Posts Tagged ‘economic recovery’

Economy on the rebound? No, not really – Be careful what you believe…

Posted: February 19, 2012 in Economy, Federal Reserve
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Just a quick post on something I heard Peter Schiff talk about, which has been discussed many times on his internet radio show over the past year.

He pointed out that the DJIA and other markets around the world have been climbing steadily and doing very well recently. He attributes the larger part of such gains to inflation. He used the Nikkei stock index as an example, citing that the day Japan announced it would continue printing money, thus causing inflation, the Nikkei rose in proportion to the inflation. This causal relationship can be applied to the other markets as well, including our own.

Peter also pointed out that gas prices are rising. Normally gas prices will rise if there is a disruption in supply, or if demand from economic growth outpaces supply. Despite those that like to point to Iran, I believe there is no impact, at least not yet, on gas prices from Iran as there has been no actual disruption in supply. I think Iranian sabre-rattling will be a convenient excuse for the politicians to use in hiding the rapid inflation they themselves are causing.

In fact if gas hits $5 or $6 a gallon, that would be quite a useful tool in the political hat trick toolbox to compel Americans to support yet another war, blaming all their fuel cost woes on a belligerent Iran.

So consider, that if the DJIA and other markets are rising which we have only personally experienced in the past due to impressive economic growth, and gas generally rises from the same impressive economic growth as rising manufacturing demands and consumer demands consumes more fuel, where is this impressive economic growth that is driving rising market and gas prices? There is none. We know this. So it can only be inflation.

So while the media and the politicians point to the markets as showing “signs of an economic recovery” the truth is that stock prices are only rising in value, in large part due to the inflation the Federal Government is creating which is destroying the purchasing power of the dollar, also known as “what’s in your checking account.” We have only seen stock prices rise when the economy is doing good, so we are applying the same assumption from then, to now. This is wrong. The markets are not rising from a good economy. They are only rising because of inflation.

Think of the insidiousness of our politicians in this regard. To purposefully destroy our currency, and then rely on the ignorance of the population so they can lie to them and reference a negative consequence of such currency destruction and sell it as a sign of a positive recovery attributable to the very same politicians. Evil! Brilliant! Successful!

An Economic Recovery Driven By Foreclosures? Interesting idea…

Posted: June 27, 2010 in Economy, Government Failures, Housing Market
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In roaming through my research sites, a fascinating possibility was offered up to account for the “green shoots” and “economic recovery” that we have heard so much about lately.

The theory starts with the millions of foreclosures in the United States which have created millions of home owners that are living in their homes for free.

Well, if you are not paying a mortgage, interest, property taxes, HOA dues, Association Fees, home owners insurance, PMI or maintenance costs…then all of that money you are not spending, can be spent on new cars, new televisions, new gadgets, vacations, new furniture, new boats, new ATV’s, new motorcycles, paying off credit cards and student loans, invested in the stock market, buying gold, etc…

It may well be that this “economic recovery” we are experiencing is nothing more than foreclosed home owners spending the mortgage money on “stuff.” This would look like a recovery driven by “consumers.” This would be false.

If this theory is true, then this “recovery” is headed for a cliff. Again.

Spin vs. Fact and GDP Contracts Net -.2%

Posted: December 2, 2009 in Government Failures
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The Spin (consumer spending increased!)

“Though cautious, consumers are holding up despite high personal debt, a tight job market and hard-to-get credit. A government report out Wednesday is expected to show consumer spending rose 0.5 percent in October, compared with a 0.5 percent drop in September. Incomes, the fuel for future spending, are expected to edge up 0.2 percent, after being flat.”

The Facts

Consumer spending rose .5%.  What does that mean?  That means if you spent $1,000 last month, then this month you increased your spending by $5.00. Five bucks.  Wow.  A $5 buck increase for every $1,000 in spending doesn’t sound like a recovery to me.

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The Spin (stock market surging!)

“Over the past few months, though, the stock market has surged. A rally on Monday carried the Dow up 133 points to its highest point in just over a year.”

The Facts

The stock market is based on stock prices.  Stock prices are based on how well companies are performing. If stocks go up, then companies are making more profits which means the economy is recovering.  At least, that is what they want you to think.  Unfortunately this is a fallacy of causation.

Companies can make more profits in two ways. They can increase sales, or they can cut costs.  One way to cut costs is to lay off a lot of workers.  That means you are squeezing more productivity out of fewer people.  So even with the same sales, or even declining sales, when you decrease costs, the area between your cost and your sales is your profit.  So the more you cut costs, the larger that “profit” area gets.  As long as you can cut costs faster than your sales are declining, it will still look like your profits are going up.   And yet, the media use this as an example of economic recovery even though clearly, it does not necessarily mean that.

On the news they will say, “higher productivity” led to increased profits.  This is a sneaky  use of the word, “productive” which is like “produce.”  This doesn’t mean the company “produced” more because of more demand for their product, which would be a sign of economic improvement, it just means that each employee has been forced to be more productive in their job because there is less of them at the company.  So again, higher productivity can still mean the company is experiencing declining sales, i.e., poor economic conditions.

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The Spin (GDP rose 3.5%! The economy is recovering!)

As I mentioned in an earlier post, the government released a 3.5% increase in GDP.  This was all over the government “cheer-leading-pom-pom” news as a sign the economy is recovering.

The Facts

The 3.5% GDP has been revised down, which is not unusual.  The new GDP is 2.8%. Somehow I bet we won’t hear much about how it was revised down in the news.

In my prior post I did some quick math to show how 3.5% was really only 0.5%.  Let’s review:

  • Cash-for-Clunkers and the federal home buying incentives made up 1.5% of the GDP
  • Inventories are in decline, but they declined less in Q3 which made up another 1% of the GDP
  • Government spending was 0.5% of the GDP

So, removing government spending and a “slow down” in the decline of inventories, you are left with only 0.5% GDP.  Hardly a recovery.

Now that GDP has been revised down to 2.8%, what you really have is a negative -0.2% contraction.

Those stubborn facts.  Always getting in the way of our government’s pom-pom propaganda.

How Our Government is Destroying the Dollar

Posted: October 25, 2009 in Government Failures
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INFLATION GRAPH

Please click on the image to see it full size.

Our government has in effect been operating the ponzi (pyramid) scheme I outline above.  The end result will be the destruction of the U.S. dollar and a serious drop in your standard of living.  The government is doing several things that are destroying the dollar, this is just one example of many.

The government prints money out of thin air and offers it to banks at 0% interest.  The banks are supposed to use this money to make loans out to everyday people and businesses to encourage growth in the economy, but that’s not what they are doing.  And I don’t blame them.  Why take a risk like that with some Joe-borrower, when you can borrow the money for free from the government (at no interest) and then buy risk-free bonds from the government that pay you back 3.5% interest.

The government in effect gets its own monopoly money back, but now owes 3.5% in interest payments to the bank.  This is paid for with more monopoly money.

Don’t you wish you could do that?  Borrow money for free, then invest it, and sit back and enjoy the interest payments you get.  Since the money doesn’t cost you anything, there’s no limit to what you are willing to borrow.  You will borrow as much as the lender is willing to give you.  So consider what that means.  The banks have no incentive to stop using free government money to buy bonds and enjoy the interest payments.  As long as the government keeps printing monopoly money, the banks will keep borrowing it.  There is no end.  Except for one, rampant inflation as all these dollars are created by the government to feed this never ending cycle.

Anybody can see that this pyramid scheme the government is running is going to end badly, and the end will be a serious bout of inflation.  A flood of dollars will pour into the economy which drives down the value of every single dollar there is, including the ones in your wallet.  As the dollar value declines it will take more and more dollars to buy everything from gas to groceries and because the economy is still failing, your income won’t increase to compensate for the loss.

This all comes down to a serious decrease in your standard of living.  Prices go up while your income stays flat.  The specter of unemployment will continue to loom in front of you every morning (unless you work for the government or a union), foreclosures will rise and house values will continue to decline.

This is our future, courtesy of our federal government, specifically The Federal Reserve.

One more reason to END THE FED.

Resistance

Posted: October 21, 2009 in Government Failures
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BigGovernment-751605I hate being an activist.

I was perfectly happy being a business systems analyst and accountant.  I had plans that I had to put on hold because of the economy.  Since I tie the delay to my future happiness to the economic meddling and social experimentation of our government, I get angry.  That’s what turns everyday peaceful working class citizens into activists.

And when I use the term, “activist,” I don’t mean the Greenpeace type vigilantism that rams whaling boats and such, I mean the activist that simply resists.

Those who are of the government and represent the government will always attempt to kill the message by killing the messenger, often through character assaults.

It is simple for them to say, angrily barking into a CNN camera with a furrowed scowl on their face, that fighting against this or that thing which the government wants to do makes us one of “those activists” or “right wing extremists.”  By psychologically manipulating others to associate us with violence, terrorists or extremists, they destroy our message no matter how logical, sound or truthful.

The truth is, WE are the everyday American.  We work, we live, we have families and we want to do more.  We want to grow personally, we want more for our families, we want to be in a position to help others and to prepare for the future.  When government intervenes in those plans, and decides that it knows better what you should be doing, and forcefully takes what you have earned and gives it to those who government decides are worthy, then government becomes the extremist.  Government delays dreams, destroys wealth and takes away your natural freedoms.

So I say RESIST.

My resistance started only five years ago by educating myself through books on how the economy works and how government impacts that economy.  As I learned I decided I needed to share this information which led to this blog.  Future posts will outline additional ways we can resist.

While your life is on hold, while you wait to continue working on your dreams, while you hold your breath everyday to see if you still have a job, while you wait to own a house or for the value of your house to return, while you wait for your investments to recover their losses, while you wait for decent schools and teachers, while you wait for your dollars to be worth something….resist that which put you and your life in this position of waiting.

Resist the redistribution of wealth, resist the expansion of government, resist the development of a nanny state and its socialist programs, resist the national debt and deficit spending, resist labor unions that lobby for neverending pensions and pay raises without accountability for performance, resist The Fed and resist the government’s manipulation of the economy and the free-market system.  Don’t just Exist…

RESIST.  RESIST.  RESIST.

Dont Tread On Me

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