Great Economy You’ve Got There Mr. President

The President is running around on his latest campaign swing making speeches about how great a job he’s done on the economy and how much better it would be if the damn Republicans would just see the light. One of his favorite things to point out is the Dow Jones Industrials, and they hit a new high today.

Let me get right down to brass tacks. The economy is in a world of hurt and the stock market is being propped up by the Federal Reserve and it – along with housing – is in another bubble and they ARE going to burst. I don’t know when, but the fuse is lit and it’s just a matter of time.

For starters, let’s look at all those jobs that President Obama says he’s been busily creating. Here’s what Reuters had to say.

WASHINGTON, Aug 21 (Reuters) – U.S. businesses are hiring at a robust rate. The only problem is that three out of four of the nearly 1 million hires this year are part-time and many of the jobs are low-paid.

Faltering economic growth at home and abroad and concern that President Barack Obama’s signature health care law will drive up business costs are behind the wariness about taking on full-time staff, executives at staffing and payroll firms say.

We’re becoming a “part-time nation” thanks wholly to this President. Or maybe we’re just becoming a “couch-potato nation” because the number of people in the workforce keeps falling like a rock. The unemployment rate is 7.3% right now, but if we had the same number of people in the workforce as we did on the day President Obama took office, unemployment would be about 11.5%.

The official U.S. unemployment rate is falling, but that’s not necessarily a good thing.

That’s because the slice of Americans involved in the labor force has shrunk to a level not seen in 35 years.

The labor force participation rate — the percentage of people over 16 who either have a job or are actively searching for one — fell to 63.2% in August. The last time it was that low was in August of 1978.

The only reason that anybody is able to talk about a “good” economy is because the stock market is doing well and the housing market appears to be recovering. Well, that and the administration is lying about jobs and business expansion. The reason the stock market is doing well is because the Federal Reserve is buying US Treasuries and mortgage backed securities like there’s no tomorrow and we are in essentially a “zero interest rate” market. The purchases are called “Quantitative Easing”, a made up term with no real meaning.

The truth about the stock market is that it keeps rising only because the Fed is pumping “money” into the market. The truth about the “housing recovery” is that sales are pumped by low mortgage rates only because the Fed is buying mortgage backed securities at historically low rates.

Taper MarketA zero interest rate market will not continue. It can’t. When the Fed stops buying, interest rates will go up dramatically, the stock market will drop like a rock and the housing market will be faced with much higher interest rates which will depress prices dramatically. Over the past five years every time the Fed even talks about slowing purchases (called “tapering”) the stock market drops. When they say “Nah, we’re not gonna do that…” the market goes back up. The market doesn’t move on the fundamentals of the companies being traded, it’s moving on action by the Federal Reserve. The chart to the right is what happened to the Dow today. The flat part on the left was the morning opening and economists were expecting the Fed to announce they were going to start tapering. The big spike was the moment they announced they weren’t. Here’s the lede from CNBC.

An economy still stumbling toward recovery was not enough to sway the Federal Reserve, which defied market expectations Wednesday and said it will not begin pulling back on its monthly asset-purchasing program.

Stocks surged on the news but bond yields were flat.

“This is incredibly wimpy,” David Kelly, chief market strategist at Morgan Stanley, told CNBC.

The Fed said it was unsatisfied with the pace of economic growth and felt the timing was not right to make a change in quantitative easing.

I wouldn’t recommend reading the whole article without alcohol.

The economy is teetering because of over regulation and ObamaCare. The President isn’t doing anything to reverse either of those problems. Things are going to get a whole lot worse before, if, they ever get better.

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