The Unsurprising Case of Increasing Stimulus AND Decelerating Economic Growth
We keep saying it…
Have said it since 2009…
The more debt we carry and the more stimulus we ingest, the less effect they have on the economy.
Just like a drug on the human body.
And the statistics keep bearing that out, despite recent incremental increases in job creation and GDP growth.
You see, part of the improvement in jobs is a result of more people dropping out of the workforce. When you shrink the size of the pool, obviously it will appear more full.
Part of the increase in business is coming from rising inventories of goods that aren’t being sold.
Much of the rebound in real estate is coming from speculators and institutions snapping up properties with cash. It’s not real new families buying homes with mortgages.
40% of the rebound in earnings per share of Fortune 500 companies is coming from stock buy-backs at low interest rates, and high cash balances not being reinvested back into real growth in capacity and jobs.
Is this a B.S. recovery or what?!
So what can you do about it?
For starters, listen to real economists and experts… the ones who have no public face or position to defend! People like me and Dr. Lacy Hunt, who is a classic economist, with all of the academic knowledge of history, scholars and theories, and who actually manages money.
Has Paul Krugman ever run a business, managed money or even had sex for that matter?
The so-called experts who’re in charge lack one vital element. That is any understanding of reality.
That’s why guys like me and Dr. Hunt work to keep you informed with the facts – not the fiction that Krugman and his crew try to feed you – and why we’re constantly on the lookout for ways you can improve your situation, despite everything the “experts” do.
And that’s why we had Dr. Hunt talk as the featured economist at our Irrational Economics Summit in November. He’s clear, objective, rational, and best of all, he has the “voice of God” when he talks.
He comes from the traditional Austrian School that says you don’t get something for nothing.
Like me, he understands how debt and asset bubbles cyclically accelerate and then inevitably crash.
Like me, he knows that it’s not just about money printing and growing supply… but how that money is invested.
He has basic indicators, like the Money Multiplier and Money Velocity, both of which I use in my analyses. They show the truth about the economy… they don’t just highlight the symptoms.
In fact, Dr. Lacy’s Money Velocity chart offers a 10- to 11-year leading indicator for major long-term downturns when velocity peaks and then starts to turn down. That means that money is going increasingly to speculation and not investment in real productive capacity. That is the beginning of the end.
The downward trends in money velocity, especially since 2008, explains why inflation has not risen, despite unprecedented money printing and stimulus… and why gold started to crash in 2013, despite escalating quantitative easing around the world.
The only success the government’s efforts have had is to inflate financial assets like stocks.
All the other things you hear about, like rising interest rates…
Nominal personal consumption…
Falling labor force participation…
Declining full-time employment…
Falling global exports and trade while business inventories rise…
None of these are good signs. In fact, they’re the signs of a B.S. recovery driven by artificial stimulus.
Don’t count on the government’s ability to keep up this charade for much longer.
Follow our research closely, and add Dr. Lacy’s work to your reading list.
|Follow me on Twitter @HarryDentjr|
Ahead of the Curve with Adam O’Dell
General Motors (NYSE: GM) is perhaps the best example of government intervention and the great, growing divide between a lackluster economy and rising stock prices.