New data indicate recovery not near

The Washington Times ^ | 7/3/09 | Patrice Hill

[advance_copy]

The end of the longest recession in recent history got pushed further off last month as employers eliminated nearly a half-million more jobs, unemployment rose to its highest level in 26 years and wage growth came to a standstill.

Thursday's news from the Labor Department triggered a dive in the financial markets and cast a cloud over President Obama's legislative agenda amid sinking approval ratings for his handling of the economy. For ordinary workers, the report renewed worries about record rates of job losses, shrinking wages and home seizures, despite what now appears to have been overblown hopes this spring for an impending economic recovery.

Big rallies in the financial markets had lifted spirits from March to early June, but many investors and consumers have grown disillusioned and unimpressed by the tiny statistical improvements in the economy that fueled predictions of a recovery.

[advance_copy]

Obamanomics is a miserable failure.

[The Magical Mischief Tour]

But wait, Barry The Kenyan said in February all would be fine by March or April once we passed the Stimulus...

[Freedom_Fighter_2001]

Here is the big indicator: Baracka Hussein Obama, dictator-for-life, 2008-?

[Ghost of Philip Marlowe]

The danger here is that, after printing the stimulus money and channeling some of it to the banks, the velocity of money is still alarmingly low. Usually, a fiat-currency created stimulus package results in an immediate spike in economic virility. It is almost always followed by an inflation hangover that never makes the party worth it.

But what is alarming here is that the velocity of money (how frequently a dollar changes hands in voluntary exchanges, usually with a profit being made by the recipient of each exchange) is very, very low considering all that has been done to “stimulate” the economy.

What this means is that there is an unknown but very large quantity of money sitting in the banks (who, rather than make the money available through loans used it to invest in the markets and cook their books to appear more solvent than they are) and in people's savings (not in the banks but in paying down personal debt and sitting under mattresses) and that unknown but very large quantity of money is building up like rising waters behind a dam about to burst. When that dam bursts, we are already facing hyperinflation.

That these fascists in charge of our government are thinking about adding to that rising water with another stimulus can only indicate that their goal is not to “fix” the economy (which can only fix itself through an increasingly painful correction) but to destroy the US dollar, betray our debts to those who have invested in our T-Bills and US bonds (the ChiComs), and to force the American public to demand that we give up the dollar and sign on to a global currency administered and controlled by a global bank.

No one with even a cursory understanding of the monetary science and of monetary policy could possibly delude themselves into believing that what the government (Obammie the Commie and his cronies) is good for the economy, good for the dollar, and good for America.

[misterrob]

I agree with some of what you mentioned but savings rates as calculated are not factoring in debt reduction on the part of consumers so I think there is likely less waiting around than you might think. The second issue is that banks are using the capital to boost reserves against the crap on their books they have been lying about.

As long as asset values keep falling I don’t think we are in for any inflation (available cash and credit chasing goods and services)

[ExTexasRedhead]

http://www.youtube.com/watch_popup?v=3CAX3aJCoDg

May the Congress get voted out along with Zero. The tidal wave is growing.

[volunbeer]

Well said! I also believe the dollar will lose much of it’s value.

[CodeMasterPhilzar]

GOP in ‘10. Sarah Palin by a landslide in ‘12. Then the real, if painful, economic recovery can begin.

[volunbeer]

As long as asset values keep falling I don’t think we are in for any inflation (available cash and credit chasing goods and services)

________________________

The party only last as long as it is financed. When enough people stop buying our debt it is over. They either create inflation by printing even more money or they default on the debt.

Either way we are in trouble.

[DB]

You can't “stimulate” people to go spend more money when they are already broke. They are essentially broke from all the debt they accumulated when banks and the like were begging people to take money from them.

Our idiot “leaders” are trying to reinflate a burst credit bubble. More debt doesn't fix a debt problem... So all we are doing is indebting our children and their children while at the same time debasing our currency.

Stupid on steroids...

[Ghost of Philip Marlowe]

The 6.9% “savings rate” is actually being used to pay-down personal debt. This is a sign that most people who are fiscally responsible are alarmed at what they see coming.

But that is small potatoes compared to what the banks are doing. The fact is, we don't know exactly what they are doing with the stimulus money because it was written into the bill that the Treasury does not have to reveal to the citizenry what it is doing. What we know is that a large amount of new currency was printed. We know that the banks received fresh supplies of money. We know that loans have been tightened, not eased, which was the stated goal of the stimulus. We know (to anyone who tracks the volumes and things like the percentage of proprietary vs. client stocks that the mega-investment firms are moving in blocks — like GS, which is moving over 70% proprietary) that the stock market is being manipulated.

We also know that banks are failing at an alarming rate, that they are not foreclosing on homes that they should be because those foreclosures would reveal their true lack of assets.

The value of assets at this point is fairly meaningless. The value of homes won't matter if millions cannot afford their mortgages and go under water, which is what will happen when/if Tap and Bleed passes, healthcare passes, and when the newly printed money is finally released into the economy.

We are going to leapfrog over the normal deflationary period (what I think you were getting at) and right into hyperinflation, which is what you get when you have lots of dollars that aren't worth anything because the money supply has been inflated out-of-synch with GDP. The best-case-scenario your are describing would be stagflation. But I don't see how in the world that could possibly happen with the economic tsunami that is approaching (commercial real estate implosion, interest resets for Alt-A and Option ARM mortgages, new money hitting the street, rising unemployment that accents these factors exponentially, default on credit-card debt as a result of unemployment).

Let me put it this way, I do hope you're right. But the more I study this, the gloomier of an outlook I have.

[Ghost of Philip Marlowe]

You are absolutely correct.

The analogy I use to explain what the feds are doing is this: imagine if you had two credit cards and you maxed them out at 20K each. But your income wasn't sufficient to pay down even the interest on the two. So you take out a third credit card with a credit line of 50K. You max it out to pay the other two cards off. Then, like a fool, you spend the other 10K.

Your income has not increased, but decreased somewhat because you took on other debts and no one trusts you anymore. Now you're operating at an even greater loss trying to pay off just the interest on that third credit card. So you take out another with a credit line of 75K. You pay off the third credit card and, like a drunken fool, you spend the extra 25K.

Then you die.

And you hand that credit-card debt off to your children.

That is what we are doing by monetizing the debt.

We are about to face this reality: over 60% of everything the US government spends each year will be on interest to the Federal Reserve for the debt it monetized for us.

Another stimulus will increase this percentage.

That is just the interest on the debt the US government has incurred.

That doesn't address new social handouts.

It certainly doesn't address the 50 TRILLION dollars in unfunded liabilities (Medicare, Medicaid, SS) that the government is responsible for.

You are exactly right. We are stealing from our children and those who have not been born yet.

[Semperfiwife]

Got one thing right, my money, what I have left after taxes, and my household expenses IS going under the mattress. There I cannot LOSE it, like I did my shorts in the stock market. I realize it cannot GROW but on the other hand, it cannot disappear with the volatility of the Obama led Wall Street.

[Ghost of Philip Marlowe]

I’d only suggest converting some of it to something tangible that holds its value, like gold or silver.

Most likely, it won’t provide a return on your investment, but it will retain its purchasing power. If you buy $1000 worth of gold today, in two years it takes $2000 of paper dollars to purchase what that $1000 does, you’ll be able to sell that gold for $2000 dollars. Note that, adjusted for inflation it is still the same value (you will not make money). But if you keep it as $1000 in cash, in two years (if inflation kicks in at 100%, which is absurdly high and I only use it by way of example) that cash will only be able to buy what $500 does now. That is, if the amount of money supply in currency doubles that halves the values of the dollars you hold. But a precious metal retains the purchasing power.

This is just my opinion and the view of those who trust precious metals. I’m not an adviser and have no vested interest in metals. I’m just trying to explain how gold is a hedge against inflation. The problem, of course, is that you can’t really “spend” an ounce of gold. What can you do, shave off a few pieces? It would have to be converted back to cash to actually purchase.