It’s the Obonomy, Stupid!
“Business investment in the US has ground to a halt” is the lead story on MarketWatch this morning. The site reports, “For the first quarter since late 2009, shipments of U.S.-made capital investment goods declined, falling at a 4.9% annual rate, according to Census Bureau data released on Thursday.”
There’s an investors’ strike underway of proportions we have never seen before. Corporations are hoarding $2 trillion worth of cash. Private equity funds have $1 trillion of unused commitments. Pension funds and life insurance companies are gasping for returns. Yet Americans refuse to take risk on other Americans. Households, corporations, and institutional investors would rather keep money under the figurative mattress in ultra-safe investments than invest in future productivity.
This isn’t like the Great Depression. During the Great Depression, to be sure, investment collapsed, but no-one had money to invest. Now everyone has money to invest (and the Federal Reserve keeps shoving new money into the system by purchasing securities from the open market), yet no-one wants to invest.
There’s no textbook description for this condition, so we’ll give it a name: the Obonomy. The anti-business toxicity in Washington is so intense that that no-one will take risks.
The investors’ strike is especially onerous given that the average profit margin for the nearly 4,000 exchange-traded public companies for whom data are available was over 18% during the second quarter of 2012. Why wouldn’t investors put more money into businesses earning 18% year, rather than buy safe securities yielding the rate of inflation or less? The answer is that they are terrified of the anti-business environment. If Obama is re-elected, business will hit a wall of tax increases and face a regulatory reign of terror.
The great American profit machine has stalled. If Obama is re-elected, we are all going to be poorer.
Businesses are not going to hire many new workers, because the cost of those workers is highly uncertain, due, in large part to the yet unwritten Obamacare regulations. And who knows if Obamacare will be repealed.
Even if President Romney grants a waiver to every state on day one, what happens 4 years in the future? Would a President Andrew Cuomo withdraw the waivers? Waivers are great short term, but there has to be a full repeal.
rbj, you are correct, full repeal must be the end game.
There is absolutely nothing within his economic death kneel which is not purposeful. There are no mistakes, only poison pills. So even if he is shown the door, there will be many, many bomblets ready to explode down the line.
He did what he intended, he started the deconstruction of America. Nevertheless, Romney may be able to save its underpinnings, but only if he goes through the entire system with a fine tooth comb.
http://adinakutnicki.com/2012/08/07/barack-hussein-obamas-deconstruction-plans-green-wise-via-the-economy-disarming-the-citizens-via-gun-control-connecting-the-dots-addendum-to-the-second-term-plans-of-an-obama-presidency-c/
History will mark this period as the ‘Anti-American Presidency’.
All business really asks for is stability and by that I mean knowing what government intentions are now and several years from now and especially in the tax department. If they keep moving the goal posts who the hell wants to play that game, especially with money it has taken you long hours of hard work and sacrifice to accumulate. If Obama is re-elected I will not be investing one red cent in anything, my holiday will continue.
Not quite… what businesses want is the opportunity to make a profit and, to do that, they need the stability that you describe to determine if any opportunity for profit exists.
“Galt Capital” has listened to and fully understands Obama, he’s the Anti-Profit Prophet. “Galt Capital” is sitting on the sidelines because it has no place to invest. There really aren’t many “capital friendly” places left in the world because the Anti-Profit Prophet is preaching worldwide these days.
“If Obama is re-elected, we are all going to be poorer.”
But more equal. The problem is, businesses use safe, neutral phrases like “anti-business toxicity” without ever being too specific. If it’s heard and (mis)interpreted, it always means more liquidity of some sort, and as you mentioned, this fails. Or, it succeeds in blowing up another bubble. The results are always heavily politically correct, whether it’s real estate swap quantitative easing or college loan financing. Picking on Obamacare is easy, but ultimately unfulfilling.
Businesses haven’t taken a stance against “equality” in generations. Whining about taxes and interest rates and insurance and budgets does not accomplish any real thing, because those are abstract numbers that do not exist in the real world. In the real world, businesses are threatened and forced to hire unqualified workers of protected status, or compete with Chinese/illegal labor, or negotiate reasonable contracts with politically invincible union thugs. They can’t win, in the long run.
And they don’t ever say anything about it. They publicly approve of every government intrusion, and this is too great for any quiet backroom negotiations to overcome. Even Republicans do nothing, and won’t do anything, until businesses learn to be explicit about exactly what they want without fear. That’s the kind of risk taking that is needed more than any other.
“If Obama is re-elected, we are all going to be poorer.”
You have said or implied as much in the past. But what about the other outcome?
I’ve been faithful to equity investments these many years, waiting for the rest of America to notice the chasm between public company earnings and the pitiful returns paid to timid debt investors. So what will happen when Romney wins? I expect the dam to break and equity investment to flood the nation.
What do you think will happen, David? I won’t hold it against you if you’re wrong, but you must have a Romney victory scenario in mind and I’d love to know what it is.
The Fed has been issuing money like mad, but there has been no significant inflation because that money is just sitting with the banks. People don’t want it, as Spengler notes. It’s not been put into circulation, so no significant inflation is occurring.
But if (I would say when) Romney wins, all the money will come flooding into circulation as people start investing again. Massive inflation will be one of the results.
The geniuses with Nobels in econ seem to miss something obvious: you can’t push on a rope.
HOW DOES ROMNEY EFFECT GOLD?
Romney wants a strong dollar. Bernanke is expected to be gone by 2014 and, with him, low interest rates.
Does gold go down when higher interest rates kick in? Or do high interest rates cause the debt to explode out of control and gold becomes a safe play?
“Does gold go down when higher interest rates kick in? Or do high interest rates cause the debt to explode out of control and gold becomes a safe play?”
Gold could go down (or stop to increase), but everything will go down. Gold you own outside the banking system will be, anyway a safe haven. But if the interest rate go up a lot of people and institutions will default and go broke.
The best way for the US to avoid a total default on its debts would be to sell the federal government land with full rights of use. Less stuff the government have less they can steal or mismanage.
The Romney choices:Bankruptcy, Austerity, Inflation, and last, and most unlikely for investors Growth. To try and grow our way out of all this debt seems very unlikely given the demographics and a world on the dole. It is no longer a question of return on investment, it is about preservation. The market is rigged in so many ways. So most are sitting this out. A few brave souls may make a run at things in the second year or so of Romney, but for most it will be like watching the guy who goes in the frozen water first – even if he does, how many will follow. What I think this ultimately portends is a downsizing of every large corporation, breaking off into ‘profit’ centers, then breaking off more and more. The tiny companies will find a niche here and there, but this will be a prolonged agony on the deathbed for most. Obama has just the knack for killing things off faster.
“There’s an investor’s strike underway”
It is going to be interesting to see how the left recasts this situation
to their advantage. They will be beating businesses and investors with it 50 years.
FWIW. I own and run a small business. Micro-business is a good discriptor. I will not hire anyone ever. All of my help are/will be via temp agencies, up to and including engineering talent. Further, since most of the prime contractors I sub-contract to are performing Federal contracts (I live in Metro DC), I will hire US Citizens only…no green cards allowed.
If my self imposed conditions prevent me from being able to provide the men, money, machines and materiel required for a satisfied customer I will decline the sub-contract opportunity.
Semi-Galt.
Many small and micro-businesses are using the strategy you outline, which is why the temp services sector has consistently been and continues to be one of the fastest growing sectors throughout the “recovery.”
When small and micro-businesses, the largest segment of job creators, are unwilling to commit to hiring full-time employees, it is a Very. Bad. Sign. Temp employees can be shed quickly with few ramifications at the first sign of another downturn.
So through the work of pure genius that is Obamacare they tack on a zillion extra costs and requirements to insurance that make it unaffordable for you to provide health insurance for your employees, then they tack on a $3000/year penalty to every employee if you don’t. Obama and co probably thought they really had business’s balls in a vice with that one! Did they even pause to consider that the logical solutions out of the bind they deliberately put companies in is the things like you’re doing? Or hiring two part time employees instead of 1 full time one? Or taking that $3000 out of their employees paychecks or future raises? Are they really that drunk on their own cool-aid that they believe business is just the bottomless well of cash that you can extract money from without consequence? Or are they malevolent enough to be doing this on purpose?
In their crusade to provide everyone with “free” birth control they’ve condemned my generation to a lifetime of unemployment, underemployment, working through temp agencies, etc. Those pills turned out to be pretty damned expensive didn’t they?
It’s the obonomy, and the whole country needs a pre-frontal obotomy.
Bronco Bamma promised a free bottle in front of me…
but all I got was a pre-frontal Obotomy!
Large companies are profitable now because, inter alia, competition from new entries is minimal to zero. Startup costs are so outrageous that even large companies cringe. Thus, the large surplus of funds among established firms who will not risk their irreplaceable pot of gold.
How to characterize this circumstance. Functional Fascism! Large companies walking hand-in-hand with the government. The ordinary person – small business, worker, even blessed and entrenched government employee – becoming impoverished. Our savings held hostage without interest for government use! We create our own destruction without building alternatives.
Correct. As Jonah Goldberg explains in his book Liberal Fascism, when regulations become stricter, it benefits big businesses (and big banks) at the expense of small ones and startups. The big fellas “cooperate” in joint business/government initiatives to “protect the consumer” yadda yadda. Sounds good right? But the incremental spend required to comply with tougher regulations is teeny as a function of –to take a random example, lol–General Electric. For a company employing 100 people, it can be crushing. So the big guys light up another cigar AND get brownie points for being good citizens. What’s not to like? Get praise for protecting the consumer AND stifle competition, cool! Don’t be surprised when your neighborhood bank goes out of business.
Apparently this is also the theme of Ezra Klein’s book, which claims, as I understand it, that Obama is essentially a corporatist. Which I find odd. Germany used to have its Mitbestimmung, which had its day. But as far as I know, Obama is no Germanophile. So where did he get these ideas? Becase as a description, it does fit the facts. Obama wants to make the banks big. Wants to have a hand in the auto companies. Washington, D.C. is booming.
People should also weigh in on what Dick Morris is saying about the U.N. My sense is that he is on to something. From other sources I know they are really pushing the social issues via the U.N.
Is this corporatism in one world? It’s weird. We are four years into the Obama presidency, and he still seems something of an enigma. Yeah, he’s the faculty lounge. Yeah, he’s Frantz Fanon lite. But he is also something else. His mom was a consultant at the World Bank. Maybe there is this elitist, McNamara streak that he picked up in Indonesia or something.
Whatever it is, it’s time to send it packing.
Correction: Edward Klein
Inasmuch as the major threats to American enterprise emanate from the regulatory bureaucracies, there arises a highly significant question: Is any economic sector favored by this set of influences?
I’ll stop short of suggesting that one should bet on that sector with one’s own money. But politically, a coalition of businesses, or an economic sector, that deems intensified regulation to its advantage is something to be watched closely — and not just until November 7. It would constitute an ongoing threat to freedom of the marketplace, and could be counted on to encourage a further swelling of Leviathan regardless of who might hold the reins of power.
“The Economy”, explained
“I was fine with math up until 7th grade”.
Which curiously enough is right around the time he joined the Choom Gang
EUROPEAN ELECTION MONITORS ARE NOT WELCOMED IN TEXAS OR ALABAMA. Texas Attorney General Greg Abbott is threatening to bring criminal charges against European election observers who may be monitoring the general election process in Texas. His always-entertaining Twitter feed suggests he would also be willing to throttle them with his bare hands. “UN poll … READ MORE:
http://bwcentral.org/2012/10/texas-ag-greg-abbott-threatens-to-press-charges-against-european-election-monitors/
You can always tell an Aggie, but you can’t tell ‘em much. God bless Texas.
That ‘investors strike’ is much broader, a manifestation of the effects of endless stimulus: the figleafs don’t work any more because consumers and businesses alike want out of the debt spiral asap. Who wants to increase his debt or generate inflation by borrowing more as we sail into uncharted waters? Answer: Only the desperate, degenerate and dim. That includes many economists (Krugman), bankers (the very word now often a synonym for arrogant, ignorant, self-important liar) and, above all, central bankers — all increasingly look and sound like Miss Piggy (Quoi? Moi?).
The only question that really matters now: where’s the next Paul Volker and when will he take over? You can be sure Obama doesn’t even understand the question; Romney may at least have thought about it. Whether he knows what to do is something else, but it beats Hobson’s Choice (barely). Big mess looms.
Nicely observed Mr. Goldman – you isolate the seriousness of the uncertainty around taxation and related expenses like Obamacare. The whole thing reminds of a steam driven Rube Goldberg contraption with the pressure gauge way into the red zone. Steyn’s After America makes the point that if these forces get out of control things could go downhill swiftly. With Europe on the brink it may not matter who we elect if the world economy tanks, but I would still rather have Mitt in charge because he might actually understand what he is dealing with.
“If Obama is re-elected, we are all going to be poorer.”
Well, aside from the fact that we are already poorer from the last 4 yrs of the Marxist redistributionist we call our President, has anyone else noticed that the Obama-supporting talking heads on TV never, and I mean never, bring up unemployment or the economy?
Fair share !
Fair share !
Fair share !
This administration overtly threatens to take away any capital it will be able to see.
There is no “strike” on the side of “capital”, there is only a natural self-defense reaction against a robber. A robber who, by the way, could steal America’s wealth one time only…and then would leave America poor forever, after his support groups have literally eaten away the wealth created in generations and generations of hard work.
Oh, I want to invest and I have – in countries other than the US that have more promise for growth. (And based on past performance, I see no reason to think that Republicans will do anything other than make things a little less worse.)
Sequestration and the fiscal cliff due Jan. 2nd. Does anyone think that the current president can unite congress to negotiate a budget? The CEO’s letter to end the debt crisis is weighed in the media against petty issues like free birth control pills.
At best, who ever becomes president can only postpone the cuts and tax increases. The damages of Obamanomics, class warfare, hyperregulation, and business uncertainty will require a revolution with resolve in the way big O government has been conducted.
I do not think it is anti-business as long as the business is a political player. Especially a player that earns its revenue from a regulatory monopoly or being a favored government vendor. It is anti-individual and free market though so even the connected businesses are seeking a directed share of a shrinking pie.
I call what is going on Corporatism usually because Fascism is so poorly understood by most people. But not among Goldman readers. http://www.invisibleserfscollar.com/ridiculing-the-1860s-mind-as-unsuitable-for-the-21st-century-cui-bono/ is a post I just finished after listening to a Chamber of Commerce program on “innovation and education” on Wednesday coupled with a new politicized federal report that came out Tuesday. Once again pushing a centrally planned, redesigned, economy around Sustainability using education to produce the desired collectivist mindsets that would literally be susceptible to manipulation.
We can still put this behind us but only if we are willing to elect a different President AND look this ugliness square in the face.
A very good post Robin! You are a scholar!
Mitt Romney – ‘Corporations are People’. Actually they hire people, and are not individuals. Unless you believe in Corporatism!
http://www.youtube.com/watch?v=4PRlPl_SUUQ
Study finds many corporations pay tax rate of effectively zero By Bernie Becker – 06/01/11
http://thehill.com/blogs/on-the-money/domestic-taxes/164103-report-corporations-pay-low-effective-tax-rates
My clients are investing, in India, Mexico, S America, the Caribbean, but not here.
Who is John Galt?
ISLAMO-FASCISTS USE SUICIDE BOMBERS TO KILL PEOPLE.
Re-electing Obama is mass suicide that will kill the economy.
There already is a name: OBAMANOMICS
Obozonomics
Good one. But maybe it should be spelled: Oh! Bozonomics.
It is difficult to overstate the importance of this article. This, rational human response to state theft is what went missing from macroeconomics when the socialist John Maynard Keynes purged ” animal spirits” from his General Theory. It paved the way for the relentless creep of socialism that has all but destroyed the world economy.
In this sense, Obama is correct that he inheirited a mess. However, the mess was created by the very policies that Obama espouses.
This article explains why Keynesian stimulus policies will never work with people like Obama in power. It should be required reading for first year undergraduate economics students, and for those with an even worse grasp on economic wisdom, such as Paul Krugman.
It may have been the fourth or fifth worst economic mess in the last 200 years, but if you count other things, it wouldn’t even get in the top 10 messes in American history.
Obviously, the Great Depression was much worse. The Jimmy Carter mess was much worse. There were two panics between 1880 and 1929 that were worse and probably several others in the 1800′s. WWII was much worse. The Civil War was much worse. The Viet Nam War was worse. The War of 1812 was worse. Reconstruction was worse. The time of the Articles of Confederation was worse. Arguably, 9/11 was worse.
obama’s “bad hand” was arguably about average for the situations American Presidents have had to deal with, certainly not much worse than average. If the Fraud had simply done nothing but work on his girlish golf swing, we would be much MUCH better off today.
And as you say, it was brought on by liberal policies anyway, primarilly Loans to Deadbeats which the Cowardly Fraud had a hand in (and there is some evidence that he was a very key instigator from his brief period of actual legal work in the early to mid 90′s).
It seems to me that a lot of people have the attitude that oh we’ll muddle through. Even years of modest growth won’t hurt all that much.
But socialist regimes don’t achieve modest growth. It’ an illusion. In fact, our current gdp is an illusion. Countrys count government spending in gdp. In the case of the US, that is currently about 3.8 T of an economy of about 15 T, or about 25% of total US spending. Of that 3.8T, a huge amount IS BORROWED, about 40%. It’s not real. It’s an illusion. Repeat, something like 40% of 25% of gdp is borrowed. This is no different than you making 70K a year, spending 77K a year by borrowing 7K, and thinking everything is ok. It’s delusional.
Real gdp is 10% lower than the fake government statistics claim. The economy has been SEVERELY shrinking for 4 years, and without a dramatic change, the shrinking is actually accelerating because the debt is compounding.
Even so, we may muddle for a short period of time. Then the muddling will reach the rim of Niagra Falls, and we will descend to the lifestyle of the rest of the world and the rest of history. It won’t be a 10% descent…it will be a 75% to 90% descent. People will starve to death. Yes, that sounds severe, but it’s what life has been like for 95% of humanity for 95% of history. That’s the path we are on; not a path where you will have to tweak your cable bill down and tip less in restaurants; a path where you spend 90% of your time trying to find enough to eat.
Perfect diagnosis.
Unluckily very few have studied history.
I mean true history, not the marxist manuals where the whole process of the take-off is completely misunderstood.
Therefore, very few understand what is going to happen when you choke the movement of capital.
If Obama wins, a lot of people will suffer a crash course in Economy 101. But it will be too late. For them, for America, and for the world.
No, not a perfect diagnosis, though certainly not nonsense. Secular ‘experts’ (let’s stay away from religious loons) have predicted the End of Things all my life. We are still here. Why, to borrow a well-known but not overworked phrase, is this time different?
We are not headed back to a hirsuite subsistence world of bark and berries, foraging for women of breeding age in a universe of monosyllabic, grunting Iron John’s. And we are certainly not going to end up eating catfood like the French, British or (surprise to some) Germans, nor will our children learn Chinese as a second language or our grandkids revere or fear the words sharia and Mecca. We choose to survive — muddling through as we can — and we will. Life will likely get simpler, as bureaucracies and ‘entitlements’ evaporate. Really, who among us needs a K-Street lobbyist or (borrowing again) a ‘jackbooted octopus of fascism’ like General Electric, or a banker like [G. Sachs or fill in your own blank]? Not you, not me, not the guy next door. And the bad guys all hang high and die easy. We are on the brink of great changes, but in that crisis lies great opportunity for good, at least for those willing to think and plan.
No country for old men, then, but it’s all about attitude. Might be time to revisit Darwin and pick up that book about growing your own vegetables, since there will be a few rough years ahead, worst of all for parasites. If you aren’t a parasite, you’ll be fine. No need for John Gault, either, or an arsenal. Aurea mediocritas, the golden mean, is still with us.
This makes my point. Not to worry. Everything will be ok.
Within the last 200 years…
1. Germany descended into chaos and famine in the 1920′s
2. lifestyles in all western countries were a fraction of what they are today.
3. Russia has gone through several cycles, and in all of them the vast majority of Russians lived as serfs.
4. China is just coming out of the Middle Ages.
5. The Middle East is in as much chaos today as during the Middle Ages.
6. Poverty in the US, real poverty not the pretend poverty of today, permeated Appalachia and much of the Deep South.
7. Standards of living plunged to subsistence levels for many in the US during the 1930′s. It even sparked a mass migration to California from the Mid/Southwest.
and on and on.
yet somehow, the United States today is immune to what has plagued the world for (much more) than 95% of history. No need to worry about a nice guy like obama who claims to have the answer to everything, and amazingly, is believed by nearly half the country.
A real economic catastrophe can happen in a few short years, and dozens of different circumstances can trigger it. And the most likely cause is a demagogue. The signs are everywhere for people who can see. For the first times in US history, wealthy people are playing defense with their wealth.
No, it doesn’t make your point at all. Swallow your argument lock, stock and both smoking barrels or you’re some pathetic deluded form of Pollyanna? Hardly.
Tempestuous change lies ahead, on that we agree completely; many will be able to add to your list without difficulty. But it’s folly to use ‘the wealthy’ as a weather vane. The wealthy, if anything, are in a worse spot than many a blue-collar worker who uses his hands to make, fix and grow things. If he can also barter, Joe the Plumber and his family will likely inherit the future. By contrast, the uber-wealthy — now constructing or already in their bolt holes in Wyoming and Idaho, complete with safe rooms, helipads and armored RV convoys — face a truly perilous prospect. Almost none have survival skills, and their authority and wealth dangles by a thread. So many examples, it’s hard to know where to start — maybe with the Secret Service, the so-called last line, which now shows every sign of having degenerated into a flabby-assed claque of drunks and losers. Or perhaps with the women: Ann Romney or Teresa Kerry or the unspeakable Michelle O as frontier women in the log cabin, loading muskets when we all hit the fan? Doesn’t sound likely (Laura Bush, possibly; Sarah Palin, without a doubt).
But you’re missing a critical point. As Buffett famously said, it has never paid to bet against the American people or the American economy, and now is not the time to start. Ain’t no magic about the idea that ‘somehow the United States is immune…’ — yet you sound almost miffed. It’s called hard work, single-mindedness and all-around decency, the building blocks of American exceptionalism in a republic founded on liberty and personal responsibility. Plenty of us remain, more than enough to do the job. The cry for the guy on the white horse is as seductive as ever, but it will be resisted in favor of the famous five hundred names (or five thousand) from the phone book.
Intentionally or not, you sound like a very mournful version of Job’s comforter. Why not get out and piss-off some Democrats? I’m abroad right now, restricted to the internet and a rather feeble attempt to encourage support for Romney, a poor second best in every way.
Why do they need to rob? They have practiced identity theft on everyone in America, are running up debt against our credit at colossal rates (40% of GDP in 4 years … will accelerate in the next downturn), and will continue until America’s credit runs out, at which time we’ll be left destitute.
Romney will slow this process but not reverse it. I support him because he gives us a chance, but it is a 1% chance against a 0% chance, not a likelihood. We can see in Europe that nobody is willing to stand against the “borrow from the future to delay the reckoning” strategy. If Merkel won’t do it there, even though the Germans have the most to lose and nothing to gain, who will do it here? We are just following along a bit slower, but not enough slower that we’ll have time to learn from European and Japanese mistakes.
Mark my words.
On November 7, Wednesday, the headline in half of the big city newspapers will be. “Turnout turns Out Obama”
Mr. Goldman, if you believe the “anti-business” meme pushed by the CONservatives as an excuse their trickle-down snake oil isn’t working and why we should now give even MORE money to the very rich that are already sitting on piles of cash, then I have a bridge to nowhere with your name on it.
Please contact me immediately and bring lots of money.
Why don’t you explain to the rest of us why investors are sitting on mountains of unused cash and refuse to invest in businesses that hire people? Forget the very rich: how about the $20 trillion sitting in US pension funds and life insurance companies, that is, middle-class savings? Compare that to $3 trillion in hedge funds globally. This is a new and unwelcome situation — we’ve never seen anything quite like it before. The US economy creates jobs when small companies turn into big companies–that’s what all the research shows. There are more obstacles than there used to be to small companies turning into big companies. And when that happens, someone usually gets stinking rich, beyond the dreams of avarice. If you don’t want investors to get rich, where are ou going to get the jobs?
Jesus, David, do I have to do your job for you. I’m not even getting paid!
The answer to your question, David, is DEMAND, as in there isn’t enough of it. i.e. people are hurting, jobs are scarce, costs are increasing. Add to that the uncertainty businesses are facing because of the fiscal cliff – the result of the Republican strategy to use raising the debt ceiling as an opportunity to force their plan of major spending cuts but no increased taxes on the rich – and you have the current stalled economy.
It needs stimulation to get it out of the ditch, not more tax cuts to the rich or not more ways for big corporations to use America like a cheap crack whore while they off-shore jobs and their money. What Rawmoney has presented as a “plan” is a bunch of gauzy, detail-free, faith-based BS. It’s basically “trust me, things will get better because I’m so awesome”.
Demand is growing much faster than investment; the 2% GDP growth estimated for Q3 was overwhelmingly demand-driven. Investment (and job creation) is the big laggard. The data simply do not support your view.
It simply defies common sense that demand is increasing but businesses refuse to invest to meet that demand but I’ll withhold judgement.
You also don’t address the D.C. gridlock problem that has business waiting until it’s resolved. As the S & P said during the credit downgrade they issued as a result of the gridlock resulting from the debt ceiling negotiations, the economy will slow down both as a result of the proposed cuts as well as the policy grid lock that was paralyzing the country. If you want to see an improvement, both those problems have to be addressed. Otherwise we get more of what we have now, an economy that’s limping along.
But, all of this has nothing to do with the basic thesis of your article – that the economy is stalled because of Obama’s “anti-business” attitude. That is sheer fabrication and unsubstantiated nonsense.
Actually it came out recently that the white house was instrumental in brokering the debt ceiling deal, so you can stop blaming the opposition party for that.
Obama’s only idea right now is “tax the rich” it’s all he knows. Never mind that all the tax increases he proposes on “the rich” would be a rounding error in the annual budget. It literally makes almost no difference to the long-term financial outlook of the country, but Obama will ride right off the fiscal cliff if he can’t raise taxes on the rich, because to him it’s not about fixing the economy, it’s about punishing success.
Check out this Obama quote from the dem primary debates vs Hillary. The moderator points out that lowering capitol gains tax rates actually increases revenue, while increasing them lowers revenue. Obama wants to raise them anyway, even though the government actually looses money, just so he can punish the rich.
http://www.youtube.com/watch?v=IUfo-RxkXA8
This clip explains pretty well why the nation is broke, the economy broken, and Obama’s only idea is to fall back on stale ideaology. He openly jokes about understanding math at only a 7th grade level:
http://www.youtube.com/watch?v=igqChKbB-t8
You don’t seem to understand it too much better if you think that taxing people out of even more of their money and redistributing it is going to encourage them to invest.
Compare
http://research.stlouisfed.org/fred2/series/PCECC96
and
http://research.stlouisfed.org/fred2/series/PNFIC96
Real consumer expenditures are well above the 2008 peak while real private nonresidential fixed investment is well below the peak.
Washington is hemorraging money. Lots of money. More than $100 billion a month, on average is added to the US debt. How long? Since Obama was elected. Who says so? US Treasury. Finally, AP prints it.
On Friday, Oct 12th, AP posted 12 years of US debt up to Sept 30 2012, which ends our fiscal year. These were taken from the US Treasury’s URL, “Debt to the Penny”. Don’t yawn. Would you yawn at an atomic bomb?
AVERAGE MONTHLY “ADDED” US DEBT
112th Congress: $103 billion.
111th Congress: $147 billion.
110th Congress $63 billion.
109th Congress $45 billion.
108th Congress $48 billion.
107th Congress $23 billion.
Friend, it is silly to call this debt. It’s never going to be repaid. The only question is a) Will our children repudiate it? or b) Will the Federal Reserve print so much money the dollar becomes the new peso?
There is not now, nor has there ever been a trickle down effect. Nor would you want there to be. If wealth simply trickled down, then we could all lead depressingly meaningless lives sitting around in the housing project playing x-box while getting wealthier.
What there is, and what made capitalism the most powerful wealth creation machine in history, is a get up off your behind and get to,work effect. When business conditions are positive, new businesses get created, along with new jobs that allow those so inclined to get off their behinds and get to work. Those who take this deal find a steady trickle of new wealth into their pockets.
And those who want to become rich can get two jobs!
Fred, you’re not going to have to worry about being hired away from your day job to become an economic analyst. Oh, wait, maybe Faux Nooze is hiring.
No one, not even the cretins that first sold the trickle-down nonsense, ever said all you had to do was sit around and the “trickle” would shower you with money, nor am I suggesting that.
Sitting on a pot of US dollars while the Fed feverishly creates more does not strike me as good business policy either. When the inflation rate calculation fails to include food and energy, how realistic is it? Isn’t it much like the “jobless rate” which ignores those who have quit looking? How much of the rest of the economic information is carefully crafted to keep the lid on and the masses ignorant? We are spending some of our dollars on tangible assets while the dollars are worth something. Every trip to the grocery store is an education on the real inflation rate
“Corporations are hoarding $2 trillion worth of cash. Private equity funds have $1 trillion of unused commitments.”
This is the problem with right-wing trickle down voodoo economics – all the money gets hoarded at the top. The economy is like the bloodstream, and cash needs to circulate for the economy to stay healthy. And when corporations hoard cash, it’s like a blood clot, and the economy has a stroke.
The hysterical part of all of this is that you guys love to talk about “market uncertainty” as the cause; that businesses are not hiring because there’s just so much scary uncertainty in the markets. Well guess what, geniuses, “uncertainty” is the natural and desirable state of a laissez-faire, free-market economy! For there to be “certainty” in the market would require extreme top-down big government regulation, i.e., COMMUNISM.
This whole talking point is a joke. It’s nonsense, and anyone who believes that “uncertainty” is why corporations are not spending is either a hoodwinked simpleton or a socialist. Corporations are not spending because they don’t care about America or the health of its economy. They only care about money, and if they have to inflict a stroke on the American economy in order to hold on to their precious cash, then so be it.
Aha! A conspiracy by evil corporations who want to earn 0.25 pc on cash.
Conspiracy? Who said anything about a conspiracy? Is it a conspiracy that all models are skinny, or that all basketball players are tall? There’s no conspiracy, just a bunch of like-minded, unimaginative wealthy cowards who are too afraid to take risks because God forbid shareholder value doesn’t rise every quarter. It’s not a conspiracy, it’s merely a culture of effete wimps who are afraid to innovate because they are afraid to fail.
Aren’t you the same clowns who scream bloody murder about wall street gambling and taking excessive risk to turn a quick buck, and blame the financial collapse on that philosophy? Now you’re going to blame them for being “cowards” and too risk averse? make up your mind already
You get what you ask for, not realizing what the entire package will be. Government is boss not the corporations. Even the biggest companies are subject to federal power abitrary as it can be, and control, and come hat in hand plus some $$ to that power, to the politcians, including the thing in the WH who I guess you support. “Uncertainty” of the market is a tad different from uncertainty due to government policies and that abitrary power. You may yet tell the difference. I also suggest you reexamine your hatreds. Obama loves you.
When businesses talk about “uncertainty” they’re talking about risk versus reward. Higher risk projects must also yield higher rewards if they’re successful, else there’s no reason to take the risk. For the past 2-3 years there has been no “market uncertainty”; there has been, if fact, “market certainty” that investments are all risk and zero reward. There has be a vigorous “war on profits” with no concern that those profits are the rewards for taking the business risk in the first place. When the President says “you will not be allowed to make a profit” then it’s beyond foolish to invest capital.
Businesses exist to generate profits. They don’t make profits if they don’t invest, and sitting on piles of cash does nothing for them except make then more attractive take-over targets.
If it was just uncertainly, things might end up ok.
The problem is that with the confiscadministration, it’s a certainty, not an uncertainty. It’s a certainty that profits will be confiscated. It’s a certainty that uneconomic regulations will increase. It’s a certainty that the monstrous deficit will continue to grow as more and more wealth is redistributed from people who can create more wealth to people who consume wealth with no ability to create it.
It’s a certainty that the economy will collapse. If obama is somehow reelected, the flight of wealth individuals and high-level entrepreneurs from this country will become a flood. Some country, Singapore, Chili, Taiwan, some nation somewhere will sieze the obvious opportunity and make it so attactive for the big-hitters to relocate that they will.
OK, I’ll bite. Once they are there they will do what? Take baths in all their money? Where will the money be and how will it get there? If it comes to class WARFARE in the most explicit sense, how many people will fight for the 1%?
The war of wits and wallets between the regulators and the sharks is working out well for both of them, but the rest of the public not relying on government jobs are getting the shaft from both sides.
As a few people hinted, the other shoe to drop from all of this lazy liquidity, when the economy does recover, is inflation. It’s baked into the cake at this point. Nothing we can do can prevent some serious inflation once things do tighten up.
Welcome back, Carter.
Obamanomics:
Failing businesses must be subsidized, because we can’t afford to lose those jobs.
Profitable businesses must pay more taxes, because they are evil capitalists.
Ideal businesses in a Obamanomic system are just getting by, not failing, and not making any money.
(The question of how that can provide any incentive for people to want to start a business in an Obamanomic System is left as exercise for the student.)
Despite 4 years of the Republican Congress doing everything in it’s power to sabotage the economy with a clear admission of “insuring Obama to be a one term President”, the economy is in fact rising from the Bush era ashes. With breaking news that the economy grew at an annual rate of 2 percent during the third quarter of 2012, this will be a bonus for the Obama campaign.
Stagflation is back, ready or not Irwin Kellner Commentary: U.S. revisiting economic woes of 1970s August 14, 2012|Irwin Kellner, MarketWatch
http://articles.marketwatch.com/2012-08-14/commentary/33183906_1_rise-in-inflation-expectations-grain-prices-unemployment-rate
Give credit to Obama, he has accomplished, so far, what he set out to do, enact in policy the deep hatred he has for America and it’s economy. It’s not every president who gets what he wants. And the low life has a good chance at a second term, still a lot to do, a lot to tear down, and plenty of morons to help him. They don’t realize what they’re in for & seem to think it will only hurt the Right. But Obama and his media are not selective haters, they spread it around.
Whoever is elected, we are going to be poorer Spengler. I expected more common sense and less propaganda from someone in your position. The hole that you and your class have created for Western society is not a problem that can be addressed solely by, or attributed to, the head of state. Your class’s greed is the root of the problem,. You have doped up the middle class into believing that you are indispensable for wealth creation. Actually you are a rentier class ripe for the guillotine. All this you have managed to project as the epitome of free enterprise. You and your class haven’t produced any real returns for America and the West in decades. Only paper profit with declining standards of living for the bulk of the population, while you add nonexistent zeros to you balance sheet and reap the profit from essentially illusory gains.
Then you wonder why Islam is making inroads in our society. I’ am sorry to state it in these particular terms but you are a fool.
You can take your graphs and do with them them you wish, to be polite. If we are to to survive we have to wrest control of our existence from the likes of you.
Good column, Spengler.
Hey Mister, got money to invest?
SUGGESTION: Be a patriot. Invest in US corporate bonds so American companies can purchase new equipment for plants, keep prices competitive, increase sales, and best of all, keep jobs in the USA.
ANSWER: CAUTION! Why? The “Rule of law” might be in trouble. Is the GM bankruptcy cramdown the new “new”? We saw 200+ years of US commercial law go poof.
Where was a US bankruptcy judge? He handed the case over to government lawyers.
What happened? Secured bondholders saw their investment moved from their pockets and put into the pockets of a lower creditor, the UAW.
What happened to Steven Rattner, car czar and architect of the cramdown? Pat on the back. If a US Bankruptcy judge had sanctioned this cramdown, he would have been disbarred, lost his job & pension, plus probably gone to jail.
What happened to the money? UAW. Delphia office staff also lost most of their pension fund – unprecedented. Plus 70% of GM employees are outside the US, so some of the extra-legal bankruptcy “goodies” like tens of billions of US dollars of tax carry forwards are now being used to keep foreigners in auto jobs. Why didn’t Canada, Europe, and Asia pitch in “their fair share”?
THE MORAL OF THIS STORY.
Stupid is as stupid does. Certain corporations have very very very good friends in Washington DC. So ask yourself: will the rule of law prevail or will my investment rights have the same legal protection Hugo Chavez allows in Venezuela?
http://www.moneynews.com/StreetTalk/CEOs-Congress-Deficit-Tax/2012/10/25/id/461406
CEOs want even higher taxes. The economists and business leaders actually prefer Obama.
Please publish immediately on this site Spengler’s latest article on the Asia Times. http://www.atimes.com/atimes/Front_Page/NK06Aa02.html