CapitalistMarks

Are you confused about the economy?

Posted on 27. Aug, 2009 by scott in economic daydreaming

The stock market has soared since the bottom on March 9.  Does this mean we are out of the woods?  I don’t think so.  It is important to remember that during the great depression there were at least two stock market surges of 40% or more before new bottoms were hit.

Now, we are NOT in another great depression (yet) but it is fair to call our current circumstances a great recession (as many already have).

Sure companies are doing better because they have cut costs dramatically (mainly by letting our neighbors and friends — and some of you? — lose jobs).  But can they increase sales?  Can they grow once the stimulus, bailout and clunker programs end?

Yes, that is the big question.  What will happen when all the government money runs out?  I don’t want to think about it either, but someone has to.

Only a few months ago, President Obama  predicted a budget deficit increase of 7 trillion $$.  Yesterday the White House bumped it a little (their words?).  Up nearly one third (2 trillion more $$) to 9 trillion $$.  Yikes what will this burgeoning Socialist administration accomplish in 4 years?  THAT is something I really don’t want to think about . . . yet someone must.

Add in the cost of healthcare reform and cap and trade carbon costs and anything else the uncontrolled Democrats want and we could be bankrupt by the end of Obama’s first term.

I liked him at first (thought I remind you that I did NOT vote for him — I currently never vote for incumbents or anyone that will give a legislative and Executive majority to any party — and by the way, you should take the same avenue for improving our nation’s governance).  But, now I am not so sure.  He is a celebrity President and hardly ever talks without a teleprompter and that worries me.  He may not be as smart or sharp as his friends in the liberal media portray.  Nothing like great potential to ruin one’s real achievements!

Remember, I have made it clear I am for change:  health care needs it, energy policy needs it, politics need it, and much more too.  But not too much at once and do it with open and frank debate not acrimonious ideological dissension.

Back to the economy.

The Commerce Department gave us some new data  today.  Here is some of it for for you to digest and I suggest you take Lomotil first.

We now have four straight quarters of GDP decline behind us.  The last two quarter declines of 6.4% and 1%  represent the biggest back-to-back declines in more than fifty years!  Further these four straight quarterly declines represent the only time this has occurred since 1947!!

Also the current recession is the longest and the most severe (in terms of GDP decline) since WWII.

Further we are still losing jobs at an alarming (though improved) rate.  We actually need to ‘create’ about 150,000 jobs every month just to keep up with the growth in the work force (due to population and immigration).  Yet we are losing over 500,000 jobs a week (that’s new unemployment claims and must be offset with new hires to get the actual damage)!

Dang, this is worrisome.  Couple it with that fact that in the not so distant future our National Debt will EXCEED total GDP (Obama’s 9 trillion $$ remember) and you have a disaster in the ‘closet.’  How the heck is the government even going to make debt paymenrts?  You know, like most of us have to on our mortgages.

Is the U.S. debt headed for a ’subprime’ rating because income is going to be so much smaller that just even the debt (forget the principal amount)?  Think about what happened to a big part of the real-estate market in the U.S. in the last 2-3 years.  Does the comparison concern you?

There is much that we can do to mitigate the looming disaster, but of course that must wait until Obama returns from Martha’s Vineyard and Congress returns from their embarrassing and revelatory vacations of townhall meetings and expert avoidance of answering any real questions.

The question now is:  will they do anything substantive when they return.  Anything to brighten the future of our children and grand-children?  History does not give us much hope.

Confused?  Don’t be.  Things aren’t nearly as rosy as the administration and the Democrats (and much of the media) are telling you.

Be prepared for further bad news and decline.  What’s the risk in that?  Nothing . . . it is the smart thing to do.

thanks to gagilas for the flickr photo

Tags: congress, future of america's economy, GDP, gdp growth, President Obama, unemployment