Three Reasons To Be Worried About The Economy

Tyler Durden's picture

Submitted by Yonathan Amselem via The Mises Institute,

On January 12, America’s central planner-in-chief gave his State of the Union address. The president promised nothing less than to feed the hungry, create jobs, shape the earth’s climate, and make everyone a college graduate. There’s nothing new here, though. We’ve heard variations of this silly song and dance every year under both Democrats and Republicans. The president lambasted naysayers as fear-mongers that were too partisan to admit we have a booming economy. The fact that the Dow Jones cratered roughly 9 percent in the same thirty-day period President Obama gave his address did nothing to quell Obama's optimism about America’s future. In fact, he labeled the US economy “the strongest and most durable in the world.”

Despite our leader’s unwavering confidence in America’s fortunes, a quick peak under the hood reveals a pretty grim state of American commerce.

1. The Federal Reserve and US Government Have Warped the American Economy

In just the past decade, the Federal Reserve’s balance sheet has grown from roughly $800 billion to over $4 trillion. Our central bankers engaging in massive asset purchases to pummel interest rates downward is not news to anyone. We’ve been living in a world of falling interest rates since the 9/11 terrorist attacks. Yet, few mainstream economists have taken a good look at the destructive effects of this unprecedented monetary expansion. The calamitous distortions Fed policy has created for actors on both Main Street and Wall Street since 2008 have laid the groundwork for yet another crash.

Low interest rates stemming from a growing money supply are the only reason the US government has managed to service its gargantuan debt in recent years. The Congressional Budget Office itself has pointed out that even a slight rise in interest rates could potentially result in anywhere from $700 to $900 billion in annual tax payments just to service the interest on our debt. At this pace, paying the republic’s creditors will become our largest government program in no time. Future Americans might go to work and have 50 percent of their paychecks seized not to pay for government services, but simply to service debt forced on them by central planners.

But public debt is far from the only distortion artificially low rates have wrought. Mortgages, auto loans, credit cards, and student loans have ballooned total consumer debt to $12 trillion, and this number is only trending upward. The easy credit economy manufactured by central bankers has obliterated American savings and replaced them with debt. The average American consumer has less than $1,000 in his bank account. He lives praying for no car trouble or a broken arm. There was a time when Americans were rewarded for saving their earnings with double-digit interest rates but this is a distant memory. If Americans want to earn a return nowadays they must play the central-bank sponsored stock market casino. In fact, calling the stock market a casino is a little insulting to casinos — at least Blackjack has consistent rules.

2. American Corporations Are Debt-ridden and Unproductive

The post-recession bull market inspired a lot of confidence in the American economy and Obama’s recovery, but this is akin to praising great happy hour specials on the Titanic. Soaring stock market prices are not a result of increased productivity or innovation — they are a symptom of central bank fueled asset inflation and corporate debt. In fact, since 2008, corporate debt has doubled. Almost 100 percent of all corporate issued debt has been used to buy back stocks and prop up equity prices. This bears repeating. Almost none of America’s recently issued corporate debt has gone toward investing in plant and equipment, increasing the workforce, research and development, or expanding operations in any meaningful way.

Our central bankers, regulatory agencies, and fiscal policies have created a financial system so distorted and removed from real assets and real cash flow generation that corporate executives can rake in billions in bonuses while producing almost nothing of real value. Investing in the real American economy is just not worth the risk. The massive long-term obligations assumed by American companies high on low interest rates will slowly crush the life out of our economy. The only answer is to start producing real goods and begin generating real cash flow. But this won’t happen in the bubble-finance nightmare cycle we’re now in.

Our current money commissar, Janet Yellen, recently “raised rates” from 0.25 percent to a paltry 0.5 percent. If this rounding error of a rate hike can send the market tumbling off a cliff, what would happen if the fed raised the target rate back up to 6 percent like in 2000?

3. American Entrepreneurship is Dying and American Workers Are Unproductive

Financial chicanery aside, we have to come to terms with the fact that Americans themselves just aren’t built like they used to be. President Obama’s administration constantly cites low unemployment as a sign that our economy is back on track. To say unemployment numbers are massaged is an understatement. Of course unemployment recovered since 2008, President Obama was sworn in at the end of a market crash! But more importantly, the American economy is not producing architects, engineers, machinists, or other high value, goods-producing workers. We are pumping out an army of waiters, social workers, and associate professors with worthless six-figure degrees they have no hope of paying off in this life or the next. American workers are not interested or encouraged to start businesses, learn new skills, or innovate in some way. The typical American graduate firmly believes he can turn a six-year sociology degree into a job that doesn’t involve bringing people mimosas for brunch.

Our unproductive workforce is not all the fault of its members.The disincentives for entrepreneurship and wealth creation are colossal in this country. Dealing with licensing boards, zoning commissions, health inspectors, unions, and other regulatory bodies at the federal, state, and municipal level is extraordinarily burdensome, particularly for the poor and nascent immigrants. Successful entrepreneurs then have taxes levied at the federal, state, and local level across a cavalcade of confusing forms and attachments. The state and its many institutions make it nearly impossible for the average American citizen to just try something. This is the lifeblood of a “durable economy.” Unfortunately, business failures are now outpacing business startups.

The political class has completely disrupted the American structure of production, made American workers uncompetitive, snuffed the life out of entrepreneurs, and burdened the entire nation with a debt obligation the size of Jupiter. The US economy is not the strongest and most durable in the world — it is an unskilled thirty-two-year-old waiter crashing at his parent’s place and trying to pay down an $80,000 international relations degree.

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insanelysane's picture

MSM has changed from Buy the Dip to Don't Panic.  Something must be up (down actually).

BullyBearish's picture

Arrogant, STUPID thieves stay too long and steal too much...

Arnold's picture

Thank you for having the fortitude to monitor television, so the rest of us don't have to.

ConfederateH's picture

Just like after the Weimar Hyperinflation the middle class will be pimping their daughters and the Jews will end up owning everything of value or that produces return.   And just like after the Weimar Hyperinflation the Jews will have caused it all.  San Francisco and New York are already as perverted as Berlin in the "roaring" twenties.

 

DownWithYogaPants's picture

Whilst bankers have an outsized role in economic disasters don't put all the blame on them.

We collectively acquience to giving the government and especially banks too much power.  Their power comes from our docility.  Please never overlook that.

NidStyles's picture

The funny thing is that you're supporting his point for him.

 

 

DownWithYogaPants's picture

I want to point out to you that the opposite of "ALL" is not "NOTHING"......it is "SOMETHING".

My only modification to his point was not to use the word "ALL".  He could have used "MOST" or "OUTSIZED INFLUENCE"

It's the sort of precise but useful language you get from doing proofs in mathematics.  Almost all times when someone uses ALL or NOTHING they are incorrect.  

And there is no way out in his scenario.  But as we all know the way out will come however unpleasant.  That door will consist of pushing the bankers and government to the side for something better.

NidStyles's picture

I don't really care, but I am a stickler for the application for logic and it's use:

"We collectively acquiesce to giving the government and especially banks too much power.  Their power comes from our docility.  Please never overlook that."

 

You validated his point for him with that sentence there. Doesn't matter if you above you said "not all". You affirmed that it was all, by stating that it was all of us that  COLLECTIVELY acquiescence to it. Fucking logic man, it's really that simply. You affirmed it, by stating that we all are guilty with their actions, which includes, "drum-roll", ALL OF THE OTHER JEWS TOO.   

FrankDrakman's picture

Er, when I studied logic, the 'opposite' of "All S is P" is "No S is P", not "Some S is P". However, that was 40 years ago. 

Modern logic:

Bruce Jenner is a man.

All men are mortal.

Therefore, Bruce Jenner is a woman. 

ConfederateH's picture

Well perhaps "all" is a little hyperbolic.  But when our entire reality is based on lies and manipulations by the likes of Bernays, Hollywood, and (this time I won't use an absolutes) virtually the entire western education system ( think of, for example, the "halocaust"), for centuries or more, then I think the usage of "all" is appropriate.  Sure, you can split hairs and cause a pissing match, but it doesn't really change the validity of what I wrote.

CheapBastard's picture

Everyone complains ... yet:

 

1) Barry "You can keep your health insurance" Soweto Obama was elected twice;

2) George "Mission Accomplished" Bush was elected twice;

3) Pelosi and Reed keep getting elected; and, perhaps most awsome of it all,

4) Soweto was voted "the most admired American man" and Hildebeast was voted "the most admirded American woman."

 

So, the opinions expressed on zh and similar blogs are a definite minority. Do NOT be surprised is Hildebeast or Bernie win.

DownWithYogaPants's picture

Most people go with the flow as "humiliation" has been proven to be the strongest thing humans react to due to their extreme social nature.

We'll see how things turn out but economic conditions have a way of Trumping all forms of social / conformist thinking.

 

NidStyles's picture

Wait a minute, we know the rest of the system is obviously rigged, and you are suggesting that the elsctions aren't somehow rigged? How do you think the rest of the system got rigged if the elections weren't rigged?

Solomonpal's picture

And we all know what happens after that.

Kprime's picture

years ago, when I traded, I was a non stop news junkie.  Now anything resembling news sends me into convulsions.  15 seconds on a news channel and I am non stop puking and convulsing so bad I can barely manage to click the remote and get to a safe zone. lol

Artemis Rand's picture
Artemis Rand (not verified) Kprime Feb 8, 2016 11:23 AM

Boy, you got that right. Watching the news today-any news-is like watching an animal being picked apart by vultures with a laugh track in the background.

It is like seeing the fall of the Roman Empire and Western Civilization happen right in front of your eyes.

It is like being Roddy Piper wearing the glasses in "They Live" only to have everyone else say your crazy.

I refuse to watch any news, listen to any radio (smartphone or CD's only), or even own a TV. I tossed mine months ago and felt a huge weight lift off of my shoulders.

DownWithYogaPants's picture

Roddy Piper!  +1000

And you are correct about the vultures / laugh track and chuckle heads.

MisterMousePotato's picture

Hey, Artie ... ZeroHedge emits more 'news' in a day than the MSM does in a year. Especially if you read the comments.

p.s. I haven't owned a television since 1984. Over three decades now. I have never, as in never, ever, had cable television. Easier to do this now since the internet came along to keep one informed, if one is inclined.

KnuckleDragger-X's picture

I'm the same way though I now look at it all as a divine comedy, but I must say that the market ticker is just truly awesome today......

DownWithYogaPants's picture

It's a joke alright.........but somehow it feels a little less than divine. Unless you are referring to Divine and the poodle.

KnuckleDragger-X's picture

Nope, I'm thinking Dante, and we're about to get a grand tour of hell........

Looney's picture

But this won’t happen in the bubble-finance nightmare cycle we’re now in

Speaking of bubbles…

John McCain has been carrying a full gallon of puss in his left cheek.

I’d love to see THAT bubble pop!  ;-)

Looney

DownWithYogaPants's picture

On a John McCain I can't tell where the boil begins and the man ends.  

True story involving John McCain:

I wanted to run a set of anti McCain ads on KFYI talk radio in Phoenix in 2010.  I was going to lampoon the SOB to the best of my ability which is not negligible.    I called and inquired.  They put me off saying "got to talk to HQ in San Antonio about this".  I kept calling back and they kept sandbagging until finally they said "don't want to touch it".  Later I called in and talked with JD Hayworth when he was hosting and mentioned how a certain radio station did not even want to take my money.  Was it not a business?  He basically said that's what happens when you let government get too powerful.  I still want to do something to piss that fockwod off.  I mean Arizona for pete's sake?!  The average guy in Az is does not think like JM.  They tend to be much more libertarian than he.

HockeyFool's picture

The "average guy" in Arizona is probably here illegally.

ejmoosa's picture

Some people never know when the party is over...

Rancho Texican's picture

That International Relations degree is gonna be valuable when he moves down to Mexico to get a job.

DownWithYogaPants's picture

"International relations" ......is that what they are calling a good dry boning lately?

Artemis Rand's picture
Artemis Rand (not verified) Feb 8, 2016 11:02 AM

And while America burned the HNIC watched breads and circuses 50, drank champagne, ate fatty, greasy foods and didn't give a fuck...

cowdiddly's picture

And then the 32 year olds parents lose the house that they used to get the HELOC to buy the Escalade in the driveway with.

Artemis Rand's picture
Artemis Rand (not verified) Feb 8, 2016 11:03 AM

Bearded Man: They are dismantling the sleeping middle class. More and more people are becoming poor. We are their cattle. We are being bred for slavery.

lordbyroniv's picture

 

At the gym I go to, all the smart kids in their 20's become cops.  They blab non-stop about retiring in 20 years when they will start their 2nd career.  Most of these kids 25 years ago were what I labeled retard glue sniffers.  YET,..they are best rewarded by society today.  It  seems as it DOES NOT pay to play the private sector game anymore.  Suck on gubberment tit is name of game.

centerline's picture

Just a cycle.  It will end.  The .gov gravytrain is heading full speed towards a canyon with no bridge.

ConfederateH's picture

And white Christians have been chained to the bumber by their ankle while Barry the liar and his white house choomers take roof hits.

Artemis Rand's picture
Artemis Rand (not verified) ConfederateH Feb 8, 2016 12:17 PM

Of course, that is why the churches are emptying out. Christianity has been replaced with a form of PC snake oil I call "Churchianity".

ConfederateH's picture

The Church of the Holy Holohoax

DownWithYogaPants's picture

Don't forget the Wondurrful Holy Church of Globull Warming.

Many of these slow witted folk worship Gaia and actually think it all real.

peddling-fiction's picture

These scheisters like to call it climate change these days.

Offthebeach's picture

Cops are the political domestic standing army.
Also, the first welfare agency. I explain. Why should the state, or someone be taxed to protect your stuff, or yourself. If you don't protect yourself, why should I care? If you are so nasty, cheap, anti social that you can not bond, find, agree to someone protecting yourself, why should others? If you have a lot of stuff, protect it. Maybe you bought too much junk, and need to sell some to buy protection. Whatever, your choice. Or don't, or let people take it.

Cops exist to political support crime. Support criminals, and those that need criminals to provide excuses to sheeple. Judges, lawyers, clerks, hack contractors, parole dolts, shrinks, ......

If there weren't cops, dolt males would be very, very careful. Being shotguned in the back, in a garage, maybe duct taped, tends to penetrate even the dullest of publick edjamakation union factory mill people's Soviet quality product.

(I do hard physical labor 50+ hours a week so I don't have to go to the gym like the butt riding cruiser queens. Spend my time at an empty research library. Never see a cop around books. Ideas are Kryptonite to cops. Makes their heads ache. Neuron synapses overheat. )

Nero_Hedge's picture

I think there are some holes in your theory, but I agree the police force could and most definitely should exist almost as a shadow of its current self. I am not for doing away completely though, because there are many categories of people who by definition cannot defend themselves/their property, and who maybe don't have the means to otherwise. And without some kind arbitrating party (judicial system, again needing many Ganges from the current) we will certainly devolve into warlord-ism. Those mutual protection rackets your wishing for could just turn out to be worse than the police if your not "in" with them, something to think avout

CJgipper's picture

The families who do best today have one member in a government job getting killer benefits and pension accrual, and one in an almost pure cash compensation situation such as a sales job.  This way, they can get great benefits now and accure a pension on one job while raking in cash with the other.

Of course, you used to be able to do this with just the guy working a decent factory or mill job because you got the benefits and the cash.  Free trade  ain't what it's cracked up to be. 

Nero_Hedge's picture

Yea but we now don't have so many pesky union members to deal with, demanding good wages and job security with all their cranky old socialism wackiness! The American citizen gets to wallow in the free market paradise of service economy wage slavery instead!

Moski's picture

"Americans themselves just aren’t built like they used to be."

The regulatory state ain't built like what it used to be.  

rbg81's picture

Women in particular love regulations and the idea of welfare.  But you talk about the cost/benefit ratio of those regulations (especially environmental ones) and you just get a blank stare.  They respond:  "But ..... how can you be against cleaner air and water?!" without realizing the exponential cost involved with going from one part per 10 billion to one part per 100 billion.  And when you're done, there will be NO discernable benefit that anyone can notice.  You can try to explain this, but to no avail.  Instead of trying to educate them, those men of the liberal persuasion try to leverage this foolishness for their own agenda.

Our biggest mistake was giving women the right to vote and feminizing society.  Society will have to crash and burn before we can rebuild.

DownWithYogaPants's picture

How many women have won the Nobel Prize for Physics?

They just are not wired for the type of thinking required and since they keep their arses indoors working in offices they never suffer the consequences.

Stopdreaming's picture

Misogynistic creep! Next time you want sex, she might not give you any!

Killdo's picture

I got a chance to see what Americans are made of a few years ago when Sowden revealed NSA dirt - nobody did anything and most people I know in DC were shit scared. 

They seem to be made of  vagina /asshole material?

DownWithYogaPants's picture

Think about it.  NSA et al keeps all the data.  When you move up from WeBlow to Eagle Scout they pull your file and see what kind of dirt they have on you.  Two likely scenarios:

-1- you've never done anything wrong - so you're likely uncreative / unproductive because with all the laws on the books anybody who has done anything to speak of has broken a 1000 laws.

-2- You've done something but broken 10000 laws knowingly or not.

In case (1) you'll just follow the crowd.  In case (2) you'll be invited to follow the crowd or sit out your term in the slammer.

I still think John Roberts was blackmailed into that ObamaCare decision by virtue of something about those suspicously european looking children from LatAm.  

g'kar's picture

corrupt politicians and bankers are going to make sure we all get venezuela'd

E.F. Mutton's picture

The last sentence wins analogy of the month - +100