In the aftermath of Hurricane Sandy, some talking heads on the TV were saying how the U.S. economy would take a significant hit from all the destruction. I remember turning to my girlfriend and saying, “Well, there’s their out.” I went on to explain that if the economic numbers for the fourth quarter ended up being crummy, the White House would just go ahead and blame Sandy.
So while I was a little surprised to hear about the drop in GDP today (I thought enough “stimulus” was already coursing through the financial system), the same can’t be said about what the White House said this morning. Alan Krueger, Chairman of the Council of Economic Advisers, wrote on The White House Blog today:
According to the “advance” estimate released by the Bureau of Economic Analysis today, real GDP edged down 0.1 percent at an annual rate in the fourth quarter of 2012, amid signs that Hurricane Sandy disrupted economic activity and Federal defense spending declined precipitously, likely due to uncertainty stemming from the sequester. This was the first quarterly drop in real GDP in three-and-a-half years (see first chart below). Over the last fourteen quarters, the economy has expanded by 7.5 percent overall, and the private components of GDP have grown by 10.9 percent. During the four quarters of 2012, real GDP grew by 1.5 percent, the third consecutive year of economic expansion.
(Editor’s note: Italics added for emphasis)
Don’t get me started on that “economic expansion” bit, as it’s been oh-so-terrific for many Americans.
Hurricane Sandy’s economic impact and a decline in government spending last quarter is repeatedly mentioned in the blog post, leading some to believe that the Obama administration is blaming the economic contraction last quarter a good deal on that late October storm and the Republican Party. Reuters’ Mark Felsenthal wrote on Yahoo! News this afternoon:
The White House on Wednesday blamed the surprising contraction of the economy at the end of last year at least partly on Republican “political brinkmanship” for threatening to let defense cuts take effect.
White House spokesman Jay Carney said similar threats over a looming March 1 deadline when defense and other cuts take effect absent a broader budget deal could similarly hurt the U.S. economy and taxpayers.
“This is political brinkmanship with one primary victim, and that is American taxpayers and the American middle class,” Carney said at a briefing.
“Our economy is facing a major headwind … and that’s Republicans in Congress.”
(Editor’s note: Italics added for emphasis)
Since the campaign for the 2008 U.S. Presidential election, Barack Obama and the Democratic Party have consistently blamed George W. Bush and the Republican Party for the nation’s ongoing economic woes (I submit both major political parties are truly at fault and the damage began decades earlier). Believing that this strategy worked to retain the Oval Office in 2012, and based on Carney’s words today, be prepared to hear even more blamethrowing of this type going forward in President Obama’s second term.
In the meantime, the financial house of cards keeps growing more unstable with trillions of dollars of debt being continually heaped upon it.
Hurricane Sandy. The GOP. How about the “stimulus” being injected into the cancer (debt)-ridden patient is perhaps becoming less effective over time? Instead of a strong, sustainable economic recovery, we’re seeing a weak one that’s requiring constant assistance.
What QE are we on again?
Furthermore, Washington and the Fed are “running out of bullets.” It’s somewhat amazing they’ve managed to “kick the can down the road” this far.
Looking back on today’s GDP announcement and related events, it’s apparent the blamethrowers are alive and well in the nation’s capital.
And the proverbial brick wall- or our “financial reckoning day,” as some like to call it- keeps getting closer.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Krueger, Alan. “Advance Estimate of GDP for the Fourth Quarter of 2012.” The White House Blog. 30 Jan. 2013. (http://www.whitehouse.gov/blog/2013/01/30/advance-estimate-gdp-fourth-quarter-2012). 30 Jan. 2013.
Felsenthal, Mark. “White House blames Republican ‘brinkmanship’ for GDP contraction.” Reuters. 30 Jan. 2013. (http://news.yahoo.com/white-house-accuses-republicans-brinkmanship-spending-cuts-181022857–business.html). 30 Jan. 2013.
You might have heard the following employment news already. In a screaming headline at the top of the MSNBC.com home page:
JOBLESS RATE FALLS TO 8.3%, LOWEST IN ALMOST 3 YEARS
FOX News is carrying the same story on its website. Although- not surprisingly- it’s tucked away further down their home page with a headline that simply reads:
Unemployment rate dips to 8.3 percent in January
Regardless, this morning’s news that U.S. employers added 243,000 jobs last month has some suggesting the economy has turned around. MSNBC.com new services wrote today:
Alan B. Krueger, President Obama’s Chairman of the Council of Economic Advisers, told CNBC Friday that January’s jobs report is “definitely indicating that the economy is improving.”
“I think that the trend is pointing in the right direction,” he added.
In addition, On the MSNBC website, a live poll is being held which asks:
Do you think the U.S. economy has turned the corner?
This is out of 10,002 votes that have already been cast the last time (10:44 AM Central Time) I visited the site.
So, 58% of respondents think the economy has turned the corner. As this is MSNBC.com and its particular audience we’re talking about here- again, no surprise.
Of course, Chicago-based readers could be voting multiple times by force of habit.
Now, I’d love to see the U.S. economy in great shape and humming along nicely, but it’s my belief that our financial health is more dire than those in power are letting on. You could say I’m in the same camp as legendary investor Jim Rogers and investment adviser Peter Schiff on this. Concerning Rogers, CNBC Associate Editor Shai Ahmed wrote earlier this week:
Turning to the broader US economy, Rogers said the United States looks and feels better because the government is throwing money at it.
“There is an election in November 2012. Every time there is an election, the government pumps as much money as it can so it can to win the election. Of course things are going to look and feel better because Bernanke is printing money and Obama is spending money,” Rogers said.
He added that the US public are essentially “saps,” being fooled by a government eager to harness as many votes as possible in an election year.
“They want to fool all of us saps and get us through the elections, and then they’ll say we’ll worry about those saps next year,” he said.
Peter Schiff recently talked about this printing and spending money in his latest entry on The Schiff Report YouTube video blog. In “The Real State of the Union” from January 25, Schiff told viewers:
We are borrowing and spending and printing ourselves over the edge of an economic cliff.
Referring back to President Obama’s State of the Union address from a day earlier, the president and chief global strategist of Euro Pacific Capital added:
Unfortunately, the state of the Union is anything but sound. It is extremely precarious. We are teetering on the edge of a cliff. The Federal Reserve, this President, and Congress, are going to make sure to push it over the edge of the cliff. In the meantime, what we’ve got to do is protect ourselves…
We are pursuing the policies that caused the last financial crisis. The next financial crisis is much greater, and it’s going to inflict far more damage on the average American because of all the things that the Federal Reserve is doing, and the things that Congress and the President continue to do. In the meantime, we’ve got to protect ourselves.
Considering all the “bullets” Washington and the Federal Reserve have already spent just trying to keep this economy afloat and barely above water, what can we expect when their effects wear off and the next slowdown, black swan, or crisis inevitably comes along?
In the meantime, if employer hiring is as good as they say it is- and you are under/unemployed, looking to change occupations, or want extra income- you might want to try and take advantage of current conditions before the labor market takes a turn for the worse.
“Jobless rate drops to lowest level in almost three years.” MSNBC.com. 3 Feb. 2012. (http://bottomline.msnbc.msn.com/_news/2012/02/03/10309295-jobless-rate-drops-to-lowest-level-in-almost-three-years). 3 Feb. 2012.
Ahmed, Shai. “Jim Rogers: I Would Not Buy Facebook.” CNBC.com. 30 Jan. 2012. (http://www.cnbc.com/id/46186936/). 2 Feb. 2012.
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