A Feel Good But Deeply Ailing U.S. Economy

Stagnant Salaries

Get comfortable with your salary, because it isn’t going anywhere positive–payrolls are stagnant!

The Wall Street Journal reports that wages since the recession “have grown slowly, advancing at a pace of about 2% annually” for a total of 12% since 2009.

In contrast, in the 20 years prior to the recession, wages “grew on average better than 3% annually”–that’s 50% more increase per year!

Sure some of the increase is now coming in the form of benefits growth, such as time off, subsidized commuting costs, and health insurance premiums, but workers still need to be able to pay their bills.

For the federal workforce, things have even been worse with pay raises of “just 2% [total] over the last five years” and a proposed 1.3% (with locality pay) for 2016.

Is it surprising then the innovation–one of our greatest strengths–is also drastically slowing in the United States. We are not rewarding risk with reward like we used to–and that changes the whole innovation equation!

Also no surprise then that mergers and acquisition are booming as the key to corporate growth as well as cost-savings through economies of scale are seen as one of the only ways to wring out profit growth in companies bottom lines.

All in all:

– While inflation is up an average of 2.13 over the same 10-year period.

– This leaves the average household more than 6% worse off then they were a decade ago…that’s a lot of time to be working and getting negative returns on your investment of time and effort.

Combine this with:

– Manufacturing down to only 9% of jobs in the U.S. economy

– The country’s ongoing spending binge–a national debt that has doubled over 8 years from around $10 trillion to almost $20 trillion by 2017 and interest payments about to take off with rising interest rates.

– Throw in a arms-race with China and Russia and the aging Baby Boomers setting up the economy for dramatic increases in Social Security and Medicare

And the “fun” NOT is only just beginning. 😉

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The Unbelievable Stupidity Of Raising Interest Rates

Bull

Interest rates have been near zero since the recession of 2008.


That supposedly to stimulate the economy. 


However, aside from a stock market bubble again, not sure we have a much stimulated economy.


We have a false low on the unemployment rate, while the the true percentage of the labor force working is the lowest in almost 40 years!


Moreover, manufacturing is down almost 40% from the 1979 peak with a loss of over 7.2M jobs


Commodities are at firesale prices as demand is sluggish and there is short-term oversupply. 


And innovation is facing a global slowdown


So people are out of work, we’re not making things, demand is depressing prices, and even ideas are few and far between–not too rosy a picture, regardless of what some politicians may have you believe. 


Let’s not forget that we have an over $18 trillion federal debt, and this is projected to grow ever greater as we borrow to fund social entitlements such as social security, medicare, etc. 


In this scenario, why would the Federal Reserve ever want to raise interest rates?


Well, if they don’t raise rates, then they can’t lower them later again when the economy really stalls out and goes into deep recession. 


Hence, this is seen as a tool for their financial toolkit–and if there are no tools with which to manipulate the economy, then there is no need for a (neutered) Federal Reserve. 


But think for a second what happens when the Fed raises rates, it’s going to slow the economy even further than the chug chug chug economy that we are already dealing with. 


Maybe even more important, it will raise the amount of interest payments we must folk over on the trillions of dollars of debt we owe.  


Simply put, when we raise interest rates, we pay more interest on our already astronomically high national debt, and this pushes our national deficit up even higher as we borrow more to pay the interest on the previous debt. 


If you did this with your credit cards, you’d probably be looking at the equivalent of debtor’s prison sooner or later. 


Rather than feed the Fed’s toolbox with interest rate bumps and drops, why not keep rates low as long as they can stay low, reducing our interest payments, and curtailing our national deficit and debt. 


What about the stock bubble…that’s a lesson investors will be learning about in their own good time–it’s the stock market, stupid. 😉


(Source Photo: Andy Blumenthal)

Nothing Is Something AND Something Is Nothing

Uber Commodities

So the world financial markets continue to go haywire. 


The Uber glorified taxi service and app (with an almost half billion dollar operating loss) is now valued at–get this–over $50,000,000,000!


And commodities–you know the precious materials that REAL things are made off (gold, silver, copper, aluminum, oil, gas, coal, wheat, cotton, corn, soybeans, cotton, cocoa, coffee, sugar, beef, and more) hit a 13 year low. 


When the nothings of this world like a basic cab service become invaluable and the real things that power our homes, technology, transportation, and manufacturing become valueless–then we know a day of painful financial reckoning is coming. 


The markets can stand on their head for only so long before the blood rushes in and people become dizzy and see spots.


A reversion to the mean is the one something here that is inevitable, along with a pretty decent recession to boot. 😉


(Source Photos: Andy Blumenthal)

Money, It’s Something

Poverty

Just an observation today about there being so much poverty in the Nation’s capital and around the country.

Homeless, hungry, and sick people on the streets in one of the richest countries in the world.

Yet, we have trillions going overseas to fight wars with seemingly little to no tangible benefits.

And so much ostensible waste with pork barrel politics, inefficiencies, and failed projects.

A relative joked with me the other day saying, “It doesn’t matter if you’re rich or poor as long as you have money!”

Here we borrow money ($17.6 trillion ) and print money and the Federal Reserve buys debt ($4.1 trillion ) to keep interest rates low and the economy churning.

People from real estate mogul, Donald Trump to Economist, Robert Wiedemer, who predicted the last recession, are warning of dire economic consequences because of these short-sighted policies.

So do we have real money to continue to burn or is it smoke and mirrors and as Wiedemer says, “the medicine will become the poison”–what do you think?

(Source Photo: Andy Blumenthal)

Why We Expect Nothing

Why We Expect Nothing

I took this photo of a sign at the Metro station to the Reagan National Airport by Washington, D.C.

“Expect The Unexpected” is the warning.

Don’t be complacent–anything can happen–be vigilant–is the message.

It reminds me of a Seinfeld episode where Jerry jokes about people going to the beach and hiding their wallets in their shoes.

Like, a criminal would never think to check your shoe!

Oh, push the wallet all the way down to the toes, under the tongue, that way the bad guys will never be able to get to it.

Here, it’s more a case of of why don’t we expect the darn expected.

Everybody knows that people “hide” their valuables at the beach in their shoes!

In modern times, we seem blind though to any expectations at all.

– Arab Spring and civil war spreading into Syria and Iraq–after Tunisia, Libya, Yemen, Egypt, and more–who would’ve thought?

– Russia taking over Crimea and agitating in Eastern Ukraine–after their little excursions into Georgia and Chechnya–who would expect that?

– Financial meltdowns and major recession after the dot com and housing bubbles–even my barber was talking about retiring and buying a mansion in the Caribbean–where are these coming from?

The question then is are we really unable to see past our noses or do we just hold steadfast to principle that ignorance is bliss?

Well let’s just test the “expect nothing doctrine” that we seem to all be living by these days and see how you feel about these:

  • North Korea–they would never invade the South again.
  • Iran–sure, they are going to give up their nuclear weapons and their greater Middle Eastern Caliphate ambitions.
  • China–Yeah, we’ll just pin them in the South China Sea and they’ll never get out.
  • The national deficit–it’s not and will never be too big for us to handle because we’re rich.
  • Terrorism in a major American city–not after 9/11 and all that Homeland Security.
  • Environmental catastrophe–we will build a big bubble over ourselves, so no problem.
  • Economic inequity–the top 1% deserves to control 43% of the Nation’s wealth and everyone else just sit down and shut up.
  • The Singularity–how could a machine ever be smarter than us; we’ve got all the technology fully under our control.

Well, if you are blind or dumb enough to believe these, just keep putting your money in your shoes at the beach, because there is no reason to expect that anyone would ever think to look for it there. 😉

Restraint or Recklessness?

Restraint or Recklessness?

Like many of you, as I watch the events unfold with the Russian military invasion of Ukraine, I am amazed at the “restraint” being shown by the West.

But I can’t help asking myself why a military invasion by the Great Bear into a sovereign nation that is leaning toward democracy is being met with restraint.

Sitting in Starbucks, I overheard one young women saying to an older gentlemen that she did not understand the reaction of the President in saying there would be “consequences” and that no one took that seriously as there was no specificity, almost as if their where no real consequences to even threaten Russia with.

So why all the word-mincing, dancing around the subject, and restraint by the West in light of this very dangerous escalation in eastern Europe:

1) Surprise – Was the West completely taken by surprise by Russia’s military intervention? Didn’t something similar happen with Georgia in 2008–less than 6 years ago? Did we not foresee the possibility of Russia lashing out against Ukraine to protect its interests when Ukraine turned back toward European integration and away from the embrace of Russia that it had made only weeks earlier? After Pearl Harbor, 9/11, and with all our “Big Data,” intelligence, and military planning–how did we miss this (again!)?

2) Duped – Were we duped by the misinformation from Russia saying that the 150,000 troops they called on a “training exercise” was planned months ago and it just happened to coincide with the toppling of Ukraine’s President? Also, were we fooled when the “mysterious” soldiers showed up without national markings and Russia said they weren’t their military–uh, where did they come from–did they float down from the heavens?

3) Apathetic – Are we just apathetic to Ukraine’s plight? Are they just a poor country of little strategic value to us? Are we so war weary from Iraq and Afghanistan that we just want to place our heads in the sand like ostriches even when democracy and freedom is threatened in a European nation of some 45 million people?

4) Fear – Are we afraid of the military might of the nuclear-armed Russian Federation? Is America, the European Union, NATO, the United Nations all not willing to stand up and hold Russia accountable even if that means a military confrontation? Not that anyone wants World War III, but if we don’t stand up and defend against wanton aggression, how can any country or anyone be safe going forward?

5) Optionless – Are we just out of options? Russia got the upper hand on this one and they are logistically right there on the border and in the country of Ukraine now and what can we do? Despite the U.S. assertion that it can project military power anywhere around the world and a defense budget bigger than the 10 next largest combined–how can we be out of options? Are we out of options because we tacitly understand that one wrong miscalculation and we could end up with WMD on our homeland doorstep?

6) Butter Over Guns – Have we retrenched from world affairs, downsized our military, and emphasized domestic issues over international ones? Have we forgotten the risk that comes from a world without a superpower that helps to maintain stability and peace? Are we just under so much financial duress with a growing mountain of national debt, a economic recovery still struggling, and the lowest employment participation in over 30 years that we can’t even entertain spending more treasure to fight again?

7) Leadership – Who is managing the crisis? We’ve seen our President speak, various other government officials from the U.S. and European Union, the Secretary General of the U.N., the Secretary General of NATO, and more? Who is in charge–setting the tone–deciding the strategy? Who has point so that we and Russia know who to listen to and what is just background noise?

What is so scary about this whole thing is how quickly things can escalate and seriously get out of control in this world, and this despite all the alliances, planning, and spending–at the end of the day, it looks like we are floundering and are in chaos, while Russia is advancing on multiples fronts in Ukraine and elsewhere with supporting dangerous regimes in Syria, Iran, North Korea and more.

Whether we should or shouldn’t get involved militarily, what is shocking is: 1) the very notion that there wouldn’t be any good military options, and 2) that the consequences are not being spelled out with speed and clarity.

In the streets, at the cafe, on the television, I am seeing and hearing people in shock at what is happening and what we are and are not doing about it.

Even if we get Russia to stop advancing (yes, based on what happened with Georgia, I doubt they will actually pull back out), the question is what happens the next time there is a conflict based on how we’ve managed this one?

I do want to mention one other thing, which is while I feel empathy for the plight of the Ukrainians seeking freedom from Russia now, I also must remember the events of Babi Yar where, between 1941-1944, 900,000 Jews were murdered in the Soviet Union by Nazi genocide and their Ukrainian collaborators. This is history, but no so long ago.

All opinions my own.

(Source Photo: here with attribution to Utenriksdept)

Dirty Little People

Dirty Little People

Popular Science had some scary germy statistics about how few people wash their hands well when coming out of the bathroom.

Take a guess?

Only 5%!

And that’s based on almost 4,000 people they observed–but how many would’ve washed correctly if they thought no one was watching?

The dirty stats (while under observation):

– 23% didn’t use soap.

– 15% of men and 7% of women didn’t even use water.

– Average washed for just 6 seconds! (CDC says you need at least 20 seconds with soap and water to kill germs)

From what I’ve seen, unless their is a touchless water faucet and automatic towel dispenser, not too many people wash their hands–they don’t want to get them dirty by touching the same bathroom devices that the other people just touched.

Another no-no for people is touching the bathroom door handle–more germs!

What do some people do–they use (wads of) toilet seat protectors to pull the door open–then guess what’s missing for the next guy or gal?

Most public bathrooms are disgusting–if everyone could just have their own, they would keep it clean out of self-interest and maybe wash their hands a little more too.

Next time we have a recession and need to invest in “shovel ready” infrastructure projects to keep America working–how about we build some (read lots!) clean bathrooms and throw in the automatic wash features, pretty please. 😉

(Source Photo: Andy Blumenthal)