It’s The Economy Stupid

I have been hearing all the pundits and supposed economists stating that the recession is over, we are in the clear and out of the woods. However, I believe this to be wishful thinking on the part of everyone rooting for the Obama administration to claim that spending more than all presidents combined fixed the economy.

I recall Obama’s name drop of Warren Buffett during his final debate with John McCain, stating that Buffett was an advisor to him when it came to markets and economics. So why is it that Warren Buffet doesn’t even know what shape the economy is going to take during a recent interview with Bloomberg TV? He actually skirts the entire question. I actually heard from a close friend that he feels weare headed for, what many of us in finance know as, the dreaded W double-dip recession/economy? Roubini, another economist who has been dead-on (gloomy but dead-on), believes we are also headed there.

If you take a gander at the shape of the letter W you can see how it begins by crashing down, as evidenced last year, then a recovery (bear market rally), and another crash. This next crash is expected to hit at some point this Fall, per more objective and experienced economists.

A W-shaped recession or “double dip” recession, occurs when the economy has a recession, emerges from the recession with a short period of growth, but quickly falls back into recession.

The Early 1980s recession in the United States is cited as an example of a W-shaped recession. The National Bureau of Economic Research considers two recessions to have occurred in the early 1980s.[4] The economy fell into recession from January 1980 to July 1980, shrinking at an 8 percent annual rate from April to June of 1980. The economy then entered a quick period of growth, and in the first three months of 1981 grew at an 8.4 percent annual rate. As the Federal Reserve under Paul Volcker raised interest rates to fight inflation, the economy dipped back into recession (hence, the “double dip”) from July 1981 to November 1982. The economy then entered a period of mostly robust growth for the rest of the decade.

It’s funny how the last W-shaped economy/recovery took place during/after Jimmy Carter which parallels what we are going through today.  If there is any president that Obama is following based on policies, stimulus, possible (to me it’s inevitable) inflation, and high unemployment, it is Jimmy Carter.  That’s why it’s important that we look back at history to assume that this recession will be no different.

Several ‘economists’ are calling for another stimulus which would be three all together.  The more money that gets pumped into the economy, the less valuable it becomes.  Short stimuli can be helpful – it’s not an all or nothing position, but when stimuli lasts for extended periods of time, and with the original TARP from Bush, the next stimulus from Obama, an unprecedented budget, an unprecedented deficit, and those calling for more stimuli will certainly cause inflation.  Some stipulate that the government wants inflation because it will be easier to pay off the debt when there is a ton of money but it’s not worth much.  Tax increases could also be another outlet to pay off this seemingly insurmountable debt – which would have another negative effect on an economy attempting to recover. 

Let’s take into account the bills sitting in Congress as we speak; Cap & Trade, Health Care reform, and Amnesty.  Amnesy will increase our population and require more jobs, although our own unemployment rates are really in the double digits.  Cap & Trade will tax middle America and put massive regulations on industry for green jobs and our own personal life.  Health Care will also require taxation, as Obama said in Portsmouth: “I plan on rolling back the Bush tax cuts to pay for reform.”  I hope people understand that when tax cuts are pulled, taxes go up. 

This administration is planning on transforming our economy in the name of green jobs, health care, and illegal immigration.  This could cause the perfect storm and an absolute disaster if inflation occurs simultaneously.

A clear indication of the lies being perpetuated about our economy are the recent retail sales numbers and unemployment claims.  Unemployment may be a lagging indicator but it is still a very important index when measuring our economic stability.  The administration was boasting that the unemployment numbers had taken a sudden drop to 9.4% a week ago, however, they forgot to include the fact that a significant reason for this drop was due to people giving up on finding jobs and in essence walking out of the unemployment lines to just wait it out.  A report had actually been presented that said the real unemployment numbers were above 10%.

So why have retail sales declined unexpectedly by .1%?

The Commerce Department said Thursday that retail sales fell 0.1 percent last month. Economists had expected a gain of 0.7 percent.

While autos, helped by the start of the Cash for Clunkers program, showed a 2.4 percent jump — the biggest in six months — there was widespread weakness elsewhere. Gasoline stations, department stores, electronics outlets and furniture stores all reported declines.

And why have jobless claims risen by 4,000K?

The number of newly laid-off workers filing claims for unemployment benefits rose unexpectedly last week, while continuing claims fell sharply.

The Labor Department says new claims increased to a seasonally adjusted 558,000, from 554,000 the previous week. Analysts expected new claims to drop to 545,000, according to Thomson Reuters.

It’s obvious that economists or the wishful thinkers out there are not looking at the entire picture.  The reason why continuing jobless claims fell has more to do with people giving up looking for work than anything else, as I state above.

All of this spells dismal times on the horizon for this country as well as many others.  Be cautious and continue to take what you hear out of the MSM and from economists associated with a particular political party/administration with a grain of salt.

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1 Comment

Filed under Media, MSM, Obama Administration

One response to “It’s The Economy Stupid

  1. LibertyLover

    I think you are absolutely correct. Many in the mortgage industry say a commercial mortgage crash is yet to come. Saying we the economy is better over and over doesnt make it so.
    This doesnt even take into account the fact the fed is monetizing the debt. High inflation cant be far behind!

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