Obmama/Democrats Goal To Make The USA Into Detroit In 8 Charts

The US economy is straying further and further away from a free-market model and towards a government-controlled, crony economy. You know, like Detroit.

We can see the results of the move to government control of the economy in the headwinds, like in the movie “Idiocracy” where the government orders Brawndo, a green liquid that resembles Gatorade, be used instead of water for crops, the government’s solution to all problems is more government, more regulation, more taxes, etc. Government is what statists crave.

Here is a partial list (the actual list is way too long) of headwinds facing the economy, the housing market and the mortgage market.

1. Declining Labor Force Participation Rate. Labor force participation has been declining since the 2001 recession and has fallen back to mid-1970s levels. Partly it is the effect of an aging population where more and more Americans retire and drop out of the labor force. Partly it is the effect of corporations moving out of the US to benefit from reduced labor costs and reduced regulations. Whichever explanation you choose (both is the correct answer), it is a troubling trend.

2. Declining Employment to Population Ratio. Similar to declining labor force participation, employment as a percentage of the population has fallen dramatically and is back to President Jimmy Carter levels. The reasons are the same: aging population, more movement of jobs to less-restrictive countries, and the booming welfare state in the US where it can pay your more to be on welfare than to work (add welfare, food stamps, housing subsidies, etc) and we have a Brawndo recovery: no common sense, but it has electrolytes. Remember when former House Speaker Nancy Pelosi said that unemployment benefits “creates jobs faster than almost any other initiative you can name.”?

3. Declining Real Household Income. Real median household income has either remained flat (pink chart) or has fallen since 2000, roughly the same time that civilian labor force participation and employment as a percentage of the population peaked. This is a troubling number for the housing and mortgage markets, in particular.

4. Obama’s Jobs Recovery Has Been In Part-time Jobs, Not Full-time Jobs. This economy is not creating full-time jobs but is creating more part-time jobs. Since January 2009 the country has added a net total of 270,000 full-time jobs, but it has added 1.9 million part-time jobs, according to the House Ways and Means Committee. While the Affordable Care Act (aka, Obamacare) is a contributing factor, see (1-3) for the general decline in employment. Having said that, when employment is declining, why adopt a massive tax plan (Obamacare and raising taxes in general)? Ah, that is the Brawndo approach: the same formula that has killed growth in the past! It has electrolytes!

5. Home Ownership Rates Have Crashed to Carter-era Levels. Most Administrations have adopted the Brawndo plan for economic growth by encouraging home ownership, even if it is risky and creates massive losses to both borrowers and lenders. But don’t worry. Affordable housing activists and other cronies will demand a government guarantee for mortgages and another great leap forward. You know, more Brawndo.

6. M1 Money Multiplier At Its Lowest Point Since President Reagan (1986). And it crashed below 1.0 at the end of 2008 and has remained there ever since. What does it mean? Essentially it means that every dollar created by the FED (an increase in the monetary base M0) will result in a <1 dollar increase of the money supply (M1), as is evident from the figure below. So, the credit and deposit creation of commercial banks is limited in this case. The banks are still holding on to a lot of excess reserves.

Again, don’t worry. The Federal government regulators are responding with … MORE BRAWNDO! That is, they are weakening credit standards for mortgages in the hopes of seeing more bank lending for housing. Despite the lackluster economy and deteriorating labor market. That should increase the M1 Money Multiplier IFF borrowers bite at the weakening credit standards.

7. M2 Money Velocity At Its Lowest Point Since .. Forever?. M2 Money Velocity continues to nosedive. Money velocity is the “average turnover” of a dollar; a velocity of 2, for example, means that the average dollar gets spent twice per year. At 1.58, the average turnover continues to weaken. That is, money is not recirculating at a sufficiently rapid rate.

8. Rising Treasury and Mortgage Rates. Mortgage rates have skyrocketed since May 1, 2013 placing a damper on the mortgage market.

The Fed is still spraying the economy with Brawndo. Let’s see if they still think that it works. Here is a chart of The Fed’s Brawndo Reservoir.

There are, of course, many other headwinds. But the Federal government will continue regulating, spending, taxing and controlling — that is, sprinkling Brawndo on the economy. Even if it kills growth.

Unfortunately the USA is already in far worse shape than Detroit but Detroit can’t print money to hide the disaster.

2 posted on 09/02/2013 5:52:48 AM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)

Thank you for that article! I still do arithmetic on this many fingers, so I couldn't make clear sense of all of it, but was at least able to make approximate sense of much of it.

Too bad there's no adult supervision in Washington, D.C.

3 posted on 09/02/2013 6:11:45 AM PDT by Standing Wolf (No tyrant should ever be allowed to die of natural causes.)

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