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With a straight face, the National Bureau of Economic Research (NBER) announced that the Great Recession ended last June. June of 2009, that is. This made the current recession the longest one since the Great Depression.
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Few were surprised when President Obama replaced Christina Romer, chair of his Council of Economic Advisers, with another statist economist, Austan Goolsbee. Goolsbee is the architect of Obama’s failed economic policies and programs, having served as the executive director of the President’s Economic Recovery Advisory Board from the beginning.
A bright student at Yale where he enjoyed membership in the exclusive and elitist Skull and Bones secret society, Goolsbee went on to get his PhD from MIT, and then immediately became a professor at the University of Chicago. With stints at the American Bar Association and the National Bureau of Economic Research, he was named to Obama’s Council of Economic Advisers in March, 2009.
(This article is a follow-up to Conjuring Magic To Cover States’ Debts.)
Economist Niall Ferguson of Harvard wrote an article entitled “Complexity and Collapse” for the March/April issue of Foreign Affairs, a publication of the Council on Foreign Relations. Ferguson uses the visual image of a series of paintings by Thomas Cole, The Course of Empire, which currently hangs at the New York Historical Society, to illustrate his point that every society goes through five stages. He says that Cole “beautifully captured a theory of imperial rise and fall to which most people remain in thrall to this day.”
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When the Federal Open Market Committee announced yesterday that “the pace of economic recovery is likely to be more modest in the near term than had been anticipated,” stocks in Europe lost three percent of their value, interest rates on the U.S. 10-year Treasury note dropped startlingly as investors ran to safety, and the dollar hit the lowest level against the Japanese Yen since 1995.
A Japanese bond dealer said, “Investors were unnerved by the Fed’s statement. It just confirmed that the U.S. economic recovery is slowing.”
Claims that “we are on a path back to growth” by Treasury Secretary Timothy Geithner in an op-ed in the New York Times entitled “Welcome to Recovery” appeared to be based on facts, proof, and hard evidence.
“A review of recent data on the American economy…show that large parts of the private sector continue to strengthen,” he said. “Business investment and consumption…are getting stronger, better than last year and better than last quarter.” According to Geithner, evidence of growth can be seen because
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The first time Rep. Paul Ryan (R-Wisc.) offered his “Roadmap for America’s Future” to the House of Representatives, it failed by 137-293, with 38 Republicans voting against, including Rep. Ron Paul (R-Texas). With his own district safe in the fall elections, Ryan has been spending his time generating support for Roadmap II with presentations to conservative think tanks and coffee klatches.
And he seems to be gaining some traction along with a lot of fresh attention.
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The Wall Street Journal took another look at the $13 trillion national debt written about here last week and announced that, according to a study by economists Carmen Reinhart and Kenneth Rogoff, the economy has now reached the tipping point, the Reinhart-Rogoff Line, better known as the point of no return.
“Once a developed nation’s debt crosses it, its annual growth [tends to be much] lower.” The best estimate is that, once that point is reached, the GDP will be reduced by one-third, with little chance of regaining normal economic output for the foreseeable future.
In their book, This Time Is Different, Reinhart and Rogoff state:
When CNBC announced that the number of workers filing new claims for unemployment benefits fell last week while private employers added new jobs in May, this was “further evidence [that] the labor market was improving.” In more muted fashion, the Associated Press called it a “slow-motion recovery,” but a recovery nevertheless.
This was in line with Vice President Joe Biden’s prediction back in April that the economy would be adding between 250,000 and 500,000 jobs “in the next couple of months.” Similar sentiments were echoed by President Obama on Wednesday in a speech at Carnegie Mellon University:
After six straight months of gains in consumer spending the April numbers showed no change from March, according to the Commerce Department. This was a surprise to some who have been tracking such things as the University of Michigan’s index of consumer confidence (higher), consumers’ expectations on the economy over the next 12 months (higher), moderate real job creation (higher), savings rate (higher) and manufacturing activity (higher).
Others remained sanguine, holding that “We do not expect household spending to flatline in the coming months,” according to Michelle Girard, senior economist at RBS in Stamford, Connecticut.
Consumers themselves, however, are not a happy lot. According to Rasmussen Reports, only 35 percent of Americans are planning to take a summer vacation this year, and those who are, aren’t planning on spending as much as they have in the past.
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When former Comptroller General Bill Walker, who headed the U.S. Government Accountability Office, said two years ago that the “official” debt of the United States “is only around $10 trillion,” he wryly suggested that since this number was produced by “government accounting, which…allows one to ignore Social Security, Medicare and the new prescription drug benefit [it was like] ignoring rent, food and utilities in your household budget [and] it will lead to a few bounced checks.” However, he added, “Our real debt is about ten times higher,” or about $100 trillion.
At the time this was a breath-taking number, but Walker was just repeating what Richard Fisher, President of the Dallas Federal Reserve, had said just a couple of months earlier.
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With great fanfare, the Obama administration celebrated its first policy victory of the year—the $17.6 billion jobs bill. Eleven Republican Senators helped push the bill through the Senate, 68-29.
The economically flawed and unconstitutional law provides employers an exemption from Social Security tax withholding through the end of the year on any employees added to the payroll who have been unemployed for at least 60 days. And if the employees stay on that payroll for at least a year, the employers would receive an additional $1,000 tax credit. In addition, the law spends $20 billion on federal highway construction and other public improvement projects.
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An Associated Press writer says “the crushing weight of its debt threatens to overwhelm everything the federal government does,” even under the best-case scenario. This theme of unsustainable debts and deep holes has been reviewed elsewhere on this site, and it’s small comfort that it is now making headlines in the controlled mainstream media:
When he appeared on ABC News‘s This Week on February 7, U.S. Treasury Secretary Timothy Geithner was quizzed about the risk of the United States losing its triple-A credit rating, the chances that foreign investors might start shunning US debt, and whether the economy would suffer a double dip recession.
Last week the credit rating agency Moody’s warned that weak economic growth and increasing debt burdens could “put pressure on the country’s triple-A status.” When asked to respond, Geithner said, “Absolutely not. That will never happen to this country.” One remembers the speaker’s rule to be very careful about using absolutes, such as “absolutely”, and “never happen.” History books are filled with examples of events that could “absolutely never happen.”
When the Bureau of Economic Analysis announced that “the output of goods and services…increased at an annual rate of 5.7 percent in the fourth quarter of 2009,” the usual suspects in the kept media could hardly restrain themselves. ABC News’ headline trumpeted, “Economy Grows…Fastest Since 2003” which was “fueled by companies boosting output to keep stockpiles up.” Their announcement explained that “Growth exceeded expectations mainly because business spending on equipment and software jumped much more than [was] forecast.”
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“The debt level of the United States is unsustainable, something has to give,” said the co-author of a new joint report released last week by the National Research Council and the National Academy of Public Administration. The committee that prepared the 268-page study, entitled Choosing the Nation’s Fiscal Future, included three former heads of the Congressional Budget Office.
A WorldNetDaily article by Jerome Corsi, entitled “Forecast: Debt to Dwarf GDP,” provided key quotes from the study as well as from Rudolph Penner, one of the former CBO heads. “The fundamental problem is that we have these three very large programs—Medicare, Medicaid and Social Security— that…are growing faster than tax revenues and faster than the economy,” Penner told WorldNetDaily. This is creating an “unsustainable federal budget deficit [that continues to grow] ever onward and upward.”
According to Newsweek, the dollar isn’t weakening, and even if it is, it isn’t Obama’s fault. On Tuesday, Daniel Gross iterated all the reasons that, according to conservatives, the American dollar should weaken. Conservatives, he said, blame the actions of the Federal Reserve with the lowering of interest rates to zero, printing money, and expanding the monetary base. They also blame the Obama administration for running up huge deficits in its efforts to restart the faltering economy.
When MSNBC headlined the report that existing home sales surged by 7.4 percent in November (according to the National Association of Realtors), it suggested that such an improvement boosted “recovery hopes.” Others jumped on the recovery bandwagon, including Treasury Secretary Timothy Geithner, and former Vice Chairman of the Federal Reserve Board Alan Blinder.
According to Geithner, it’s now reasonable to expect “positive job growth” by spring and correct to assert that people should have confidence in an improving economy. “I think most people would say the economy actually is strengthening now,” he added.
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