Could Dems Hang A Recession Around Trump's Neck by 2018?

Thanks to the work of Ben Carlson in 2015 at "A Wealth of Common Sense" (referenced below) we have this extremely interesting graphic:

As you can see, the median time between recessions since 1929 is 4 years and 2 months.  The longest time between recessions is 10 years from 1990 to 1991.

By June, this country will have gone 8 years without a recession. The primary reason for this is that the Federal Reserve has treated those 8 years as if we were in a recession by keeping Fed Funds Rates at historically low levels.  But, in December 2015 the Federal Reserve began raising rates and there is no indication that they won't continue to do so because they're now responding to the growing inflation they're seeing in the economy.

Raising the Fed Funds Rate will have a negative impact by making it more expensive to borrow money.  Credit card debt, car loans, and mortgages will all become more expensive.  The problem  is that the economy isn't that strong and might not be able to support higher interest rates.  The Atlanta Federal Reserve is with the GDPNow estimates that the economy will grow at a meager 0.6% in the first quarter.  Well below consensus estimates, as you can see from this graphic:

What this all means is that we could see another recession before or during the 2018 elections and the Democrats are sure to pounce on this and blame Trump and the Republicans; arguing that Obama never had a recession during both terms;  something that uniformed voters are sure to swallow hook, line, and sinker.

References:

Source of 1st Graphic: http://awealthofcommonsense.com/2015/02/when-will-the-u-s-have-its-next-recession/

Fed Funds Rate History: Highs, Lows and Chart With Major Events: https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135

GDPNow: https://www.frbatlanta.org/cqer/research/gdpnow.aspx?panel=1

Obama's Economy in One Chart

At almost every opportunity, Barack Obama touts his record on the economy.  In fact, at his final press conference as President, he said this:

As I was preparing to take office, the unemployment rate was on its way to 10 percent. Today it is at 4.6 percent, the lowest in nearly a decade. We've seen the longest streak of job growth on record, and wages have grown faster over the past few years than at any time in the past 40.

Of course, the implication of that statement is that he, and he alone, saved the country.  That, without him, we would still be in recession.  But, guess what?  From the Federal Reserve's perspective, we pretty much still are.  The primary job of the Federal Reserve (our central bank) is to keep our economy stable and growing at a reasonable clip.  When the economy is overheating, the Federal Reserve increases its prime lending rate (the Fed Funds Rate) to make borrowing more expensive, and thus, retard economic (buying) activity.  On the other hand.  When the economy is in recession, the Fed Funds lending rate is lowered to stimulate economic activity by making borrowing cheaper and more attractive.  With that in mind, note this chart of Fed Funding rates (prime interest rates) over the last 65 years:

Click on Chart to Enlarge or Select Link Below

What this clearly shows, is that the Federal Reserve has kept its lending rates at the lowest levels in the last 65 years; and, for an unheard of period of time.  Still, almost 7-1/2 years past the end of the recession, rates are still below any other rates on the chart.  More importantly, this graph refutes Obama's claims of job and wage growth.  If those claims were really true, the economy would be firing on all cylinders and the Federal Reserve would be forced to raise interest rates to keep the economy from overheating due to too much buying activity.

However, just like most of Obama's claims, there are few facts to support them.


References:

Transcript: Obama’s end-of-year news conference on Syria, Russian hacking and more: https://www.washingtonpost.com/news/post-politics/wp/2016/12/16/transcript-obamas-end-of-year-news-conference-on-syria-russian-hacking-and-more/?utm_term=.3e6ad3f0b6fd

Source of Chart: https://fred.stlouisfed.org/series/FEDFUNDS

Video: Federal Funding Activity Explained:  https://www.youtube.com/watch?v=iK91Lq2Jz2Q

pb

What Do Food Prices and Restaurant Sales Say About Our Economy?

In an unprecedented fashion, in a non-recessionary period, food prices have fallen for 9 straight months, and the trend is actually accelerating:

Many analysts blame the Wal-Mart effect, where grocery chains are slashing prices to maintain or perhaps even gain market share. At the same time, fast food and restaurant sales are "dropping off a cliff" because with lower grocery prices,  people are choosing to dine at home.

But, to all of that I say "bull". The reason is because retail sales are also falling and have been falling for decades. 

Click on Image to See an Enhanced Image

Today, retail sales growth is at non-recession lows as noted by the trend line in the above graph.  Simply, low food prices, falling restaurant sales, and falling retail sales, all point to the fact that American's wages are stagnant.  Dining out and buying things has become a luxury.  In fact, 7 out of 10 Americans surveyed said they have less than $1,000 in their savings accounts.

References:

Olive Garden just signaled an ominous threat to the restaurant industry: http://www.businessinsider.com/olive-garden-darden-ceo-restaurant-industry-closures-2016-10

Grocery Prices Are Plunging: http://www.bloomberg.com/news/articles/2016-09-27/eight-cent-eggs-consumers-gobble-cheap-food-as-grocers-squirm

There's a simple reason fast-food sales are slowing: http://www.businessinsider.com/simple-reason-fast-food-sales-slowing-inflation-groceries-2016-9

United States Retail Sales: http://www.tradingeconomics.com/united-states/retail-sales-annual

Analysts Say Food Prices Have Tumbled to a ‘Completely Unprecedented’ Low: http://www.grubstreet.com/2016/09/food-prices-are-now-at-a-completely-unprecedented-low.html

Nearly 7 in 10 Americans have less than $1,000 in savings: http://www.usatoday.com/story/money/personalfinance/2016/10/09/savings-study/91083712/

Falling Productivity and the Sad State of Our Economy

On August 9th, it was reported that, for the first time since 1979, U.S. worker productivity fell for three quarters in a row.  The problem with this, is that without increasing productivity, wages and the economy will stagnate.

This is easily proven by the recent economic growth report in which the GDP in the second quarter grew at an abysmal rate of 1.2%.  And, the fourth quarter of 2015 was downgraded from 1.4% to 0.9%.  Also, the first quarter was downgraded from 1.1% to just 0.8%.  Therefore we have had 3 straight quarters with an average of less than 1%.  Well below the historical average of 3.79%.

But, the fact that productivity is weak should be no surprise when you look at this graph of the "Business Inventory to Sales Ratio" (also known as Business Inventory Turnover Ratio):

Click on Image to Enlarge

What this graph represents, is how efficient companies are at selling their inventory of products.  Simply, under Obama, decades of improving efficiency are being wiped out because sales are slumping.  Obviously then, it is only logical that falling productivity would follow, and in fact, so would declines in economic growth; as we have seen in the last 9 months.

Going forward, there is no reason to believe that there won't be another quarter of falling productivity. Something that hasn't been seen since the Great Depression.

References:

U.S. Productivity Fell for Third Straight Quarter: https://www.google.com/search?q=U.S.+Productivity+Fell+for+Third+Straight+Quarter&ie=utf-8&oe=utf-8

Was the Weak 2nd Quarter Economic Growth, Even Weaker?: http://cuttingthroughthefog.blogspot.com/2016/08/was-weak-2nd-quarter-economic-growth.html

Graph Source: https://fred.stlouisfed.org/series/ISRATIO

Pence and Indiana: The Best Economic Growth of All States

The Democrats are going to accuse Trump's announced running mate, Governor Mike Pence,  a devout Catholic, of being an extremist because of his stance on social issues such as abortion, his lack of support of Planned Parenthood; and of course, his objection to gay marriage.

But, what they can't argue against, is his economic record in Indiana.  The Bureau of Economic Analysis recently released growth numbers by state, and Indiana was number one for the fourth quarter of 2015 (the latest data available).  With its 3% economic growth, it stands at more than twice the 1.4% growth, for the same quarter, for all of the U.S.

What is truly amazing is that coal is an integral part of Indiana's economy, and coal has suffered major losses of jobs. Yet Indiana was still able to beat all other states and come out on top.  God only knows what Indiana's economic growth would have been without Obama's relentless attempts to kill off coal production in the U.S.

What most Democrats seem to ignore is that -- in poll after poll -- unemployment and the economy are job number one for this country.  Pence fits that mandate.

References:

Prior to becoming Indiana's governor, Pence served in Congress for 12 years, where he pursued a staunchly conservative agenda: http://www.bloomberg.com/politics/articles/2016-07-13/mike-pence-s-record-scrutinized-ahead-of-trump-running-mate-decision

State GDP Growth in Last Quarter 2015: http://www.bea.gov/newsreleases/regional/gdp_state/2016/pdf/qgsp0616.pdf

In the fourth quarter of 2015, real GDP increased 1.4 percent: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Coal layoffs in Indiana continue as industry struggles: http://www.ibj.com/articles/57919

Priorities:  Polling Report.com: http://www.pollingreport.com/prioriti.htm

What the Obama's Aren't Saying in Commencement Speeches

Michele and Barack Obama have each given commencement speeches this year.  Both have injected politics into those speeches.  However, what neither of them are saying to these newly minted college grads, is that thanks to the bad economics under this presidency, the chances of getting a good paying, college-level job right out of college, aren't too great.

In fact, even though the actual unemployment rate is 5%, this country's underemployment rate sits at 14.5%.  In other words, we have 22-1/2 million people working below their skill and education levels and/or working part time when wanting full time positions.  The pre-recession rate of 2007 was around 8%, and usually, it is below 10%.

So, here's the truth as Newsweek puts it: "Millennial College Graduates: Young, Educated, Jobless".  That's what is really facing this year's 1.8 million bachelor-degreed graduates.

References:

Michelle Obama Injects Politics Into Commencement Speech: http://collegeinsurrection.com/2016/04/michelle-obama-injects-politics-into-commencement-speech/

Obama swipes at Trump in commencement address - PressReader: http://www.pressreader.com/usa/the-washington-times-daily/20160516/281578059886674

Millennial College Graduates: Young, Educated, Jobless: http://www.newsweek.com/2015/06/05/millennial-college-graduates-young-educated-jobless-335821.html

Current Underemployment rate: https://www.google.com/search?q=underemployment+rate&ie=utf-8&oe=utf-8

Underemployment rates 1994 to 2010: http://www.economytrack.org/underemployment.php

Fast Facts:  Education enrollment and graduation numbers: http://nces.ed.gov/fastfacts/display.asp?id=372

Venezuela: Another Socialist Utopia Falls Asunder

Socialists always believe that government is the best way to control the destiny of mankind. They believe that without complete government control over people's lives, income inequality will rule and that the rich will get richer and the poor, poorer.

Such was the case in Venezuela.  Hugo Chavez in 1998 -- when elected President -- was to turn Venezuela into a socialist utopia with the working class and the poor finally enjoying a better life in a country he felt only served the rich.  All of this would would be based on a revolutionary movement that he founded in 1982 called the "Revolutionary Bolivarian Movement-200".

Properties were seized and given to the poor.  He took control of the media and the supreme court to insure that there was no insurrection while he did what he needed to do to bring Marxism to his country.  He even managed to make himself "El Presidente" for life. Even though Chavez died young in 2013, his dream was continued by his successor President Maduro -- his former Vice President.

Today, Venezuela is an economic mess.  There is no food on store shelves. Even toilet paper is in short supply. Inflation is completely out of control, and this year is expected to exceed 700%; well up from last year's 180% and 172%.  That means that prices went up 1000% in just 3 years.  Not exactly the ideal inflation rate of 2 to 3%.  Because the country is so dependent on oil export revenues, the extreme fall in oil prices has further crippled its economy.

On top of everything else, electricity is in short supply because they were too dependent on hydro-electric power, This, in a country that is awash with oil.  In order to conserve electricity, government workers have recently had their workweek cut to two days -- Thursday and Friday.  As it is, the country's 2 million government workers had already had the workday slashed to 6 hours.  This latest move by Maduro means that the government workers will only work 12 hours a week.  This simply means that the country will fall into more turmoil as government services are even more severely curtailed. 

Once again, this proves that Socialism does not work.  And, I believe that Venezuela will again see another upheaval that will overturn the Chavez-designed Marxist government; and, it could be a violent revolution. The truth is, it may be too late to do anything to fix the country since it has been damaged so much in the last 18 years.  The legacy of Hugo Chavez is that Venezuela may wind up being the poorest country in South America.  Just the opposite of his original utopian dream.

References:

Hugo Chavez: https://en.wikipedia.org/wiki/Hugo_Ch%C3%A1vez

Revolutionary Bolivarian Movement-200: https://en.wikipedia.org/wiki/Revolutionary_Bolivarian_Movement-200

Nicolas Maduro: https://en.wikipedia.org/wiki/Nicol%C3%A1s_Maduro

Shortages in Venezuela - Wikipedia, the free encyclopedia: https://en.wikipedia.org/wiki/Shortages_in_Venezuela

Venezuela Inflation: http://www.tradingeconomics.com/venezuela/inflation-cpi

IMF Sees Venezuela Inflation Rocketing to 720 Percent in 2016: http://www.bloomberg.com/news/articles/2016-01-22/imf-sees-venezuela-inflation-rocketing-to-720-percent-in-2016

Venezuela enforces public sector leave on three weekdays: https://www.yahoo.com/news/venezuela-enforces-public-sector-leave-three-weekdays-230119339.html?ref=gs

U.S. concern grows over possible Venezuela meltdown - officials: http://www.reuters.com/article/us-venezuela-usa-idUSKCN0Y42MT

pb

Hillary Touts Bill Clinton's Wage Growth

Yesterday, I briefly caught a Hillary Clinton stump speech in Indiana, in which she stated  that the last time there was wage growth in this country, was when her husband was President (1993 to 2001).  Then, she said it all stopped when a Republican replaced him.  And, yes, if you look at the following chart, she would be correct.

Click on Image To Enlarge

Neither George Bush nor Barack Obama have been able to get the real median household income back to the 1999 peak that occurred during Bill Clinton's presidency.  However, what is also true, is that wage growth under Clinton was all due to the largest increase in income inequality, with the top 1% of incomes generally patterning the peaks and valleys of the chart above (as noted in the following chart).

Click on Chart to Enlarge

At the same time, the bottom 90% (the bottom line on that graph) improved very little under her husband's years in office.

The truth is. that Bill Clinton was in office  during a time when more millionaires were created than ever before.  It was the core years of the dot-com and the Internet revolution.  What is also true is that, as seen above, the top 1% recouped their losses quickly after the Great Recession.  On the other hand, it shows that despite these gains, median incomes continued to fall through 2012.  Thereby implying that 99% had substantially greater losses in income through 2012.   Of course, that doesn't speak well for the current Democrat in office, now does it? 

One last note.  Growth in wages stopped a year before Bush got into office because the dot-com bubble burst; sending the stock market reeling.  Contrary to Hillary's assertion, George Bush had nothing to do with that, or 9/11, which also caused incomes to fall until they bottomed out in 2004. Then they continued to rise again until the Great Recession hit.


References:

Real Median Household Incomes: https://research.stlouisfed.org/fred2/series/MEHOINUSA672N

This chart shows why Hillary Clinton wants to ‘topple’ the 1 percent: http://fusion.net/story/123719/hillary-clinton-income-inequality-topple-1-percent/

 Dot-com Bubble: https://www.google.com/search?q=dot+com+bubble&ie=utf-8&oe=utf-8

To CNN: It's the Economy, Stupid!

In 1992, Bill Clinton was able to shorten George H. W. Bush's Presidency to just one term  by coining the slogan: "It's the economy stupid!".  I think today, its still appropriate, because the liberal political class and the liberal media just don't get it.

In a discussion following Bernie Sander's unexpected win over Hillary Clinton in Michigan, the host of a CNN news and opinion show -- whose name I don't know because I was just listening to the audio - expressed her amazement that the number one issue in exit polling was the economy and jobs.  Then, she went on to state that the economy is good.  Unemployment is the lowest its been in 8 years.  The stock market is still doing well, and that gasoline prices are 68 cents lower than last year.  So, I guess in her mind all is well, and there is nothing to complain about economically.


What she apparently doesn't understand is that people outside of her own gilded life are hurting.  If the economy is so good, why do we have a record number of people living in poverty?  Why is the real median household income sitting at a level that hasn't been seen since 1986?  Why did the average weekly wage fall by $6 in February for America's more than 157 million workers?  Why more than 6000 stores for major retailers closed last year, and why another 2500 stores are set to close this year?  Apparently, CNN's hosts don't read CNN's own Money news division's commentaries about how bad things really are. (see links below).

I think show producers should get their facts straight before airing falsehoods to a national audience.  Just one of the reasons that I rarely watch CNN.


References:

Exit poll: Both parties’ voters worry about economy, disdain federal government: http://www.star-telegram.com/news/politics-government/article64901532.html

It's the economy stupid!: https://en.wikipedia.org/wiki/It's_the_economy,_stupid

Record 46.7 Million Americans Live In Poverty; Household Income Back To 1989 Levels: http://www.zerohedge.com/news/2015-09-16/record-467-million-americans-live-poverty-median-houshold-income-back-1989-levels

Major U.S. Retailers Are Closing More Than 6,000 Stores: http://theeconomiccollapseblog.com/archives/major-u-s-retailers-are-closing-more-than-6000-stores

2016 Store Closures: http://retailindustry.about.com/od/USRetailStoreClosingInfoFAQs/fl/US-2016-Store-Closings-All-Retail-Chain-Store-Locations-To-Be-Closed.htm

The cracks in America's economy are growing - CNN Money: http://money.cnn.com/2016/01/28/news/economy/cracks-in-the-us-economy/

U.S. economy grinds to near halt at end of 2015 - CNN Money: https://www.google.com/search?q=cnn+economy+doing+well&ie=utf-8&oe=utf-8

Sears announces it's closing at least 50 stores - Feb. 9, 2016: http://money.cnn.com/2016/02/09/news/companies/sears-kmart-stores-closing/

Walmart will close 269 stores this year, affecting 16,000 Jobs: http://money.cnn.com/2016/01/15/news/companies/walmart-store-closings/

Sports Authority is bankrupt and closing 140 stores - CNN Money: http://money.cnn.com/2016/03/02/news/companies/sports-authority-bankruptcy/

Macy's closings could leave a trail of dead malls - CNN Money: http://money.cnn.com/2016/01/11/news/companies/macys-dead-malls/

Obama's False Claim About The Economy

During a recent press conference, and in an effort to deflect GOP candidates' comments regarding how bad the economy is, President Obama made the claim that America has the "strongest, most durable economy in the world".  Well, tell that to the retailers who are feeling like canaries in a coal mine.

By May of last year, the major retail chains -- those with 10 or more stores -- announced the closing of more than 6,000 across the  United States.  By the end of the year, the number of closings was much higher than 6,000. Leading the pack was 1800 Radio Shack stores that closed due to bankruptcy.  McDonalds announced 700.  God only knows how many retailers with less than 10 stores shut their doors.

This year, by February 9th, more than 2500 stores have announced closures for 2016 and beyond.  This includes the just announced 140 for Sports Authority closing due to bankruptcy, and the 154 Walmart stores that were previously announced.

Now, understand, most all of these closures are for stores that previously weathered the Great Recession.  Yet, now, when we are supposedly not in recession, we are experiencing all these closures.  The simple answer for this lies in the following chart:

Growth in retail sales has been steadily declining since 2011 with 2015's (excluding autos) already being lower that 2008; when we were at the height of the recession.  The simple conclusion is that people have increasingly less money to spend; indicating fewer good paying jobs. Thus, if both retail sales dip below the "zero" line this year, we are probably in recession.  Just as we were in the years of 2008 and 2009.

Once again, the President tells us what he thinks we want to hear and not the truth.  Because the truth, in this election year, might hurt his party's chances in the fall.

References:

Obama: US Has Strongest, Most Durable Economy in World: http://www.bloomberg.com/news/videos/2016-02-05/obama-u-s-has-strongest-most-durable-economy-in-world

Major U.S. Retailers Are Closing More Than 6,000 Stores: http://www.zerohedge.com/news/2015-05-02/major-us-retailers-are-closing-more-6000-stores

2015 Retail Store Closures: Sorted Largest First: http://retailindustry.about.com/od/USRetailStoreClosingInfoFAQs/fl/All-2015-Store-Closings-Stores-Closed-by-US-Retail-Industry-Chains_2.htm

2016 Retail Store Closures: Sorted Largest First: http://retailindustry.about.com/od/USRetailStoreClosingInfoFAQs/fl/US-2016-Store-Closings-All-Retail-Chain-Store-Locations-To-Be-Closed_2.htm

Retail Sales in U.S. Decrease to End Weakest Year Since 2009: http://www.bloomberg.com/news/articles/2016-01-15/retail-sales-in-u-s-decrease-to-end-weakest-year-since-2009

Sports Authority is bankrupt and closing 140 stores: http://money.cnn.com/2016/03/02/news/companies/sports-authority-bankruptcy/

Obama's Alternate Universe on the Economy

Last Friday, when the Bureau of Labor Statistics announced that the unemployment rate had fallen to 4.9% -- the lowest since the recession -- and President Obama could hardly contain himself celebrating this feat and taking credit for it.  Then, he went on to claim that, contrary to the GOP predictions of gloom, the economy is "durable".

Putting the 4.9% unemployment rate aside as a mere quantitative number, the issue that bothers most Americans is the "qualitative" status of our economy.  In that area, Obama appears to be living in an alternate universe where his reality is much different than ours.  A reality that seems to forget that he promised that we would see a 5% unemployment rate by July of 2013 if we passed the stimulus package. Not the more than two years later when, in October of 2015, 5% unemployment was finally achieved.

While he was quick to jump in front of the microphones to take credit for the 4.9% unemployment, I have never seen this President come out and lay claim to the following:

• A record 47 million people in poverty and 45 million needing food stamps to survive.  
• The fact that real median household incomes are back to where they were in 1989.  
• That the real unemployment rate is actually 9.9% when you include people, who (1) in frustration, have stopped looking for work; or, (2) are forced to work part time for for a lack of full time work; or, (3) are underemployed and working at jobs they are overqualified for.

In addition, Obama seems to ignore that realityh that the economy had grown by just seven tenths of a percent in the fourth quarter of last year, and overall, under his presidency, has only grown at a rate of 1.78%. Well below the average economic growth in this country since World War II, and before he too office, of 3.24%.

There are many more statistics I could quote, but these are the ones that really impact the average American.  They are the ones Americans feel and that are mostly in direct contradiction to Obama's "good economy" claims.

References:

Obama Celebrates 'Durable Economy' As Unemployment Drops Below 5 Percent: http://www.npr.org/sections/thetwo-way/2016/02/05/465686010/u-s-added-151-000-jobs-in-january-unemployment-dropped-to-4-9-percent

Record 46.7 Million Americans Live In Poverty; Household Income Back To 1989 Levels: http://www.zerohedge.com/news/2015-09-16/record-467-million-americans-live-poverty-median-houshold-income-back-1989-levels

Food Stamp Beneficiaries Exceed 46,000,000 for 38 Straight Months: http://www.cnsnews.com/news/article/ali-meyer/food-stamp-beneficiaries-exceed-46000000-38-straight-months

Record-breaking 11M receive Social Security disability benefits: http://nypost.com/2014/05/21/record-breaking-11m-receive-social-security-disability-benefits/

2013: Where’s that 5% unemployment rate Obama promised by now?: https://www.aei.org/publication/wheres-that-5-unemployment-rate-obama-promised-by-now/

Real Economic Growth: https://research.stlouisfed.org/fred2/series/A191RL1Q225SBEA

United States GDP Growth Rate - Trading Economics: http://www.tradingeconomics.com/united-states/gdp-growth

Which Presidents Have Been Best for the Economy?: http://www.usnews.com/news/blogs/data-mine/2015/10/28/which-presidents-have-been-best-for-the-economy

Cheap Oil Isn't Helping Our Economy

All through 2015, gasoline prices fell.  Many economists wrongly predicted that this would stimulate the economy with stronger retail sales.  Yet, when it was all said and done, 2015's consumer activity was the worst since 2009, when sales were at a negative growth rate as this chart from Bloomberg.com shows:

Click on Image to Enlarge or See Link Below

Overall, total retail sales came in at just 2.1% for 2015.  Less than half that when auto sales are excluded.  What's worse, retail sales in December actually fell one-tenth of a percent in a month that most retail expected strong Christmas sales.

But, this data comes on the heels of another piece of worrisome data: the Consumer Price Index (CPI). Like retail sales, saw its lowest growth in prices in years.  This time since 2008. Note this chart from usainflationcalculator.com:

Click on Image to Enlarge or See Link Below

The reason that these two charts are so important is that they both show a serious slowing of consumer activity which may result in a recession in 2016.  The reason being that 70% of our growth is a direct result of consumer spending.  For example, in 2014, our economy was calculated to be $17.4 trillion dollars.  Consumer spending was responsible for $11.9 trillion dollars.  So, any significant slow down in that area would result in negative growth; and, two consecutive quarters of it are the classic definition of a recession.

So, the slowing in retail sales is obviously a problem.  But, the slow down in the CPI inflation is less obvious but an equally serious problem. A healthy economy should see CPI inflation between 2 and 3% per year.  That indicates that wages are increasing; a confidence in the economy and the job market; when retailers feel like the can raise prices without losing business.  But, we haven't seen that kind of growth in the CPI since 2011.  Simply, the year-by-year fall in any CPI inflation shows that there are pricing restraints.  In other words, people are buying enough to convince retailers to increases prices.  To economists, this is called disinflation.  And, should the growth in the CPI go negative in the coming months, that would be called "deflation".  That is serious and that would also show a contraction.  Possibly, a recession.

Thus, when I hear certain politicians and economists claim strength in the economy, I look at these two charts and think not.  To me, these charts are like two canaries in a coal mine; signalling economic disaster in the not too distant future.  Despite falling gasoline prices, the consumer has decided to save and not spend; indicating a certain amount of fear and uncertainty.

References;

Retail Sales in U.S. Decrease to End Weakest Year Since 2009: http://www.bloomberg.com/news/articles/2016-01-15/retail-sales-in-u-s-decrease-to-end-weakest-year-since-2009

Current US Inflation Rates: 2005-2015: http://www.usinflationcalculator.com/inflation/current-inflation-rates/

What Are the Components of GDP? Explanation, Formula and Chart: http://useconomy.about.com/od/grossdomesticproduct/f/GDP_Components.htm

pb

Bernie Sander's Fascination With Scandinavian Economies

During the Democrat Debate, Bernie Sanders, the consummate socialist, remarked that we should model our economy after European countries such as Denmark, Sweden, and Norway.  Of course, the only reason he mentioned these Scandinavian countries is because they're socialist, cradle-to-grave nanny states that have shown themselves able to provide a high standard of living.  Other European socialist states like Spain, Greece, Italy, Portugal, and Ireland are struggling to survive.

But, what Sanders doesn't seem understand, is that these countries have small populations; less than 10 million people with a wealth of huge stores of natural resources -- relative to their population -- which strongly helps to support their economy.  More importantly, the Nordic race has a very strong work ethic.  As a result, the unemployment rates and poverty levels are fairly low.  A strong work ethic also means that there is very little corruption.   Thus, there is little government interference in business activities in terms of regulations; making them one of the most freely capitalist economies in the world.  Additionally, that same work ethic means that their population is better educated; and this too results in stronger businesses and the creation of new businesses.

Here's the simple fact. None of the above attributes of these Scandinavian countries are transferable to this country.  Just as the failure of socialism to work in Greece. Our highly mixed population and our economic base are totally different.  Also, understand how much those countries pay to achieve the level of socialism they have today.  For example, in Sweden, the cost to pay for their programs is equal to more than half (51.9%) of that nation's total economic output; as measured by Gross Domestic Product.  In this country, our government outlays are $3.5 trillion on an economy of $17.4 trillion; or, just 20% of our Gross Domestic Product.  In order to achieve what Sweden has achieved, we would have to have massive increases in federal taxes.  Even more, if we want the current $18+ trillion debt reduced or eliminated.  Probably a third of all workers would work for the government.

Lastly, to pay for all this socialism, these countries tax everyone in the form of a Value Added Tax.  A form of a 25% national sales tax (not applicable to food and some services that would impact tourism).  That's because simply taxing the rich -- as Bernie Sanders would suggest -- won't even come close to paying for the large increase in socialism he is proposing.

References:

Clinton, Sanders spar over capitalism, gun control at Democratic presidential debate:  http://www.amny.com/news/clinton-sanders-spar-over-capitalism-gun-control-at-democratic-presidential-debate-1.10959244

Economy and Business Environment: http://www.heritage.org/index/country/sweden

Is Sweden a False Utopia: http://www.newgeography.com/content/001543-is-sweden-a-false-utopia

Does Scandinavian Socialism Work?: http://www.frontpagemag.com/fpm/101480/does-scandinavian-socialism-work-steven-plaut


 

An Economy That Can't Even Stand a 1/4% Interest Rate Hike?

Normally, when the American economy is trying to recover from a recession, the Federal Reserve lowers interest rates to stimulate borrowing, and in theory, cause job growth and economic expansion. Since early in the last recession, they have held interest rates between zero and one-quarter of one percent. Yet, all that time, the economy and the jobs situation have been so weak that the Federal Reserve hasn't been able to raise rates.

Last Thursday, the Federal Reserve was expected to raise rates by a baby-step:  a quarter of a percent.  But, once again, they avoided the hike for fear that it might not only hurt our economy, but the global one, also.

To all those who claim that our economy and employment is strong, the Federal Reserve's inaction speaks volumes to the contrary.  The fact is simple.  Under Obama, we have had the weakest recovery since 1932.  The fact that the Federal Reserve has had to hold rates at zero to 1/4% just proves that weakness.


References:

Stuck on Zero - Wall Street Journal: http://www.wsj.com/article_email/stuck-on-zero-1442532105-lMyQjAxMTI1NjE5ODYxOTgyWj

Obama Owns Worst Economic Numbers in 80 Years, Since 1932: http://www.thegatewaypundit.com/2015/07/facts-are-facts-obama-owns-worst-economic-numbers-in-80-years-since-1932/

The Obama Economy: The True War on Women

Last month, a record 93.8 million Americans weren't working.  Of that number, 60% or 56.2 million were women.  Another record. 

The simple fact is that women are being disproportionately hurt by a slow economy under this President's watch.  As such, the women that were such a strong part of Obama's winning coalition are now turning away from Hillary Clinton. A surprising fact when you think that she might be this nation's first woman President.  There is no enthusiasm. In a recent survey, 56% of women polled say they voted for Obama in 2012.  Now, only 49% of those polled say they are interested in voting Democrat again in 2016.


References:

Record 93,770,000 Americans Not In The Labor Force: http://www.breitbart.com/big-government/2015/08/07/record-93770000-americans-not-in-labor-force/

Record 56,209,000 Women Not In The Labor Force: http://www.breitbart.com/big-government/2015/08/07/record-56209000-women-not-in-labor-force/

President Obama has presided over an economic recovery — now more than six years old — that is far worse than all the previous 10 stretching back 70 years: http://news.investors.com/ibd-editorials/073015-764333-tepid-gdp-growth-leaves-economy-even-further-behind-the-pace.htm

2016: Obama coalition of blacks, women, GenX, losing interest in voting: http://www.washingtonexaminer.com/2016-obama-coalition-of-blacks-women-genx-losing-interest-in-voting/article/2566950

Why Trump Is So Popular: It's the Economy, Stupid!

Many think that Bill Clinton became President and beat George H.W. Bush in 1992 because of a single catch phrase: "It's the economy stupid!".   That may be true since the economy had slipped into recession under Bush.

While we are not in a recession -- at least not yet -- most people feel that we are.  In poll after poll, Americans again are saying that the economy and jobs are the number one national priority; well ahead of anything else such as immigration.

What people see in Trump is his success in business.  A man who can create jobs and get things done.  He tells it like it is.  We're right back to "it's the economy, stupid" all over again.  A recent Gallup poll supports this with 56% of Republicans; 35% of Independents; and even 16% of Democrats saying he would do a good job with the economy.

Simply, this is why Trump is doing so well against his rivals.  He is the only one of those 17 GOP candidates who is a successful businessman.  A multi-billionaire.  While, Carly Fiorina was also a business person, many know and remember how she had to be let go as CEO from Hewlett-Packard; a scar on her record.  She also wasn't successful in her run against Barbara Boxer for California's U.S. Senate seat.  Another scar.

Trump may fade but, for now, people seem to think he would be a strong leader on the very issue they consider to be "the" priority.


References:

It's the economy stupid!: https://en.wikipedia.org/wiki/It%27s_the_economy,_stupid

Polling Report: Priorities: http://www.pollingreport.com/prioriti.htm

Trump Stronger on Economy Than Foreign Affairs, Immigration:  http://www.gallup.com/poll/184166/trump-stronger-economy-foreign-affairs-immigration.aspx

The Obama Economic Recovery Is Even Worse Than Previously Thought

Yesterday morning, the U.S. government released its initial report on the economy in the second quarter of 2015; and as measured by Gross Domestic Product (total consumer and government spending+business inventories+the net of imports and exports).  But, also with this reporting, the Bureau of Economic Analysis -- the group that develops the GDP numbers -- will apply the new formulation for how the GDP is calculated and will apply those changes back to 2012.  Many economists predicted that recalculations would smooth out the erratic swings and actually result in higher GDP growth. Boy, were they wrong.

Prior to the revised calculations, 2012 through 2014 had dismal growth rates that averaged only 2.4%.  Now, with the new revisions; the average growth for those years is just 2.1%; which puts it at almost half of the average 3.97% growth rate following all previous recoveries from recessions since 1960. It also puts growth below the previously calculated average of 2.24% since the recovery started in the third quarter of 2009.  Worse than that, the growth rate for the first six months sits at just 1.45% -- when averaged against just 6-tenths of a percent in the first quarter and 2.3% in the second.  This is a slowing of 31% from Obama's previous 3-year average of 2.1%.

Simply, each successive year under President Obama's watch is getting weaker.  Not a good trend, and it reflects on how government imposition in the economy, such as ObamaCare, is affecting economic growth.

References:

US government revises earlier GDPs to fix anomalies in reporting: http://www.cnbc.com/2015/07/30/us-government-revises-earlier-gdps-to-fix-anomalies-in-reporting.html

Our dismal GDP numbers: Under Obama US stuck in slow growth rut: http://www.foxnews.com/opinion/2015/04/29/our-dismal-gdp-numbers-under-obama-us-stuck-in-slow-growth-rut.html

Here are the revisions made to GDP growth over the last three years: http://www.businessinsider.com/q2-2015-gdp-revisions-2015-7

The Economy Under Obama In One Graph

Click on Chart to Enlarge

This Federal Reserve of St. Louis graph details the year-over-year growth rate of the economy -- as measured by the percent of increase/decrease in Gross Domestic Product (GDP) -- from 1930 through 2014.  The gray horizontal line represents the peak economic growth under President Obama.  Except for dips during the Great Depression and all the other recessions, no other time in the last 85 years has there been economic growth this low.

Simply, government regulations under Obama are killing the economy.  Even when the Great Depression ended (seen on the far left of the chart), the snap back was tremendous.  Then, following the 1936 recession, the snap back was even greater which is why economist's would always say -- until now -- "the deeper the recession the stronger the recovery". 

The heavy-handed lending regulations under Dodd-Frank are stunting business growth. The employer mandate under ObamaCare is forcing higher costs of labor on business and, as a result, making them less likely to give normal wage increases.  The same with the minimum wage increases that have been taking place in 29 states and in a growing number of cities.   Obama's salaried overtime ruling will also force many companies to forgo normal wage increases.  The push towards solar and wind and the elimination of coal-fired power plants is driving electricity prices higher affecting costs for consumer and businesses alike.

The list of regulations is literally endless since this President has decided to "fundamentally change" America.  With growth this slow and so near the "zero" line, it would be quite easy for us to slip into recession again, should the economy start stumble.

References:

Graph: Gross Domestic Product: https://research.stlouisfed.org/fred2/graph/?id=A191RP1Q027SBEA,

Red Tape Rising: Obama-Era Regulations: http://www.heritage.org/research/reports/2012/03/red-tape-rising-obama-era-regulation-at-the-three-year-mark

Obama's Slams Small Businesses With Excessive Regulations: http://www.usnews.com/opinion/economic-intelligence/2014/03/24/obamas-slams-small-businesses-with-excessive-regulations

December 2014: Obama Crams Over 1200 New Regulations Just Before The New Year: http://dailycaller.com/2014/12/23/obama-admin-crams-over-1200-new-regulations-just-before-the-new-year/

Fireworks Industry Bemoans Tough Obama Regulations: http://www.newsmax.com/Newsfront/fireworks-obama-regulation/2015/07/04/id/653445/
 

Increasing Disinflation and the Federal Reserve is Helpless Against It

While none of us like paying higher prices for things, most economists agree that an inflation rate between 2 and 3 percent is a good thing because it shows that there is normal consumer demand for products and services.

When inflation goes above 3 percent, the economy is running too hot and those in poverty and people on fixed incomes are being hurt by high prices.  In this case, our central bank, the Federal Reserve, would step in and force higher interest rates.  Thus, the money supply becomes constricted and, in theory, an overheated economy will contract enough to get back into that 2-3% sweet spot.

One the other hand, when inflation is below 2%, it shows that consumer demand is too low; usually because of tepid or low wage growth. Then, sellers of products and services must compete more fiercely to attract customers by slashing prices or keeping prices low.  Businesses that can't lower or hold prices would typically go under. In this situation, the Federal Reserve would normally lower interest rates to kick start a weak or weakening economy in an attempt to keep it from falling into recession and to stem any job losses and business closures.

To that latter paragraph, here is this ten-year chart from the site usinflationcalculator.com:

Since 2011, when inflation hit a peak of 3% following the 2007-2009 recession, each successive year thereafter has seen disinflation (a decline in the rate of inflation) to the point that, now, in 2015, inflation is actually slightly negative.  Economists call this condition deflation. Essentially, American wages have stagnated to a point that consumers are unable to buy at the same levels as the year before.  This explains why dozens of retailers are being forced to close stores.  McDonald's will close 700.  Walgreens 200.  Staples, OfficeMax, and Office depot are closing a combined total of nearly 600 stores.  Radio Shack has gone belly-up and will close 1784.  With all of these store closings, plus hundreds more from other retailers not listed here (see link below), this year is beginning to look like the start of a recession.

So, what can the Federal Reserve do to avoid one?  Absolutely nothing. Since the beginning of the 2007-2009 recession, the Reserve has been holding interest rates between zero and 1/4 of a percent. Therefore, there's no room to lower them in order to stimulate the economy.  In fact, insanely, it appears that the Federal Reserve might actually raise interest rates. If I'm right, this action would only exacerbate disinflation because it will do the very opposite of what's needed.


References:

Chart Source: Current US Inflation Rates: 2005-2015: http://www.usinflationcalculator.com/inflation/current-inflation-rates/

2015 Store Closing Roundup: Radio Shack, Wet Seal, Sears, Target, etc.: http://retailindustry.about.com/od/USRetailStoreClosingInfoFAQs/fl/All-2015-Store-Closings-Stores-Closed-by-US-Retail-Industry-Chains_2.htm

Fed leaves interest rates unchanged - CNBC.com: http://www.cnbc.com/2015/06/17/fed-leaves-interest-rates-unchanged.html

If the Fed raises interest rates, what's your move?: http://www.news-gazette.com/news/business/2015-07-20/if-fed-raises-interest-rates-whats-your-move.html

Strong Retail Sales Does Not Mean A Growing Economy

Last Thursday, the retail sales numbers saw a surge; prompting the news agency Reuters to state this:

U.S. retail sales surged in May as households boosted purchases of automobiles and a range of other goods even as they paid a bit more for gasoline, the latest sign economic growth is finally gathering steam.

What I take issue with is the "finally gathering steam" statement.  Quite simply, a retailer can have stronger sales, not just because of more foot traffic to their store, but also because they may have been forced to raise prices.  If a retailer doesn't have enough sales to pay the bills, it will have no other choice but to close its doors.  This is a reality that is growing in strength, and which, belies the "gathering steam" comment.


The fact is, that American national retailers are suffering. Dozens of them are announcing store closures.  CNBC predicted this a year-and-a-half ago with their story titled  "A 'tsunami' of store closings expected to hit retail".  Since that story was run, Radio Shack has announced the closure of 1784 stores due to bankruptcy.  McDonald's is shuttering 700. The combined Office Depot/Office Max operation is closing 650 retail operations, and their chief competitor Staples, 225. Others include 200 Walgreens; 338 Wet Seal; 77 Sears; 100 Pier One's, 300 Deb Shops; 40 J. C. Penney's; and on and on with a list too long to enumerate (See References). 

In addition, shopping malls are also shuttering their doors.  Forbes is predicting 300 Mall closures in the next 10 years, mostly because they are losing their "anchor" stores like J.C. Penney,  Sears, and Macy's.  But, when a mall closes its doors, so do the dozens of small retail stores that probably won't survive without the large amount of foot traffic a mall provides.

We're six years passed the end of the Great Recession and we are seeing national chain store closures as if we were still in the midst of it; leaving us to question whether or not small local retailers are also closing at that same high rate.

I personally believe that "retail" is hitting the proverbial "brick wall".  You have a consumer who has so little money to spend after necessities, that you would have to go back 20 years to see the real median household incomes this low.

Then, retail prices are being driven higher by a variety of factors.  For starters, this is the first year that the employer mandate of ObamaCare kicked in.  Thus large national chains are being forced to provide health care insurance or pay a fine of between $2000 and $3000 for each employee not properly covered.  On top of that, liberal state legislators and city councils are raising the minimum wage.  For example, California's minimum wage was raised to $9 this year; and will go to $10 as of January 1st.  Additionally, President Obama, through executive order, is expected to force any employer, whose salaried workers make less than $52,000 a year, to pay overtime (time-and-a-half) when they work more than 40 hrs/wk..

The increase in retail sales is more about higher prices and not increased sales. Simply, the consumer is cash strapped and marginal retail operations are being forced to close their doors due to declining foot traffic.  

References:

Strong U.S. retail sales boost growth outlook: http://www.reuters.com/article/2015/06/11/us-usa-economy-idUSKBN0OR1H720150611

A 'tsunami' of store closings expected to hit retail: http://www.cnbc.com/id/101353168

Store Closings Index 2015 of Largest US Brick-and-Mortar Retail Chains: http://retailindustry.about.com/od/USRetailStoreClosingInfoFAQs/fl/All-2015-Store-Closings-Stores-Closed-by-US-Retail-Industry-Chains_4.htm

Some 300 malls should close in the next decade: http://fortune.com/2015/01/28/2015-mall-outlook/

Real Median Household Income in the United States - FRED: https://research.stlouisfed.org/fred2/series/MEHOINUSA672N

ObamaCare Employer Mandate - ObamaCare Facts: http://obamacarefacts.com/obamacare-employer-mandate/

State Minimum Wages | 2015 Minimum Wage by State: http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx

White House plans to force business to pay more overtime: http://www.washingtonexaminer.com/white-house-plans-to-force-business-to-pay-more-overtime/article/2556692