The Second Grand Unification Theory of Sucking

It’s just a helluva news day for a Friday — and usually they hold the bad stuff back until after the markets close. But since everything is everywhere, I have a job to do this morning. Let’s get to it.

Retail sales “unexpectedly” cratered in May. Especially telling is this bit from the WSJ story:

The retail sales report “is a reminder that households are not going to be the engine of growth for some time,” Capital Economics economist Paul Dales wrote in a note, adding that the retail sales report “dramatically weakens the outlook for consumption growth in the second quarter.”

Huh. So it seems that artificially propping up home prices doesn’t help people buy homes or avoid foreclosure. Who knew?

The plan, I suppose, was to purposely return us to the housing bubble, when Americans borrowed against their homes to buy lots of cool stuff. Of course, the first time the bubble popped it cratered the economy of pretty much the entire planet. American consumers wised up, and stopped borrowing (not always by choice) and started socking money away and paying down debts.

American politicians on the other hand didn’t wise up, and instead doubled down on stupid. Make that tripled down — because not even government can get consumers to borrow and spend, while at the same time stopping banks from lending any money. Again — who knew? Although don’t be surprised if our Dear Leader manages to reinflate the housing bubble despite himself.

Now that American consumers are loaded down with debts (both public and private), it’s apparently the perfect time to saddle them with ever-higher energy prices. Because if there’s one way to get people shopping again, it’s to drastically increase the cost of making, shipping, storing, buying, owning and operating virtually everything.

Meanwhile, official unemployment refuses to duck much below ten percent, and nearly one in five Americans is at best underemployed.

Maybe it has something to do with the fact that American employers have been saddled with unknowable new health care costs. Oh, and that American entrepreneurs are about to get socked with increased taxes and American corporations are penalized with the industrialized world’s second-highest tax rate.

Or maybe it has to do with the First Grand Unification Theory of Sucking, explained on this page almost exactly one year ago. Back then I said the Stimulus was doomed to fail, for three possible reasons:

1. That extra spending means extra taxes which means the whole thing is a wash. (Government spending having some “multiplier” effect unknown to consumer or business spending is a big, fat lie.)

2. That extra spending means extra debt, which drives up interest rates, which chokes off growth.

3. That extra spending means extra money being printed, which means inflation which means any growth is illusory.

Reason 1 seems the most obvious reason for the Stimulus Fail thus far — but the spending binge is yet. And back then I illustrated it with some very funny examples involving the Three Stooges and cute stuff like that, but one year and four days later, I’m not feeling very amusing. Or amused. Why? Because after spending $800 billion we didn’t have to create jobs that never materialized, Obama wants to spend $30 billion more we don’t have to create even more jobs that will never materialize. So please excuse me for not going “Ha!”

Meanwhile, we’re literally being crushed by the public debts we’ve already accrued, the public debts we’re shortly to accrue, and the long-term public debts which will make the last year seem like a Golden Age.

Again, American consumers are hunkering down and paying down their private debts, because we know someday we’ll have to pony up for the tab on Washington’s no-limit MasterCard.

But don’t worry — how high can those payments really go, when interest rates are still being held so low? Just try to forget those low rates give the Fed zero wiggle room to deal with any future crisis, while also reducing the value of the dollar and increasing the risk of adding inflation to our recession. And you thought “Stagflation” went out with bell bottoms and Donna Summer.

And we haven’t even gotten to what’s happening in the Gulf of Mexico — but for now let’s just hope I don’t have to revisit the Spill again in another year, and leave it at that.

Somehow, the Democrats grandfathered in every bad idea the Republicans promulgated under Bush, then asked themselves, “But how can we really make things bad?”*

Well, now we know.

And while I won’t say “I told you so,” please note the “Second” in the headline above.

*There are some who say that destroying the economy is a feature, not a bug. I usually lump the Cloward-Piven Conspiracy Theorists in with the Birthers and other assorted kooks — but the CPCTers are looking smarter every day.