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.

Captain Rick: Many economists were shocked by the magnitude of this drop in economic growth. I was surprised, but not shocked. Those following my reports know I have been forecasting a coming recession for some time. I caution that this is only the first of three GDP reports for the 4th quarter of 2012.  It won’t be until the end of March until the third and final GDP figure for the fourth quarter of 2012 is released. The final figure could be slightly higher or lower. Regardless of the final figure, the economic trend is not favorable. How Congress handles the very serious looming U.S. debt crisis, especially the portion of the Fiscal Cliff that was ‘kicked like a can down the road’ will play a roll in future economic growth. 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.

I see several troubling economic factors that parallel the times leading up to the ‘Great Recession’. The world stock markets are within 2% of the all time highs reached just prior to the stock market crash of 2008. Like then, I see no justifiable reason for the recent market rise. It looks to me like a bunch of gamblers in Vegas betting 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…but I feel that a down slide is coming at some point soon. Much will have to do with congress’s handling of the debt crisis. The best thing they can do is ‘bite the bullet’ and suffer the consequences of balancing the budget early on. While that will most likely allow our GDP figures to become even worse than they are now, action soon might stave off an economic catastrophe a few years from now. I wish I could offer a more wholesome outlook for the American economy, but the fact remains…America is facing the most serious financial crisis in its history, one which has the potential to reduce America to a third world nation if not handled properly and soon.

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Captain Rick: The December Jobs Report marked the tenth month in a row of lackluster job creation. Only 155,000 jobs added, just above the red break-even line of enough jobs to keep pace with population growth. That leaves 4.8 million discouraged workers … hopelessly unemployed.

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1.84 million jobs were created during 2012. That sounds huge, but it only broke even with the 1.8 million needed to keep pace with population growth.

U.S. Unemployment rate is inept and meaningless … the real unemployment rate is about 15%

I no longer report on the U.S. Labor Department unemployment percentage, which basically counts only those who are registered and receiving unemployment compensation. It does not include the other half of the workers that dropped off of the government’s ‘radar screen’ … the 4.8 million who have exhausted their unemployment compensation and remain discouraged and hopelessly unemployed. The Labor Department should abandon the ‘unemployment rate’ and replace it with a figure that is closer to reality. The actual unemployment rate, sometimes called the ‘underemployment rate’, stands at about 15%, among the highest since the Great Depression of the 1930s.

The growing number of hopelessly unemployed is worrisome

Studies widely show the longer a person is unemployed, the weaker his or her chances are of getting a job. At some point, long-term unemployment can lead workers to become permanently detached from the labor force. That’s not good for the economy.

How long will it take to reduce unemployment to pre recession levels?

The Hamilton Project, an economic research arm of the Brookings Institution, publishes a “jobs gap” calculator that estimates just how long it will take to get back to pre recession levels, assuming the only major job market dropouts are Baby Boomers who are retiring. At the current rate of hiring, the Hamilton Project estimates it would take until 2025 to get back to a pre-recession job market. I must caution … that report does not consider the monumental fiscal challenge America faces with the upcoming Fiscal Cliff Sequester and Debt Ceiling issue. If President Obama and the U.S. Legislature continue to ‘kick the fiscal can down the road’, it could be far beyond 2025 before America recovers to pre recession unemployment levels, possibly never.

Caution for U.S. State Governors and City Managers

If you think America is on the road to recovery … THINK AGAIN !!! America is on a very serious fiscal downhill slide …headed for the ultimate ‘Fiscal Cliff’. Continue to spend money like there is ‘no tomorrow’ or prepare for coming reality by shoring up fiscal defenses.

Get Educated about the serious fiscal problems facing America … and the world

A great source: Captain Rick’s Fiscal Cliff Course 101 … The course starts at the very bottom.

Captain Rick: Here we go again. Treasury Secretary Tim Geithner warned Congress in a letter that U.S. borrowing will hit the debt ceiling on Monday, and that Treasury will begin using ‘extraordinary measures’ to prevent government spending from exceeding the legal limit of $16.394 trillion. On Monday, debt subject to the limit was just $95 billion below the $16.394 trillion debt ceiling. That allows for spending over $13 billion a day through next Monday. It makes my head spin thinking about how fast the U.S. spends money and that over $1 trillion of what it spends each year is borrowed money (deficit spending) that adds to the U.S. National Debt.

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The extraordinary measures include suspending the reinvestment of federal workers’ retirement account contributions in short-term government bonds. All told, the extraordinary measures can create about $200 billion of headroom under the limit — normally about two months worth of borrowing.

If America begins going over the ‘Fiscal Cliff’ on Tuesday, January 1, as all indications point to now, $600 billion in annual spending cuts and tax revenue increases will kick in and slow the generation of debt to half speed. This would double the period of time to 4 months remaining before extraordinary measures would be exhausted.

After the extraordinary measures run out, Treasury won’t be able to pay all the country’s bills in full and on time. At that point, the United States will run the very real risk that it could default on some of its obligations, such as making interest payments on America’s National Debt which total a staggering $260 billion per year. This would have a severe negative impact on America’s credit rating which would have a ripple effect of making it more costly for the U.S. Treasury to borrow money. At some point foreign governments, like Japan and China, which hold large sums of American debt, would slow lending or even curtail it. The American economy would grind to a halt and be thrust into a deep recession, dragging all world economies along with it.

Other solutions could be to default on Social Security, Medicare, Medicaid and other government program payments. We all can comprehend the immediate, massive, destructive effect that would have on society.

Thus, we can conclude that default of any kind  is not an acceptable solution. The only immediate solution will be to increase the national debt again. Those who have studied Captain Rick’s FISCAL CLIFF Course 101, know that its just a matter of time before raising the national debt ceiling will no longer be a workable option. This is why it is so important that the ‘Fiscal Cliff’ spending cuts and tax revenue increases take effect on January 1.

Captain Rick’s Dream for America

I find the manner in which the President and Republicans and Democrats in Congress are trading off fiscal ‘trinkets’, in an effort to fool America that they can come up with a better solution than the ‘Fiscal Cliff’ to solve America’s serious problem of thirst for debt … almost laughable.

The President and Congress should stop playing fiscal games. The current members of Congress should stay home on vacation for the rest of the year. A new slate of legislators will be sworn in on January 3, hopefully with a work ethic that is void of politics (I am holding my breath), and work towards raising the debt ceiling along with the creation of Fiscal Cliff 2 … another painful round of spending cuts and tax revenue increases that would finally balance America’s budget and eliminate deficit spending. Ideally, it would start on January 1, 2014, when the next raise of the national debt ceiling will most likely be required. Hopefully that would be the last need to raise the America’s National Debt Ceiling.

Perhaps Fiscal Cliff 3 could kick in on January 1, 2015 with another round of spending cuts and tax increases that would begin reducing America’s National Debt and its interest on the debt which will be well over $300 billion per year by then.

If America were to follow this painful fiscal road, our children and grandchildren could have a realistic chance to make a descent living and recapture some of the Great American Dream that kids growing up in America back in the 1950’s and 1960’s once had. I was one of them. They were great times that are ‘long gone’, but can be rekindled if we, the generations who helped create America’s fiscal ‘nightmare’, accept some sacrifices. I urge everyone in America to accept the ‘Fiscal Cliff’ with a ‘grain of salt’ as it becomes effective on January 1, 2013 and urge your legislative representatives to work towards achieving Fiscal Cliff 2.

View Captain Rick’s entire FISCAL CLIFF Course 101: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

Captain Rick: 2012 is drawing to a close with no congressional deal in sight, which means the ‘Fiscal Cliff’ will happen automatically, by law, on January 1, 2013. The ‘Fiscal Cliff’ is a combination of the expiration of temporary tax cuts and spending extensions and other spending cuts from laws passed previously. In total, it reduces half of Americas deficit ($600 billion per year…approximately $7 trillion over the next 10 years). Previous laws allowed America’s staggering national debt to be raised to keep the U.S Government running in exchange for the ‘Fiscal Cliff’ if the congressional appointed ‘super committee’ did not produce a better solution. No agreeable alternative solution was found, as appears likely with current negotiations…so America will most likely witness the ‘Fiscal Cliff’, by law, on January 1, 2013.

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‘Fiscal Cliff’ Solution Scenarios:

Scenario of Congress agreeing to stop, postpone or ‘water down’ (lower) the ‘Fiscal Cliff’

Captain Rick’s chances of this happening: Near 0%

Captain Rick’s rating for such action: “F” (FLUNK)

Captain Rick’s prognosis: While this is what is being portrayed by the news media as the best solution, it is mathematically impossible and fiscally irresponsible…because America’s National Debt Clock continues to tick. Its just a short time before America will need to raise the debt ceiling again, because it spends $1.2 trillion more per year than it receives in revenue. That will foster ‘Fiscal Cliff 2’…perhaps twice as high as ‘Fiscal Cliff 1’. Keep in mind that even if America were to balance its budget (a far off dream), it would be left with its staggering debt of $16.2 trillion and its annual interest of $258 billion, the 5th largest U.S. expenditure of tax revenue. This money is paid to America’s debt holders…the largest being Japan and China.

Scenario of America going over the ‘Fiscal Cliff’

Captain Rick’s chances of this happening: Near 100%

Captain Rick’s rating for such action: “B” (Best possible current solution, but America can and must do much better in the future)

Captain Rick’s prognosis: As horrible as the news media has made the ‘Fiscal Cliff’ sound, it is Americas best hope to get ‘back on track’ to prosperity. Yes, it might mean a small drop in GDP and small rise in unemployment…but that is far better than a large drop in GDP and large increase in unemployment and possible recession or even depression a few years from now if America does not confront its extremely serious debt problem ‘head on’ NOW.

Captain Rick’s hope for the future of America

Once we go over the ‘Fiscal Cliff’ and begin to realize the shock of it all, our Congress needs to ‘come to bat’ for America and produce constructive legislation to fix a few urgent, very serious problems like the Medicare ‘Doc Fix’. Historically congress provides for a periodic ‘cost of living’ adjustment for reimbursement to Medicare doctors. This years adjustment has been stopped by the ‘Fiscal Cliff’. If this is not fixed, eventually many doctors might stop seeing Medicare patients, leaving them without a doctor. Congress will also need to begin serious reform to its entitlement programs…Medicare, Medicaid, Social Security and federal pensions, which have expenditures growing at astronomical speed in comparison to tax revenue. The U.S. fiscal problem is monumental and deserves our immediate attention now, in an effort to ward off significant fiscal failure of the U.S. with a ripple effect to the entire world in years to come.

View Captain Rick’s entire FISCAL CLIFF Course 101: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

Captain Rick: I believe the “Fiscal Cliff” could be a means of leading America away from the verge of economic destruction, that if left uncorrected could reduce America to a third world country … while much of the ignorant news media is presenting the “Fiscal Cliff” as a dreaded thing that America must avoid.
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America is facing the “Fiscal Cliff” because of monumental fiscal errors. The Bush tax cuts and Iraq war expenses were extremely reckless. They contributed to  producing America’s “Great Recession”. The Obama spending fixes of trillions of dollars were astronomically stupid. It all has left America on the verge of fiscal disaster, spending far more than it is receiving in revenue.
Stay tuned for “Lesson 2” in my continuing “Fiscal Cliff 101” series…where I will continue to “break it all down”.

Captain Rick: Japan, the world’s third largest economy, saw its economic growth sharply contract 3.5% in the third quarter of 2012. If its GDP (Gross National Product) growth rate remains in negative territory during the fourth quarter, Japan will officially fall into recession. Some economists have warned that looks likely. Some believe Japan is in recession already. Many fear that in light of China’s economic contraction, this is wake up call that the entire region might be headed for recession. I will help clear it up in my closing thoughts below.

Japan’s economy, especially exports, has been battered by the 2011 disasters caused by the earthquake, tsunami and subsequent meltdown of several nuclear reactors. China is Japan’s largest trading partner, but its diplomatic spat with China over disputed islands has made Chinese consumers reluctant to buy Japan-made products, especially automobiles.

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Last year nearly 20% of Japanese exports were sold to China, compared to 15.3% to the U.S.

Captain Rick’s closing thoughts on Asia, Europe and the USA:

Japan has been busy gobbling up U.S. debt over the past year. Its current holdings of $1.12 Trillion might soon pass the current top holder of U.S. debt … China at $1.15 Trillion. I find this very interesting and hope to focus on it in an upcoming report as America nears the “Fiscal Cliff”.

To help clear up the controversy of whether or not Southeast Asia is headed for recession, we should consider the problems that our friends in Europe face. Several countries in Europe are already in recession and more on the brink. Europe is facing a very serious financial challenge.

The most serious of all world financial problems lies in the United States of America. Its called the “Fiscal Cliff”. If this financial “nightmare” is not addressed head on with real and meaningful cuts in spending, coupled with increases in taxes, I assure that the negative financial echo effect will have the potential to thrust all countries of our world into recession. Watch for more of my reports on this matter of major global importance.

Captain Rick: Hiring ticked up to 171,000 new jobs in October … along with the unemployment rate, up .1% to 7.9%. The biggest job sector gainers were business services at 51,000 positions. Health care added 31,000, construction 17,000. Caution…many of the jobs added were low-paying service jobs.

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Captain Rick’s REAL Mathematical Jobs Analysis:

At least 150,000 jobs need to be created each month (1,800,000 per year) to keep pace with the growing population, as represented by my red line in the chart above.

In the past 12 months, beginning November 2011, America has added 1,950,000 new jobs. Subtracting the needed addition of 1,800,000 to keep pace with population growth, America added just 125,000 REAL jobs in the last year. That represents a move in the positive direction, but is far short of what is needed to regain the nearly 9 million jobs lost during the Great U.S. Recession in 2008-2009. At the pace American jobs have been restored during the past year, America will not experience a return to pre-recession job conditions for decades, if ever. Many economists share my feeling that what we are seeing now is the new job norm. The great job conditions of the mid 2000s will not be returning … possibly ever.

The U.S. Fiscal Cliff: This is the most important fiscal challenge facing America … perhaps the most monumental in U.S. history. How our legislators manage this crisis will determine America’s Jobs outlook and fiscal status for years to come. If not handled properly, our legislators are in position to reduce America to a third world country during the coming years. This is very serious ‘stuff’. I will do my best to keep you informed. Read my report on the Fiscal Cliff: https://atridim.wordpress.com/2012/09/26/fiscal-cliff-what-the-heck-is-it-how-will-it-affect-us/

Captain Rick: The U.S. economy grew a bit faster in the third quarter than the sluggish 1.3% of the second quarter, according to the first of three estimates for the third quarter. First estimates are notoriously optimistic, especially when they come before a presidential election. The first estimate for the second quarter was 1.5%, raised to 1.7% on the second estimate and then sank to the ‘final’ 1.3% figure. We will have to wait until December for the more realistic third estimate.

Gross domestic product (GDP) is the broadest measure of the nation’s economic health. 3% economic growth, represented by the red line in the chart below, is necessary to provide enough new jobs to keep pace with U.S. population growth. America has fallen short in all but two quarters of the past four years. This means that the percentage of eligible workers who are working continues to drop almost every month. Real unemployment is continuing to increase, in spite of the bogus and meaningless unemployment percentages the U.S. government publishes each month that show a slow decline. America’s unemployment rate is currently published to be 7.8%, but the real number is actually about twice that…and rising, not falling.

I do not see anything on the horizon that is going to raise America continuously up above that red line, where we need to be to enjoy a healthy and growing economy … at least for the next several years, perhaps 2017 or beyond. Even the Fed, the IMF and other global financial authorities forecast similar sluggish growth through 2015. Europe appears to in recession or close to it. U.S. growth of 1.3% in the second quarter is knocking on recessions door. China’s economy is slowing quickly as a result of economic sluggishness in the West. This paints an anemic image of America’s economic health, with a global ripple effect. If the U.S. legislature attacks the “Fiscal Cliff” with vengeance when they return to work in January, we might see a boost in GDP in coming quarters. I am referring to major spending cuts and yes…tax increases. Anything short of that means “kicking the can down the road”, as has been done for many years, and will give us continued economic stagnation and possible recession.

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