Economy Hanging by a Thread

(Editor’s Note: You’d think that governors and state and county legislators would read the constant flood of information about the American economy and have a mind to avert the tragedy in their own states. But I guess once a leech, always a leech. It doesn’t occur to a leech that he could be anything other than a leech. Leeches are not leaders…they feed off others. They don’t create…they drain. And leeches don’t usually let go of their host voluntarily…right up to and including the host’s death. America is slowly dying from the effect of the government leeches. The American economy will die soon. We can only hope that the leeches will die with it.)



“The economy lost steam in the first quarter. Growth in personal consumption — the single largest component of the economy — slowed markedly. Business-related construction cratered and residential construction fell. Exports stumbled. The only unambiguous plus was continued business investment in equipment and software, which is necessary but not sufficient for overall growth.
In all, economic growth slowed from an annual rate of 3.1 percent in the fourth quarter of 2010 to 1.8 percent in the first quarter of 2011….
When lauding the economy, Mr. Bernanke and many other economists and politicians point out, correctly, that the unemployment rate has declined from a recession high of 10.1 percent in late 2009 to 8.8 percent now. That would be encouraging news if it indicated robust hiring for good jobs. It does not.
Over the last year, the number of new hires has been outstripped by the masses who have either given up looking for work or who have not undertaken a consistent job search, say, after graduating from high school or college. Those missing millions are not counted in the official jobless rate; if they were, unemployment today would be 9.8 percent. The rate would be 15.7 percent if it included those who took part-time jobs in lieu of full-time ones.” (“The Economy Slows” New York Times)

So, even the New York Times agrees that unemployment would be nearly 16 percent if the figures were correctly calculated. Those are Depression numbers. 14 million people are out of work and record numbers of people are on food stamps (44 million).
Today’s down-market sent commodities plunging as signs of emerging deflation pushed investors into Treasuries. Gold and silver fell sharply. Troubles in Japan, China and the eurozone have intensified fears of a global slowdown and perhaps another bout of recession. The dollar strengthened for the third straight session, in spite of the Fed’s zero rates and $600 billion bond buying program. Trillions of dollars in monetary and fiscal stimulus have jolted stocks back to life, but debt-deflation dynamics in the broader economy are as strong as ever. Unemployment remains stubbornly high, consumer retrenchment has reduced discretionary spending, and housing continues its inexorable nosedive. The stock market continues to inch higher buoyed by central bank liquidity and margin debt, but investors are increasingly skittish and searching for direction.
The soaring price of gas has shifted consumer spending from retail to energy consumption, the opposite of what the Fed had intended. 
I doubt energy prices can go a whole lot higher without triggering another recession, so it depends on whether the world can scrape up a few more million barrels  of oil to keep growth going without prices rising too much more. Everyone should be watching oil production statistics closely…
…We are in an era where the availability of natural resources is not sufficient to support the wealth levels that the developed world has grown accustomed to, along with the speed of growth with which the developing world is trying to approach those same levels….. the global economy keeps trying to grow in a way that is inconsistent with the resource constraints, and then some part of the system tears and gives way….
I would argue that this data is at least consistent with the narrative that, in the post 1973 era, energy is consistently in somewhat problematic supply, and you can think of many of the recessions as showing a pattern in which energy prices are rising as the world overshoots what can currently be supplied, or what can currently be supplied drops as a result of geopolitical events, and energy prices rise until some pre-existing weakness in the global economic fabric tears in the course of a recession, and prices fall back again…........if they ever do.