The Fed Could Ruin The Country With Their $4.5 Trillion Magic Trick

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Here, we call it quantitative easing.

Wow, that’s a really tortured way of saying printing money.  Everyone knows printing money is bad.  Every politician and economist, deep in their hearts, knows there is no free lunch–that is unless you are a member of the Paul Krugman fanclub.

There WILL be consequences to the Fed making up $4.5 trillion out of thin air.  There always are consequences.  The problem is that you just always can’t foresee in what form they will materialize.

So the Federal Open Market Committee minutes of their recent meeting are going to be released today.  This is the group of wizards who look into the crystal ball every month and decide how to financially engineer the U.S. economy.  Over the last decade, they have decided that in order to save us from our free-market principles, they would print almost five trillion dollars and distort the U.S. bond market by acting as a buyer and keeping interest rates low.

Of course, there was no collusion between the White House and the Fed on this effort.  The fact that if interest rates rise we can’t service our debt (and social spending would be obliterated) is not the point.  The point is the Fed says they did this in order to achieve full employment.

And they have succeeded!  Unemployment is way down in the six percent handle. The fact that one-hundred million Americans have given up looking for work and left the workforce is not to be uttered in the hallowed halls of the Federal Reserve.

In any event, most likely today, we will be given the wonderful news that the Fed has decided to stop easing quantitatively.  I feel much better, don’t you?  They still are keeping short term rates at zero, and they still have to pull five trillion dollars back out of the economy at some point; but Obama will be out of office by then (at least I think), and he won’t have to worry about it.

Whew, I feel better knowing he won’t have to face the consequences of his actions.  But when has he faced any consequences?  (That’s another column.)

The market will have to face this modicum of financial responsibility. And the markets are not going to like it.

Markets never like rising rates. It’s not different this time.

America can’t get away from the fact that we have been living on a QE sugar-high, an irrational bond market, and debt.  At some point, we will have to pay the piper.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

EXPOSED: The Ugly Truth Behind New Jobs Report The Obama-Backing Media Won’t Tell You

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Whenever a new government report comes out that gives the left-leaning media any reason to raise a cheer for the Obama administration, you can bet the progressive chorus will begin to sing the praises of their champion.

And so it goes after today’s release of the latest jobs creation and unemployment report from the Labor Department.

Right on cue, outlets such as The Huffington Post sound a triumphant trumpet for the latest figures — 248,000 jobs created last month, with the country’s unemployment rate falling to 5.9%.

Here’s how The Huffington Post helped to lead the cheerleading for Obama, citing a report by the reliably pro-administration Associated Press:

The mostly positive government report also showed that employers added 69,000 more jobs in July and August than previously estimated.

The rate fell from 6.1 percent in August and is now close to 5.5 percent, which many economists consider a healthy level.

The improved figures come after President Barack Obama touted his administration’s economic achievements in a speech Thursday. The economy is the top issue in voters’ minds as the November elections near.

So, right after the president’s speech at Northwestern University in which he extolled the virtues of his economic policies and programs…right when polling shows that the economy and the jobs market are at the top of most voters’ list of concerns…right as the real pressure mounts on vulnerable Democrats heading into crucial midterm elections — we get this “mostly positive” government report.

Well, let’s look a little deeper than the glossy surface reflection of Obama’s self-congratulatory talking points — the ones that make for the kind of glib arguments that miss the underlying fundamentals — the fundamentals showing a perilous weakness.

Beneath those top-line talking-point numbers — new jobs, lower unemployment — beneath those figures lies a much-more telling statistic. The labor force participation rate — the not-so-rosy number that Obama and his cheerleaders in the media don’t want to shout about.

Zerohedge.com reveals the ugly truth — that, once again last month, a ton of folks dropped out of the U.S. labor market. They became a drain on the system rather than contributors to it. Instead of paying taxes, they’ll suck up government benefits funded from tax revenues paid by others.

While by now everyone should know the answer, for those curious why the US unemployment rate just slid once more to a meager 5.9%, the lowest print since the summer of 2008, the answer is the same one we have shown every month since 2010: the collapse in the labor force participation rate, which in September slide from an already three decade low 62.8% to 62.7% – the lowest in over 36 years, matching the February 1978 lows.

And while according to the Household Survey, 232K people found jobs, what is more disturbing is that the people not in the labor force, rose to a new record high, increasing by 315,000 to 92.6 million!

So, far more people last month left the labor force than joined or rejoined it. Far more Americans gave up on finding work and dropped out.

The truth is, America is working less…even as Obama is gloating more.

 

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This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

The Obama Economic Record: The Worst Five Years Since World War II

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Editor’s note: This article first appeared The Daily Caller.

In spite of the claims by President Obama’s Council of Economic Advisors regarding his administration’s economic accomplishments, the U.S. economy has grown very slowly in the years since the Great Recession of 2008-09. After four years of slow growth, the latest data reveals that the U.S. economy shrank at a 2.9 percent annual rate during the first quarter of 2014.

That figure has been widely reported, but here are some figures that have not been reported, and they are quite eye-opening:

Over the first five years of Obama’s presidency, the U.S. economy grew more slowly than during any five-year period since just after the end of World War II, averaging less than 1.3 percent per year. If we leave out the sharp recession of 1945-46 following World War II, Obama looks even worse, ranking dead last among all presidents since 1932. No other president since the Great Depression has presided over such a steadily poor rate of economic growth during his first five years in office. This slow growth should not be a surprise in light of the policies this administration has pursued.

An economy usually grows rapidly in the years immediately following a recession. As Peter Ferrara points out in Forbes, the U.S. economy has not even reached its long run average rate of growth of 3.3 percent; the highest annual growth rate since Obama took office was 2.8 percent. Total growth in real GDP over the 19 quarters of economic recovery since the second quarter of 2009 has been 10.2 percent. Growth over the same length of time during previous post-World War II recoveries has ranged from 15.1 percent during George W. Bush’s presidency to 30 percent during the recovery that began when John F. Kennedy was elected.

Economic growth is usually faster than normal following a recession as entrepreneurs find more productive ways to employ the resources that were idle during the recession. How rapidly the economy grows and recovers depends partly on whether market forces are allowed to allocate resources, including labor, to their most productive uses. Unfortunately, the Obama administration has pursued several policies that make it harder for market forces to work. These include: bailouts, expansion of entitlement programs, regulation of the economy, tax increases, and huge government deficits.

Bailouts have resulted in capital being stuck in businesses that are either inefficiently run or have failed to produce goods and services that consumers’ value highly. In the absence of bailouts, some firms would have gone bankrupt and the capital reallocated to vibrant firms that are producing what consumers demand in a cost-effective way.

Expansion of government entitlement programs, such as food stamps and unemployment compensation, has reduced the incentive to be employed. The average benefit per recipient of food stamps jumped by approximately 25 percent between 2007 and 2010 due to rule changes. It also became easier to qualify for food stamps. As Richard Vedder points out in a Wall Street Journal editorial, the number of food stamp recipients rose by over 7 million between 2010 and 2012, a period of falling unemployment.

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This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Lower Benefits, Higher Jobs — Paul Ryan Has It Right

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Neel Kashkari, the Republican candidate for governor of California, just recounted in The Wall Street Journal his week on the streets of Fresno posing as a homeless man looking for work. At the end of his op-ed, Kashkari lamented that he didn’t need a higher minimum wage, paid sick leave, or a health care plan. What he needed was a job.

And Kashkari made the important point that all those government benefits, especially extended unemployment benefits, are work disincentives that may actually block job creation.

To be sure, there are signs that employment in the country is rising more rapidly these days. The February-July period was the first six-month stretch of consistent employment gains above 200,000 since 1997. And that came without any new programs from the federal government to “create jobs.” Even more surprising, those gains overlapped a quarter in which the gross domestic product actually contracted.

So what drove the increase? University of Chicago professor Casey Mulligan put his finger on it: “Major subsidies and regulations intended to help the poor and unemployed … reduce incentives for people to work and for businesses to hire.” And guess what happened when federal emergency job assistance ended? Job increases were the best they had been in 17 years.

Economists tend to focus primarily on the demand for labor in analyzing employment trends, giving short shrift to the supply of labor. Indeed, given the harsh winter weather and first-quarter drop in real GDP, it’s hard to believe that the demand for labor increased significantly in February and March. But is there anything about the supply of labor that could explain the improvement in employment?

Well, there is a very good reason to believe that extending unemployment benefits to a maximum of 99 weeks in recent years held back the labor supply. Rather than take a job, potential workers could more easily lengthen their job searches, hold out for higher-wage positions, or just choose not to work.

However, supply-side theory would also suggest that as extended unemployment benefits expired at the end of last year — despite major hand-wringing from the president and Democratic leaders — workers would go back to work. And they did. Technically, this would be visible as an outward expansion of the supply-of-labor curve. Without the crutch of continued unemployment benefits, workers are willing to take jobs, even at a somewhat lower wage. They know that work is its own virtue.

Now, if the demand for labor is steady, what would be the implications of an increased labor supply? Here, as the supply curve shifts, economic analysis would suggest that wages might fall somewhat–but the level of employment would increase. And guess what? Since the month after extended unemployment benefits expired, the number of employed workers has increased, the employment-to-population ratio has increased (59 percent in July, versus 58.8 percent in February), and the civilian labor force has increased (to 156 million in July, from 155.7 million in February.) Average hourly earnings growth remains sluggish, at only 0.2 percent per month over the past six months; but at least wages have risen modestly while employment gains have increased markedly.

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This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Obama Dragged Down By Chaos At Home And Abroad, Not By The Economy

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“Why do you think President Obama’s job rating is falling, even though the economy is recovering?” the interviewer asked.

It’s a fair question, even though the economy declined 2.9 percent in the first quarter, even though most jobs created in June were part-time, and even though labor force participation remains low.

The fact is that the economy is growing, however slowly; jobs are being created, and the unemployment rate is heading down toward what economists consider full employment. And still, the president’s job rating languishes.

What’s wrong with the question is an assumption embedded within it, that what voters seek most from government and political officeholders is economic growth. I think there’s something they value even more: the maintenance of order.

This isn’t what I was taught in political science classes. Political scientists who had grown up in the 1930s Depression taught that politics was about “who gets what, when, and how.”

Operating on that assumption, political scientists developed rules that explained past election outcomes as a function of economic variables — how much the economy grew in the second quarter of the election year, for example.

Those rules generally worked pretty well at predicting future elections — until they didn’t.

What they don’t explain very well are the political upheavals that come when voters perceive that the nation and the world are in disarray. Americans, blessed with a mostly happy history, tend to take fundamental order for granted. They recoil and rebel when things spin out of control.

Example: The political scientists taught that the big shift toward Democrats in 1874 was a response to the financial panic of 1873. Sort of like the Great Depression.

But further study convinces me it was a rebellion against Ulysses Grant’s military occupation of the South to protect blacks’ rights. Voters tired of violence voted for the anti-black Democrats, who held House majorities for 14 of the next 20 years and won the popular vote for president in five of six presidential elections in those years.

Or consider Republicans’ “back to normalcy” victory in 1920. This was a response to disorder at home (dizzying inflation and depression, waves of strikes, terrorist bombings) and abroad (Communist revolutions, continued fighting in Russia and the Middle East, rejection of Woodrow Wilson’s League of Nations).

Closer to our times, Jimmy Carter was rejected in 1980 as the nation faced not only stagflation (inflation-plus-recession) at home but also an “arc of instability” abroad.

Americans, unlike voters in many other countries, demand the maintenance of order in the world as well in their own nation. From the early days of the republic, there has been an unspoken awareness that what happens in the world affects their own lives.

In the 19th century, American merchants went out into the Mediterranean, American whalers to the Pacific, and American missionaries to China and the Middle East.

American troops followed. The Navy and Marines went after the Barbary pirates on the shores of Tripoli. American gunboats opened Japan to the world in 1854 and were stationed on rivers in China from the 1840s to the 1930s.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom