Wednesday, 25 June 2014

That Economic Stumble Today

It is a shocker....the US economy as of today's report....slipped by 2.9 percent.  The quote attached to it?  The largest slip in the economy outside of a recession (Fox New's quote, not mine). For folks with short memory was the last two quarter of 2008 and the first quarter of 2009.....when all the bad news came and folks felt pretty negative about the economy.  Course, the Bush team fixed up some minor deal and the new Obama administration carried the rest of the "fix" down the line.

What should we take from this episode today?  Well....the recession or depression (as the President often talks of).....probably never came to an end.  When you look at employment numbers and how they've changed the entire game of counting who is employed and who isn''s more than a mere six or seven percent.  Forbes magazine in 2013 gave the real rate in the US at around 14.3 percent.  The CNBC business news folks put the rate back in December at around 13 percent.

Toss in bank failures (they still occur).....major US companies keeping their profits overseas....small business stagnation across the US.....and the CD rate still stuck at barely one percent, and you've got a depression on your hands.

Why did the President authorize the sales of US-produced oil to business operations outside of the US today?  It's been forty years since we halted US-produced oil being sold to other countries.  I'm guessing for the past month they knew the economic news was going to be bad, and this was the only positive thing they had left in their bag of tricks.

What's left?  Repeat cash-for-clunkers?  Toss out seven-hundred-and-eighty billion in stimulus money to build bridges and schools?    Slash taxes on the working class?  Pump up taxes on the wealthy?

A short history lesson.  When Wall Street fell in 1929, and the FED refused to step in to help the banks in their moment of crisis.....Hoover ended up with twenty-odd solutions which simply delayed spiral until the election, and then FDR stepped in with his hundred-odd solutions which kept the depression underway until 7 Dec 1941 (Pearl Harbor Day).  As the next month went by and various members of the FDR White House team admitted that it'd take a year or so to gear up industry and even start to marginally get us into the war.....private industry walked in and simply said to put them into the control seats and suspend all of the FDR practices of the past decade.

Roughly a hundred days after 7 December 1941.....the nation was in a building frenzy....violating every past FDR rule set into place.  When the war came to an end....the economic experts of the FDR era felt that the government would have to step in and manage the economy once again....otherwise, we would collapse back into a depression again.   Well.....that didn't happen.  Overmanagement of the economy wasn't allowed.  As Eisenhower came in around 1953...the economic management crew were still left sitting and out of the picture.

Since the Nixon era.....there's been various efforts to bring the economic back under a government-managed system.  Both Republicans and Democrats have agreed to the measures.  We sit here today.....with massive regulation, rules which stagnant growth, and lack of clear future goals because folks think the government will step in to tax them more or set up marginal stumbling blocks.

Stock prices drops?  I'd prepare myself for a correction or two in the next week.  More speeches by the President?  Maybe....but what else can he say?  Admit we never emerged from the 2008 depression?  It's best to just smile and hope for better days ahead.