Joe’s economy still healthy: GDP expands +2.9%

Beat me to it.

 

This is from my previous post. The Clinton directive only affected GSEs, primarily Fannie Mae. Logically if the Clinton directive was the cause of the financial crisis the delinquency rate of GSE loans would have been as high or higher than that for private loans. Not the case. The defaults and foreclosures were clearly attributable to private lenders, Countrywide mortgage being the biggest offender.

 

When gas was at all time highs, and inflation was soaring everyone was talking about it being an issue.

The Feds massive tightening is still going on and hasn’t fully made it way through all areas of the economy.

Most experts still believe a recession is likely later this
year.

Time will tell if they are right and the change that the Fed navigates a soft landing is small(historically they over shoot).

 

And if the China reopen goes well it will go much higher. Hence the rally in the energy stocks.

 

The 2.9% was only slightly better than the 2.85 projected. IMO, a 2.9% expansion with inflation at 2% would be a healthy economy.

 

Then you have been successfully hoodwinked. Congrats! 2023 and 2024 will bring an end to American politics forever. Both sides are at fault, with republicans not really tackling the debt and democrats really not caring if the debt hits $100 Trillion. Politicians are running out of road to kick that can down. The issue is we haven't done much to combat inflation. The ONLY WAY to beat inflation is raise rates > inflation and we are nowhere even close to it. The Fed knows it and that's why they are skirting the rate hikes. All that QE money has propped up a fake economy. I've been saying that for over a decade. Nothing is a safe asset outside of investing in a foreign business that actually can show positive earnings. Here in the US, nothing is safe - cash, equities, and bonds are all failing and some cases the worst it has ever seen. Typical 401ks lost on average 7% in 2022. With inflation, sitting on cash lost you money. Cryptocurrencies were obliterated and bonds are negative. Tech stocks demolished. Index funds, vaporized. So the Fed is walking that fine line. They know they have to increase rates another 5% but they know what that would do to the economy. The problem is, if they don't, we are looking at a decade of stagflation.

So to increase rates to 7% at least, has ominous repercussions. That $30T in debt calculates to about $2T in interest payments. $2T would be the largest bucket in our budget by a long shot. That means the White House is going to have to enact austerity measures since where do you find another $1.4T? Increase taxes on everybody for one, cut spending for another. I could see them having to do a 20% spending cut on all discretionary spending. And that only gets us to breakeven. You still aren't touching the debt so those austerity measures are forever. Many economists have sounded the recession alarm for 2023 with no idea how bad it will be. The reason they don't know is QE Infinity - it changed the game. Peter Schiff, one of a few that warned about 2008, has said it's just about game over for the US:



He pretty much paints a bleak picture. The Fed and the WH has been blowing smoke up our asses by trying to compare CPIs from today and 1980 which aren't even close. If you apply the CPI used in 1980, our current inflation increase is the largest in US history, surpassing the 70s stagflation and 1980. He goes on to say the Fed is impotent today, they can't use what Volcker used in 1980, jack interest rates up to 20%. The reasons are obvious, we are an insolvent nation today. We weren't in 1980, we actually had real assets, extremely low national debt, spending was less, taxes were nominal, and we lead the world in all industries. We had the means to survive high inflation back then. Considering how right he was in many areas in 2007 and since 2009, I'd probably listen to him before I ever listen to our government.

 

When November rolled around gas prices had already come down dramatically and month over month inflation had essentially flattened out. Stock market had recovered. Etc. Etc.

The economy had clearly not been destroyed, and most who are honest know the main contributors to the spike in inflation had little to do with Biden's policies and much more to do with the war in Ukraine and lingering impacts from the pandemic.

Didn't stop the pubs from running non-stop ads saying it was all Biden's fault.

As to what the Fed does, they are independent of the president so it really isn't a Biden issue what they do.

But what is going to destroy the economy is if the Pubs allow us to default on our debt. What are your guys doing to ensure that doesn't happen? Nothing but pushing us closer to the edge.

 

Couldn’t read past the first two sentences. For you to claim democrats are the ones running up the debt and the only blame republicans have in it is not stopping them … it’s just a total disconnect from reality. Since Clinton, who had the country on track to pay off the debt, Republicans have added more to the debt than democrats… that is simply a fact.

You can see here that every Republican, going back to Reagan, has made the deficit worse, and every democrat has reversed that and improved the deficit….

It’s past time for you guys to drop the 30 year old nonsense that democrats drive the debt, and face reality…

 

But unemployment is at all time low!!! Wages are increasing!!!
You guys get to down in the weeds!!
I would agree with everything you said but the dept problem is both sides. Yes the dems don't care and the pubs talk about it but in the end they all agree and pass some $hitty omnibus package.

 

I would ask the simple question of when was the last time an actual budget was passed? Not some omnibus spending spree but an actual budget?

 

Enacted Federal Budgets

According to this, they've pass a budget every year ... if you don't like the way they do it, who's fault is that? Republicans had complete control of the government from 17-19 for example, did they pass "an actual budget"? Why not?

And what does that have to do with what I posted?

 

What's interesting about the graph is that under Trump and a Republican-controlled Congress FY 2018 and 2019 were perhaps the only years in well over a century if ever in which the deficit increased when unemployment declined (to the lowest level in 50 years) during peacetime. While the Democrats may or may not be the party of tax and spend, since Reagan the Republicans have been the party of borrow and spend and Trump who once referred to himself as the "king of debt" put that policy on steroids. Let's keep in mind that the deficit is the result of expenditures exceeding revenues. It doesn't take a CPA, an MBA or a PhD in economics to realize that the deficit is going to increase when expenditures increase at a greater rate than revenue especially as the result of policies and legislation that reduce revenue the most recent example being the 2017 tax cut.

Edit: I would add that a dirty little not so secret is that the American electorate wants the benefits of government but they don't want to pay the price. Walter Mondale's suggestion that he would support a tax increase led to one of the largest presidential electoral defeats in history. George H.W. Bush's tax increase was a factor in his presidential defeat in 1992 and Bill Clinton's modest tax increase in 1993 led to the Republican red wave in 1994 although interestingly the Bush and Clinton tax increases were probably responsible at least in part for the only Federal budget surpluses since 1969.

 

CPI up just 0.1% in dec
YoY inflation down to 4.4% and dropping like a stone
Consumer spending down in December.

Soft landing looking quite possible, but I think JPow hammers that dream next week.

 

Powell better keep hammering. 2 things besides the headline #s are the reason why
1. Services inf
2. Inf expectations as shown by consumer survey

Thank god the fed is independent

 

Schiff has been dramatically wrong for over a decade. I can’t predict the future but m thoughts are you greatly overstated the risks here. Inflation seems to be moderating. While our debt is high it isnt at unprecedented levels. I will agree we need to get some fiscal discipline for the long term but I have no reason to think any of his doomsday stuff will come true, unless we actually do default for a protracted period.

 

The peacetime prosperity deficits during the Trump years were excessive, disgraceful and unnecessary. They are probably the largest as a percent of gdp in those conditions in a long time.

 

The last stimulus that was passed under Biden clearly was not needed and brought the smoldering inflation to a boil, it’s hard to disagree with that.

That has caused the Fed to be forced to tighten harder and longer and increase the risk of recession.

I’m not saying it was all Biden’s fault but to ignore the impact he had is silly.

That’s has pushed us faster to the debt ceiling despite have ing a great GDP and great tax intake.
Raising the rates also worsen the debt as it increases the debt payments.
Do you recall Biden saying inflation is transitory?
He ignored it and poured more fuel on the fire.

Yes the Ukraine war and China on rolling lock downs made it worse, as China reopens watch the price of oil rise even more Biden’s only choice now is to vilify the oil companies for not producing more oil, all afternoon he campaigned for a year about how he would shut them down…

 

Consider this, when the pandemic hit many places stopped making things(supply went down), typically when people’s jobs are shutdown they have less. only to spend. That would have crushed demand and the two would have been matched. Both would have went down.
Not this time, we poured trillions into the economy and it helped demand stay up thus the imbalance and inflation.

If people didn’t have the extra government supplied dollars they wouldn’t have all been out buying new and used cars, TV and all the other discretionary items.
Cheap money helped fuel the housing market boom as well.
Many companies got millions in PPP, individuals got rent abatement and never lost their jobs, some of them saved the money many did not. Those extra dollars got spent on something right?
There is no way you can dump trillions into a system and not have it affect prices.