Negative Interest Rates

The Growth of Health Care Spending Since World War II

Why Government Spending Suppresses Growth, It DOESN'T Stimulate Growth...

Fiscal Cliff Deal Does Nothing To Reverse Profligate Spending...

Quote of The Day: How Gasoline Prices Impact Consumer Spending...

"Every penny increase in the price of gas at the pump equates to a loss of $1.0 t0 $1.5 billion in lost consumer spending in other areas."

Bloomberg News

The Misery Index: The Worst in 28 Years...

To put the current Misery Index (unemployment plus inflation = 12.9) in some historical context:

(1) it's higher than any time in the past 28 years

 (2) it's +36% higher than the post-World War II average of 9.5 


(3) there have been only 9 years in the past 63 when the annual Misery Index topped 12.9 — all in the inflationary 1970s.

The 1970s was the last time stagflation reared its ugly head.

Rampant government spending, regulatory hyperactivity and endless federal meddling in the economy were the root causes.


Sound familiar?

Government Spending As A Share of GDP Is Skyrocketing...

Spending as a share of GDP in the last 3 years is higher than at any time since 1946.

In 3 years the debt has increased by more than $4 trillion thanks to stimulus, cash for clunkers, mortgage modification programs, 99 weeks of jobless benefits, record expansions in Medicaid, and more.

The forecast is for $8 trillion to $10 trillion more in red ink through 2021.

If that happens, the U.S. dollar will no longer be the world's reserve currency.

The Economy: The Good, The Bad and The Ugly...

The Good: The manufacturing data in the U.S. continues to improve, at least within the confines of the major diffusion indices.

The Bad: The U.S. income and spending numbers were hardly stellar. It remains to be seen how much of the weakness was weather-related, but consumer spending dipped -0.1% in January - the first decline since April 2010. The fact is that consumers kept a lid on their spending even with the fiscal windfall in January, pushing the savings rate up to a four-month high of 5.8% from 5.4% in both November and December.

The Ugly: The housing sector remains in the dumpster.

Source: "The Good, The Bad and The Ugly" by David Rosenberg of Gluskin Sheff

Please - No More Stimulus!

Canada has been cutting spending and tax rates for the past decade or so. If Keynesians are right, the U.S. economy should be outperforming the Canadian economy now and Canada should have done better back in the 1980s and 1990s, right?

Wrong. It's the opposite.

The unemployment rate in Canada is currently 8% and has been below the U.S. level since October 2008, when government spending started to go crazy.

The lesson is clear: Less spending, less taxing and more freedom work.

Let's not stimulate anymore. The U.S. economy just can't take it.

How The Recession Has Changed America's Spending - Forbes.com

Americans were becoming frugal before the economy's decline, but the recession has accelerated this trend.

 The biggest news out of the Pew study was that "more than half of the adults in U.S. labor force (55%) have experienced some work-related hardship--be it a spell of unemployment, a cut in pay, a reduction in hours or an involuntary move to part-time work.
 
In addition, the bursting of the pre-recession housing and stock market bubbles has shrunk the wealth of the average American household by an estimated -20%, the deepest such decline in the post-World War II era, according to government data."
 
Read the entire article here...

Forbes.com - John Zogby - How The Recession Has Changed America's Spending

Is Washington Bankrupting America?

The U.S. Government Will Spend $31,406 Per Household in 2010

Taxpayers filing their 1040s are likely wondering just where all their hard-earned tax dollars are going, anyway.

Washington will spend $31,406 per household in 2010 — the highest level in American history (adjusted for inflation).

It will collect $18,276 per household in taxes.

The remaining $13,130 represents this year's staggering budget deficit per household, which, along with all prior government debt, will be dumped in the laps of our children.

Government spending has increased by $5,000 per household since 2008, and nearly $10,000 per household over the past decade.

Yet there is no free lunch: If spending is not reined in, then eventually taxes must also rise by $10,000 per household.

Why The Stimulus Hasn't Worked. And Won't Work. Ever.

"We've got to keep spending, to keep from going bankrupt."  — Vice President, Joe Biden

Brilliant observation, Joe. No wonder the economy is on life support.

Think of the U.S. economy like a household. If you were in trouble financially, how would you be FORCED to behave?

1. You'd cut spending dramatically.
2. You'd stop all borrowing immediately and pay down existing debt as fast as possible.
3. You'd refuse to lend anyone money.
4. You'd stop all charitable giving until you got back on your feet.
5. You'd try to be as productive as possible, perhaps taking on a second job or starting a new business to bring in more money.

The U.S. government doing the EXACT opposite, isn't it?  Borrowing isn't being curtailed. It's increasing exponentially. Spending isn't being cut. The bigger the hole gets, the more the politicians keep digging. 

If borrowing and spending what you don't have won't rescue your household from financial ruin, how can it possibly remedy the economy's predicament?

It can't, because unrestrained borrowing and spending is the antithesis of financial security.

The economy, we're told depends on credit. That's exactly backwards, and is no more correct than if you'd said your own prosperity depends on credit. It doesn't.

Credit depends on the economy and the existence of capital, which is only accumulated through savings, not spending. The only way you can truly stimulate the economy in a lasting way is to cut the burden of government immediately, dramatically and permanently.

The U.S. government is destroying value by increasing spending astronomically. That's why the U.S. dollar is in a free fall. A conceptually bankrupt plan cannot work, and President Obama cannot reach his stated goal of halving the deficit by 2013 on the current track. Our economy will not soon spring back to health. The more the government spends and the more it interferes in the financial system, the riskier every entrepreneurial or investing endeavor becomes.

We only have to look to Japan for an example of the folly of blindly embracing the desperate delusion that it's possible to borrow your way to prosperity with stimulus by running deficits of over 200% of GDP.

After 10 stimulus packages, Japan had little to show for its efforts. It was what economists call a "Lost Decade." Make that TWO Lost Decades! 

During the '90s, Japan's economy grew a paltry +0.5% a year — way down from a +3%-plus average in the preceding 20 years. And its net wealth plunged by -$16 trillion, more than three times the size of the Japanese economy.

Japan does have one lingering legacy from this: a Total Debt of roughly 200% of GDP, the developed world's highest. This has and will continue to hinder Japan's economy and, along with aging demographics, slow economic and productivity growth for the rest of this century. 

Two decades of borrowed and spent stimulus have failed miserably in Japan, which is now drowning in debt.

Are we wise enough to learn from Japan's mistakes or foolish enough to follow Japan down the road to fiscal and financial ruin?