The only thing from the great
depression that we avoided was the willy nilly rock bottom
liquidation of the housing market. We certainly have thrown
10,000,000 folks out of work and have done nothing convincing to
repair the situation and it has not self repaired at all.
The fundamental problem facing the
nation in late 2008 was the need to reprice and recapitalize the
housing market in such a way as to preserve the customers. Iceland
had a far worse situation and managed to do just that and is now
experiencing a vigorous recovery. All preserving the banks
accomplished was to preserve their claim against noncollectable
mortgages. Restructuring the mortgages and the customers would have
worked far better and at much less ultimate cost.
Recovery in the building industry has
now begun at a very low level. $50,000 fully serviced lots are been
acquired for $15,000 and rolled into a build at $35,000 allowing the
new build to undercut the present market. It all starts small this
way but demand can be absorbed for years this way while the present
housing stock finally readjusts to the pricing regime so created.
Welcome to the floor.
Left alone, this will continue to be a
drag on USA economic performance for a whole decade as also happened
in the aftermath of the Great Depression. Recall then that lousy
economic conditions lasted for a full decade then until war contracts
kicked in and conscription sucked up the manpower. That will not
happen this time.
The good news in the USA is not coming
from the housing industry, although it should and could. It is
coming from the rapid displacement of imported hydrocarbons with
domestic hydrocarbons thanks to fracking and the pending displacement
of diesel in long haul trucking with LNG. This is a huge transition
and it needs several years at least to complete. At the same time,
coal power is winding down. In fact if it were not for energy, I do
not know were the jobs that have been created would have come from.
That is why it did not become an outright depression.
The Worst Recovery Ever
Posted by Arnold Ahlert Bio
↓ on Jul 9th, 2012
http://frontpagemag.com/2012/arnold-ahlert/the-worst-recovery-ever/
Last Friday another dismal jobs reports
was released. Non-farm payrolls rose by just 80,000 in
June, coming in lower than even the more pessimistic “expert”
prediction of 90,000. Unemployment stayed steady at 8.2 percent, a
number that obscures the reality that many people who have given up
looking for work are no longer counted. Yet president Obama remains
remarkably sanguine. Speaking to a crowd in the battleground state of
Ohio, he characterized the latest numbers as “a step in
the right direction.” For those Americans determined to continue
believing a president who plays it fast and loose with the facts,
perhaps such “steps” are comforting. Yet the actual facts
tell another story: president Obama has presided over
the weakest recovery on record.
The stats are daunting. The
unemployment rate has been above 8 percent for 41
consecutive months, yet as cited above, that number only reflects
those people participating in the labor force. The labor force
participation rate was 63.8 percent last month, one of the lowest
percentages on record. If not for that convenient anomaly,
unemployment would be 11 percent. Chronic unemployment, which
reflects the length of time people remain out of work, rose to 39.9
weeks in June. That number is sixteen weeks higher than the number in
June 2009, when the recession “officially” ended. And despite the
president’s assertion that “businesses have created 4.4 million
new jobs over the past 28 months, including 500,000 new manufacturing
jobs,” the nation has endured a net decline of
roughly half a million jobs during the president’s tenure in
office.
Yet jobs tell only part of the
story. 2011 was the worst sales year ever recorded for housing,
and home values remain nearly 35 percent lower than they were five
years ago. The decline in Americans’ standard of living is the
steepest since government began keeping records 50 ago, and family
income has declined more post-recessionthan it did in the actual
recession itself. In addition, record numbers of Americans
are living on food stamps and a record number are living in poverty.
Thus it is no surprise that overall government dependency, defined
as the percentage of persons receiving one or more federal benefit
payments, is the highest in American history.
Economist Michael Boskin reveals a
list of other dubious, post-WW II records set by this
administration. They include federal spending as a percentage of GDP
at 25 percent, federal debt as a percentage of GDP at 67 percent,
and a budget deficit as a percentage of GDP at 10 percent. President
Obama has also amassed more debt ($5 trillion since January
2009) faster than any president in the history of the nation,
including the submission of four budgets with trillion dollar plus
deficits. This marks the first time any president has submitted even
a single budget above the trillion dollar mark. Add a
first quarter economic growth rate revised downward to
from 2.2 to 1.9 percent, a manufacturing decline for the
first time in three years, and unemployment rates of 14.4
percent for black Americans, 11 percent for Hispanics and 23.7
percent for 16- to 19-year-olds, and it’s no
surprise that Obama presided over another dubious milestone: for the
first time ever, America’s credit rating was downgraded.
Context must be added to these
numbers. For example, they have been calculated before the $1.76
trillion, 10-year cost of the Supreme Court-sanctioned
Affordable Heath Care Act is added to the the national debt,
and after the $787 billion American Recovery and
Reinvestment Act was passed. That measure was supposed to keep
unemployment below 8 percent, according to a report released by the
administration.
Moreover, the former number represents
the first of what is likely to be a series of revisions regarding
the true cost of Obamacare. For perspective’s sake it should be
noted that in 1967, the House Ways and Means
Committee estimated that Medicare would cost $12 billion
in 1990. The actual cost? $98 billion. Thus, even if the cost
projections of Obamacare are only off by a small percentage of that
miscalculation, Americans could be looking at hundreds of billions
of dollars in additional–and unaffordable–outlays added to the
national debt. As for the latter number, we now know that nearly a
trillion dollars in Keynesian-inspired, prime-the-pump “stimulus”
was an abject failure, highlighted by the president’s
own admission a year later that “shovel-ready projects”
didn’t exist.
It was far from Obama’s only
erroneous prediction, or more accurately, broken promise. During the
2008 campaign, he pledged to create five million energy jobs,
to “bring down (health) premiums by $2,500 for the typical
family,” help “stop foreclosures,” and “cut the deficit
we inherited in half by the end of my first term in office.” The
president is oh-for-four in that regard.
Which brings us to the two recurring
themes Obama consistently uses to “explain” all of his
administration’s current shortcomings: the fiscal crisis was “far
greater” than anyone imagined, and that the ongoing malaise
can still be attributed to George W. Bush, more than
three-and-a-half years after Obama became president–and more than
five-and-a-half years since Democrats gained majority control of
government, including two years of absolute control.
Yet while those excuses are writ
large, a litany of others have been trotted out as well.
The Japanese tsunamis, the BP oil spill, the Arab Spring, the
economic “headwinds” created by the ongoing crisis in the
European Union, the debt ceiling debate, the rich not paying their
fair share in taxes, Wall Street, corporate jet owners and
recalcitrant Republicans have all been employed by a president who
promised he was “not going to make excuses” for a bad economy
continuing under his watch. The same president who told America
in 2010 that he should be “held accountable for the policies that
I put in place.”
That was then. Last week in an
interview with WLWT-TV in Cincinnati, Ohio, Obama offered the
quintessential fall back for progressive policies that fail. “I
suspect that most people in Cincinnati would acknowledge that I’ve
tried real hard,” said the president, before once again blaming
Republicans for a failure “to engage on a whole range of issues
that I wish had happened.” One suspects trying “real hard” is
of little comfort to the millions of Americans “trying” to make
ends meet in an economy on the precipice of a double-dip recession.
Republican presidential candidate Mitt
Romney offered a simple rebuttal to Obama’s combination
of fatuous excuses and self-pity. “It doesn’t have to be this
way,” he said, speaking to reporters at a hardware store in
Wolfeboro, N.H.
That remains to be seen. Above all else
the 2012 election is a referendum on the nature of the American
experience itself. It is the election that will determine whether
Americans wish to turn back the tide of Euro-style, welfare state
dependency and begin to restore the notions of entrepreneurialism and
exceptionalism that have made us the envy of the world, or plunge
headlong into a world of chronic malaise, continued class warfare and
certain bankruptcy.
The president did keep one promise he
made in 2008. Obama promised to “fundamentally transform”
the nation. All of the above records suggest he has succeeded, likely
beyond his wildest expectations. America now has more people “riding
on the wagon” than this nation has ever had. The 2012 election will
determine whether or not they outnumber those pulling that wagon.
Europe’s “wagon” has already stopped moving. We can learn from
their experience–or be part of it.
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