Tag Archives: stimulus

Obama's Policies Not Going the Distance

Other than Jimmy Carter, I am not sure we’ve had a President in recent history with so many policies that failed so dramatically so fast.  President Obama promised that he would do health care reform, wall street reform, and then he had his Keynesian stimulus policies tested.  So far, the mighty Obama.. has struck out.

Cash for Clunkers
Cash for clunkers: clearly the best medicine for ailing Detroit (which we Citizens had invested heavily in 2/3 of.  Certainly, the pouring of tons of federal dollars (a.k.a. your money) would help float the unions .. I mean manufacturers.. so that they help the economy recover.  Well, not really.  In fact, it shows that $3 Billion of tax payer money, does not buy happiness – or economic recovery as the case may be.  In fact, it may have delayed the recovery by 4-6 months as the industry was already seeing an upward slope in sales until the program caused them to see a quarter-over-quarter sales rate loss during the program.  One whole month showed a spike, after which a devastating drop in sales showed up, well below where the manufacturer’s numbers were before the program began.

If that wasn’t the medicine of truth, how about the truth about medicine?  Health care reform has now been cast into daylight – burns a little doesn’t it?  The government’s own Congressional Budget Office is saying that the program does not cut costs or the deficit now that the facts are known, doctors are dropping Medicare patients at unprecedented rates, pharmacies are running away from the program and even Canada, Oh Canada, is re-factoring it’s overly-expensive, government-run system (I know, not Obama’s fault, but he did try to  model this mess after them).  Then again, Speaker Pelosi did honestly say that Americans would find out what was in the bill once it got passed – we’re learning.

Then we have the President’s wall street reform (aka Financial Reform).  Even the liberal media admits that the financial reform bill doesn’t end “too big to fail”.

So cash for clunkers turned into your cash in the toilet, health care reform has given your cash to the reformers, and the financial reform doesn’t do anything to prevent your cash from disappearing into the bowels of  Wall street.  The President is claiming success on all of these things, and is thrilled about the Duke jersey he scored.  The rest of us.. not sure what we’re getting for well over $3,5 trillion dollars in reforms and stimulus.

So what’s an all talk, no action President supposed to do?  Well, ours is talking more – this time about cap-and-trade, alternate energy, and cap-and-trade policy, more new policy.  So far.. he’s Oh-for-three.  Can he take batting .000 after four at-bats?  .000 with the bases loaded even?  Sure he can – his contract isn’t up until 2012.  Let’s not renew it.

Obama to Hold Jobs Summit and Continue Weakening of Dollar

Ok, he didn’t literally admit to weakening our currency and setting us up for record inflation, but he might as well have.   In the President’s unusually short speech this morning, Obama again touted his fictitious one million jobs saved/created number, the government-sponsored GDP growth in the third quarter and that the new jobs figures that show another half-million Americans out of work are good news.

The President went on to basically admit two things Americans figured out long ago:

  1. He has no idea how to spur the economy and create jobs (or has no intention to)
  2. He plans to continue weakening the dollar

Obama being the politician that he is didn’t say these things as honestly as he could have.  Instead he disguised them as positive moves.

Instead of saying that he’s clueless on how to fix the economy, the President announced that he will hold a jobs summit next month.  Will that summit then be followed by several months of talking with his advisers as in the Afghanistan troop decision?  If a summit was needed, why didn’t he hold this in January or February?  Wasn’t Obama aware that unemployment was an issue back then?

Secondly, the President informed us that he intends to make the dollars we hold, less valuable.  Despite little Timmy Geithner’s remarks yesterday that a strong dollar is “very important” for our economy, it is fairly obvious that the Treasury, Federal Reserve, and Obama are all focused on pushing the dollar into a low-weight currency.  In the President’s remarks this morning, he said that we would be changing our economy from one of consumption of foreign goods to one where foreign countries buy our products.  To create this international trade  reversal would require a massive devaluation of the dollar to make our exports competitive with cheap Asian exports.  The flip side of making our products cheaper for other countries is that everything will get more expensive for us.

Most news outlets are focusing on the short-term jobs summit, but there was much more in what Obama said than just more useless talk about an ineffective gathering of worthless people to come up with a plan that will continue to do nothing.

Massachusetts Says Stimulus Money Created “Almost Nothing”

Government-created economic stimulus is unsustainable and does not create or save anything.  It simply delays the inevitable.   The ARRA (American Restitution and Redistribution Act) has done nothing to improve the actual economy, and The Globe finds more evidence:

One of the largest reported jobs figures comes from Bridgewater State College, which is listed as using $77,181 in stimulus money for 160 full-time work-study jobs for students. But Bridgewater State spokesman Bryan Baldwin said the college made a mistake and the actual number of new jobs was “almost nothing.’’ Bridgewater has submitted a correction, but it is not yet reflected in the report.

The globe goes on to help us understand that in some ways, the stimulus spending has simply been replacing money the government already spent.  The obvious ploy, to get those institutions to reply on the strong-armed ARRA survey that their jobs had been saved or created:

In other cases, federal money that recipients already receive annually – subsidies for affordable housing, for example – was reclassified this year as stimulus spending, and the existing jobs already supported by those programs were credited to stimulus spending. Some of these recipients said they did not even know the money they were getting was classified as stimulus funds until September, when federal officials told them they had to file reports.

It would also appear that the government paperwork is confusing (surprise – seen the IRS B.S.?).  Some recipients say that they never asked for the money and certainly not the administrative overhead – then again, administrative overhead is how the government creates most jobs:

“There were no jobs created. It was just shuffling around of the funds,’’ said Susan Kelly, director of property management for Boston Land Co., which reported retaining 26 jobs with $2.7 million in rental subsidies for its affordable housing developments in Waltham. “It’s hard to figure out if you did the paperwork right. We never asked for this.’’

It’s been widely-reported that the stimulus package has failed to do much more than give Obama another opportunity to practice his gift of gab.  Unemployment has continued to grow, the dollar is shrinking, gas prices are approaching $3.00 again (and have crossed it in some areas).   As the news reports float in, more may realize that speeches were not enough and the stimulus was a wasted of almost $800 billion.

China Seeing Record Inflation After Too Much Stimulus – Familiar?

A Bloomberg.com article stated that even a government-run economy can go awry when it pumps too much liquidity into the market under the guise of “stimulus”.

“China’s banking regulator plans to review debt levels at some real-estate developers on concern the companies’ borrowings are fueling excessive gains in property prices..”

More the concern is what happens when that stimulus is removed.  The U.S. economy faces the exact same threats.

The Economy Stinks and the GDP Doesn’t Have a Clue

We all gain an understanding of gross income vs. net income when it comes to tax time and many of us forget the relationship shortly after.  What do these two terms have to do with our economy?

The U.S. G.D.P. (Gross Domestic Product) is an indicator of the total of goods produced with no regard to the cost of producing those goods.  Gross simply indicates the positives with total disregard of the negatives.  Your gross income simply states what you brought in without taking into account any costs against that income (deductions).  The resultant is net income.

This becomes important in looking at how our Gross Domestic Product rose.  It did not do so on the basis of productivity or demand alone.  GDP rose because the government gave it no other choice.  Even the White House has not argued against the fact that cash-for-clunkers and the stimulus package are totally responsible for the current positive GDP.

That means that 100% of the GDP increase came by taking money away from the economy (the private sector).  We also have a measure called Net Domestic Product which would more accurately measure the strength of the true economy, but no one is talking about that number.  In fact, I can’t seem to find it on the Bureau of Economic Analysis website or much of anywhere else.

Imagine that you brought in $60,000 gross income in 2009, but you spent $60,000 to get it.  Obviously, you wouldn’t have gotten to keep anything and your net income would show that.  You would have had a net income of $0.  That’s where we really are in Q3.  A GDP that was totally brought about by spending our own money.  That’s a net of zero, zilch, nada, nothing.

The concern isn’t just the absolutely misleading indicator that GDP can be when the costs of that product are not quantified.  It’s what happens when the input to that product are removed.  For our economy, that’s the already over cash-for-clunkers, the recently-ended first-time home buyers tax credit and the White House admitting that the stimulus probably won’t provide much more than it already has.  When all of that taxpayer funded productivity is gone… we have a mess in the form of a double-dip recession or W-shaped recovery.  These are typically slaughters for all those that believed that the economy was improving instead of understanding that the government was just making it appear as though it was improving.  Many people leverage themselves (new car loans, credit card debt, etc) or invest a large portion of their nest egg thinking that things can only get better.. only they don’t.

The government tells us that GDP made its largest gains in a long time, but then we look at the fact that consumer spending took the largest drop in more than 9 months and that real incomes (our paychecks) haven’t gone up at all during the Obama reign).  70% of our economy is directly tied to consumer spending and our money.  It’s obvious where the increase in productivity came from and it had nothing to do with a basic improvement in the American economy.

Business understands this and is continuing to lay-off or hold-steady on employment and investment.  Professional investors understand this and are trying to get out while maintaining some profit (lately it just looks like they’re getting out).  Some Americans understand what’s going on and are deleveraging (paying off credit cards, loans, and real-estate) at an historic pace.  When we look at the fact that 9 banks failed this past Friday, it would be hard to see a picture as-rosey as Obama would have us believe.

The Economy is Not Getting Better.. Yet

Much of the media has been declaring an end to the recession.  I have been on the sidelines for months now and a few talking heads were not going to get me to throw my assets at a loser market.

I have done my best not to sound like Chicken Little, but there was absolutely no way I could in good conscience influence my readers into putting their assets into this bubble after the bubble.  The government needs you leveraged, consuming and cash-strapped.  This is not the time to be any of those.  Despite the GDP rise, which is quickly-becoming a false indicator, we are not recovering.  The government can’t even figure out why the GDP rose, but both of their explanations point to government liquidity in the market, not economic recovery.  My recommendations?  Put away some cash, get out of debt, invest, by cool stuff.  In that order.

I am not hedged against gold, a short on the market or in any other way trying to influence you so that I can make a buck.  I am conveying my current position.  My positions in the market during this whole fiasco have allowed me to increase my retirement account by11%, make money on a few equities, and overall protect my family’s assets.  Why?  Because I did not believe the Bush crew, I do not believe the Obama team, and I never believe the media.  I do my own research, look for true indicators, not just the cool meter that CNBC flashes or that Bernanke points at.

If I am wrong, I’ll admit it (my promise is that if Q4’09 and Q1’10 show growth over last year… I’ll write an article entitled, “I was wrong”), but so far… hasn’t happened.  I am struggling to figure out if we will go inflationary or deflationary because our government can’t make a decision and is making some of the most dramatic and ill-advised moves in history.  That is the same reason that business will cease to spend money.  A wise investor will not put money into a market if they cannot understand the principles upon which the market it based.  Our leadership wants to disassemble capitalism “brick-by-brick”, redistribute wealth, control the media, etc.  These uncertainties prevent me from doing any real investing.

In September we see that consumer spending dropped off dramatically.  Why?   Because the government wasn’t buying cars and houses for people anymore.  It proves that the economy isn’t recovering, only that the government was propping it up.  Even the administration admits that the growth in GDP was due to cash-for-clunkers and the stimulus bill.  That means that the American economy didn’t do anything.  It also means that the government’s artificial propping-up of the auto and housing industries will just cause a secondary crash in both.

I do not intend to cry, “the sky is falling”, but if that’s what it takes to prevent you from losing your nest egg, house, or livelihood, then so-be-it.  Call me Mr. Little if you must, but save, de-leverage, invest… then buy cool stuff.

Mortgage Bubble Started Crisis, Isn’t Getting Better

Last year the economy crashed.  Now, the stimulus has stimulated, the Federal Reserve has eased, Geihtner has.. well done whatever he does, and Obama has spoken (certainly that should have fixed everything).  So how did we hit 9.8% unemployment since the stimulus was an emergency action that would keep unemployment from going over 8%, pumping massive amounts of liquidity into the economy should have loosened credit, little Timmy G. and Obama bought GM, AIG and Chrysler and they helped everyone buy a new car that wanted one?  It must be that G.W. Bush must still be affecting the economy from his ranch in Texas…

Today, the Mortgage Bankers Association published it’s index of applications.  The measure of home mortgage applications dropped 14% last week.  When broken-down, the measurement of refinancing applications decreased 17% and new home purchases declined 7.6%.  When combined with  yesterday’s less-than-stellar housing starts report, it’s apparent that between TARP, ARRA (stimulus), the Fed, government buyouts, the first-time buyers credit, and a truck-load of printed money.. the housing crisis is still glaring us in the face.

The trouble isn’t that the government isn’t doing enough – thankfully.  The trouble is that due to too much federal meddling, we never let the bubble fully burst.  Economies go through boom-and-bust cycles.  Even socialist countries deal with economic cycles that go up and down.  By propping up a bursting housing market we end up with artificially high housing prices and no one that can afford them.  Mortgage rates can’t get any lower and demand still isn’t there.  If you have too many goods (houses) being chased by too few dollars… that’s deflationary to that market.   Our dollar is weakening due to the government’s reckless printing.

A Yahoo! Finance article states that economists expect home sales prices to decline more than 11% by June of 2010.  That’s fairly rapid and could trigger the second half of a double-dip recession when combined with the commercial loan crisis about to hit the financial industry.

So now those few dollars chasing mortgages aren’t worth as much (notice your gas prices the last seven days or so – welcome to inflation).  The Fed has kept rates near zero so now they can only go up – and they are.  All this means those houses have got to get cheaper to get sold.  Meaning destroyed wealth for millions of Americans as their house values plummet.  The housing bubble will certainly bust and the more the government props it up, the worse that crash will be.

Unemployment Suffers Under Big Government: Reagan Had The Answer

The chief of the Atlanta Federal Reserve said on Wednesday that the unemployment rate is actually 16%, “If one considers the people who would like a job but have stopped looking…”. Discouraged workers are one of the dirty little secrets of the Bureau of Labor Statistics (BLS). It’s a secret the Obama administration is happy to let continue on.

It is to be expected that people would eventually give up on looking for a job after spending months and months competing for fewer and fewer jobs. The longer a jobless period lasts, the more people drop off of the unemployment rolls. So the longer this lasts, the more the rate will appear to slow-down or even deceptively improve. The signs of improvement are not so and there’s more.

Unemployment line

Unemployment line

President Obama stated that the stimulus would create or save 2.5 Million jobs. According to the BLS, all we’ve seen is job losses since the start of this recession and that picture has not improved at all since the enactment of the American Reinvestment and Recovery Act (The Stimulus Bill). We were shown the fact the the unemployment rate stabilized in July to somehow back this up as jobs saved. Unfortunately, by reviewing the BLS statistics we see a different picture.

To get the real picture, we didn’t look at the deceptive unemployment numbers the government chooses to use.  Instead, we analyzed the employment statistics.  Basically, we looked at who had jobs in recent reports, and who has a job now then we broke-out the calculator.

For all 50 states (yes Obama, fifty), there were 134,300 fewer working people in August than in July. Where are the created jobs? We actually have the answer, and it has nothing to do with government stimulus.

We plotted the numbers state-by-state, then added in personal and corporate taxation as a factor. A not-so-surprising result appeared. States with less-than-median corporate tax rates, gained jobs – 13,600 of them. Wait, tax-incentives improve an economy faster than bottom-up government spending? Who would have thought, besides Reagan. It gets better.

States that had no personal income tax, gained 35,700 jobs. This can’t be. Obamanomics, Stimulus and bottom-up big-government, were supposed to stave off job losses, not Reaganomics. Evil, entrepreneurial, trickle-down only serves the greedy CEOs (and the 49,000 people that apparently got jobs in states that bothered to practice it).

It’s obvious that President Obama did not start the recession, but like Roosevelt, he is using big-government solutions to intervene and may have made it longer and more detrimental than it would have been if market forces had been allowed to work. This is another failure of bottom-up economics by the likes of Hoover, Roosevelt, Carter, now Obama – not great company if you want to be the savior of the economy. Due to the stimulus act and a monstrous influx of government money in to the private economy, this is now Obama’s economy – good or bad.

Just last month Vice President Biden told us that the Stimulus had performed better than his, “wildest dreams”. This is a continuation of the sales pitch to get America to buy a lemon. I’m betting more lemons are coming. Keep an eye out for extensions of unemployment benefits, an extension of the first-time home-buyers credit, and… heaven forebid… ARRA 2: The Mother of All Stimulus Bills.

The Stimulus Has Performed a Miracle

Vice-President Joe Biden was sent in front of Television cameras to tell us how the ARRA (stimulus bill) has saved the country from catastrophe on September 3rd.

The stimulus is a total of $792 billion that was intended to invigorate the American economy in an effort to avoid an unemployment rate over 9% – at least that’s what they told us so long ago that we’ve forgotten.  Today.. we’re approaching 10%, but Mr. Biden has informed us that all is better, the economy is not in trouble, and the stimulus is, “in fact working”.  The liberal administration told us on Thursday that, “Instead of talking about the beginning of a depression, we are talking about the end of a recession.”.  If you’ve lost your job in the last few weeks…can you possibly agree?

So how about that plain, hard truth?  It’s needed here.  This is nothing more than propaganda and taking credit for the boom-bust cycle that this new administration has continually admonished.  Joe Biden and Obama want us to attach ourselves to the message that our economy could not have possibly come out of a recession without them.  The problem is… they really haven’t done anything.  It’s been all of us, working hard, buying what we need, and taking care of our families.  Oddly enough, that is what has brought us out recession time-after-time.

Now, how can we say such things?  Certainly Obama and Biden have done this all without us….   Do you really want to know?.. here it is:

First, based on government accounting, less than 15% of the stimulus money has been spent!  Wait, the stimulus has saved us all and we coud have done it for 85% less money?   No, of course not!  The government needed it all, wait no, YOU needed it all… no, that’s not right… the government needed it all for you…. yeah… that’s it.

How could the government have spent less than 15% of the stimulus money in almost a year, claim that it has repaired all our ills, and have most of us believe it?   Because we believe whatever they tell us… damn the statistics.

Looking closer at the numbers we see that out of the money that has been spent, it’s mostly on government programs that have no effect on the economic recovery.  Out of the minuscule amount that has been spent, most of it is on propping up Social Security, Health and Human Services and the Veteran’s Administration.  While all of these might be places that we should spend money, it has little to do with why the economy is doing what it has always done – recover, on its own.

There is also growing concern on whether or not the money is even being spent properly.  In an MSNBC article Brett Blackledge reports that “Inspector General Calvin Scovel said last month he will examine the Federal Aviation Administration’s process for selecting programs for the $1.1 billion in grant money. His announcement came after his office discovered that the Obama administration used stimulus money to pay for 50 airport projects that didn’t meet the grant criteria and approved projects at four airports with a history of mismanaging federal grants.”.

The whole program is a poster for government waste, fraud and abuse.  No competitive bidding means we don’t get the most project for the dollars spent.  Poor project selection has led to the repair of roads and bridges that did not need it while others continue to decay.

The economy will recover and it likely has already started.  There is little debate about that as the economy has always recovered and always will as long as free enterprise is allowed to thrive.  That is the point.  America has the most-resilient economy in the world precisely because we have historically fought government intervention in the economy.  Out of the big three automakers, who’s fairing the best?  Ford, the one company that did not get helped by the current administration.  Now, Ford is on pace to be the #1 U.S. automaker overtaking even Toyota.

Take what the government tells you with a grain of salt, especially when they are taking credit for much of anything.

Recent Entries »