Tuesday, June 7, 2016

The Obama Economic Recovery

Over at the Zero Hedge blog “Tyler Durden” takes the full measure of the Obama recovery and concludes that it is smoke and mirrors, supported by massive money printing from the Federal Reserve.

He has the charts and graphs to prove it:


He writes:

This means that while Obama may have inherited a bad economy, contrary to the endless propaganda, the economy has only gotten worse. One needs only to go on a very short drive through any of the neighborhoods of Obama's native Chicago to get a clear realization of this sad fact (while wearing a bulletproof vest).


Ignatius Acton Chesterton OCD said...

Mr. Schneiderman, you are yet another one of the doomsayers "peddling fiction" about the real and robust Obama recovery.

Shame on you, sir. You belong in a re-education camp.

Sam L. said...

Hey, folks, get your tickets NOW for the EIGHTH Annual Tour of The Summer Of Recovery! Go to www.summerofrecovery.com, or call our operators at 1-800-IMAFOOL. (We'll let you know if they're coming to a venue near you.)

Ares Olympus said...

Zero Hedge and Tyler Durden are great at showing problems, and as Trump says "We have lots of problem."

My own interpretation is to call this a "controlled descent", something a jet airliner can afford to do at 35,000 feet, but the Titanic can not. Or what James Howard Kunstler called a decade ago "The Long Emergency" If you "let things fail" you allow too much destruction, so we have to keep putting out all the fires until we can't.

It would be cool if we could do one of those quantum timewarps (or Christmas Carol ghosts of Christmases future) and explore an alternative future where Bush and Obama refused to bail out the banks, and allowed the liquidity crisis to sink 90% of all the investment banks into insolvency and we hit 40% unemployment due to frozen credit markets with millions of individual and corporate bankruptcies adding up. Then we could observe our parallel universe for a few more decades and decide which ultimate future is better.

Unfortunately democracies don't seem to be able handle 20 year correction cycles. Whatever the current leadership does, their rivals decry it, and then when they gain power, they do the same failed tactics as those they removed from power.

Myself, I have no kids, and no debt, and I'm okay with the "let the markets correct for 20 years" approach and see what comes out. But who am I to advocate for 20 years of misery just because we spent 40 years trying to avoid misery?

The U.S. economy certainly looks like crap, as long as you don't compare it to the rest of the world. I'd definitely rather live here than anywhere else, although Canada might look better than my annual $6200 health care deductible.

Meanwhile every just has to believe this is a partisan problem, and if we can just get the right leadership, we can Make America Great Again.

It might still be that single-party China might still come out ahead despite all their problem, despite all its insane new debt, its just symbols on paper, right? They're used to losing 60 million people through starvation, and relocating millions of people for huge dam projects.

It's going to take a Trump presidency to have half as much "true grit" as the Chinese.

Ares Olympus said...

p.s. Here's an interesting blog talking about something the U.S. hasn't attempted yet, negative interest rates. You can be sure anyone trying this is more desperate than we are, although we're close. We're only better off now because we hold the "global reserve currency" status.
...But first let us back up a bit and answer several preliminary questions:

1. Why did zero interest rates become necessary?
2. Why are negative interest rates now necessary? and,
3. Why are negative interest rates a really excellent idea?*

* if you ignore certain unintended consequences (which is what everyone does all the time, so let’s not worry about them just yet).

1. Interest rates went to zero because economic growth went to zero.

Interest rates and rates of growth are related: a positive interest rate is little more than a bet that the future is going to be bigger and more prosperous, enabling people to pay off the debts with interest. This is an obvious point: if your income increases, it becomes easier to repay your debts; if it stagnates, it becomes harder; if it shrinks, it eventually becomes impossible.

2. Once you are faced with a continuously shrinking economy, just holding interest rates at zero is not sufficient to forestall financial collapse. The interest rates must go negative.

3. Are you starting to see how this works? Whereas before you had to be careful about taking on debt, and had to have a plan for how you will repay it, with negative interest rates that is simply not a consideration. If your debt pays you, then more debt is always better than less debt. It no longer matters that the economy continuously shrinks because now you can get paid just for twiddling your thumbs!
Negative interest rates are an excellent idea—and perhaps the only way to keep the financial game going a bit longer—but, given these unintended consequences, they are also a terrible idea. The bankers know that. They want to preserve their cult’s status, and constantly talk about raising interest rates. But they haven’t yet, because they also know that just a small increase will result in trillions of dollars of losses, triggering widespread business failures and ushering in the Greatest Great Depression Ever.

This is not a problem for them to solve; this is a predicament. They will delay and pray, and make pronouncements loaded with keywords designed to please the high-frequency trading algorithms that are in charge of artificially levitating the “free market” with judiciously timed injections of “free money.” But in the end all they can do is act brave, wait for a distraction and then… run for the exits!

And your job is to make it to the exits before they do.

Ignatius Acton Chesterton OCD said...

Ares Olympus @June 7, 2016 at 2:17 PM:

"Zero Hedge and Tyler Durden are great at showing problems..."

And you spent the rest of your comment showing more problems. I hear nothing but complaint and concern, punctuated by comments that you don't care, except for your healthcare deductible, which you yourself chose as a health insurance consumer. Be grateful you still have a choice. You don't get a choice in Canada, unless you want a private supplemental plan.

"It might still be that single-party China might still come out ahead despite all their problem..."

The Chinese are coming out ahead? As a "single-party"? Turns out the consequences of corrupt, single-party rule are what stand in the way of Chinese economic growth beyond the commanding heights of the economy (like building dams). To get to the next level, they're going to need entrepreneurship, and corrupt, centralized, quasi-communist control won't deliver that, because corrupt, centralized, quasi-communist control can't coexist with an entrepreneurial class. That's a ceiling, a barrier. It's built into a single-party system. The Japanese Liberal Democratic Party had the same problem with its monopoly, when the Japanese "miracle economy" collapsed under its own weight. Single party systems don't work. Look at California.

So, after complaining about others being "great at showing problems," ummmm.... what did you actually say, Ares? Looks like a pile of problems to me.

Ignatius Acton Chesterton OCD said...

Ares Olympus @June 7, 2016 at 2:43 PM:

"And your job is to make it to the exits before they do."

Wow. Uplifting. Ares Olympus' vision of the future is "every man for himself."

By all means... keep voting for Democrats.

Ares Olympus said...

IAC: Wow. Uplifting. Ares Olympus' vision of the future is "every man for himself."

My intention wasn't to say we don't have problems, although we do have a problem in our ability to avoid our problems that have no solutions. Since we don't know what future is possible, we don't know how far we should compromise for security and how much we can afford to bet on ingenuity.

And the investor classes are only looking at returns, not long term viability, which means exploit the cheapest assets and resources first and let the future deal with what's left. That's capitalism, not my vision.

And my vision isn't "every man for himself" but just the opposite - recognizing the centralize power (governmental or corporate) we've depended upon isn't going to save us. It only gives us more time to find our own individual peace with our collective predicament. Centralize systems will break down, but if this happens slowly enough, localized responses will have time to be discovered.

So solutions are built up from individuals to families to communities and all organizations and institutions of common interest. Some of these will be exclusive, and some more open.

But we're still in an open time and place where you can move away from poverty, move away from areas that are failing to thrive, and make a bet on a new home elsewhere, mainly in the big cities. But the global refugee crisis now going on shows that when economies fail, and too many people start moving, at some point borders are going to close, even perhaps between states, or maybe more likely in "gated communities" that protect the well-to-do. I saw that when I was in Mexico City, walled schools with broken glass and barbwire on top, and it makes sense it will continue as people look to ways to protect themselves from the chaos.

How will we decide who deserves a leg up, and who should be kept on the far side of the wall? Meritocracy (or creditialism?) offers one answer. The rich will make the rules at some level and decide who is useful, and who needs to be controlled.

Everyone says we've "kicked the can down the road" and every decision the government has done is pushed problems into the future. Corporations are not in much of a better place with endless mergers with ever more debt.

So how do you suggest I be "uplifting" to say there is an indefinite end date to our procrastination?

The good thing about betting against the system, is I can be happy if I'm wrong, and if I'm less vulnerable in the next crisis, I'll be one less person looking for handouts.