Posted on 01/20/2019 12:56:38 PM PST by Kaslin
News article after news article is predicting the federal government partial shutdown will lead to economic hardship. That economic growth will slow in both the public and private sector. But despite all the doom and gloom mentioned in the media, the measure that counts most in predicting the future, the stock market as actually improved significantly since the shutdown started.
A headline on Thursday in Politico claimed: “Recession warnings pile up as shutdown wraps up fourth week.” The New York Times, CNBC, Yahoo News , and newspapers across the country have all had similar stories. Jamie Dimon, the CEO of J.P. Morgan Chase, caused shockwaves this week when he asserted that the shutdown could reduce economic growth to zero during the first quarter of the year. His comments got massive news attention.
There are real costs to the shutdown. Some companies can’t even operate now because they are so dependent on government regulation. For example, breweries need the Alcohol and Tobacco Tax and Trade Bureau to approve new labels. Currently, around half of all U.S. breweries are waiting for label approval.
Standard & Poors Global Ratings claims that in the next couple of weeks, the impact on the economy from the shutdown will exceed the $5.7 billion cost of a southern border wall. Others are shaving over three tenths of a percentage point in economic GDP growth.
But investors don’t see a looming crisis. On December 21st, the day before the shutdown, the total value of the 5,000 U.S. stocks equaled almost $31.5 trillion. As of Tuesday, January 15th, those stocks were worth $34.2 trillion —an 8.5% or $2.7 trillion increase in value.
Not bad for a few weeks’ work.
Nor is it just the overall value of the stock market that has risen. Well-known indexes with a smaller number of stocks have also gone up. The Dow Jones Industrial Average rose by 6.5%, the heavily tech-weighted NASDAQ soared by 9.1%, and the industrial S&P 500 went up by 6.9%.
Obviously, lots of things can change the value of stocks. The media has focused heavily on U.S. trade talks with China, but then if it is good news on the trade talks that is driving the increase, Chinese stocks should have risen by as much as U.S. stocks. Since China is even more dependent on trade with the U.S. than vice versa, good trade news should have caused stocks there to go up by even more.
Yet, the Shanghai Stock Exchange increased by just 2.1% and the Shenzhen Stock Exchange by 3%.
Stock markets in Europe have faired little better. The UK’s FTSE 100 index went up 2.4%. Germany’s DAX and France’s CAC rose by 2.8% and 2.9%, respectively. Japan’s Nikkie increased by 1.5%.
Indeed, there have only been two countries anywhere in the world that have seen bigger stock market increases than the US: Argentina (19.1%) and Brazil (9.3%).
New data on other aspects of the economy won’t be released until after the shutdown ends, but if past history is any guide, even the longest previous shutdowns during December 1995 and January 1996 had no detrimental impact on unemployment, GDP or interest rates. In fact, while the unemployment rate remained unchanged during the shutdown, the GDP growth rate actually grew faster during the two quarters affected by the shutdown than it had during the preceding four quarters.
Just as now, stock prices also continued to rise throughout the whole drama, with the Dow Jones Industrial Averagerising by over 6 percent, from 4,873 on November 13th to 5,181 on January 5th.
But just as the media is trying to blame President Trump for the shutdown, they are trying to put pressure on him to cave by predicting economic disaster from the shutdown.
You’ll never get the lefties to admit the government is a drag on the real economy. Misallocation of capital, senseless regulation, costing the private sector untold amounts of time wasted complying with rules and laws.
If this shutdown can permanently oust 800,000 government workers, the psychological effects on the population will more than offset any temporary softness in the economy.
No, excessive debt and a Chinese slow down will.
Yep
And those 800,000 only represent 25% of the total Gov’t workforce.
That means the Federal Government employs ~ 3.6 million.
This is a huge problem.
Non-essential gov’t employees are by definition a waste of tax payers money.
But I have not seen one story, any reporting at all for that matter, about how much more federal employees make versus their counterparts in the private sector. Federal workers make significantly more income with more benefits than the private sector workers do.
The latest figures I could locate were for 2014. Here are the results of a Cato Institute study based on figures from the U.S. Bureau of Economic Analysis (BEA), sourced from a Washington Free Beacon article dated October 8, 2015 (linked below):
".... Federal workers’ pay and benefits were 78 percent higher than private employees, who earned an average of $52,688 less than public sector workers last year.
The study found that federal government workers earned an average of $84,153 in 2014, compared to the private sector’s average of $56,350....
.... But when adding in benefits pay for federal workers, the difference becomes more dramatic. Federal employees made $119,934 in total compensation last year, while private sector workers earned $67,246, a difference of over $52,000, or 78 percent....
.... Federal workers earned 43 percent more, on average, than state and local government workers, as well...."
And we're supposed to feel sorry for these folks? Cry me a river indeed....
Government Workers Make 78 Percent More Than Private Sector
Senator Schumer was an important public force for the recession of 2008.
He deliberately incited a bank panic that year because he wanted a recession to usher in a profoundly anti market Presidency.
We need to understand that the anti-American radicals do want to have a recession in fall of 2020. They will be publicly advocating for this and discussing anything that will destroy public confidence in the markets and other aspects of the economy.
One area to keep an eye on is the student loan debt. It is controlled by the Federal government much like housing was controlled by Fannie Mae and GSEs. The Deep State can work to incite a credit crisis within such realms to cause an economic panic so they can get the President they want.
Don’t forget that those 800,000 federal employees are considered non-essential.
What shutdown?
Government employees don't produce wealth. In most cases they create far more labor for the actual producers of wealth than it normally takes. Thus the shutdown will increase wealth production and accelerate the economy rather than slow it down.
“The Government Shutdown Won’t Cause a Recession”...…..
What “shut down” I hadn’t noticed.
If there are 800,000 “government workers” not working, looks like time to do some soul searching to see if those so called “workers” need to be terminated permanently.
Where I live there are “Help Wanted” signs everywhere.
Despite with the loss of spending power of furloughed federal employees, the likely cost of reimbursing employees for withholding wages after the shutdown ends, any purported “cost” of lost or delayed work, it is likely that there will be a net benefit to the economy during the partial shutdown.
Like many here with businesses, I am not at all displeased by the discomfiture of employees at predatory agencies or frustration of the efforts by federal courts.
In other words, we pay taxes to hire Federal workers to harm the economy and inflict pain upon ourselves. Sounds like economic masochism.
Nice pic, but I think crime scene tape is more appropriate.
I haven't noticed any beer shortages - maybe the old labels are good enough to keep beer on the shelves...what a horrible tale of a business suffering.
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