Townhall...
Obama Economy Worse
Than 1970s
By Floyd and Mary Beth Brown
The worst economic conditions in recent memory were during the Jimmy
Carter era of stagflation. Stagflation was a term coined in the 1970s
to describe high unemployment with high inflation. Stagflation is back.
Translation: America’s middle class is getting poorer; a record number
of middle class workers are out of work. If you are lucky enough
to have a job, your wages aren’t going up, but you are facing higher
prices for everything.
“Recent data suggests that the current economic recovery is both
sluggish and slowing with unemployment stubbornly high.” This from a
page one story in Investor’s Business Daily.
The Obama/Bernanke partnership has been a bust.
The Fed is winding down Ben Bernanke’s experiment in money printing
called “QE2”. He trumpets his success saying that QE2 has pointed the
U.S. economy “in the right direction.” But did it really? It
turns out that QE2 has created maybe 700,000 full-time jobs, but at a
cost of about $850,000 for each job.
All QE2 did was create a boom in the stock market. Wall Street bankers
reaped millions while the average investors barely made back some small
amount of the money that they lost during the 2008 crash.
We believe this boom is an easy money mirage. As MarketWatch.com
reports, “But even the stock market boom hasn’t been what it appears.
An analysis shows that most of the rise in the Standard & Poor’s
500 Index under QE2 has simply been a result of the decline in the
dollar in which shares are measured. Measured in hard currencies, the
stock market boom has been much less impressive. In Swiss francs, the
S&P has risen by just 8.4% since Aug. 27. In currencies like the
Swedish krone and Australian dollars it’s even less. Measured in gold,
the S&P 500 is up just 4.5%.”
QE2 has had little visible effect on the real economy. Over the
same period, the number of part-time workers has gone down by 600,000.
In other words, we’ve basically shifted 600,000 or 700,000 workers from
part-time jobs to full-time jobs.
Marketwatch.com continues: “The percentage of the population in work is
actually lower today - 58.4%, compared to 58.5% last August. The
percentage of the work force in actual work, the so-called
‘participation rate,’ has fallen by half a percentage point.”
Housing is no better because of QE2, as April housing starts fell 11%.
Marketwatch.com says, “Housing is double-dipping. According to the
National Association of Realtors, the average price of an ‘existing’
home was $177,300 in August, just before QE2. Now it’s $163,700 - or 8%
less. Economic growth has slowed. It was 2.6% last summer. It’s a
miserable 1.8% now. Meanwhile inflation has risen, from 1.2% before QE2
to 3.1% now.”
We all wish for better news, but Obama’s policies are pointing us in
the wrong direction. Regulation of business is growing. One CEO of a
mining firm we talked with said he is looking for new projects abroad.
“I have been fighting for nearly a decade to open a new mine in
Montana, and at every turn the government places roadblocks in my way.
How am I to create any jobs?”
If Obama’s tax policies are enacted then we could see marginal income
tax rates of 60% in some states. Obama clings to socialism and
his new programs in healthcare and welfare. They all retard
growth. Unemployment taxes are at record highs in most states and this
further depresses hiring.
The Fed has invested nearly $2 trillion in Treasury debt since 2008.
The investment hasn’t paid off, but when the relentless buying of US
Treasury debt ends, we have no similar experience to guide us. One
result could be even further collapse and a full blown depression.
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