No, Virginia, There is No Economic Recovery


How many Americas can deal with another six years of middling economic performance?

September 25, 2014 – While the restUS-POLITICS-CONGRESS-CONFIRMATION-YELLEN of the world hung on Janet Yellen‘s every word last week for news of the future of the Federal Reserve‘s policy of quantitative easing, her real bombshell came at the end of her press conference and was largely ignored by the media who had rushed to release their pre-written narratives. According to Yellen: “So the story is, it is not that the Fed is behind the curve in failing to return the funds rate to normal levels when the economy is recovered. It is rather that in order to achieve such a recovery in 2016 or by the end that it is necessary and appropriate to have somewhat more accommodative policy than would be normal in the absence of those headwinds.” [Emphasis mine.]

The media and Wall Street, in their hope for eternal quantitative easing, focused on Yellen’s comments about accommodative monetary policy and how it might take until the end of the decade for the Fed to shrink its balance sheet back to normal levels. They ignored the above statement, coming as it did near the end of the press conference, that acknowledged that the economy has not yet recovered. Six years of Federal Reserve intervention, nearly $4 trillion of balance sheet expansion, and a 45% increase in the money supply (M2 & MZM), and the Fed is hoping that the economy might recover two years from now? How many more trillions of dollars will be doled out to Wall Street before the Fed admits that it has hurt, not helped, the recovery?


Yellen’s statement also requires a bit of parsing. When she said “in 2016 or by the end,” did she mean by the end of 2016 or by the end of the decade? Given her view that full policy normalization won’t occur until the end of the decade, the latter interpretation would not be at all surprising. This would mean that the Fed believes that we are still at best only at the halfway point toward economic recovery. The last financial crisis recovery that took that long was the recovery from the Great Depression, in which the economy really didn’t return to normal until after World War II. How many American households can deal with another six years or more of middling economic performance?

More importantly, Yellen’s admission of non-recovery belies all of her previous statements about the rosy condition of the economy and the job market. From now on, every time you hear someone from the Fed talking about how well the economy is doing, take it with a huge grain of salt. It is just a continuation of the Greenspan-Bernanke conduct of monetary policy via psychological manipulation, euphemistically referred to as “expectations management.” With one hand the Fed tinkers with the levers of monetary policy while with the other hand it holds the megaphone with which it announces that the economy is doing just fine, even if bubbles are beginning to burst all around.

The Federal Reserve’s thinking is that if it can convince people to believe that everything is alright then things actually will be alright. The power of positive thinking only goes so far, however. At some point it will run into the brick wall of economic reality. No amount of happy thoughts can overcome the reality that the Fed’s money creation is leading to rising prices and inflating asset bubbles. Positive thinking won’t find jobs for the unemployed and underemployed, nor will it put food on the table of families who are living from paycheck to paycheck. Expectations can only be managed so far, until people realize that they are being sold a bill of goods.

At that point, no amount of talk can turn the American people away from the conviction that the Fed is giving them the shaft. The Fed may imagine itself as Santa Claus, stuffing money down chimneys in an attempt to stimulate the economy, but the impoverishing effects of its inflationary monetary policy make it clear that it is more like the Grinch.

AP Fact-Check Shreds Obama UN Speech

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Debunks key claims about America’s response to global warming

9.24.2014 News Bradford Thomas

An Associated Press fact-check on President Obama’s climate change speech to the United Nations Tuesday accused the president of clearly spinning the facts and distorting the truth about America’s response to global warming.

The AP fact-checker faulted Obama “gloss[ing] over some inconvenient truths” in his global warming lecture Tuesday, particularly in regard to his claims about America’s attempts to clean up emissions at home and his insistence that emissions reductions do not have an impact on the economy.

The fact-check says that not only did Obama distort the numbers to claim that in the last eight years the U.S. reduced total carbon pollution “by more than any other nation on Earth”—Europe actually reducing theirs by a larger percentage in that time—Obama is hiding the fact that the U.S. has largely lowered those emissions by “sending dirty fuel abroad to pollute the same sky.”

THE FACTS: The U.S. is actually sending more dirty fuel abroad even as it takes steps to help other nations transition to cleaner energy. The U.S. has cuts its own coal consumption by 195 million tons in six years. But according to an AP analysis of Energy Department data, about 20 percent of that coal was shipped to power plants and other customers overseas. Emissions from that coal were not eliminated but rather moved to other countries. As well, the U.S. exported more products refined from oil — another dirty fuel — than it imported, starting in 2011.

Obama also tried to claim that we have been able to grow our economy while simultaneously cutting carbon emissions, “proving” there’s no conflict between combating global warming and growing the economy. The AP rips that claim apart, pointing to the Great Recession as the key factor in half of our so-called self-imposed reductions:

OBAMA: “So, all told, these advances have helped create jobs, grow our economy, and drive our carbon pollution to its lowest levels in nearly two decades — proving that there does not have to be a conflict between a sound environment and strong economic growth.”…

THE FACTS: About half of the 10 percent reduction in greenhouse gas emissions the U.S. has achieved in recent years can be attributed to the economic recession, not any specific actions from the Obama administration. Obama’s comments also left out that U.S. carbon emissions rose 2.9 percent from 2012 to 2013, the first increase since 2007, because higher natural gas prices spurred more coal use.

Another verifiably false statement by the president was that the Climate Action Plan “was working,” helping lower greenhouse gas emissions in 2012. Major problem: the plan was not even announced until June 2013.

THE FACTS: That plan has nothing to do with reductions in emissions in 2012 because it was not announced until June 2013. Moreover, two of its cornerstone regulations — controls on new and existing coal-fired power plants — are at this point just proposals. The administration isn’t expected to complete those rules until next year and some states may not submit plans until after Obama leaves office. The statement also leaves out the fact that in 2013, emissions in the U.S. rose for the first time since 2007.

Obama did invest in renewable energy and boost fuel economy before announcing the climate plan. But the plan can’t be credited with improving anything before it came into existence.


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There is too much debt in the economy that cannot be serviced


“The key point is why it is unable to service this debt, which is declining traffic.

The Financial Times put it this way: “The fall in traffic volumes on U.S. roads since 2004 has undercut the financial assumptions behind a series of deals devised in the middle of last decade during an infrastructure investment boom.” Note that the FT mentions “U.S. roads” in the plural because what is happening in Indiana is not unique. It is happening across the United States.

The bankruptcy of this Indiana company confirms what a seven-year decline in gasoline sales is illustrating: People are driving less.

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The key to interpreting what is happening with this road in Indiana is understanding the bigger picture. So is this decline, as the Financial Times says, because “economic and lifestyle changes have prompted people to use cars less”? Or is it just another clear indicator of a declining workforce driving fewer miles in a weak economy, which has also stretched consumer budgets so they are driving less?

I think the latter, particularly when considering the growth in population. The decline in gas sales no doubt reflects, in part, increased fuel efficiency. But if gas sales per person were illustrated when looking at the total population, the decline would be even more dramatic.

There is no doubt about it — Americans are driving less. This has reduced the country’s demand for gasoline. It has also reduced what governments take in each year from the gas tax. This is also an important point. The federal gas tax has not been raised since 1993. So declining fuel sales have brought the Highway Trust Fund — yet another government fund — to insolvency.

As the following chart shows, the US Department of Transportation is saying the fund is running out of money.

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Now what does all of this have to do with the precious metals? Basically it underlies the key reason for owning physical gold and silver.

There is too much debt in the economy that cannot be serviced. This is what the creditors of this bankrupt Indiana company are finding out. The price of financial assets has been forced up by all this debt, which in turn is making gold and silver relatively cheap. It is this point that we should be focusing on after last week’s drubbing, as the precious metals return to the chore of base building. Also note that although silver made a new low price in its now 3½-year correction, gold is still holding well above the $1,180 low it made in June 2013. This divergence is a sign that the precious metals are oversold and due for a bounce.”


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Twice as many sign up for food stamps

Illinois’ sluggish jobs recovery is coming at a tremendous cost. For every post-recession job created in Illinois, nearly two people have enrolled in the Supplemental Nutrition Assistance Program, commonly known as food stamps.
In the recession era, the number of Illinoisans dependent on food stamps has risen by 745,000. Without adequate job creation in the state, Illinois families have had no choice but to depend upon food stamps to put bread on the table.
The Prairie State has had the worst recovery from the Great Recession of any state in the U.S. There are nearly 300,000 fewer Illinoisans working today than in January 2008, and 170,000 fewer payroll jobs.

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Jobs began to come back to Illinois in January 2010. But even since then, job creation hasn’t kept up with the needs of Illinois families. Food-stamp enrollment has outpaced job creation by nearly 2-to-1 during Illinois’ jobs recovery, from January 2010-July 2014.
The pace at which Illinois has been creating jobs is simply not good enough for Illinois families, and policy mistakes, such as the historic 2011 tax hikes, have made it worse. Illinois has gained only 240,000 jobs since the bottom of the recession, while food-stamp enrollment has gone up by 420,000.

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Even this year, as policy leaders claim the state is amidst a recovery, food-stamp enrollment continues to surge. Over the first seven months of 2014, Illinois is dead last in the U.S. for private sector job creation, having lost 5,900 private sector jobs. Food-stamp enrollment has surged by 17,000 over the same time period.

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There are now over 2 million Illinoisans dependent on food stamps, and more than 1 million in Cook County alone. That means that one in five residents of Cook County depend on food stamps just to get by.
Lawmakers need to jump-start entrepreneurship and embrace structural reform in order to get the economy going again. Without a fair shot at work, Illinoisans are forced into food-stamp dependency.
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