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Obama’s “No Growth, No Jobs, No Recovery” Economy Gives Up the Ghost
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The world’s biggest economy ground to a standstill in the first quarter of 2015 wracked by massive job losses in the oil sector, falling personal consumption, weak exports and droopy fixed investment. Real gross domestic product (GDP), the value of the production of goods and services in the US, increased at an abysmal annual rate of just 0.2 percent in Q1 ’15 according to the Bureau of Economic Analysis demonstrating conclusively that 6 years of zero rates and Large-Scale Asset Purchases (LSAP)– which have enriched stock speculators, inflated the largest asset-price bubble in history, and exacerbated inequality to levels not seen since the Gilded Age– have done nothing to improve the real economy, boost demand or reduce unemployment. As the BEA data illustrates, the US economy is basically DOA, a victim of criminal congressional negligence and Central Bank chicanery.

From the BEA release: “The deceleration in real GDP growth in the first quarter reflected a deceleration in PCE, downturns in exports, in nonresidential fixed investment, and in state and local government spending, and a deceleration in residential fixed investment that were partly offset by a deceleration in imports and upturns in private inventory investment and in federal government spending.”

Translation: The economy is in the shitter. Consumers aren’t spending because the crap-ass jobs they landed after the crisis pay half as much as the jobs they lost when Wall Street blew up the financial system. Personal savings are up and spending is down because households face an uncertain future where pensions are being trimmed and Social Security is under attack. Also, spending is impacted by the historic low (employment) participation rate which indicates that joblessness is much higher than the government’s phony numbers suggest. When workers are unemployed they don’t spend, activity drops, and the economy tanks. It’s that simple. Today’s data just confirms what most people already know, that the economy stinks and that they’re being ripped off by a voracious oligarchy that’s stacked the deck in their favor.

The US economy is stuck in the mud because our bought-and-paid-for congress has relinquished all authority and handed over the management of the economy to the industry-controlled Federal Reserve. Whereas our current budget deficits are in the range of 2 percent per annum, the government should be spending a lot more to compensate for the slowdown in private sector spending and investment. In the past, the congress and president would initiate sensible Keynesian fiscal stimulus programs to keep the economy sputtering along while households repaired their balance sheets or businesses struggled with weak demand. Those tried-and-true remedies have been jettisoned for the new monetarist orthodoxy that requires that all the nation’s wealth be filtered through the Wall Street casino so that the pampered thieves who destroyed the country with their mortgage-securities-Ponzi-scam be further rewarded for their insatiable greed.

Manufacturing, retail sales, MBA purchase applications, business investment etc, are all in the toilet. There’s a very good chance the economy is already in recession which will undoubtedly send stocks even higher since every proclamation of bad news generates a buying frenzy by clever speculators who anticipate that the Fed will continue to extend the zero rates and easy money to infinity.

It’s worth noting that the economy had been hanging on by the skin of its teeth mainly do to strong activity in the oil patch where credit expansion, intensive corporate investment, and high-paying jobs (which supported 4 additional jobs in the local economy!) contributed more than $200 billion per year to GDP. Now domestic oil production is in deep distress. Layoffs recently surpassed the 100,000 milestone (See:Oil Layoffs Hit 100,000 and Counting, Wall Street Journal) and borrowing has dried up. Economist Warren Mosler explains the impact the cutbacks in domestic oil have had on GDP in this video from RT that I have transcribed:

“The price drop in oil has turned out to be the unambiguous negative that we had talked about before….where income saved by the consumer, is lost by another consumer. For every dollar not spend by one consumer, another doesn’t get it. ..so you’re just left with the collapse in capital expenditures. (business investment) It turns out, there was about $150 borrowed in the sector last year, driving what modest growth we had last year. Since that disappeared, all the numbers have been going straight down. Unless something steps up to the plate to replace the lost borrowing-to-spend from chasing $100 oil, I see no hope whatsoever.” (Warren Mosler Interview, RT)

Economic recovery requires credit expansion, business investment and jobs. All three of these were severely impacted by the Obama’s goofy plan to push down oil prices in order to destroy the Russian economy. Here’s a brief summary:

“John Kerry, the US Secretary of State, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.” (Stakes are high as US plays the oil card against Iran and Russia, Larry Eliot, Guardian)

As indicated by today’s ghastly GDP data, Obama not only shot himself in the foot, he might have blown off his whole leg. Aside from the colossal growth in private inventories–which will be a drag on future growth–todays report was nothing short of a disaster.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at [email protected].

(Republished from Counterpunch by permission of author or representative)
 
• Category: Economics • Tags: Oil Industry, Unemployment 
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  1. Anonymous • Disclaimer says:

    Yeah, the U.S. neo-con/neo-lib plan to hurt Russia economically brings to mind the Confucian saying, “Before embarking on a journey of revenge, dig two graves.”

    • Replies: @Realist
  2. “Obama not only shot himself in the foot, he might have blown off his whole leg.”

    Lawyers don’t lose their lives, clients do.

    That was you out on a limb in your Bummer, who got hit by that Improvised Economic Disaster.

  3. David says:

    This is the third essay where Mr Whitney has linked to that evidence-free article from Guardian months ago. There is ample evidence that a drop in demand is causing the oil price decline. For example, US oil consumption has declined each year since 2007. The Chinese economy and Europe are crap too.

    In the past, the congress and president would initiate sensible Keynesian fiscal stimulus programs to keep the economy sputtering along while households repaired their balance sheets or businesses struggled with weak demand. Those tried-and-true remedies…

    So there was a time between 1920 and 2010 when a Keynesian fiscal stimulus was correctly and successfully deployed? When? You see, Mr Whitney gets an idea and just makes stuff up to validate it.

    The reason our economy is crap is not because of the reasons Whitney can grasp. It’s because all notions of maximum preparation to function within the most complicated and productive economy in history have been replace with sentimental tripe. It’s about production not monetary policy.

    • Replies: @Realist
    , @Bill
    , @Anonymous
  4. […] Obama’s “No Growth, No Jobs, No Recovery” Economy Gives Up the Ghost by Mike Whitney for the Unz Review [Added 5/1/2015] […]

  5. This has been the plan since 1991 and Bush the wrinkled’s New World Order and if you think it’s bad now wait until we get the TPP.

  6. War for Blair Mountain [AKA "Battle for Blair Mountain"] says:

    The way more fundamental issue:post-1965 labor policy=importation of high fertility highly racialized nonwhite Legal Immigrant scab labor…that is to say:the globalization of US Labor Markets.

    There is no doubt that this has had very nasty consequences for Blacks. But Blacks are in the anti-whitey coalition that installed the Kenyan as POTUS. And that’s a coalition that includes post-1965 nonwhites. Blacks brought their economic misery upon themselves.

    The Native Born White American Working Class is being deprived of the very great benefit of a very severe labor scarcity…blame the passage of the 1965 Immigration Reform Act..or as I like to call it:The 1965 Native Born White American Extermination Act.

    • Replies: @jack shindo
  7. “Whereas our current budget deficits are in the range of 2 percent per annum, the government should be spending a lot more to compensate for the slowdown in private sector spending and investment. In the past, the congress and president would initiate sensible Keynesian fiscal stimulus…”

    Yeah, riiight, that’ll fix things.

    This crap started with JFK in the ’60s and went into overdrive with the Humphrey-Hawkins Act. Now the geniuses want to go into hyperdrive.

    No one can cancel the business cycle, it is based in human nature (whose existence all good liberals deny). All they can do is build the house of cards higher so the crash will be more destructive.

    Our economy is a bag of hot air. The GDP is fluffed up with excessive retail consumption of cheap goods made overseas and diversions like the “entertainment industry” and the “vacation & leisure industry”. Take a walk down the breakfast food aisle of a supermarket or through any suburban mall – that’s our economy.

    Family farms and Mom & Pop businesses did not vanish overnight, nor will they be “stimulated” back into existence, but they were the backbone of the nation and the economy.

  8. Flower says:

    Wow. And throughout the entire article not one word about the tons of money being poured down the hole called “war”. Michael, listen to me on this, there cannot be any rational discussion of the US Economy, good or bad, without mentioning the 3-4 BILLION dollars PER MONTH that we spend to pay for our most useless wars, as well as the BILLIONS of DOLLARS spent EVERY MONTH to maintain military bases around the world. This money is completely wasted. Imagine taking those billions of dollars and investing it here at home, say, to repair our infrastructure. Lots of jobs there. Instant infusion of cash into the economy. Nope. We gotta fight somebody over there because they say nasty things at us or Israel, or Israel says nasty things about them.

    I doubt that many of you know the truth about Ronald Reagan’s “Star Wars” program, but it was sold as being a “space based defensive shield”. The only thing was, it didn’t work. But Reagan got the scientists to say that it did work, which caused the Russkies to try to keep up, which caused them to spend themselves into oblivion. Yippee, we won! But that could never happen to us. Nah.

    • Replies: @Anonymous
  9. Realist says:
    @Anonymous

    Yes, the wisdom of Confucius.

  10. Realist says:
    @David

    “There is ample evidence that a drop in demand is causing the oil price decline.”

    With this I agree.

  11. George says:

    “sell crude at below the prevailing market price”

    Who was the marginal buyer paying the $100+ a barrel? That would be the NATO military industrial complex during the war on terror. Those are the people paying $600 a gallon for diesel fuel. But unlike normal consumers, cutting back the GWOT fuel use is possible. Have you heard the word ‘surge’ recently?

    At the same time a combination of new energy sources and less waste was starting to come online. Once the fixed cost of an energy project is in place it is not possible to shut in down by lowering oil prices (until they are less than the cost of production, which is usually very low).

    And why aren’t you blaming Vladimir Putin for high oil prices? And then low oil prices?

  12. Bill says:
    @David

    Yeah, you can get the data for oil production up through Dec, 2014 here. There is no spike in Saudi production in the second half of 2014, when the oil price decline happened. So, you’d have to claim that those data are falsified in some way as well.

    • Replies: @David
  13. Renoman says:

    Same here in Canada, I run a small construction Company. This very long Winter has been dead flat, the Government has made hiring so expensive and taxes so high that no one can afford to do anything, soon we will drift back into a cash under the table system, the Fall election will see the Liberals [basically the Democrats] back in power and then we will be totally screwed.
    I’d say we’ll see a big war soon, that’s what the US always does.

  14. In the past, the congress and president would initiate sensible Keynesian fiscal stimulus programs to keep the economy sputtering along while households repaired their balance sheets or businesses struggled with weak demand

    • Replies: @Hare Krishna
  15. @Hare Krishna

    Sensible Keynesian fiscal stimulus is something that does not exist and could never exist

  16. Anonymous • Disclaimer says:

    Love your diagnosis, hate the cure — ye gods we’re already trillions in debt and you want to spend more? As stated by others previously our main
    Problems are virtually unlimited immigration both legal an d illegal, the wholesale removal of our industries overseas under the guise of “free trade” and our endless wars.

  17. People in the rich Western countries got lazy and fat and lost the energy that comes from deprivation – demanding too many ‘rights’ and luxuries. Fly Cathay Pacific or Thai or Singapore and compare their service to Delta or Air Canada – better yet, visit those places and be amazed how people cheerfully go the extra mile to give satisfaction – SE Asia is still bursting with energy.

    We had it too good, too long – now it’s the turn of others, that’s all.

    Once the US can no longer print money to pay for a lifestyle its citizens don’t earn the stuff will hit the fan and, maybe, after a generation or so, the population will become energized once again.

  18. David says:
    @Bill

    Thanks a lot for that link. Looking at the data I see that production rose worldwide by 3.2% from Dec 2013 to Dec 2014. This is the fastest worldwide production increase in over a decade, so I’m wrong to say that a drop in demand explains the price decrease. Interestingly, the entire difference can be explained by two countries: the US and Iraq.

  19. I agree with Flower! The US should take the money it spends on security and try to do something productive with it like solving our energy and water problems. Try to mine asteroids with it. The economic order needs to be shaken up with innovation that will allow for new economic expansion that includes everyday blue collared workers. The Bureau of Labor Statistics shows that the majority of jobs are going to be low paying as a result of manufacturing being gone. Dumping money isn’t going to magically bring about Utopia. If that were true we would all be rich from the wars in the Middle East wouldn’t we? Perhaps we need to seek out a new way to live using bio/technological innovation.

  20. Anonymous • Disclaimer says:
    @David

    No, wrong. It is about monetary policy. It is about a monetary policy that screws up production.

    Hayek; fatal deceit, pages 43-44

  21. @War for Blair Mountain

    Why don’t you thank His Holiness Imperial President Ronald Reagan for granting amnesty to illegals and to George Bush’s Executive Order to assist family members per the Reagan amnesty, which the US Congress approved. Illegals do not hire themselves, never have and never will since they do not have the papers to do so. It is US Corporations who hire these illegals knowing they will not tell on themselves so they are a captive workforce. Anything else is a lie! One cannot tell me that 5 million illegals in USA and the US Congress is quiet on the matter then they wake up one day and pretend they got here yesterday!

  22. Anonymous • Disclaimer says:
    @Flower

    You seem confused. Are liberals or conservatives responsible for the cold war? What about Vietnam? WW1 ?
    When and how did cold war end?
    The bloated fed etc etc.
    Get a clue.

  23. Anonymous • Disclaimer says: • Website

    Is it not true that in the long term we need less oil consumption to ward off global warming? If we all learned to live with less then less would be the norm…

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