Dear Friends,
It seems to me that if we don’t change headings, our economy will crash, bigger than 1929. The 4th quarter 2012 GDP figures that just came in showed a contraction. If we have another 2 quarters of contraction we are in recession. I don’t know if this quarter, 1st quarter 2013, will show decline or growth. I have strong suspicions that we are at the beginning of a pernicious downturn however. This would be tragic for the World Economy, the United States economy and the fortunes of every American.
When Obama came into office the economy was at the perihelion of a recession. Bush had enacted the Troubled Asset Relief program that became know as TARP. Bush had also began the bailout of AIG, to stop the cascade of bank failures, that seemed on the horizon at that time. The Swearing in ceremony in 2009 was at the very bottom of the recession.
Obama came in and immediately called for most of a trillion dollars to be spent on his “stimulus.” He claimed the US economy would hit 9% unemployment if he didn’t get the money, (it did anyway). $800 billion was borrowed in your name, and spent on pork, political slush funds and handouts to political backers. The idea was to stimulate the economy with all that added spending. Like Keynes urged government to do when in recession… spend spend spend, to drive up aggregate demand.
Not only did Obama get most of a trillion dollars to spend as he saw fit, (and has yet to meet his obligation to report to Congress the results), he got additional stimulus money, as well as an open checkbook. The US Senate has not passed a budget for the last 4 years! The House has for the last 2 but the Senate has not even voted on them. In Obama’s first 2 years in office the House was as indolent as the Senate. As a result the US budget deficit and debt has skyrocketed under Obama.
Obama care is starting to hit the American consumer and worker this year. Waves of taxes will be washing the cash from American consumer’s pockets from it. The economic impact will be bolstered by the tsunami of regulations that will hit American industry. The cost of health insurance is poised to double driving up the cost to business for every employee. All this will create a strong incentive, for firms to lay off as much of their work force as possible, simply to stay in business. Giving Obama care profound negative impacts on the economy.
The media is now starting to report, in the foreseeable future, the US debt will exceed 200% of annual GDP! This level of spending cannot continue. The bond market vigilantes will put an end to Obama’s profligate spending before that… I hope. No government can sustain this level of deficit spending and remain a viable concern. It is not possible. Historically, most countries that have found themselves in this situation, have printed money to get out, and slipped into a hyper inflationary cycle.
The Federal Reserve is printing money at $85 billion a month in their attempt to pull this economy out of the ditch. The money supply has grown under Obama and Bernanke at an extraordinary rate, (30% in the last year). This phenomenal printing of money has not resulted in fast GDP growth or inflation, countering traditional money theory. This is made possible by both the zero velocity of money and most other countries on Earth printing in a race to the bottom. And so, as more money is printed the tension builds, like winding a spring, at some point either the spring gives or the mechanism breaks. Neither outcomes are good especially in our economy.
Obama has made the political climate very hostile to profits and markets. People are not willing to take a chance and start a business in this anti business climate. Yet today, when the shocking numbers came out, Obama blamed the republicans! Claiming that their intransigence over the debt ceiling and fiscal cliff was the reason. His hypocrisy, due to his own intransigence, was never pointed out by the unbiased media… because that would be biased. So the irony is lost on the public. He also made the siren call for more government spending. As if the trillion dollars plus each year deficit he is racking up is not spending enough!
The fact is, we are heading to economic oblivion if we don’t change the course we are on. No nation can tax, print and spend it’s way to prosperity. That road only leads to calamity. Haven’t enough nations of people traveled down that road to ruin already? How many more millions will suffer oppression, poverty and subjugation, at the hands of those who claimed to be the protectors of the people? The only way to change direction is to call your Congressman or woman. Let them know you want the budget balanced, regulation lowered and stop the crony capitalism! In short… tell them to get off their fleshy derrieres and do their jobs!
Sincerely,
John Pepin
