This next item came as no surprise after the dismal last couple of jobs reports:
WASHINGTON—The U.S. economy slowed to a crawl at the start of the year as businesses slashed investment, exports tumbled and consumers showed signs of caution, marking a return to the uneven growth that has been a hallmark of the nearly six-year economic expansion.
Gross domestic product, the broadest measure of goods and services produced across the economy, expanded at a 0.2% seasonally adjusted annual rate in the first quarter, the Commerce Department said Wednesday. The economy advanced at a 2.2% pace in the fourth quarter and 5% in the third.
Don’t be fooled by those “strong” numbers from Q3 and Q4 of last year — they were mostly the result of a surge in consumer spending on health insurance, as mandated by ♡bamaCare!!!. Being mandated into a milch cow for the insurance industry might not sound very fun, but it sure goosed the GDP figures. And now even that meager steam has run out.
I just happened to have come across that WSJ story right after reading Jeremy Warner’s Telegraph report on negative interest rates in the eurozone. It seems apropos to our own situation, so here you go:
What makes today’s negative interest rate environment so worrying is this; to the extent that demand is growing at all in the world economy, it seems again to be almost entirely dependent on rising levels of debt. The financial crisis was meant to have exploded the credit bubble once and for all, but there’s very little sign of it. Rising public indebtedness has taken over where households and companies left off. And in terms of wider credit expansion, emerging markets have simply replaced Western ones. The wake-up call of the financial crisis has gone largely unheeded.
One by one, all the major central banks have joined the money printing party. First it was the US Federal Reserve. Then came the Bank of England and later the Bank of Japan. Just lately, it’s the European Central Bank. Now even the People’s Bank of China is considering the “unconventional” monetary support of bond buying. Anything to keep the show on the road. It’s what Chris Watling of the consultancy Longview Economics has termed the “philosophy of demand at any cost”. A crisis caused by too much debt has been fought with even more of the stuff.
It makes the central bankers happy to think so, and it probably makes them feel very important as well, but as I’ve said here many times before: You can’t spend your way to prosperity.
Every con man runs out of marks, and every credit bubble runs out of takers.
Europe is a little ways ahead of us on this road, but make no mistake — we’re on the same road.