GayPatriot

The Internet home for American gay conservatives.

Mr. President, enough about the stock market!

by

Sorry to repeat myself, but President Trump keeps hitting the idea that the stock market is making new highs and the media should talk about it. I could post video but, just to keep it text-y, here are Twitter examples from the last couple of days:

Aug 1 – Stock Market could hit all-time high (again) 22,000 today. Was 18,000 only 6 months ago on Election Day. Mainstream media seldom mentions!

Jul 31 – Highest Stock Market EVER, best economic numbers in years, unemployment lowest in 17 years, wages raising, border secure, S.C.: No WH chaos!

Big mistake. Why?

  • Candidate Trump understood that the stock market was a Fed-inflated bubble.
  • Candidate Trump understood that the unemployment numbers are fake and disguise the ongoing suffering of Middle America.
  • If President Trump is now tying his reputation to those numbers, what happens when they reverse?

The stock market IS overvalued, and WILL go down eventually, if only for “cyclical” reasons. Maybe down a lot. What happens then?

Consider that Switzerland’s central bank is now a huge holder of U.S. stocks First…Why? Why would they be in the business of propping up the U.S. stock market? Second…What happens when they change their minds, and sell?

All this time, we’ve been in a Great Depression

by

A few weeks back, Michael Snyder at The Economic Collapse blog looked at U.S. GDP growth rates for the ten years 1930-1939 and the ten years 2007-2016. I didn’t verify his numbers but they seem plausible (referring to “real” or inflation-adjusted GDP). Snyder says:

1930: -8.5%
1931: -6.4%
1932: -12.9%
1933: -1.3%
1934: 10.8%
1935: 8.9%
1936: 12.9%
1937: 5.1%
1938: -3.3%
1939: 8.0%

When you average all of those years together, you get an average rate of economic growth of 1.33 percent.

That is really bad, but it is the kind of number that one would expect from “the Great Depression”.

So then I looked up the numbers for the last ten years…

2007: 1.8%
2008: -0.3%
2009: -2.8%
2010: 2.5%
2011: 1.6%
2012: 2.2%
2013: 1.7%
2014: 2.4%
2015: 2.6%
2016: 1.6%

When you average these years together, you get an average rate of economic growth of 1.33 percent.

The same! But wait, averaging them isn’t quite right. For math-y reasons, it’s better to take a starting index value like 100, then apply the growth rates year by year. I did that, and

  • Real GDP grew 10% from 1930-1939.
  • Real GDP grew 14% from 2007-2016.

Still not much difference! The point remains that the last 10 years have been super lame. President Obama was perhaps the first in U.S. history to never have a single year of real GDP growth over 3%.

And it’s possible that Obama’s record was yet worse. Remember, in recent years they’ve been padding the GDP numbers. They directly added nonsense to GDP. They also under-estimate inflation, which artificially boosts the growth estimates.

But for now, let’s stick with official numbers (where Obama’s overall record is nearly as bad as a Great Depression), and pivot to look at unemployment.

You may wonder: if we’ve been in a depression, how could the unemployment rate be down at 5%? The difference from the 1930s is that, in our time, the Establishment (or Political-Financial Complex) has been determined to fool people – to boil the frog (us) slowly, so to speak – and to cover for President Lightworker. Thus,

  • They let him jack the national debt from $10 trillion to $20 trillion. Even a monkey could make GDP seem halfway-OK for 8 years, if you gave him a $10 trillion credit card.
  • They had the central bank (Federal Reserve) conjure trillions of new money from thin air and inject it into the financial markets. It’s chicanery, but people say “At least my home and 401k are up.”
  • And they baked the unemployment statistics. Remember, the official 5% number hides a huge decline in Labor Force Participation, plus full-time jobs being replaced with crappy part-time jobs.
    • If you add back the people who left the labor force in despair these last ten years, real unemployment is 11-12%.
    • And if you add the extra part-timers (assuming they would rather be full-time), it’s even worse.

Depression 2.0 has been with us, all this time. It’s part of why people were so unhappy with Queen Cersei in 2016 (who ran as the Establishment’s poster child).

What does all this bode for President Trump? Probably not well.

  • He’s trimmed back some of Obama’s growth-killing regulations. That will help.
  • And his infrastructure spending may go to productive works (unlike Obama’s 2009 “Porkulus” package), if he can get it passed. He wants to revive American manufacturing, which would be good.
  • BUT, with so much debt on the books and so many Americans expecting handouts, our underlying economic problems are worse than ever.

Trump has inherited a sinking ship. The next recession should be a roller-coaster. If the American Left is krazy and violent now, just you wait.

Then again, maybe our leadership will hit on the solution quickly (a Free Enterprise system with smaller government, Rule of Law, sound money, cutting the Welfare-Warfare State, letting Washington and Wall Street fail, letting Main Street pick up the pieces). And maybe our leadership will use the media skillfully (plus a few well-placed arrests) to transition people’s minds to all that. Don’t tell me I’m dreaming.

OK, I’m dreaming. Time to buy more ammo.

A mistake from Trump

by

President Trump keeps saying (in speeches) or tweeting things like this:

Donald J. Trump Retweeted FOX & friends‏ – Wall Street hits record highs after Trump pulls out of Climate pact

Donald J. Trump Retweeted Eric Trump – Eric Trump Retweeted Reuters Business – JUST IN: Dow, S&P 500 and Nasdaq set record closing highs.

I wish he wouldn’t. Let’s be clear.

  • Stock market numbers matter to individuals; not the nation.
  • Low numbers don’t mean a President is doing a bad job, and high numbers don’t mean he’s doing a good job.
  • The stock and bond markets are bubbles, fueled by the Federal Reserve Bank.
    • As I said under President Obama, way back at Dow 14,000.
    • We also have bubbles in the real estate, auto loan, student loan, forex (USD) and cryptocurrency markets. But I digress.
  • During the 2016 campaign, Trump knew it and correctly said “We are in a bubble.”

Now Trump is taking credit for the high (bubble) numbers. Big mistake.

Instead, he should be warning Americans about how poor the economy’s fundamentals still are (thanks to Obama – until a lot more of Trump’s reforms get enacted). And readying us for hard times in the next recession.

“Live by the sword, die by the sword.” If Trump is going to take credit for high stock markets now, people will slam him when they fall.

Midnight in America

by

That dark title comes from Peter Schiff, the investment analyst and libertarian ninja. His article’s conclusion:

Ronald Reagan was the last Republican president who was swept into office promising great change. He made good on his “Morning in America” promises to cut taxes and regulations. But he failed in his promises to reduce spending. …[and now after others did even worse,] the economy of 2016 has far deeper problems than the economy of 1980. Reagan’s morning now looks more like Trump’s midnight.

Trump did not make this mess, but he will likely be in office to clean it up.

The question is: Will President-Elect Trump be able or willing to clean it up? As Schiff puts it:

…as bleak as the picture Trump painted of the current state of the U.S. economy, it was not bleak enough. Before things can actually get better, they must first be allowed to get much worse. Decades of government promises to supply voters with benefits taxpayers can’t afford must be broken, starting with many of the promises Trump made himself to get elected.

(Emphasis added) That has been my chief criticism of Romney (in 2012) and of Trump all along: Although they were “truthier” with the voters than their Democratic opponents, they still didn’t tell voters nearly enough of the truth.

After eight years of President Obama, we now have a national debt of $19.8 trillion by official figures; and something far north of $100 trillion when you include the “unfunded liabilities” (the future benefits promises that the government should report, under proper accounting standards – and does not). States, and especially their pension funds, also face a great crisis where they won’t come close to meeting their future promises. This is all very different from when Reagan took office.

Based on his speeches about “infrastructure” spending and his past track record, Trump’s first instinct might be to run up the U.S. debt up to even greater heights than Obama has. But at some point, Trump’s deficit spending will hit a wall: a full-on recession (it’s overdue) and a new financial crisis, wherein world markets simply won’t allow the United States to carry on as before.

What happens then? Will Trump give Americans the bad news about serious cuts to their benefits and hopes? Or will Trump flounder, protect special interests – maybe hyperinflate the dollar – and allow events to destroy him and us?

Anyway, it’s been fun to watch the left-wing butthurt over President-Elect Trump these last few days; but realism compels me to start being a wet blanket again. America’s problems, especially its debt problems, are beyond anything that even Trump had acknowledged.

He won’t be able to fix them by magic. And in a way, left-liberals are right: the next four years will be awful, for many.

Shock: Big banker, up to no good, would rather not be audited

by

Refresher: The Federal Reserve Bank is not a government agency. It is the world’s largest private bank. Government has given it special privileges to basically:

  • counterfeit money (i.e., create it from thin air);
  • fix key prices in the economy (interest rates);
  • tax Americans indirectly (by creating inflation/money and financing government with the proceeds);
  • goose the financial markets for the proverbial “one percent” – which includes government officials themselves;
  • bail out irresponsible/incompetent banks – and (via measures of “regulation”) prevent up-and-coming banks from challenging them;
  • generally plan the markets (create bubbles, followed of course by crises);
  • plan the number of crappy, part-time jobs that Obama’s economy can create for the little people;
  • and escape the Freedom of Information Act.

So, from The Hill’s coverage of Janet Yellen’s testimony to Congress on Wednesday:

The biggest challenge to the Fed’s structure is the growing movement to Audit the Fed via legislation from Sen. Rand Paul (R-Ky.)…

A GOP-controlled Congress has given the bill its best chances yet of passage, and that renewed interest led Yellen to deliver her most spirited opposition yet.

“I want to be completely clear,” she said. “I strongly oppose Audit the Fed.”

Surprise, surprise.

Hat tip, ZH.

Explaining Obama’s economy

by

Readers of GP’s Economy category know that I like to write about how money-printing, now called “Quantitative Easing” (QE), actually drags on the economy (rather than stimulating it). In the long run, QE is just a ripoff to inflate asset bubbles for the Point-One Percent – and stick the rest of the economy with the fallout.

The topic is obscure, but it explains much of what has gone wrong in the U.S. economy as well as Europe, Japan, etc. (Overgrowth of the State explains the rest.) But today, I’ll spare you my verbiage and refer you to Pater Tenebrarum’s. Key passage:

When central banks or commercial banks add new money to the money supply, not one iota of real wealth is created…

However, monetary pumping does disturb the finely tuned dynamic processes [of the economy], as it distorts interest rates and prices. Economic calculation is then falsified and malinvestment invariably ensues. Have the housing bubbles in e.g. Spain and the US not shown this quite clearly?…The emergence of such illusory profits leads to the consumption of capital..

Eventually it turns out that companies actually lack the funds to maintain their real capital. This is what we mean when we refer to the pool of real funding being under pressure: the capital structure has been damaged. Actors in the economy need to…”repair” [the economy’s real capital]…Then the economy is in “recession”, but this is really a healing process. It takes time to heal.

Additional money printing actively sabotages this healing process. It achieves nothing but even more impoverishment in the end, especially if it succeeds in igniting another boom by redistributing existing wealth and spurring more capital-consuming activities…

Inflationism is apparently more popular than ever. It doesn’t seem to matter how often and how consistently it fails to produce the desired results, there are always more people in the world who have an epiphany about saving the economy by printing money…[until] the economy has become so structurally damaged…that if banks indeed were to lend out more money [as the money-printers desire], they would be almost guaranteed to lose most of it.

If you have the patience, Read The Whole Thing.

Addendum: By the way, the Swiss don’t get it, after all. Last Sunday, 78% of Swiss voters were against having a sound currency. (Updates my earlier post, Do The Swiss Get It?)

UPDATE: The Japanese people suffer from their latest version of QE, even as their Nikkei stock index sits at seven-year highs. In the end, the U.S. will fare no better (and probably worse).

This is who plans our economy

by

Some might disagree with my view that the U.S. is a centrally-planned economy (and thus, non-capitalist; more of a social-fascist economy). But it is. A central planning board carefully rigs the three most important features of a large economy: its interest rates, its money supply, and the practices of its financial markets and banks.

Of course, that doesn’t mean our economy always co-operates with our brave central planners. And it doesn’t necessarily mean that our planners even have a clue. This chart (via ZH) shows some of their cluelessness:

It tells a story like this:

  • In 2009, they thought publicly forecast that they’d have interest rates back to normal by 2011.
  • In 2010, they publicly forecast that they’d be rigging up some normal rates by 2012.
  • And so on, with each new year. Today, they forecast having normal rates by 2016-17.

These are some of the very people (*cough* Janet Yellen) who had no clue that the 2008 Global Financial Crisis was coming.

As to the economy: If it were recovering (for real) all these years, interest rates would indeed have been back to normal by 2010-11. But our economy hasn’t been recovering much, all these years. Just the markets. (Oh, wait.)

Japan: Has it really been in deflation?

by

In the comments to my recent post On Deflation (and “too-low inflation”), a commenter expressed a frequently-heard belief, that a negative “example of deflation is Japan from 1990 to the present.”

I appreciate all comments and, without picking on the person, I wanted to examine the claim. Is it true? Here is a chart (from tradingeconomics.com) that shows Japan’s consumer prices since 1990:


Points that stand out:

  • Japan’s CPI today is over 10% higher than it was in 1990.
  • It’s true that from 1998 to 2013, Japan had a slight CPI decline; perhaps 5% total, over the 15 years.
  • Japan’s CPI is now shooting up again.

Clearly, Japan has not had a large deflation. But perhaps the commenter’s (restated) point might be that Japan has had basically-stable prices since 1990, and the stable prices have done nothing to help Japan’s moribund economy. Here’s how I would answer that.

Japan has long had a relatively government-planned economy. And, over the period shown above, Japan has pursued inflationary, “stimulus” policies of government spending, deficits, expanded national debt, and money-printing. How has it worked out for them?

It hasn’t worked out well. As we see above, Japan’s inflationary policies may have prevented a large-scale deflation (not that that is necessarily good; see my other post). The inflationary policies also seem to have done nothing to fix Japan’s multi-decades of a debt-burdened economy.

In the midst of a 20-year lame economy, stable consumer prices have been a saving grace for Japanese households. But now that Japanese CPI inflation is on the rise in 2014, real living standards in Japan are dropping and “Abenomics” is gaining well-deserved unpopularity among the Japanese.

Japan is not an example of the failure of pro-freedom and sound-money policies, because Japan didn’t try them. Japan is an example, rather, of the failure of what they did try: Big Government, pro-debt, inflationary policies.

UPDATE: David Stockman tells the story of Japan, with charts. RTWT. They inflated massive stock, debt and real estate bubbles in the late 1980s; the bubbles burst; and ever since, they’ve piled up more debt and money-printing in trying to re-inflate their bubbles. Like we’re doing – with no better results.

On deflation (and “too-low inflation”)

by

If inflation is about rising consumer prices, deflation means falling prices. If you have watched CNBC or any financial TV these last few years, you have seen people often raising the bogeymen of either deflation or his new buddy, “too-low inflation”. (A printed example here.)

The people raising these bogeymen are there to help Big Government and Big Banking. They gain from pro-inflation policies – such as high government spending and deficits, zero percent interest rates, massive money-printing (to cover the government’s deficits and boost the financial markets).

Who loses from such policies? You, the person with a productive job. Each year, the dollars you get from your wages, salary, pension or savings hardly go up – and buy you less than the year before. You’re the sucker at the poker game, and they frighten you into going along.

In reality, falling prices – or the steady, stable prices of “too-low inflation” – are a help to consumers in good times and bad. What sane person doesn’t benefit from (and desire) everyday low prices?

Inflationists claim that if consumer prices decline (as in deflation) or fail to rise (as in too-low inflation), the economy will suffer, because people will postpone buying consumer goods. You should ask: Really? When has the prospect of next year’s stable-or-lower prices ever stopped people from buying what they need and desire now?

Prices have been stable-or-declining for years on computers, smartphones, flat screen TVs, eye LASIK operations, game consoles, and more. Have people stopped buying them? Quite the opposite. Or suppose that prices stayed the same, or even went down, for gasoline, food, rent, health care and education. Would that hurt you and your family, or help you?

Inflationists also claim that deflation (or too-low inflation) means economic depression. And we’ve had an occasional episode, such as the Great Depression, where deflation was *correlated* with depression.

But remember the saying, “correlation isn’t causation.” In the Great Depression, the deflation actually helped a lot of people. By making paychecks go farther, it kept the number of people who were turned out of homes, starved, etc. from being even larger than it was.

And we’ve all been carefully ‘educated’ to forget that deflation and/or low inflation are historically *more correlated with good times*. Via Zero Hedge and The Cobden Centre, here is a chart on that. It shows how deflation prevailed in America in the 19th century, which century overall was the greatest for economic growth in our history.


Cobden Centre gives the source, and further notes:

In their research article ‘Deflation and Depression: Is There an Empirical Link?’ of January 2004, Federal Reserve economists Andrew Atkeson and Patrick Kehoe found that “..the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929-1934). We find virtually no evidence of such a link in any other period.. What is striking is that nearly 90% of the episodes with deflation did not have depression. In a broad historical context, beyond the Great Depression, the notion that deflation and depression are linked virtually disappears.”

Which makes sense, because in the real world, economic progress means lower prices. As more things are produced with greater efficiency for lower costs, their prices drop – so that you can afford to buy them. It’s a good thing.

What frightens the inflationists is that if we stop the money-printing and other bad policies, they’re out of jobs. The government would have to balance its budget; so the government would probably have to cut spending (i.e., bureaucrats). Companies would have to cut unproductive consultants. Universities would have to cut economists, among others.

Interest rates would have to rise (to historically-normal levels). Real estate prices would come down (making homes more affordable). Stock and bond prices would come down (hurting Wall Street, but making retirement more affordable on Main Street). Bad investments would have to be liquidated (like some bad debts, or the craziest of the “green” or “dot-com 2.0” companies).

And, to allow for real growth and recovery, government would have to restrain itself (removing its jackboot from the economy’s throat; which Europe and even Japan have still not done). But at the end of it, we’d have a healthy economy where the working person can make ends meet; their wages, salary, pension or savings will buy them a good life. Which we don’t have, today.

It’s no coincidence that pro-inflation policies are pro-debt, anti-freedom policies. What we have today is the debt-bloated, gasping economy that you get after decades of such policies. An economy where the TV commentators tell you with a straight face that fast-rising prices (which make YOUR life harder) are required and, if we don’t keep inflation up at 2% a year or more, the world will collapse.

They’re partly right; their world (built on decades of bad policies) might collapse. But yours wouldn’t. Always remember the difference between their interests, and yours. Or who gains from inflation – and who loses.

You’re not spending enough!

by

In saner times of yore, people who spent their entire income were put down as spendthrifts, and people who didn’t were praised as savers.

It was well understood that savers financed the world’s productive capital and so helped to create the Industrial Revolution. The IR used capital to boost the productivity of labor, so that human beings could enjoy good stuff like higher living standards, longer lives, middle-class education and retirement, an end to infant mortality and child labor, etc.

In today’s crazy times, language is turned on its head (to keep the craziness going as long as possible). Savers are now called hoarders, people who hoard money.

Earlier this month, the Federal Reserve Bank of St. Louis published an analysis of our moribund economy, called What Does Money Velocity Tell Us about Low Inflation in the U.S.? The key sentences:

…the unprecedented monetary base increase driven by the Fed’s large money injections through its large-scale asset purchase programs [ed: Quantitative Easing, or “QE”] has failed to cause at least a one-for-one proportional increase in nominal GDP… [ed: though it has certainly boosted the financial markets for “the one percent”]

During the first and second quarters of 2014, the velocity of the monetary base2 was at 4.4, its slowest pace on record. This means that every dollar in the monetary base was spent only 4.4 times in the economy during the past year, down from 17.2 just prior to the recession…the sharp decline in velocity…has offset the sharp increase in money supply, leading to the almost no change in nominal GDP…

The answer lies in the private sector’s dramatic increase in their willingness to hoard money instead of spend it. Such an unprecedented increase…has slowed down the velocity of money…

(Emphasis added.) Get it? If only people would spend all their money, again and again – rather than hoarding it because they need it for bills, or worry about the future – THEN the economy would grow. THEN the Dear Obama-Yellen’s plans would work.

In reality, the economy is restrained by excessive debt and even more, by lack of freedom. As government gets bigger and consumes (or takes over) more of the economy, the private sector shrinks. As government plans, regulates and intervenes more heavily, the private sector gets sicker, lazier and more fearful. Just as Big Government creates more problems than it ever solves, the opposite – Freedom – ultimately solves more problems than it creates.

But that’s not what Establishment economists, politicians, bureaucrats and media want people to know. They’d rather blame, in this example, people who “hoard”. Look for the scapegoating of so-called hoarders to become a drumbeat, as the economy continues to languish into the 2016 election.

If we hit a new financial crisis, they’ll also be sure to scapegoat mysterious “speculators”, as President Nixon did in the 1971 crisis. But they’ll never put the blame where it belongs: on 8+ decades of money-printing and Big Government.