David Malpass writes in The Wall Street Journal, Economic Signals Point to a 2013 Recession, 09/28/12

Excerpt:

Data released this week by the Commerce Department waved bright red recession flags—orders for durable goods fell 13.2% in August and inflation-adjusted personal income fell 0.3%. President Obama is asking for more time to allow the lackluster recovery to pick up steam. His plan is to move the economy “forward” by keeping the current policy framework in place and adding higher tax rates on income and capital gains. But the new Commerce Department numbers, combined with his stay-the-course approach, point to recession in 2013.

This administration’s economic policy is built on deficit spending, government control over the economy and dependence on the Federal Reserve to buy the government’s excess debt. These policies aren’t working. They discourage private investment and jobs, and the policies have resulted in high unemployment, weak business confidence and rapidly declining median incomes.

The signature of our times is the fever for investing in government bonds and $1,700-an-ounce gold rather than in job creation and small businesses. That is the market’s response to Obama administration efforts to reverse core American principles of growth and prosperity.

These principles include a sound dollar to provide price stability and to attract capital; a commitment to limited government as a prerequisite for higher living standards; a preference for low tax rates to encourage investment and hiring; and a belief that markets can set prices and allocate capital better than governments.

The administration will have spent more than $14 trillion in just four years and added $6 trillion to the national debt. The Federal Reserve has dramatically expanded its role in the economy and markets, practically creating a new branch of government. Its near-zero interest-rate policy favors government, the world’s biggest borrower, at the expense of private-sector savers. The Fed’s heavily leveraged purchases of government bonds work against the market-based allocation of capital that is a key driver of economic growth. The Fed has now promised to make unlimited future purchases of government debt if job growth remains weak, an affront to the principle of limited government.

The claim that these policies are working and should be given more time is absurd. Since President Obama took office in January 2009, the U.S. government has implemented more fiscal stimulus and monetary intervention than ever before, yet real GDP has slowed from 2.4% in 2010 to 2% in 2011, and to only 1.6% in the first half of 2012.

Nearly 25% of Americans ages 25 to 55 are not employed, the highest percentage in 30 years, pointing toward an atrophy in job skills that may take decades to repair. Inflation-protected Treasury bonds have a negative yield for the first time in history, reflecting either a massively distorted market or a market expectation of negative real growth. Either way, it’s a loud signal that U.S. economic policy is on the wrong path.

HKO observations:

1.  Over the last few years I do not think I have opened a single account for a startup: a welding shop, or any new company.

2.  I have shut down dozens of accounts for slow pay and have seen many close their business for lack of work.  These will not be starting back up any time soon.

3.  Our largest new customers are either direct government contractors or do government related work.

4.  Scrap prices and structural steel prices are falling.  Low demand and excess supply.

The weak spot in the economy is the business with 50- 500 employees.  These businesses are barely holding on but are hit with very expensive regulations and much tighter credit conditions. The smaller companies with a few employees get a pass on the regulations and the larger companies have the necessary infrastructure to manage the onerous regulations.  But it is these companies with 50-500 employees that job growth normally comes from.  This is a critical reason why unemployment is chronic.

The QE policies which keep interest rates low serves the large publicly held companies.  They can get credit and this lowers their interest cost, improving their financial performance. Stock prices rise.  Large companies are taking out long term credit lines even though they do not need the money.  It is wiser to borrow money when it is cheap rather than when you need it.

The government also benefits because they find it easier to manage this excessive debt. Imagine the problem with our currency value and our deficit if interest rates should climb even modestly.

Retirees suffer and middle class savers suffer as they are unable to get any reasonable return on their savings. It cannot be a good thing when savers are punished to pay for profligate borrowers.

The very demons that the OWS morons protested are making out like bandits from the actions of the president and party that they support.  Romney may have his shortcomings, but the fact that this president is ahead in the polls so close to election with the economy doing so poorly is more than a reflection on Romney’s shortcomings.  It may indicate that we as a nation have become so addicted to government planning that we are willing to give the most statist, anti-free market president in recent history a second term.  This is far more disturbing than a mere loss for Romney.

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