Caleb Lawrence – KPIG-KPYG Radio – Share the Wealth – January 27, 2017
The major averages fell at the open on disappointing news entering the final hour with small losses. Since Monday the Standard and Poors 500 Index is up 25 points or about 1% while the NASDAQ advanced 110 points or 2%.
4th quarter advance GDP or Gross Domestic Product missed expectations at 1.9% as consumer spending and exports disappointed. For the year GDP advanced an anemic 1.9% on a real or inflation adjusted basis, just below the Fed’s desired 2% target. There was a time not long ago, or pre 2007, when economic potential was figured to be about 3.5% per year, we now struggle to manage 2% growth and that with emergency level interest rates and trillions in stimulus.
Durable Goods orders disappointed in December falling .4% on a large decline in defense orders. The proxy for business spending core capital goods ex-aircraft advanced .8% to mark a 3rd consecutive gain. A volatile series it has managed essentially no change for over a year.
Rapidly advancing global trade lifted 100’s of millions out of poverty over the last 4-decades and spurred numerous free trade and related agreements in the modern era. The new millennium saw these gains slow dramatically and in fact global trade actually went backwards last year. The big question of course is why, I have always maintained that the serial bubble blowing policies of various central banks are economically and socially destabilizing with the 2007-2009 financial crisis also a huge credit bust whose inherently deflationary effects plague us to this day. As like the Japanese we declined to take our medicine and suffer the consequences of our actions. Choosing instead to bail out the banksters with taxpayer funds and in turn set the system up for another huge debt fueled deflationary collapse. We would be over our period of economic malaise by now and would in fact have real economic recovery not the fake one that we are told is real on a daily basis had we not chosen bail out. The real problem though is what the official policy response will be to the next crisis. Slashing interest rates is essentially mathematically impossible. Even if you push rates to negative 5% a financial institution can’t really issue a mortgage at less than 3% due to servicing costs etc. Leaving a harsh dose of medicine or blanket debt forgiveness, aka helicopter money for everybody and anybody, not just the banksters.