Barack Obama, perhaps the most dishonest president in modern history, has, in a cynical abdication of leadership, not only proposed a budget that, if adopted, is guaranteed to destroy the financial future of the country, but he has done so while lying about a supposed economic recovery underway. His proclivity to do or say anything to enhance his image or achieve his ends was amply on display at a press conference held on the 16th of February.
There is a recovery underway for those in the federal government and those that have signed on to the Obama version of crony capitalism in the boardrooms of certain major corporations and Wall Street. But for those in "flyover country" who pay the taxes and create the jobs the facts are starkly different.
In the bubble that is Washington D.C. there has not been a recession as incomes continue to soar. Wealth has also increased as property values in the fourth quarter of 2010 grew over 7.5% (as compared to the previous year) while the national average showed a further decrease of 2.0%. The current unemployment rate in the metro Washington D.C. market is 5.6% as compared to Gallup's latest estimate of a national unemployment rate of 10.0% and an underemployment rate that has now hit 19.6%. Some may point to the soaring stock market as an indicator of economic growth. In reality the stock market is a reflection of the need to find a home for the massive amount of new dollars essentially printed by the Federal Reserve. As a result there is the beginning of a bubble emerging in the stock markets, particularly in various internet stocks. Gold has topped out and virtually all commodities are at their all time highs. Municipal Bonds have become a very high risk with so many States and municipalities in dire financial trouble now facing the very real possibility of a downgrade in ratings thus making the bonds an even greater risk. Meanwhile the interest return on CDs and IRAs is averaging around 1.0% or less thanks to the Fed monetary policy.
However, the markets do reflect a reality that the Obama administration and their sycophants in the mainstream media will not acknowledge, as their primary and only interest is the re-election of Barack Obama. The American people can no longer trust or look to the current governing class for honesty or integrity, but should instead rely on what the financial markets are saying, whether it is the impending state and municipal debt crisis, inflation or global political upheavals.
The major worldwide concern is, at present, inflation -- something the Federal Reserve and the Administration refuse to acknowledge. However, since August investors have been switching to inflation-linked debt instruments in the United States and other European countries. These index-linked bonds, the traditional way investors protect themselves against rising prices, have become a favored asset class for many fund managers. In the U.S., the world's biggest market for these securities, the issuance of these instruments will set a record this year. Consumer prices have jumped more than 4% in the United Kingdom, in China over 5%, and in Germany by the fastest rate in over two years. And the estimates are that these rates will continue to rise. In January, the cost of living in the U.S. climbed more than forecast, led by higher prices for food and fuel. The consumer price index increased 0.4% for a second month (annualized at 4.8%). By contrast the real average hourly earnings have increased only .4% over the past year (January 2010 to January 2011). Many companies that have, over the past year, absorbed the higher cost of manufacturing, will be forced into raising prices, which will further exacerbate the rise of the consumer price index. This action could also precipitate a drop in sales volume which will impact any decision to hire new employees on a permanent basis. Within the international marketplace there is now open discussion of replacing the dollar as the world's reserve currency with SDRs (Special Drawing Rights or a basket of international currencies in conjunction with the IMF). The purpose is to have a reserve asset for central banks that better reflects the global economy since the dollar is vulnerable to swings in the domestic economy and changes in U.S. policy. In other words Washington D.C. has made a hash of the domestic economy and the entire world is also paying for it. In other news: Applications for jobless benefits increased yet another 25,000 in the week ending February 12 again surprising the so-called experts. There is a record share of U.S. mortgages in foreclosure. The combined share of foreclosures and loans with overdue payments hit a record 14% of loans in the country (one out every seven mortgages in the U.S.) At the end of 2010 16 million housing units or 27% in the country had a negative equity in the property. The projections are that housing values will continue to decrease and foreclosures increase as job creation and income will not be growing.
With this as backdrop the leadership of the United States, in the comfortable bubble that is Washington D.C., proceeds to flounder, obfuscate and play games with the American people.
The Federal Reserve in its latest FOMC meeting minutes "continues to express disappointment in both the pace and unevenness of the improvements to the job market" and conceded it would take five to six years to return to historical rates of growth and job creation. However, they claim that the second round of quantitative easing (essentially printing money) was so far a success.
The Fed expects the GDP to grow even faster than their last projection (they have been wrong for 8 straight quarters so far). Even more surprisingly they don't expect the recent increases in commodity prices to filter into broader inflation permanently. Their preferred price index (which inexplicably does not include food and energy costs) is projected to rise only 1.3% in the twelve months of 2011. Yet the consumer price index in January, which does include food and energy, rose 0.4% on one month alone. No mention was made of any anticipated growth in average hourly earnings.
At the White House, whose motto is: "The end justifies the means," its primary occupant, Barack Obama is perfectly comfortable saying whatever he wants knowing the mainstream media will report his spin with straight faces. As befitting high school juveniles, the Administration, the Democrats, and the media can portray the goings on at each end of Pennsylvania Avenue as game of gotcha, while the country sinks under a mountain of debt.
The only place that the American people can turn to for the truth is themselves and the international financial markets that do not have a vested interest in this irresponsibility.