PeakTrader.com

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PeakTrader said...

Many people don't realize Obama and his cronies made the country weaker and poorer, not stronger and richer.

And, if Americans had to actually pay for all the government regulations and spending, instead of being subsidized by foreigners, the country would be even weaker and poorer.

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Ultimately, the American people are to blame.

They want things they don't have to pay for, whether it's from taxing others, the hard work of foreigners, or higher prices of some goods.

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Scott Grannis shows the U.S. is in a 21st century-style depression:

The 13% GDP gap
January 27, 2012

This chart nicely illustrates just how weak the current recovery has been—it's actually unprecedented.

According to my calculations, there is a 13% "gap" between the current size of the economy and where it would be if it were following its long-term trend growth rate.

Since 2008, federal payments to individuals as a % of GDP have increased by at least one-third, to their highest level ever.

Income redistribution on a massive scale like this can not only fail to create growth, it can stymie growth by creating perverse incentives (e.g., rewarding the lack of work and punishing success).

One thing about today's fourth quarter GDP report that caught my eye was the relatively weak growth (3.2%) in nominal GDP, which was entirely due to sharply lower inflation.

http://scottgrannis.blogspot.com/2012/01/13-gdp-gap.html

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Why the depression will continue in 2012:

1. The top 1% (or really the top 20%), who create most of the jobs, are under attack (particularly, this election year).

2. The E.U. is in recession.

3. China's long-boom is unsustainable (a massive creative-destruction process is overdue).

4. Peak oil (or high oil prices) will constrain growth.

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Jon said...

Peak, I agree with your points 1 & 3, but your conclusion and points 2 & 4, I'd argue with.

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PeakTrader said...

Jon, although the U.S. economy isn't "receding," the output gap shows depression.

And, if the E.U. isn't in recession, it will be, and it may worsen into a vicious cycle.

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The "train wreck" is still unfolding.

It would've been avoided if the U.S. achieved a V-shaped recovery in 2009-10.

The last time the U.S. failed, it took WWII, or the destruction of major economies, for the U.S. to prosper in the '50s and '60s.

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PeakTrader said...

How about just freezing government spending at the 2012 level for about 10 years to balance the budget?:

According to "Government Spending - Wikipedia:"

U.S. Federal, State, and Local Government spending was 40.0% of GDP in 2010, or $5.79 trillion.

Major categories of government spending 2010 in billions of dollars:

Pensions $939.2
Health Care $1028.8
Education $887.3
Defense $848.1
Welfare $727.3
Interest $296.3

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The stronger fourth quarter was still weak;

National Income and Product Accounts
Gross Domestic Product, 4th quarter and Annual 2011 (advance estimate)

Real final sales of domestic product -- GDP less change in private inventories -- increased 0.8 percent in the fourth quarter.

The change in real private inventories added 1.94 percentage points to the fourth-quarter change
in real GDP.

Real GDP increased 1.7 percent in 2011 (that is, from the 2010 annual level to the 2011 annual
level).

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According to a chart in:

Advance 4Q 2011 GDP at 2.8% Is Weaker Than It Seems
27 January 2012

Real GDP per capita peaked in Q4 2007 at $50,086. In Q4 2011, real GDP per capita was $48,552.

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PeakTrader said...

Americans will work harder for less.

The era of cheap manufactured goods (through offshoring) and cheap oil (being depleted) are ending.

Also, I suspect, more resources will flow into farming.

And, government needs a lot more revenue.