Posts Tagged ‘Recession’

Captain Rick: The U.S. Economy officially tanked big time in the first quarter of 2014…the first slowdown since early 2011. It is a ‘wake-up call’ that America is heading into ‘Recession’ in spite of the ‘it was just a hard winter’ hype that many ‘blind’ economists have been pumping. 

Last month I posted a report showing the US government’s second estimate of GDP dropped to –1% in the first quarter of 2014…a drop from the first estimate in April of a gain of 0.1%. This third and usually final government GDP report shows that the US economy plummeted soundly into ‘recession’ territory during the first quarter of 2014.

The weather had an effect…but perhaps not as much as other factors like the curtailment of ‘Quantitative Easing’ … the pumping of tens of billions of U.S. debt dollars into the economy each month to make the economy look like its doing OK, when in reality, it is not.

This severe drop of GDP into negative territory (–2.9%) is a sign that another recession might be looming.  A recession is generally defined as two consecutive quarters of negative growth. Overall, the U.S. economy continues in limp along in anemic growth…and now negative growth, as shown in the chart below.

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BLUE LINE: 3.0% GDP Growth is required to keep up with U.S. Population Growth. GDP above the blue line represents real growth that adds real jobs. GDP below the blue line indicates real economic decline that is loosing real jobs. GDP below the blue line, but above zero line (‘Recession’), is what Captain Rick calls the ‘Anemic Zone’.

RED LINE: 2.1% GDP Growth is the average of what the U.S. economy scored in the past 12 quarters (3 years). This demonstrates that the U.S. economy is stuck in the economic ‘Anemic Zone’…not mustering enough growth to keep up with population growth. 

GDP…What is it?

‘GDP’ represents ‘Gross Domestic Product’…a market value of all officially recognized final goods and services produced within a country in a year. GDP performance (increases and decreases) present a broad-based picture of the health of a country’s economy. High GDP growth is typical of a healthy economy. Low GDP growth (below 3%) is typical of an unhealthy economy. Negative growth is typical of an economy in recession. 

What does this GDP data mean concerning the future of America?

America is stuck in a land of anemic growth…actually declining in real growth because its economy can not consistently rise above 3% growth … a level required to produce enough jobs and income to keep pace with population growth. In reality, this means that America is declining in economic strength. In the coming few years America faces an astronomical increase in expenditures due to entitlement programs like Social Security, Medicare and welfare programs like Medicaid and Obamacare. America’s relatively level revenue will not be able to cover the mushrooming expenditures. Congress will not be able to address this problem by simply ‘kicking the debt can down the road’ as it has in recent years. At some point soon, the fiscal mess that is brewing will explode as America plunges over the pending ‘real fiscal cliff’.  At the bottom lies America as a third world country.

What can be done to better America and other countries?

Lots can be done! Take notice of what our elected officials do. Vote them out…replace them if they do not perform to your expectations. You might even consider running for an office. The world is in extremely short supply of intelligent people who care about our lands and well being of our people. Go for it. Run for an elected office. Help our world from plunging over the pending ‘real fiscal cliff’…before its too late.

I welcome your comments, likes, shares and following of my blog! (If not visible, click the red title at top)

Interesting ATRIDIM NEWS JOURNAL Links:

Previous GDP Report

GDP

U.S. Debt Crisis

Economy

Captain Rick’s Fiscal Cliff Course 101

Captain Rick: The U.S. Economy took a nose dive in the first quarter of 2014…the first slowdown since early 2011. Some economists are blaming the sudden drop in GDP on the cold and snow in the northeast. The weather had an effect…but perhaps not as much as other factors like the curtailment of ‘Quantitative Easing’ … the pumping of tens of billions of U.S. debt dollars into the economy each month to make the economy look like its doing OK, when it is not. Another alarming factor is the stalling of house sales in America. The current real estate boom might be nearing its peak.

This drop of GDP into negative territory is a sign that another recession might be looming.  A recession is generally defined as two consecutive quarters of negative growth. There is still one more final tweak that will be made to the official GDP number at the end of June. The current –1.0% estimate, a significant drop from the first estimate of .1% last month, could be revised up or down. Overall, the U.S. economy continues in limp along in anemic growth…and now negative growth, as shown in the chart below.

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BLUE LINE: 3.0% GDP Growth is required to keep up with U.S. Population Growth. GDP above the blue line represents real growth that adds real jobs. GDP below the blue line indicates real economic decline that is loosing real jobs. GDP below the blue line, but above zero line (‘Recession’), is what Captain Rick calls the ‘Anemic Zone’.

RED LINE: 2.2% GDP Growth is the average of what the U.S. economy scored in the past 12 quarters (3 years). This demonstrates that the U.S. economy is stuck in the economic ‘Anemic Zone’…not mustering enough growth to keep up with population growth. 

GDP…What is it?

‘GDP’ represents ‘Gross Domestic Product’…a market value of all officially recognized final goods and services produced within a country in a year. GDP performance (increases and decreases) present a broad-based picture of the health of a country’s economy. High GDP growth is typical of a healthy economy. Low GDP growth (below 3%) is typical of an unhealthy economy. Negative growth is typical of an economy in recession. 

What does this GDP data mean concerning the future of America?

America is stuck in a land of anemic growth…actually declining in real growth because its economy can not consistently rise above 3% growth … a level required to produce enough jobs and income to keep pace with population growth. In reality, this means that America is declining in economic strength. In the coming few years America faces an astronomical increase in expenditures due to entitlement programs like Social Security, Medicare and welfare programs like Medicaid and Obamacare. America’s relatively level revenue will not be able to cover the mushrooming expenditures. Congress will not be able to address this problem by simply ‘kicking the debt can down the road’ as it has in recent years. At some point soon, the fiscal mess that is brewing will explode as America plunges over the pending ‘real fiscal cliff’.  At the bottom lies America as a third world country.

What can be done to better America and other countries?

Lots can be done! Take notice of what our elected officials do. Vote them out and replace them if they do not perform to your expectations. You might even consider running for an office. The world is in extremely short supply of intelligent people who care about our lands and well being of our people. Go for it. Run for an elected office. Help our world from plunging over the pending ‘real fiscal cliff’…before its too late.

I welcome your comments, likes, shares and following of my blog! (If not visible, click the red title at top)

Interesting ATRIDIM NEWS JOURNAL Links:

Previous GDP Report

GDP

U.S. Debt Crisis

Economy

Captain Rick’s Fiscal Cliff Course 101

Captain Rick: The 17-nation Eurozone economy contracted for a record sixth consecutive quarter, making this the longest period of recession in the Eurozone’s history. The recession has depressed business confidence, sent unemployment to record highs, inflation to record lows and blown attempts to cut government record debt.

Gross domestic product in the Eurozone fell by 0.2% in the first quarter. The GDP estimate was worse than economists were expecting, largely due to disappointing growth in Germany and could increase pressure on the ECB to take further action to try to stimulate activity.

Unemployment continues to hit new record highs. Unemployment broke through 12% for the first time in March, meaning 19.2 million people were without work in the Eurozone, 1.7 million more than a year ago.
Youth unemployment rose sharply, hitting 24% and leaving 3.6 million people under 25 looking for work.

Prices slumped and inflation has fallen way below the central bank’s target. Inflation posted its biggest monthly drop in four years in April. It fell to 1.2% and touched its lowest level since February 2010.

Eurozone debt hit 8.6 trillion euros, a record 90% of GDP, last year and is forecast to rise to 95% in 2013. As bad as this is … in contrast, U.S. debt to GDP ratio is 107%, trumping it as the worlds worst. One has to wonder if America is next in line to experience the hardships facing those in the Eurozone.

Future Concern: Economists are becoming increasingly concerned at the growing divergence between France and Germany, historically the twin motors of the EU economy and political integration.

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France: French President Francois Hollande (shown above) who was elected a year ago after campaigning to put growth before austerity and introduce higher taxes on the rich, has seen his approval ratings fall sharply as unemployment continues to climb. In recent months he has begun to reform labor markets and pensions, and announced plans to cut capital gains tax. But he is moving too slowly for some, and his government continues to send mixed messages.

France, the Eurozone’s second-biggest economy, slipped back into recession. Its output fell by 0.2% for a second consecutive quarter as it suffered from weak exports and falling investment.  France faces a heavy financial burden from its labor unions and pension systems.

Italy: The pace of contraction eased. GDP shrank by 0.5% in the quarter.
Italy, the region’s third largest economy, nominated a new prime minister. Enrico Letta is a pro-European from Italy’s center-left. He wants Europe to ease up on austerity.

Spain: The recession deepened in the first quarter. The economy contracted by 2% compared with the same period a year ago, and by 0.5% compared with the final quarter of 2012. Spain has been stuck in recession for 21 months. It has been given two more years to bring its budget deficit to below 3% of gross domestic product. In contrast, the U.S. deficit ratio is 6.5% of GDP … more than twice as bad. One has to wonder if America is next in line to experience the hardships facing those in the Eurozone.

The number of unemployed in Spain broke the 6 million barrier during the first quarter, a new record. The unemployment rate rose to 27.2%, tied with Greece for the Eurozone’s highest. For Spaniards aged 16 to 24, the unemployment rate is 57.2%.

Greece: The jobless rate was 27.2% for January, tied with Spain for the Eurozone’s highest. In Greece, 34.2% individuals aged 25 to 34 are unemployed. It’s even worse for younger workers — 59.3% of Greeks aged 15 to 24 are out of work.

Portugal: Portugal was able to slow the pace of contraction to 0.3% from 1.8% in the fourth quarter.

I welcome your comments, likes, shares and following of my blog! (If not visible, click the red title above)

Info from previous reports:

European Debt Crisis: https://atridim.wordpress.com/category/european-debt-crisis/

Europe: https://atridim.wordpress.com/category/europe/

France: https://atridim.wordpress.com/category/france/

Germany: https://atridim.wordpress.com/category/germany/

Greece: https://atridim.wordpress.com/category/greece/

Italy: https://atridim.wordpress.com/category/italy/

Portugal: https://atridim.wordpress.com/category/portugal/

Spain: https://atridim.wordpress.com/category/spain/

Home page (all reports): https://atridim.wordpress.com/

Captain Rick: The U.S. managed to crawl out of the GDP recession zone in its ‘final’ report for Q4 2012 to post a dismal 0.4% GDP, second worst since the end of the Great Recession in 2009. The first estimate in January reported –0.1% GDP, in the recession zone. 

GDP (Gross National Product) is the broadest means of quantifying the health of an economy.

In my previous GDP report, I stated: “If Congress gets tough and addresses the debt crisis head on, I suspect it will present a deeper, temporary plunge into negative growth territory. If Congress continues to ‘kick the can down the road’, I suspect we will see less of a dive in GDP early on…but will set the stage for a much deeper dive in a year or two…possibly as deep or deeper than the ‘Great Recession’ of 2008-2009”.

The U.S. Congress passed and President Obama signed legislation to “kick the debt can down the road” AGAIN as reported in my previous post. While these actions have no effect on GDP for Q4 2012, they will effect GDP for Q1 2013 and beyond.

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The red line in the chart above indicates the 3% level that the U.S. GDP must maintain to keep up with population growth. GDP has been far short of that for many years. In spite of the positive hype we are hearing in the mainstream news media, America is traversing extremely dangerous economic waters. Hype does not fix problems… credible action does. Unfortunately the world is seeing ‘zero’ credible action out of the politicians who represent the citizens of the United States of America.

Prognosis for the future…where are we headed?

I see several troubling economic factors that parallel the times leading up to the ‘Great Recession’. The world stock markets have reached a new high, passing those reached just prior to the stock market crash of 2008. Like then, I see no justifiable reason for the market rise. Today’s market reminds me of a bunch of gamblers in Vegas looking for a place to throw all of their dollars to bet it all. The market is again inflating into a balloon ripe for explosion. Real estate prices have been climbing at a fast pace, as is real estate speculation…similar to that witnessed prior to the bursting of the real estate bubble, prior to the Great Recession. I can not predict how much farther things can go before a repeat of 2008 occurs…or perhaps worse, but I feel that a down slide is coming soon. Much will have to do with congress’s handling of the debt crisis (very dismal at this point). It will be further complicated by the multi-trillion dollar cost of Obamacare (the worlds greatest socialized, welfare medical program). In addition, we must remember that multi millions of baby boomers are beginning to collect Social Security from a trust fund that has been totally robbed of funds to finance the U.S. Government and its politician’s thirst for deficit spending. It will all play out in a very ugly scene before the world’s eyes during the next few years.

I welcome your comments, likes and shares!

Info from previous reports:

Fiscal Cliff: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

U.S. Debt Crisis: https://atridim.wordpress.com/category/u-s-debt-crisis/

GDP: https://atridim.wordpress.com/category/gdp/

Captain Rick: France enters fourth quarter of recession as business activity slumps in Eurozone’s second largest economy. The French economy stagnated through the course of 2012. France’s performance in the first quarter of 2013 is shaping up to be the worst since the same period in 2009. Readings point to a contraction of 0.2% to 0.3% in Eurozone gross domestic product for the first quarter of 2013, after a 0.6% drop in the final quarter of last year.

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America is not alone when it comes to difficult economic times. European countries have been experiencing similar economic problems to those in America…perhaps worse. The world, including America needs to pay attention to what our friends in Europe are experiencing. We all should see events unfolding in Europe as a ‘crystal ball’ to vision into the future for what is coming our way…especially for America, if it does not correct its current suicidal course of spending far beyond its means. 

Follow my reports of the European Debt Crisis: https://atridim.wordpress.com/category/european-debt-crisis/

Captain Rick: If the U.S. Federal Government was in control of your household budget, you would be in serious financial trouble!  I have prepared this simple comparison to show you why:

Annual Financial Statement of the United States of America:

U.S. Tax revenue: $ 2,170,000,000,000

Federal budget: $ 3,820,000,000,000

New debt: $ 1,650,000,000,000

National debt: $ 16,571,000,000,000

Interest on the National debt: $ 222,800,000,000

Recent budget cuts: $ 38,500,000,000

Let’s now remove 8 zeros and pretend it’s an annual household budget:

Annual family income: $ 21,700

Money the family spent: $ 38,200

New debt on the credit card: $ 16,500

Outstanding balance on the credit card: $ 165,710

Interest on the credit card: $ 2,228

Total budget cuts so far: $ 385

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What would happen if the bank froze your credit card, preventing more debt?

Can you imagine how bad your budget would be if you were spending $16,500 more each year than you received in income? The interest on your credit card balance would be $2,228 this year and would be added to your massive balance of $165,710. Each year your debt is growing larger at a rapid rate.

Now, suppose your bank lost faith in your ability to pay your balance. Its easy to guess that your bank will freeze your credit card, allowing no further debt. How will you pay the $16,500 in expenditures that were beyond your budget?  How will you make your loan payments, or even pay the $2,228 in interest on your credit balance? You would probably be left with one choice…declare bankruptcy. Luckily, you would have the U.S. Federal Government (Uncle Sam) to excuse your debt and allow you a new financial start.

What would happen if the bank froze Uncle Sam’s credit card, preventing more debt?

The situation with Uncle Sam’s budget is identical to yours, only exponentially larger. However, there is a large difference in who controls the credit. Uncle Sam’s debt is not held by a bank. It is held by a large number of investors, investing firms and countries all around the world. Japan and China hold a large portion of America’s debt. It is highly unlikely that all of the creditors would freeze Uncle Sam’s credit all at once. But, supposing one day China or Japan lost faith in Uncle Sam’s ability to repay their investment…or even the interest on it? Its easy to guess that they would stop further investments in the U.S. federal government.

When a large enough source of new investment is stopped, how will Uncle Sam finance America’s programs which count on $1.65 trillion of borrowed money each year? How will it repay its debt to investors…or even pay the $223 billion in interest on the balance? Unfortunately bankruptcy is not an alternative for Uncle Sam. There is no bigger entity to bail it out or give it a fresh financial start. Its only remaining option will be to reduce payments to various programs so that it stays within the limits of new debt which can be sourced. It could also mean that the U.S. would have to default on its debt owed. This in return would most certainly stop most, if not all of America’s creditors from making further investments. This would worsen the situation and virtually force America to live within its budget, drastically slashing its programs by $1.65 trillion per year. Programs like Social Security, Medicare, Medicaid and Defense would most certainly be significantly affected, as they are the largest budget items. Such massive cuts would most certainly cast America into a deep recession, probably far worse than the Great Recession a few years ago.

Captain Rick’s Solution Scenarios

Maintain Current Course of Deficit Spending with only small, token reductions:

This is not an acceptable solution. It will lead to failure of America’s financial system within a few years. The cost of America’s entitlement programs like Social Security, Medicare and Medicaid are growing in size at an astronomical rate. In a very short time these three programs will consume 100% of all Federal Tax Income, leaving nothing to support the entire balance of the government without deficit spending. With this course, its not a matter of IF the world’s creditors will cut off America’s credit…but WHEN.

Balance the U.S. budget within 10 years:

This is the course America must take if it is to survive. The Fiscal Cliff had a goal of cutting half of the deficit spending 10 years. That was a good start, but congress cant even achieve it. Congress continues kicking America’s debt can down the road, agreeing on allowing only token spending reductions and tax increases. America must do better…soon!

It will require major spending reductions affecting all programs and tax revenue increases across the board. It will also require significant entitlement and grant program reform. The days of Uncle Sam handing out money with a blindfold on must end soon.

Does America have the ‘guts’ to make these sacrifices? Time will tell…but time is running out quickly. I hope for our children’s sake that America gets its act together soon or our kids will likely find themselves living one day in a third world country.

I welcome your comment and hope you will share this with your friends via one of the means I have provided. Together, our voice can make a difference.

More Info:

Fiscal Cliff: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

U.S. Debt Crisis: https://atridim.wordpress.com/category/u-s-debt-crisis/

Captain Rick: The Eurozone suffered its third consecutive quarter of decline at the end of 2012 as exports from leading economies Germany and France sank, deepening a regional recession that has driven unemployment to record highs.

Gross domestic product in the 17-nation Eurozone fell by 0.6% in the fourth quarter, leaving its economy 0.5% smaller than it was at the start of the year. The region saw a contraction of 0.1% in the third quarter.
Performances in all four of the region’s biggest economies — Germany, France, Italy and Spain — deteriorated compared to the third quarter of 2012. Output is likely to shrink in 2013 for a second year running, according to the latest forecast from the International Monetary Fund.

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17 Member Eurozone

Germany, the Eurozone’s biggest economy, which accounts for about 30% of Eurozone GDP, suffered a contraction of 0.6%. The decline in GDP was was mainly due to the comparably weak German foreign trade. Exports of goods went down much more than imports of goods.

France, the second biggest economy, suffered a 0.3% contraction. France also suffered a sharp fall in exports in the fourth quarter, down 0.6% after growth of 0.7% in the third.

Weaker growth will make it harder for Eurozone governments to meet their debt-cutting targets and intensify the debate about the impact of a strong euro on the region’s recovery prospects.

With fiscal policy tightening, and the ECB in a holding pattern, exports offer one of the few opportunities for the recession-ravaged region to return to growth.

A stronger euro threatens to cancel out some of the hard-won gains in competitiveness brought about by wage cuts in indebted European states.
 
Many of the 17 Eurozone countries are in the middle of austerity programs that are reducing demand, and prompting households and businesses to defer spending and investment.

While policymakers have signaled a willingness to give states more time to bring their budget deficits into line with European Union targets, if the economy continues to deteriorate, there is no sign of a major change in approach.

Wider 27 Member European Union

The economy of the of 27 states of the EU went into reverse in the fourth quarter, shrinking by 0.5%.

The U.K. contracted by 0.3% in the fourth quarter of 2012, bringing it to the brink of a third recession in five years. The Bank of England trimmed its forecasts for U.K. growth in 2013 Wednesday while raising them for inflation.

EU Leaders hope for U.S. Trade Pact to boost Economy

EU leaders are hoping efforts to remove trade barriers with the U.S. could provide a shot in the arm for growth. President Obama promoted this trade pact in his State of the Union Address on Tuesday evening.
Both sides said this week they wanted to move quickly to start formal talks on a trans-Atlantic free trade agreement. 

Captain Rick’s Vision

There are many benefits that could be gained by both economies with such an agreement, especially in the area of regulation…like agricultural, medical and automotive safety standards. Considering the complexities involved, it will require a multi-year approval process…perhaps a decade or more. After all, genetically modified crops, which are commonplace in the U.S., are known as ‘Frankenfoods’ by many in the EU.

A trans-Atlantic free trade agreement will not solve either the EU’s or U.S.’s monumental debt and financial problems. While it could be a tool to help both economies, the EU and the U.S. need to face the realism that their economies are in need of much larger repair…that continual deficit spending of money that does not exist must end. The course that both nations are currently on will not achieve success…more probably, eventual failure. Both nations will need a significant influx of politicians with some ‘serious spine’ to ‘right our ships’. That kind of courage is so rare that I fear for both of our nation’s ‘ships’. Both ‘ships’ are leaning heavily on the port ‘left-welfare’ side. The question that remains is whether our ships are leaning too heavily to prevent the inevitable ‘titanic’ maneuver.

I welcome your comments.