Eight years of Obama made America great, where will the economy be in four?

[danmand]

2017's Real Milestone (Or Why Interest Rates Can Never Go Back To Normal)

Submitted by John Rubino via DollarCollapse.com,
Forget about NAFTA or OPEC or TPP or crowd size or hand size or any other acronym or stat or concept that obsesses the financial press these days. Only two numbers actually matter.
The first is $20 trillion, which is the level the US federal debt will exceed sometime around June of this year. Here’s the current total as measured by the US Debt Clock:

To put $20 trillion into perspective, it’s about $160,000 per US taxpayer, and exists in addition to the mortgage, credit card, auto, and student debt that our hypothetical taxpayer probably carries. It is in short, way too much for the average wage slave to manage without some kind of existential crisis.

It’s also way more than it used to be. During his tenure, president George W. Bush (2000 – 2008) nearly doubled the government’s debt, which is to say his administration borrowed as much as all its predecessors from Washington through Clinton combined. At the time this seemed like a never-to-be-duplicated feat of governmental profligacy. But the very next administration topped it, taking the federal debt from $10 trillion to the soon-to-be-achieved $20 trillion. And the incoming administration apparently sees no problem with continuing the pattern.


The other meaningful number is 6.620. That’s the average interest rate the US government paid on its various debts in 2000, the year before the great monetary experiment of QE, ZIRP and all the rest began. When talking heads at the Fed and elsewhere refer to “normalizing” interest rates they’re proposing a return to this 6% average rate.
But of course the last time that rate prevailed our debts were just a little lower. Run the numbers on today’s obligations and you get, well, let’s see:
$20 trillion x 6% = $1.2 trillion a year in interest expense. To put that in perspective…
It’s $15,000 a year per family of four, or about a fourth of what the typical American family earns.
It’s 31% of the federal budget, which would mean massive cuts in every other spending program.
The conclusion: It can’t happen without causing one of the following:
Government spending cuts and/or tax increases that impose Greek-style austerity on Americans who won’t respond well to their sudden demotion to Third World status.
A new round of monetary experiments involving the “forgiveness” of the government’s debts, financed with newly-created dollars. This will work – as long as dollars remain universally accepted as a store of value. History offers no examples of such a thing.
An overt effort to devalue the dollar, with the goal of paying the interest in full, but (again) with newly- created, much-less-valuable currency.
The resulting dilemma: If we hope to live within our means interest rates can never be allowed to rise. But if interest rates don’t rise, the Fed is forced to create a tsunami of new dollars to keep rates low, and must take its chances with inflation, currency war, crack-up boom, and all the other black swans that live in the land of monetary excess.
Which is why the sound money community keeps harping on gold. All the politically-acceptable policy options have inflation/devaluation at their core, and those things are always and everywhere great for real assets.

 

[onthebottom]

Free trade is an overly simplistic term, all countries create varying degrees of friction to imports based on policy priorities. Agricultural is a great example.

China has dubious claims to free trade itself. I find it humorous that the US government treating US citizens as the primary priority is seen as news worthy.

China’s Bid to Fill U.S. Trade Shoes Risks Falling Flat

Trade barriers and lack of legal protections may stymie China’s bid to assume global role in commerce

By Mark Magnier and Josh Chin Updated Jan. 24, 2017 4:36 p.m. ET
Chinese workers loaded crates at a port in Lianyungang last week.
Chinese workers loaded crates at a port in Lianyungang last week. Photo: AFP/Getty Images

BEIJING—China’s spotty record on open markets will test its efforts to seize the mantle of global economic leadership left by the U.S. withdrawal from an Asia-Pacific trade pact, though Beijing is now poised to expand its regional sway.

President Xi Jinping’s strong defense of economic integration last week in Davos, Switzerland, signaled China’s bid to step into Washington’s shoes as U.S. President Donald Trump hurriedly moves to overturn decades of global order. Mr. Trump’s Monday withdrawal from the 12-nation Trans-Pacific Partnership trade accord, brokered by his predecessor, provided the first solid confirmation of U.S. intent.

But Beijing’s attempt to set the global trade agenda and more closely integrate China’s economy with the world risks falling short on the road from rhetoric to reality.

China’s state-led economy is still riddled with trade barriers, particularly in the investment and services sectors at the forefront of global trade negotiations, trade experts say, adding it is governed by often vague policy and short on property-rights protection.

“I’m bemused by President Xi Jinping’s waving the free-trade banner at Davos when China is still so far off the mark,” said Alan Oxley, a former Australian trade negotiator and chairman of the Australian APEC Study Centre at RMIT University in Melbourne. “Most people in business who understand the market would not say China represents the next step in market opening.”

A survey of members of the American Chamber of Commerce in China released this month found that the percentage of companies that rate China among their top three investment targets fell to 56%, the lowest since at least 2009. Four out of five companies said they felt less welcome in China than before, nearly double the rate from three years ago. European and Japanese companies voice similar concerns.

Last week, China introduced a plan to lure more foreign investment and improve access in over 20 industries. But it has released few details on how the policy would be carried out.

Still, a U.S. less engaged in Asia gives Beijing more leeway to shape regional economic development, analysts say.

Beijing “is looking at this and thinking ‘Finally, we can leave this mess behind,’” said Zhu Feng, an expert in international relations at Nanjing University, referring to the TPP.

If Asia-Pacific nations become more dependent on China economically, they are also more likely to follow Beijing’s lead on military and security issues. A more inward-looking U.S. would provide fewer checks on China’s growing clout, forcing smaller countries to recalibrate, security experts say.

“When more and more countries in the region depend on China for economic growth and investment, it will significantly diminish their security relationship with the U.S. and diminish their incentive or political will to challenge China,” said Li Mingjiang, professor at Singapore’s Nanyang Technological University.

A Foreign Ministry spokeswoman on Tuesday said China supports free trade and hopes U.S. policy will contribute to global stability.

China’s blueprint for trade liberalization and its answer to the TPP, the proposed 16-member Regional Comprehensive Economic Partnership, would build on an existing trading bloc among Southeast Asian nations. The tariffs in countries proposed as RCEP members have fallen by four-fifths in the past two decades, averaging just 3.1%, according to trade-weighted estimates from the World Bank.

But the China-led pact is less ambitious than the TPP, which would cut or reduce some 18,000 tariffs for a group of Pacific Rim nations in the Americas, Asia and Oceania—an area accounting for 40% of the global economy.

A lack of enforcement mechanisms also risks undercutting China’s trade leadership, say trade experts. RCEP members would likely face few sanctions if they failed to comply with its terms, allowing participants wide latitude to violate rules and resulting in a weak agreement.

The RCEP pales next to the TPP in other respects, U.S. officials have said. It wouldn’t raise labor and environmental standards, impose disciplines on state-owned industry, strengthen intellectual-property-rights enforcement or maintain a free and open internet.

“It’s difficult if not impossible that the RCEP would be comparable to the TPP in opening up services or investment,” Mr. Oxley said.

China has moved to expand its economic sway in U.S.-friendly countries since U.S. presidential candidates slammed the TPP last year. Beijing signed trade and defense deals with Malaysia, a TPP member. It cultivated warmer relations with the Philippines, whose leader, President Rodrigo Duterte, clinched billions of dollars in commitments following an October visit to Beijing. China went further afield as well, moving to deepen its economic ties with Mexico, which also faces an uncertain U.S. trade landscape.

The leader of one U.S. ally, Japanese Prime Minister Shinzo Abe, said Tuesday that he would try to convince Mr. Trump to change his mind over the TPP. Another, Australian Prime Minister Malcolm Turnbull, said he has talked with leaders from the remaining TPP member nations, including Japan, Singapore and New Zealand, about salvaging the deal without the U.S. He even suggested Beijing could take Washington’s place at the table.

“Certainly there is the potential for China to join the TPP,” Mr. Turnbull said.

—Rob Taylor in Canberra, Australia, contributed to this article.

 

[eznutz]

Harvard Study Crushes The "Obama Recovery" Farce in 9 charts
http://www.zerohedge.com/sites/defa...ot/2016/09/15/20160915 - Harvard 13_TJB_0.jpg

Some Key Findings

1) labor force participation rate has continued to decline after the "great recession" and currently stands at the lowest level since 1982.
(If you just look at male labor force participation the drop off is even more pronounced)

2) labor productivity has collapsed.

3) poor job growth and declining participation rates results in lower real household income.

4) the only counties across the country that have experienced real income growth in recent years has been areas where the economy is dominated by oil production...ironically, the industry that Obama has tried hardest to crush

5) people in the lowest income brackets, those Obama claims to care most about, have suffered the most under his presidency.

6) entitlement spending has soared under the Obama presidency as investment has declined.

7) all of Obama's major policy initiatives were identified as the key reasons for our under-performing economy, including, a health care, high personal income taxes, high corporate taxes and a burdensome regulatory environment.

https://www.scribd.com/document/324137454/Harvard-Study-on-US-Economy-Under-Obama#from_embed

 

[fuji]

Trade is obviously beneficial. But you are ignoring the human cost of imports from low wage countries. The landscape is littered with factories that have closed because they cannot compete with the Chinese and workers dumped on the heap of unemployment.

And those factories aren't suddenly going to become efficient just because you slapped on a border tax. The hard reality is that these are just not the types of jobs the US economy needs or wants and artificially propping then up will come at the expense of economic growth and prosperity.

There are clearly losers from trade but that isn't an argument against trade. The wrong answer is to shoot yourself in the head with a trade war. The right answer is to move on, finding ways to soften the blow to the losers.

You bet on your winners. Betting on your losers is a sure way to waste money and opportunity.

China sold goods worth about $500 Billion to the US in 2015. The US only $113 Billion.

That's because Americans are richer and can afford to consume more. Literally the only way you will "fix" that is by making Americans poorer so they consume less. In that perverse sense Trump may indeed "fix" the problem by starting a trade war that leaves Americans too poor to consume as many foreign goods.

Trade is not zero sum. A trade imbalance does NOT mean you are losing anything. That's just economic illiteracy.

This will make several companies more competitive to sustain jobs.

No a tariff WON'T make them more efficient. It will just prop up inefficient companies with tax dollars. That doesn't actually work.

. The more than $50 billion raised should be used to:

That's also false. While your border tax will raise money the economy will lose MORE than that elsewhere. Income taxes and property taxes will decline and consumer spending will fall. You will end up with negative dollars and an need to cut spending. You won't have anything extra to spend unless you borrow it and go into debt.

There's no such thing as free tax money, it's always coming out of an American pocket somehow.

I don't disagree with your suggestions to provide retaining to impacted workers but that shouldn't be achieved by starting a destructive trade war. Raise income taxes on the winners from free trade instead.

 

[K Douglas]

fuji once again trafficking in intellectual dishonesty. the fact that Trump was elected in a landslide tells you all you need to know about the state of the economy for the median American.

 

[bver_hunter]

I have business in China and did you know China provides 15% export credit for exported goods? For several companies, this is their only profit margin. So a 10% labor adjustment tax will curb lots of exports. Now, bear in mind, I am speaking against my own self interest. But I believe its worth it to balance the scale somewhat. Granted, such a tax will increase prices somewhat. But I believe it will be more than balanced by increased purchasing power of the increase in employment.

The US Commerce department publishes a monthly summary of imported and exported goods. Importing more expensive goods from China is more lucrative. So goods from China are no longer just toys and clothing. Spare parts, tires, refined chemicals and so on are all part of the mix these days. In return, one of the largest commodities the US exports to China is garbage. No, I am not speaking euphemistically - I am being literal. Scrap for electric arc furnaces is one of the largest US exports to China. This is what the US has been reduced to - exporter of garbage.

Someone like you who believes its justifiable for a worker who earns $100 a day to compete with another who earns $10 a day (I am being charitable) is not only economically illiterate but more than that. And how long should this go on? Should it continue until all manufacturing and some service jobs like call centers have disappeared? Is that what you want?

All the American multinational companies have invested in research facilities in China as it was a requirement to get access to the Chinese markets. At first they all built some half cooked institutions to meet the requirements that was set by the Chinese Government. However, these companies then realised how these research facilities that they set up were paying off at such an affordable investment. Now, everyone have benefited by this Chinese Government legislation. See that is much more smart then what Trump is proposing.

 

[fuji]

fuji once again trafficking in intellectual dishonesty. the fact that Trump was elected in a landslide tells you all you need to know about the state of the economy for the median American.

How is losing the popular vote and squeeked by in three swing states by less than one vote in 150 a "landslide"?

Do you also believe the earth is flat?

I note that while you slurred my post you weren't able to dispute any part of it. Just sputter. No content.

 

[fuji]

I have business in China and did you know China provides 15% export credit for exported goods?

Sounds like a fantastic deal for AMERICANS, whose consumption is being subsidized by Chinese tax payers.

The US Commerce department publishes a monthly summary of imported and exported goods. Importing more expensive goods from China is more lucrative. So goods from China are no longer just toys and clothing.

And?

Let me clue you in to some economic fundamentals:

1. Nobody buys anything unless they think it's worth more than the money they spend on it.

That means for every dollar Americans spend on imports they are getting more than a dollar in value, otherwise they wouldn't buy.

You represent the trade flows as if the dollars matter but the goods don't. That's ridiculous.

I guarantee you that trade is not only balanced, but profitable for Americans.

2. Goods matter more than money

You try to eat a dollar but it isn't very nutritious, and it won't keep you as warm as a coat will. The only reason why anybody wants money is so they can trade it for a good or a service.

So let's restate your trade "imbalance" in terms that representive what everyone actually cares about: goods:

3. More goods flow into the United States than flow into China

That's right, more resources are flowing into the US than out. That's what your trade imbalance means in the actual physical world everybody cares about.

Goods, resources, services flow from the rest of the world to Americans.

And you want to "fix" that. You want FEWER goods as resources flowing to the United States.

That's ass backwards.

4. America buys more stuff because America generates more wealth

More goods flow to the United States because Americans generate a lot of wealth, so they buy up the goods and resources other people have, and consume more than anybody else.

The richer Americans get relative to others the bigger the trade surplus will get. More wealth means more consumption.

To wit, you can make more money in America as a Walmart greeter than you can make working in a factory that sells Chinese goods to Walmart.

5. The US and China specialize in different things

As for your comment that an American worker can't compete with a Chinese worker, who would WANT to? You can produce more economic value doing almost anything else and then buy cheap stuff from that guy.

Your Populist manifesto is as false as the Communist manifesto.

 

[SkyRider]

Obama inherited a nation that was staggering through a financial crisis, with massive layoffs and a plummeting stock market.

President Obama was lucky he took office in early 2009. The Dow was at around 6,000 with nowhere to go but up. The economic cycle was in recession which meant that recovery would be next.

(Newcomer to this thread so somebody else might have already said the same thing.)

 

[fuji]

The Dow was at around 6,000 with nowhere to go but up.

Eight years of the GOP will do that.

 

[FAST]

Originally Posted by SkyRider

That is the narrow view. Yes, you can buy that 4K TV for $100 less.

The broader view is that the $100 savings comes at a cost of closing down American factories and unemployed American workers lining up at food banks. Plus, the social cost of being unemployed --- marriage breakdowns, depression, suicides, etc.

BTW: I don't believe for a moment that the U.S. unemployment rate is only 4.7%.

I found this response by skyrider to one of your posts elsewhere. I will restate it here to conclude my response on this matter because obviously you've never hired anyone in your life and you've never had to lay off anyone in your life. Good luck!

Plus,...IF the unemployment rate in the US was 4.7%,...Trump would NOT have been elected.

Economics have always influenced elections, far more than some snowflake's conspiracy theories.

FAST

 

[eznutz]

Counting All Discouraged/Displaced Workers, May 2016 Unemployment Rose to About 23.0%.
http://www.shadowstats.com/alternate_data/unemployment-charts

 

[K Douglas]

How is losing the popular vote and squeeked by in three swing states by less than one vote in 150 a "landslide"?

Do you also believe the earth is flat?

I note that while you slurred my post you weren't able to dispute any part of it. Just sputter. No content.

Trump won the electoral college 306-232 and 31 of 50 states. OK so maybe not a landslide but a decisive victory.
I disputed your post with the simple analogy - Donald Trump won. A complete indictment of Obama's failed record on the economy. But if you want some #'s to back it up the two that are most damning are as follows:
BHO is the first 2 term POTUS to not reach at least 3% GDP growth in any one year. This despite extremely low interest rates and extensive quantitative easing by the Fed.
BHO increased the national debt during his term by over $9T. Deficits of more than $1T per year! Dropped debt rating from AAA to AA

Case closed

 

[onthebottom]

2016 GDP growth lowest since 2011....

 

[Smallcock]

Plus,...IF the unemployment rate in the US was 4.7%,...Trump would NOT have been elected.

Economics have always influenced elections, far more than some snowflake's conspiracy theories.

FAST

Correct. The poor state of the economy was the most important factor of the election. People in ivory towers keep touting how great the economy is, but Joe Citizen who lives and breathes it every day, knows better.

 

[fuji]

I found this response by skyrider to one of your posts elsewhere. I will restate it here to conclude my response on this matter because obviously you've never hired anyone in your life and you've never had to lay off anyone in your life. Good luck!

I have hired and fired a lot of people.

Clearly you want to prioritize a SINGLE FACTOR, which is factory jobs, over all the other benefits of trade. You are willing to give up the enormous growth in the economy since the 1950s just to go back to the old days before improved tech made it possible to offshore that.

SkyRider and you blindly missed the broader benefits which I outlined in great detail in the post you quoted but cannot actually answer.

Lower prices, increased employment in other sectors, overall dramatically increased wealth, and so on, are all benefits that drastically outweigh the loss of factory jobs.

Your single minded focus on only factory jobs as having any value and your overlooking the huge gains elsewhere are why this debate frustrates you: you don't WANT to see. You WANT the 1950s.

The world changes and the skills that are in demand change. I recognize There are lots of people who now have the wrong skills, or wrongly thought they could get by with no skills, based on looking back at the old ways.

Those people should be made whole in some way, but not by going back to the days before tech made globalization the enormous boost to the economy that it is.

 

[fuji]

NAFTA and globalization were sold by Brian Mulroney and Bill Clinton on the premise that toys, shoes, clothing - the so-called cheaper stuff - would be made overseas while the newly displaced American and Canadian workers would transition to make more expensive stuff like appliances and vehicles for export to be purchased by those making the cheaper stuff.

And it's been a spectacular success by any objective economic measurement.

Win-win, they proclaimed. That was supposed to be the deal. But the reality, as is evident to all of us, is that Mexicans and Chinese are making those more expensive stuff as well.

So what? We have still gained massively.

Your continued single minded focus on factory jobs is ridiculous. You post as if they are the only jobs in the economy.

Here's the reality:

Even as factory jobs have declined employment has increased and wealth has grown.

Yeah it's a lot tougher if you want to avoid university and make a living with just a highschool diploma, but the wealth in our economy has made higher education accessible to more people than every before and that in turn has driven higher paying jobs and growing wealth.

Canadian and American workers are left sucking air.

Totally false. Only Canadian and American factory workers have been impacted. Everybody else is better off.

The rest of your post was empty rhetoric bitching about Chinese people being better off than they used to be as if that's a bad thing.

The point you can't avoid is that other than factory workers the Canadian and American economies have grown tremendously as well.

Back in the 50s there were no entry level jobs paying six figures. Now there are, at Microsoft, Apple, Google, Amazon, Facebook, Intel, Dell, HP, Qualcom, and Trump's favorite, Twitter. That is also the result of globalization and that wealth pours in to the economy. The high skilled workers pulling those salaries drive wealth throughout the whole economy, more than replacing the factory jobs that we traded away.

 

[fuji]

I have business in China, as I said before. So I am a beneficiary of globalization.

Good for you, that doesn't make your single minded focus on factory jobs less misguided.

But there are millions who have been destroyed by globalization.

No there aren't. That's hyperbole. No one has been "destroyed". They lost factory jobs and now they work in lower paying jobs more commensurate with their lack of education.

No doubt they are worse off, but they are not destroyed, and one reason why not is that they live in increasingly wealthy countries that provide very well for them.

And while millions were made worse off, hundreds of millions are much better off than before.

This is not the win-win that was promised. This is what I am saying. Can you not read or this is too hard for you to understand??

I understand what you are saying, it's just wrong. It HAS been a win-win.

And I am all for wealth earned through genuine resourcefulness. But the Communist party and its membership have stolen (and are stealing) billions of dollars through hidden stakes in state enterprises and pay for play schemes.

That's their problem. That makes Chinese people worse off, not Americans or Canadians. But even with the fraud and graft in China, trade has made people there better off.

In fact globalization has been the most effective anti poverty campaign in the history of humanity, lifting literally billions of people out of dreadful, abject subsistence living into productive and meaningful lives.

Meanwhile it has also made Canadians and Americans richer as well. That former factory worker who is now working in the service industry has more real purchasing power today than he had in 1960 when the factories were at their peak.

 

[SkyRider]

Back in the 50s there were no entry level jobs paying six figures.

In the 50's you could buy a house in High Park for $5,000 and raise a family on one salary.

 

[SkyRider]

But there are millions who have been destroyed by globalization.

What is ironical is that the G20 protestors and President Trump are on the same page on this issue.