax increases no longer generate revenue.

I am going to assume that Democrats are going to try to block President Trump’s tax reform. I think that is rather obvious. So the question becomes, “Do Democrats not understand economic principles and economic growth (e.g. the Laffer curve) or do they simply want to enslave the American worker?” At this point it is a valid question.

I can understand high-tax states not wanting to give up the benefit they reap in the current tax code. I can also understand all the lobbyists tearing their hair out because their special interest will no longer get a tax break, but at some point Congress needs to do what is best for the country and for the American people. Economic growth is struggling under the current tax burden. Every American who works is giving the government a higher percentage of what they earn than the Medieval surfs paid their lords. That is a scary thought. At the same time, many people who choose not to work are driving expensive cars and living better than the people who do work. The poverty in America that the government is now supporting currently owns a nice car, a big-screen television, an ipad, a smart phones, and central air conditioning. I am all for helping people in time of need, but I think we have lost our way.

Congress needs to pass President Trump’s tax plan. Every Congressman who does not support the plan needs to be voted out of office as soon as possible. Unless the American voters begin to hold their representatives accountable for what they do, the swamp will never get drained. The problem is in both political parties. It is time to take note of the people whose votes help America and the people whose votes hurt America.

 

The Impact Of A President On The Economy

Reuters is reporting today that U. S. weekly jobless claims have recorded their biggest drop in two years.

The article reports:

Initial claims for state unemployment benefits declined 25,000 to a seasonally adjusted 234,000 for the week ended April 1, the Labor Department said on Thursday. The drop was the largest since the week ending April 25, 2015.

The prior week’s data was revised to show 1,000 more applications received than previously reported.

Claims have now been below 300,000, a threshold associated with a healthy labor market for 109 straight weeks. That is the longest stretch since 1970 when the labor market was smaller.

The labor market is currently near full employment.

Economists polled by Reuters had forecast first-time applications for jobless benefits falling to 250,000 last week.

A Labor Department analyst said there were no special factors influencing last week’s claims data. Claims for Louisiana were estimated.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 4,500 to 250,000 last week.

The article reminds us that last week’s data will have no impact on the March unemployment report due out on Friday.

The article further reports:

According to a Reuters survey of economists, nonfarm payrolls likely increased by 180,000 jobs last month after rising 235,000 in February. The unemployment rate is seen steady at 4.7 percent.

Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid decreased 24,000 to 2.03 million in the week ended March 25. The four-week moving average of the so-called continuing claims fell 7,750 to 2.02 million, the lowest level since 2000.

This is good news. The number to watch in the report coming out tomorrow will be the Labor Force Participation Rate. If the unemployment rate stays low as more people enter the workforce, then we are on our way to an actual recovery. The unemployment number was kept artificially low during the Obama Administration by not counting people who had given up looking for work. As those people begin to look for work, it is quite possible that the unemployment number will rise slightly. In order to get a true picture of what is actually happening to employment in America, you need to look at both the unemployment rate and the Labor Force Participation Rate. The unemployment rate needs to be low and the Labor Force Participation Rate needs to be high. I will be posting both of those numbers as soon as I get them.

 

Why Is Anyone Surprised?

Investor’s Business Daily posted an editorial today about the current state of the economy. The editorial reminds us that under President Trump, the economy is growing rapidly.

The editorial reports:

Growth: For eight years, economic indicators repeatedly came below forecasts. Now, there’s been a string of reports — the latest one is on jobs — that have outperformed economist predictions. What’s changed, we wonder?

The Bureau of Labor Statistics reported Friday that the economy added 235,000 jobs in February, when economists expected 200,000 new jobs. And that comes after January’s 227,000 gain, which also beat economists’ forecasts by a substantial margin.

That’s not all. Other recent indicators have come in better than economists had expected.

Orders for capital goods were higher in December than forecast.

There were supposed to be 5.55 million existing-home sales in January. The actual number was close to 5.7 million — which was the highest level since 2007.

Retail sales in January climbed 0.4%, where economists had predicted they’d advance only 0.1%. At the same time, the Commerce Department revised the December sales increase upward to 1%.

Now, obviously we can’t draw any broad conclusions from a few unexpectedly good economic results.

But it’s worth pointing out that this is a dramatic change from the Obama years, when about the only thing that you could predict with any degree of accuracy was that the economy would underperform economists’ predictions.

This is an example of soft bias on the part of the media. When the economic numbers are changed during the month following their release, they may not receive the media coverage that the numbers received when they were originally released.

The editorial concludes:

…The National Federation of Independent Business‘ small business optimism index hit a 12-year high in January. The IBD/TIPP Economic Optimism Index was the highest it’s been since October 2004. The Dow has gained nearly 17% since the November elections.

This sudden change of heart appears to be having an immediate impact on the economy. The unexpected rise in home sales, for example, is being driven in part by “a postelection jump in mortgage rates, led by optimism about President Donald Trump‘s plans to ease regulations and spur economic growth,” noted Crain’s Business. The jump in capital goods orders “is a sign that businesses might be following up buoyant postelection sentiment by spending more after years of tepid global growth,” according to Bloomberg.

Whether this will last depends on whether Trump gets his economic policies in place.

In the meantime, it’s worth asking why it is that economists consistently overestimated the economic impact of Obama’s tax-regulate-and-spend policies, and now appear to be underestimating Trump’s pro-business agenda.

It’s time to get on board–it seems that the train has left the station.

It Might Be Time To Elect A President Who Is A Successful Businessman

Yesterday The Washington Free Beacon reported:

The International Monetary Fund downgraded the economic growth outlook for the United States to 1.6 percent in 2016, which is the largest one-year drop seen for an advanced economy, according to the Fund’s World Economic Outlook report.

That does not sound like the wonderful economic growth Secretary Hillary Clinton and President Barack Obama keep talking about.

The report states that the United States grew at a rate of 2.6 percent in 2015 and is projected to slow to 1.6 percent in 2016, a decline of 38 percent.

The article further reports:

Weaker-than-expected growth in the United States is one of the reasons why the International Monetary Fund cut its global growth projections. The group projected that global growth would slow to 3.1 percent in 2016 after growing 3.2 percent in 2015, citing the U.S. growth forecast as well as the Brexit vote.

Economic growth in recent years has fallen short of expectations in both advanced and emerging market economies,” the report says. “As the world economy moves further away from the global financial crisis, the factors affecting global economic performance are becoming more complex. They reflect a combination of global forces—demographic trends, a persistent decline in productivity growth, the adjustment to lower commodity prices—and shocks driven by domestic and regional factors.”

Let’s look at how government policy can impact economic growth. The first problem is over-regulation. That is a problem in all industries, but in particular in the energy sector. How many coal mines, coal companies, or coal-powered electric plants has the Obama Administration put out of business? What happens to the cost of electricity for the average family as cheaper methods of generating electricity are shut down? As the cost of electricity rises, how does that impact the disposable income of Americans and the willingness of companies to do business here. Let’s also look at the healthcare industry. ObamaCare is dying a slow, painful death. Insurance premiums for some Americans are rising rapidly, and the government is fining other Americans who can’t afford health insurance. Meanwhile, some of the reimbursement rates are so low, some doctors are refusing certain patients.

What impact has the Obama Administration had on the cost of doing business in America? Will those policies change under Hillary Clinton? This may be an ‘if you like your job, you can keep it’ moment in America. Your vote may actually determine whether or not you are gainfully employed after January.

Numbers Are Such Inconvenient Things

The Democrats accused the speakers at the Republican National Convention of preaching doom and gloom. President Obama has stated that he is proud of the current economic recovery. Some of us might ask, what recovery?

EconomicInfoThis graph was posted by a friend on Twitter. Houston, we have a problem. Our economy has not been growing. We need to free the private sector from the burden of overregulation by the federal government. Hillary Clinton will not do that–she will simply continue President Obama’s economic policies. That is not a good idea.

 

Who Has Prospered Under President Obama?

Investor’s Business Daily posted an article on Friday about the growth of regulations under the Obama Administration.

The article includes the following chart:

RegulatorsThe growth of regulations under President Obama has been astounding.

The article reports:

Total spending on federal regulatory activity has jumped almost 18% in real terms since Obama took office, reaching $56 billion this year. That outpaced overall economic growth, which has climbed a total of 13% since 2008.

Over those same years, the number of jobs at these regulatory agencies climbed by 11.8% — to almost 280,000 workers — while the number of private sector jobs has growth by 8.5%.

To put these numbers in perspective: If GDP had grown as fast as the federal regulatory budget, the economy would be $696 billion bigger today. If private sector employment had kept pace with the growth in regulatory jobs, there would be 3.7 million more people at work.

 The study, published jointly by the Weidenbaum Center at Washington University in St. Louis and the Regulatory Studies Center at George Washington University, also breaks down regulatory spending into “social” and “economic” categories. Social regulations cover health, safety and environment, and include agencies such as the FDA, Homeland Security, the EPA, the National Highway Traffic Safety Administration.

The thing to remember here is that regulations cost money. They are an extra burden on small businesses and slow down the growth of the economy.

The article notes:

Based on the administration’s own figures, these Obama-imposed rules cost the economy a total of $108 billion a year, but as Heritage notes, the actual costs are much higher because federal regulators routinely lowball compliance costs.

This is no way to run an economy.

The Cost Of Paying A Higher Minimum Wage

Yesterday Twitchy reported that Wendy’s will be introducing self-service kiosks in their 6000 stores nationwide this year.

Investor’s Business Daily reported yesterday:

Wendy’s Penegor said company-operated stores, only about 10% of the total, are seeing wage inflation of 5% to 6%, driven both by the minimum wage and some by the need to offer a competitive wage “to access good labor.”

It’s not surprising that some franchisees might face more of a labor-cost squeeze than company restaurants. All 258 Wendy’s restaurants in California, where the minimum wage rose to $10 an hour this year and will gradually rise to $15, are franchise-operated. Likewise, about 75% of 200-plus restaurants in New York are run by franchisees. New York’s fast-food industry wage rose to $10.50 in New York City and $9.75 in the rest of the state at the start of 2016, also on the way to $15.

Wendy’s plans to cut company-owned stores to just 5% of the total.

There are some things those asking for significant increases to the minimum wage should keep in mind. Very few people are actually attempting to support families on minimum wage jobs–generally those holding those jobs are people attempting to enter the work force for the first time. These jobs allow them to develop basic workplace skills–showing up on time, being polite to customers, and showing up for work every day. Companies are in business to make a profit. If they do not make a profit, there is no reason for them to stay in business. No government has the right to determine what profit is acceptable–left alone, the free market will do that. Part of our current problem is that the government has interfered so much with the free market, that that normal checks and balances within the free market are not working as they should. The solution would be to get the government out of the marketplace–let businesses complete for workers and pay them what is necessary. It is also telling that because economic growth in America is currently slow, workers who would not normally be working in minimum wage jobs are working there.

Celebrating The Labor Force On Labor Day

Yesterday The Washington Times posted an article about America‘s shrinking labor force. Although the unemployment rate is reported at 5.1 percent, that does not take into account the number of Americans who have given up looking for work.

The article reports:

The “unemployment rate” most often cited in the news media is U-3. But U-3 ignores everyone who hasn’t actively looked for work within the previous four weeks. So if you can’t find a job and give up looking, you don’t count as “unemployed” in the U-3 rate.

If we calculated the illiteracy rate that way, we wouldn’t count someone as illiterate unless he had attended a reading class in the past four weeks. In other words, the U-3 figure is fake, because it ignores whether the labor force participation rate has dropped.

According to Diana Furchtgott-Roth, former chief economist at the Labor Department, if America today had as high of a labor force participation rate as we had in 2006, then “last year’s average unemployment rate would have been 11.4 percent instead of 6.2 percent.”

So the U-3 measure of unemployment creates the illusion that the economy is serving American workers roughly twice as well as it really is, when you consider all the persons who’ve given up looking for jobs.

Today’s labor force participation rate is 62.6 percent, a 38-year low. That depressed number wipes out all the gains in employment made during the Reagan era, a time when women by the tens of millions moved into the workforce.

Today, more women are on food stamps than have full-time jobs.

If the economy is doing so well, why are more women on food stamps than have full-time jobs?

The article goes on to explain that before the housing bubble burst, the American economy grew at a rate of about 3.1 percent a year. Since President Obama has been in office, the growth has been slightly over 2 percent. Slow growth is expected to continue due to President Obama’s policies–ObamaCare and excessive Environmental Protection Agency regulations on energy production are expected to have a serious negative impact on economic growth.

The article concludes:

Even worse: That idea of a “new normal” 2.1 to 2.2 percent annual growth rate may be overly optimistic. We have yet to see the effect of many recent and proposed anti-growth policies — for example, Obamacare, which is being phased in over a period of years, and the Environmental Protection Agency’s proposed plan, not yet final, to make the price of electricity “skyrocket.” If anti-growth policies push the economic growth rate down to around 1.6 percent a year, that’s like cutting the size of the 2063 economy in half. Long before that, government finances will collapse.

Welcome to Greece.

Elections matter. Unless we change those making policy in Washington, D.C., we will become Greece.

Government Policies Do Impact The Economy

John Hinderaker at Power Line posted an article today about the latest economic numbers showing that the Gross Domestic Product numbers are not good.

The article includes the following chart:

Screen Shot 2015-05-29 at 11.07.02 AM

As you can see from the chart, the economy has not shown consistent growth since 2009.

The article concludes:

The administration always offers excuses for the economy’s inadequate performance on its watch–most recently, cold weather–but the common denominator is an anti-business, anti-growth administration that spends too much, wastes too much, incurs too much debt, and imposes too many costly regulations.

Our country was designed to be governed by laws made by lawmakers who would be held accountable by the voters. Unfortunately, we have evolved into a country where regulations made by unelected officials who are not accountable to anyone have crippled economic growth. It is long past time to elect leaders who will follow the constitution and not allow unelected bureaucrats to determine our economic future.

Some Good News and Bad News In The October Employment Numbers

Yesterday Investors.com posted an article about the employment numbers released by the Bureau of Labor Statistics on Friday.

The jobless rate is 5.8%, the lowest since June 2008. However, the Labor Force Participation Rate (the percentage of Americans of working age who are working) is at 62.8 percent, essentially flat since April according to the Bureau of Labor Statistics website.

Despite these relatively good numbers, consumer confidence is still low, Part of the reason for that is what has happened to Middle Income family income since 2007.

The article at Investors.com reports:

Real median household incomes fell 6.6% from $55,627 in 2007 to $51,939 at the end of last year. It will take years to recoup that loss. Meanwhile, male workers’ incomes have been in a tailspin for over a decade.

Private-sector wages grew 2% from last year in October — just barely ahead of the 1.7% rise in inflation.

So lack of opportunity stemming from 2% GDP growth and slow-growing family incomes have put average Americans in a sour mood.

The article at Investors.com further reports:

It’s policy failure. We and others repeatedly warned that President Obama’s massive stimulus, cheap money and heavy-handed regulation were a recipe for stagnation. That’s exactly what happened.

Each era of big government tinkering ends with the the economy being systematically run into the ground by Keynesian policymakers — and with economists pondering whether it’ll always be this way.

“Are you better off today than you were four years ago?” President Reagan famously asked in the 1980 campaign. Today, Americans seem to be saying no.

I hope the new Republican Congress will have the courage to encourage the President (strongly) to change direction.

The Pictures Tell The Story

As President Obama goes around the country praising the economic growth in America, there is another side of the story.

Yesterday, John Hinderaker at Power Line posted the following charts:

Screen Shot 2014-10-02 at 3.41.36 PM

Screen Shot 2014-10-02 at 3.44.19 PM

Screen Shot 2014-10-02 at 3.48.00 PM

The charts are taken from a booklet put out by the Republicans on the Senate Budget Committee. The booklet includes another chart which explains the low unemployment numbers that were released today–the workforce has significantly decreased. If the unemployment rate reflected the number of workers that have left the work force, the number would be considerably higher.

workforceparticipationratePlease follow the link above to the booklet to see the eleven charts that explain what is happening to the American economy and to the Middle Class in America.

The Economic Recovery In One Graph

Today’s Wall Street Journal posted a story about the latest Gross Domestic Product numbers. The article included the following graph:

The Wall Street Journal reported that the Gross Domestic Product grew at a seasonally adjusted annual rate of 0.1% in the first quarter of 2014.

The article in the Wall Street Journal explains some of the factors responsible for the low economic growth. Some suggested causes were the extremely cold winter which slowed consumer spending, and the sudden drop in exports, declining at a 7.6% pace in the first quarter.

Obviously, this is not the robust economy the President has been claiming.

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At Some Point, Even Low-Information Voters Will Laugh At These Reports

Ed Morrissey at Hot Air posted an article today about recent economic growth in America. The Bureau of Economic Analysis claimed a moderate economic annualized growth rate of 3.2% last month. The Bureau has now adjusted its numbers, saying that the economy only grew at the stagnation level of 2.4%:

The article reports the following from the Bureau of Economic Analysis:

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 3.2 percent. With this second estimate for the fourth quarter, an increase in personal consumption expenditures (PCE) was smaller than previously estimated.

Reuters reports the following:

Consumer spending was cut to a 2.6 percent rate, still the fastest pace since the first quarter of 2012. It had previously been reported to have grown at a 3.3 percent pace. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, contributed 1.73 percentage points to GDP growth, down from the previously reported 2.26 percentage points.

As a result, final domestic demand was lowered two-tenths of a percentage point to a 1.2 percent rate. The loss of momentum appears to have spilled over into in the first quarter of 2014, with an unusually cold winter weighing on retail sales, home building and sales, hiring and industrial production.

The article at Hot Air concludes:

Weather will be a factor in 2014 Q1, but it wasn’t in 2013 Q4. The economy was stagnating well before the polar vortices arrived, and has been ever since the June 2009 technical recovery. This is just more of the same.

President Obama’s economic policies are not working. Can we please try something else?

 

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I Might Be A Member Of The Flat Earth Society

I might be a member of the flat earth society. I don”t believe the earth is flat, but I don’t believe that global warming is caused by man either. So Secretary of State John Kerry compares me to a member of the flat earth society. Well, let’s see how John Kerry’s data on man-made global warming stacks up with reality.

Ed Morrissey at Hot Air posted an article today about what the scientific models have predicted about global warming and what has actually happened.

This is the chart:

wsj-temps-lg2

As you can see, the truth has simply not kept up with the scientific predictions.

The Wall Street Journal posted an article yesterday that stated:

“Consensus” science that ignores reality can have tragic consequences if cures are ignored or promising research is abandoned. The climate-change consensus is not endangering lives, but the way it imperils economic growth and warps government policy making has made the future considerably bleaker. The recent Obama administration announcement that it would not provide aid for fossil-fuel energy in developing countries, thereby consigning millions of people to energy poverty, is all too reminiscent of the Sick and Health Board denying fresh fruit to dying British sailors.

Before we take actions that negatively impact the economy of the entire world, we really do need to make sure that the science we are using to justify the actions is valid.

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Don’t Get Too Excited At The Stock Market Numbers Today

The Stock Market reached record levels today. Normally that would be cause for celebration, but if you look at the reasons behind the rise in the stock market, the news doesn’t look quite so good.

Yahoo Finance reported today that the federal government will continue putting stimulus money into the economy for the near future because the economy is not growing at a satisfactory rate.

The article reports:

The Fed predicted Wednesday that the economy will grow just 2 percent to 2.3 percent this year, down from its previous forecast in June of 2.3 percent to 2.6 percent growth.

Next year’s economic growth will be a barely healthy 3 percent, the Fed predicts.

Fed officials decided to continue their $85-billion-a-month bond purchase program, surprising most economists, who had expected a slight reduction. The bond purchases have been designed to keep long-term loan rates low to encourage spending.

So what has this got to do with the stock market? Financial people expected the Fed to begin to slow its bond purchases, which would have begun the rise of interest rates. Right now, with interest rates at record lows, and the possibility of inflation, the stock market is a logical place to invest. As the Fed begins to pull back from its bond purchases, the stock market will fall slightly, mortgage rates will increase, and we will probably begin to see some serious inflation.

The stock market is currently being propped up by the Fed. I have not heard any good guesses as to what will happen when the Fed begins to slow down the money flow.

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Where Is The Economy?

The economy hasn’t been in the news lately–there seem to have been a few other things going on–but the economy is something we do need to be keeping an eye on.

CNBC posted an article today describing where the country is economically.

The article reports:

GDP growth is in the midst of its longest sub-3 percent annual growth rate since 1929, the beginning of the Great Depression, according to Bespoke Investment Group. The economy hasn’t topped 3 percent since 2005—before Federal Reserve Chairman Ben Bernanke took over—and is unlikely to do so this year.

The article points out that in two months the revised economic numbers will show that the United States economy has grown to more than the currently stated $15 trillion. This has nothing to do with economic growth–it has to do with a change in the way that the size of the economy is calculated.

The article points out:

Under the new math, the government will add research and development spending, as well as the capital value of all books, movies, records, television programs and plays produced since 1929.

In jacking up the economy’s size, the revisions also will skew the ratio of debt to GDP, considered important in determining government spending.

Of course, the recent attempt at debunking a critical study of the ratio by Carmen Reinhart and Kenneth Rogoff also has dimmed the prospects for government debt-cutting. The two economists asserted that a 90 percent debt-to-GDP ratio restrained growth, but the data set they used has been challenged as faulty.

The new GDP calculations, combined with the souring on the Reinhart-Rogoff conclusions, likely will add to the thirst to keep Washington’s debt machine purring.

Meanwhile, the unemployment rate remains high.

The article reports:

Though employment has risen by 1.3 million over the past year, unemployment that counts the discouraged and underemployed, as well as the jobless (often called the “real” unemployment rate) has remained stubbornly high, at 13.8 percent of the workforce, according to the most recent count.

In fact, a state-by-state look at the numbers, released a few days ago and current through the first quarter, shows that just six states have real rates below 10 percent.

There are a lot of reasons for the high unemployment numbers. One of them is the fact that businessmen are reluctant to hire new employees until they understand the impact of Obamacare will have on their business. Uncertainty is creating an environment where hiring is at least temporarily delayed. The other thing to keep in mind is that as the government grows, it takes money away from the private sector. When the private sector isn’t growing, the economy isn’t growing.

There hasn’t been a lot of reporting lately on the economy, but we still need to be aware of what is going on around us economically.

What Did The Fiscal Cliff Deal Really Accomplish ?

Investors.com posted an article today about what the deal reached on the fiscal cliff this week will actually accomplish. Not much.

The article states that the tax hikes will hurt the economy. Specifically:

Moody’s Analytics chief economist Mark Zandi says the higher taxes on the wealthy and the increase in payroll taxes will shave close to 1 point off GDP growth this year and result in 600,000 fewer new jobs.

Pantheon Macroeconomic Advisors chief economist Ian Shepherdson figures the deal will cut GDP by 1.5 points. And Gallup’s chief economist Dennis Jacobe says the deal has created a “higher probability of recession — just the opposite of what fixing the fiscal cliff was intended to do.”

The article also points out that the increased taxes will not actually help shrink the deficit. Included in the article is the following chart:

Any answer to the debt crisis must include cuts in government spending in order to work. Americans are waiting for the President to propose a plan to shrink government. If President Obama fails to do that, he will lose the support of the public. If he does propose a plan for smaller government, he will lose the support of his party (and a large part of the Republican establishment).

Tax hikes don’t necessarily raise the money that those who pass them think they will. For instance:

President George H.W. Bush‘s tax hikes in 1990 generated $135 billion less than expected. And revenues as a share of GDP came in lower than predicted after Clinton’s tax hikes went into effect.

The article concludes that because President Obama has added more brackets to the tax code, it will be harder to reform. I’m not sure that is an accident.

At any rate, we survived a Congress-created crisis and are about to face another one (the debt ceiling). It would be nice to believe that there are enough grown-ups in Congress to create a long-term solution to our overspending, rather than to simply put a band-aid on a broken arm.Enhanced by Zemanta

The Truth Comes Out–Unfortunately It’s A Bit Late

John Hinderaker at Power Line reported today on testimony given by Doug Elmendorf, head of the Congressional Budget Office to the Senate Budget Committee. Senator Jeff Sessions reminded Mr. Elmendorf of the CBO’s projection, made around the time the stimulus bill was enacted, that the measure would have a negative long-term impact on economic growth. Elmendorf confirmed that this is still the view of the CBO.

The article at Power Line contains a video of the testimony. So let me get this straight–we spend $800 billion-plus dollars, the unemployment rate is still at 9 percent or more, and the spending will have a long-term negative impact on economic growth. Where do we go to get our money back?

 

 

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Overlooking The Obvious In Dealing With High Unemployment

A coal mine in Wyoming, United States. The Uni...

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John HInderaker at Power Line posted an article yesterday about a simple solution to the high unemployment numbers we currently have in America. Developing America’s domestic energy sources would not only employ people, it would have many other positive side effects on the economy. This is one of the charts from the article:

The increased employment that would result from developing America’s domestic energy resources would result in more taxpayers paying taxes. Developing domestic energy sources would also result in lower energy costs to Americans, allowing Americans to spend more money on other things, thus stimulating economic growth. Developing domestic oil resources would also help America become energy independent, rather than sending billions of dollars to people who hate us. It’s a winning situation for the country for many reasons.

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