Economic Rebound Slowed Last Quarter

[boedicca]

Hardly surprising: economic growth UNEXPECTEDLY was less robust than forecasted last quarter.

Well, that's what happens when the government increases spending and taxes, grows the size of government relative to GDP by 25% in 18 months, and increases debt to 90% of GDP. Oh, and when so much money is taken from the private sector that it doesn't create Real Productive Jobs and U6 unemployment remains near 17%.

The economic rebound last quarter turned out to be slower than first thought, one of the reasons unemployment is likely to stay high this year.

The economy grew at a 3 percent annual rate from January to March, the Commerce Department said Thursday. That was slightly weaker than an initial estimate of 3.2 percent a month ago. The new reading, based on more complete information, also fell short of economists' forecast for stronger growth of 3.4 percent.

The reasons for the small downgrade: consumers spent less than first estimated. Same goes for business spending on equipment and software. And, the nation's trade deficit was a bigger drag on economic activity.

In a separate report, the Labor Department said Thursday that the number of newly laid off workers filings claims for unemployment benefits fell by 14,000 to 460,000 last week. The decline came after claims had risen by a revised 28,000 in the previous week, the largest gain in three months.

The latest level of claims is slightly higher than it was at the start of the year. That shows the nation's workers are still facing tough times even though the overall economy is growing again.

During normal times, growth in the 3 percent range would be considered healthy. But the country is coming out the longest and deepest recession since the Great Depression. So economic growth needs to be a lot stronger - two or three times the current pace- to make a big dent in the nation's 9.9 percent unemployment rate.

Economists say it takes about 3 percent growth to create enough jobs just to keep up with the population increase. Growth would have to be about 5 percent for a full year just to drive the unemployment rate down 1 percentage point.

After the last severe recession in the early 1980s, GDP grew at rates of 7 to 9 percent for five straight quarters and the unemployment rate dropped from 10.8 to 7.2 percent in 18 months.


My Way News - Economic rebound slowed last quarter


Reagan growth rates: 7-9%

Obama's growth rates: 3-5% (and cooked with bogus cash for clunkers)

Reagan's Polices are Mo Mo Bettah than Obama's.

Just SAYIN'.

 

[Neubarth]

Even more frightening is the fact that M3 is contracting. This does not bode well for the future.

 

[manifold]

Hey, try not to sound so thrilled about it ok douchebag?

 

[Queecho Feecho]

Even more frightening is the fact that M3 is contracting. This does not bode well for the future.

Would you mind going into a little more detail no why you find a contraction in M3 to be frightening?

The biggest reason I see is that so much of our economy is backed by debt, so when money supply contracts, debtors wind up defaulting. Am I oversimplifying or ignoring something else significant?

Thanks

 

[Toro]

Economic growth first five quarters under Reagan: -1.8%.

Under Obama: +3.3%.

Of course, if you think the two periods are comparable, you don't know much.

 

[boedicca]

You aren't comparing the proper periods. The clock starts when the recovery began. The recovery during Reagan's term was far more robust than the anemic Obama era one.

 

[Toro]

Oops. I forgot to change to quarters. Actual growth first five quarters:

Reagan -0.45%
Obama +0.81%

 

[Toro]

You aren't comparing the proper periods. The clock starts when the recovery began. The recovery during Reagan's term was far more robust than the anemic Obama era one.

First, the comparisons between the two time periods are completely fallacious.

Second, you cannot have it both ways. Either you judge both Presidents by the same standards or you don't. If you judge the economy as soon as Obama comes into office as a reflection of his policies and believe it is causal, then you do the same thing for Reagan. You don't say "We will ignore Reagan's first year but we won't for Obama."

Finally, the economy fell back into recession in the summer of 1981 and stayed there until the end of 1982. Reagan presided over the longest recession since The Great Depression.

Now I am not making the causal relationship. But highly political people do. They put far more emphasis on politics than is warranted. And if you are going to do that, you better understand the data and historical context.

 

[Neubarth]

You aren't comparing the proper periods. The clock starts when the recovery began. The recovery during Reagan's term was far more robust than the anemic Obama era one.

First, the comparisons between the two time periods are completely fallacious.

Second, you cannot have it both ways. Either you judge both Presidents by the same standards or you don't. If you judge the economy as soon as Obama comes into office as a reflection of his policies and believe it is causal, then you do the same thing for Reagan. You don't say "We will ignore Reagan's first year but we won't for Obama."

Finally, the economy fell back into recession in the summer of 1981 and stayed there until the end of 1982. Reagan presided over the longest recession since The Great Depression.

Now I am not making the causal relationship. But highly political people do. They put far more emphasis on politics than is warranted. And if you are going to do that, you better understand the data and historical context.

The only proper comparisons as I have stated thousands of times are in the direct efforts of the president to promote employment. Obama has done almost nothing while Reagan started talking about a 600 ship Navy. We really did not need a 600 ship Navy, but it did put people back to work and slowly got the economy rolling again.

Obama needs to put my pet project to work. We need to open up farm land, and he does not understand why. I keep on telling him that farm products are the only way we can cut into the balance of trade deficit. That is too difficult for him to understand, so he has nixed the program to divert Missouri River watershed to the west to put millions of acres under cultivation.

 

[Neubarth]

You aren't comparing the proper periods. The clock starts when the recovery began. The recovery during Reagan's term was far more robust than the anemic Obama era one.

What recovery? We are still losing jobs.

 

[boedicca]

You aren't comparing the proper periods. The clock starts when the recovery began. The recovery during Reagan's term was far more robust than the anemic Obama era one.

First, the comparisons between the two time periods are completely fallacious.

Second, you cannot have it both ways. Either you judge both Presidents by the same standards or you don't. If you judge the economy as soon as Obama comes into office as a reflection of his policies and believe it is causal, then you do the same thing for Reagan. You don't say "We will ignore Reagan's first year but we won't for Obama."

Finally, the economy fell back into recession in the summer of 1981 and stayed there until the end of 1982. Reagan presided over the longest recession since The Great Depression.

Now I am not making the causal relationship. But highly political people do. They put far more emphasis on politics than is warranted. And if you are going to do that, you better understand the data and historical context.

I've posted this in other threads. During the first year of Reagan's presidency, 300K jobs were lost due to the recession. Obama's tally is more than 10X that figure.

The anemic GDP growth right now is a fraction of the robust era that Reaganomics fostered. You can deny the facts all you'd like, but anyone with basic math skills can tell that 7-9% is greater than "unexpectedly lower" 3%.

 

[Neubarth]

Even more frightening is the fact that M3 is contracting. This does not bode well for the future.

Would you mind going into a little more detail no why you find a contraction in M3 to be frightening?

The biggest reason I see is that so much of our economy is backed by debt, so when money supply contracts, debtors wind up defaulting. Am I oversimplifying or ignoring something else significant?

Thanks

Certainly! Please see below!

The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.

The M3 figures - which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever.

Bad news: we're back to 1931. Good news: it's not 1933 yet

"It’s frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said.

The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.

Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to "grit its teeth" and approve a fresh fiscal boost of $200bn to keep growth on track. "We are nearly 8m jobs short of normal employment. For millions of Americans the economic emergency grinds on," he said.

US money supply plunges at 1930s pace as Obama eyes fresh stimulus - Telegraph

 

[boedicca]

I just read that same article.

Mr Congdon said the Obama policy risks repeating the strategic errors of Japan, which pushed debt to dangerously high levels with one fiscal boost after another during its Lost Decade, instead of resorting to full-blown "Friedmanite" monetary stimulus.

"Fiscal policy does not work. The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantititave easing. If the Fed doesn’t act, a double-dip recession is a virtual certainty," he said. ...


Obamanomics is a Freakin' Disaster.

 

[Toro]

I've posted this in other threads. During the first year of Reagan's presidency, 300K jobs were lost due to the recession. Obama's tally is more than 10X that figure.

The anemic GDP growth right now is a fraction of the robust era that Reaganomics fostered. You can deny the facts all you'd like, but anyone with basic math skills can tell that 7-9% is greater than "unexpectedly lower" 3%.

And politically motivated and highly partisan people will engage in data mining to support their own confirmation biases. That is what one does when one ignores data to support their argument. That is exactly what you are doing by ignoring the fact that Reagan presided over the longest recession since The Great Depression to make a political argument.

I have no opinion on whether Obamanomics will be better than Reaganomics. But people with a basic understanding of economic history know that the economic problems are radically different, and making trite compaisons between the two time periods with no understanding of the extraneous circumstances is a futile intellectual exercise.

 

[boedicca]

Unsurprisingly, there are those who refuse to acknowledge that 9 is bigger than 3, and that big government policies which overburden the private sector lead to lower economic performance than do those which do not stifle the private sector.

 

[william the wie]

Unsurprisingly, there are those who refuse to acknowledge that 9 is bigger than 3, and that big government policies which overburden the private sector lead to lower economic performance than do those which do not stifle the private sector.

In the sense that policies should reflect reality I generally agree with you. Obama should be reducing contingent liabilities through entitlement reforms not adding entitlements. Reagan was trying to reduce fiscal drag in a monetary contraction, which was the right policy. But from a technical viewpoint Toro is right but then again technically the 7th cavalry pulled off a military miracle at the Little Big Horn. You posed the question wrong.

 

[Toro]

Unsurprisingly, there are those who refuse to acknowledge that 9 is bigger than 3, and that big government policies which overburden the private sector lead to lower economic performance than do those which do not stifle the private sector.

In the sense that policies should reflect reality I generally agree with you. Obama should be reducing contingent liabilities through entitlement reforms not adding entitlements. Reagan was trying to reduce fiscal drag in a monetary contraction, which was the right policy. But from a technical viewpoint Toro is right but then again technically the 7th cavalry pulled off a military miracle at the Little Big Horn. You posed the question wrong.

Make no mistake about it. The government has to start finding an exit from its spending. We spend too much money and we must cut back. There should be zero new programs that are not funded in its entirety. We are going to have a crisis if we don't. All you have to do is the math. Unfortunately, we don't have the political will to change. Neither the right nor the left are willing to make the sacrifices necessary to right the ship.

Having said that, political people want to be political. I have no opinion about the following graphs other than I personally don't put much stock in them. However, since someone wanted to put this into a political context, I'm happy to oblige.

Economic growth under Reagan was middle of the pack.

BEA National Economic Accounts
http://www.bea.gov/national/xls/gdplev.xls

As was job growth.

St. Louis Fed: Download Data for Series: CE16OV, Civilian Employment

While unemployment was the highest under Reagan's tenure than any other President.

St. Louis Fed: Download Data for Series: UNRATE, Civilian Unemployment Rate