Friday, August 10, 2012
When an Insufferable Blowhard Runs Out of Money This is What it Looks Like
By John Ransom
Let me set the scene for you: Rising oil and gas prices, rising equity prices and falling housing prices. Storm signals start winking on the global economic front after a month of a braggadocious presidential tour telling us all that finally the economy has got it right; that it’s on its way to recovery.
Where have I seen this film before? Oh yeah: February 2010, 2011, 2012.
In his State of the Union address of January 2011 and 2012, Obama was bragging about his economic accomplishments.
“We are poised for progress,” he told Congress in 2011. “Two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing again.”
At the start of 2011, the president was an insufferable blowhard, anxious to let us know that he saved the economy. He was even more of a blowhard in December going into 2012.
But after successfully destabilizing the Islamic world by intervening in Libya, Obama, along with loose money policies of the Federal Reserve, created successively higher oil prices as more and more regimes felt pressure from the Islamic Spring and Obama stifled production at home. And it wasn’t just oil prices, either, that went up. Food prices, gold and silver and other basic material prices were heading up just at a time when the global economy was showing signs of slowing.
Inflation then acted as a brake on economies that were struggling to gain traction.
Then Mr. President Obama- who has always looked disinterested in real policy work- took several long vacations, inspired a sovereign debt crisis in the US and started the class warfare rhetoric that he now clings to bitterly as a substitute for religion and guns and real tax reform.
Several sovereign debt crises later, the largest economic union in the world, the Eurozone, is on life support, while China deteriorates economically and Japan is listless.
And how did America do in this after all of Obama’s bragging?
Corporate profits are mixed, unemployment is ticking back up, while GDP grows at about 1.5 percent annually. The S&P 500 returned a measly 1.02 percent for 2011, however much Obama was roaring about the stock market in January.
Apparently the president doesn’t get to decide in January what the market will do for the year.
Now Obama knows that.
Investors, who make economic decisions, not political speeches, didn’t buy the all-is-well mantra and bought very little equity in the stock market in 2011, despite “record profits.”
This time around, in 2012, as Obama’s economy rises from the dead once again, he’s claiming only to have saved the auto industry on the backs of the taxpayers’ gift of ten and twenty dollars bills that stretches out a billion times.
General Motors, which made “record profits” last year, after getting the largest forgivable loan in the history of mankind- seriously- from the federal government, has announced profits have plunged.
Investors haven’t been buying those “record profits” either, chasing shares down to $20 from an offering of $33 in late 2010. $54 is break even for taxpayers- I guess investors were waiting for higher “record profits” before they are convinced that GM is as valuable as Obama says.
Now Obama has a big problem.
He wants you to believe that the economy is so bad that he needed trillions more to fix it. If that’s true, then all the bragging in the world by him isn’t going to remove the responsibility he has for the mess that he’s created over three years.
But he also wants you to think that things are improving as well. If that’s true, if unemployment is heading downward, as Obama would want you to believe, then the question becomes: Why does he need trillions more to fix an economy already in recovery?
It’s clear the both-ways president, as usual, wants it both ways. He wants to declaim any responsibility for anything, while taking credit for everything.
He got Bin Laden, he saved GM and he blamed Bush.
Subtle clues can be seen in places other than the bottom line of the employment report that the economy is fragile and at risk of fracturing.
Let’s for a moment ignore the contortions that socialist economists execute in order to make it appear the best-of-times and the worst-of-times alternately for the benefit of Obama.
Millions of people have left the workforce in the last year, driving labor participation rates to a 30 year low and costing the economy literally hundreds of billions of dollars per year. Consumer sentiment is down markedly, but that’s a lagging indicator of the economy. Confidence will be meaningful only on election-day. Even still, consumer confidence is well below what is considered healthy- for an economy or a president.
Getting the picture?
While GDP was not-so great in the first half, that was a one-off event. It will be a disaster in the second half of the year. And the first quarter of 2013 will be decidedly worse, maybe even 2008-9 type worse.
Already we have seen durable goods orders drop. And quarterly dividend futures point to companies eager to retain cash despite “record profits.”
Now add into that potent mix of economic miasma: 1) an Obama energy policy that has resulted in higher, less stable prices; 2) an Obama foreign policy that has resulted in more hostile and less stable global relationships, and; 3) world wide central bank policies that admits of one conclusion: We are out of money.
We. Are. Out. Of. Money.
So this is what it looks like when an insufferable blow hard runs out of money?
To read another article by John Ransom, click here.
Posted by Brett at 4:56 PM