Yet another sign was reported today that the Barack Obama economy is a disaster. The Commerce Department revised its assessment of the 1st Quarter and downgraded a +0.2% in GDP growth to a 0.7% contraction. A final assessment will be published next month, which could be even lower. A survey conducted by Bloomberg News has an average 0.9% contraction of GDP. Yesterday, the weekly jobless numbers of those applying for unemployment was higher than expected, about 282,000. The stock market appears to be the only aspect of the economy doing well these days, but that is easily explained by the cheap money produced by the Federal Reserve Bank, allowing banks to make more money borrowing the cash they reinvest in the markets. But even cheap money may have a limit.
Globally, the world economy is still on pins and needles due to the sovereign debt issue. Japan leads the way with a national debt nearly two-and-a-half times its annual GDP rate. Its even worse than Zimbabwe! Greece is also high on the list of debtor nations and negotiations are ongoing concerning their ability to make interest payments on their debt. Italy and Portugal follow them and even the United States is among the handful of nations with national debts exceeding their annual GDP rates at about 105%. In comparison, China, which is displacing the U.S. as the largest economy, has a debt level less than half of their GDP. Even Mexico is doing better than we are! Probably helps that nearly a third of their citizens are living illegally here in America sucking away at our welfare state.
Many economists are warning that in the event of another recession, the ′toolbox′ for fixing the U.S. economy is empty. Under Obama, our National Debt has more than doubled in just six years and will only get worse. If you thought that the 2008 crash due to the mortgage-back security crisis was bad, hold on to your hat when the sovereign debt bubble bursts. The pain will be wide, deep and unbearable. Once again, there is much buzz floating about in Washington about the seizing of 401K retirements by the government to pay its bills.
A couple of months ago, the fine folks at ZeroHedge ran the numbers and the math was not pretty. Basically, the National Debt has reached a point where it can never be paid. If and when the Federal Reserve Bank finally decides to raise interest rates, which they have not done since Obama took office after setting them to practically zero, this will put huge pressure on the federal budget. Even with the modest, in comparison, spending spree during the George W. Bush administration, with an average Fed rate of about 4%, the minimum interest payments by the federal government were about three times higher than what the Obama administration budgets required. With the debt more than doubled, even a modest increase in interest rates will require at least $200-300 billion dollars more to be allocated by the government. Otherwise, we are looking at default, much as Greece is today.
The Barack Obama economic policy has not only failed to fuel a recovery from the 2008 crash, but has set the stage for an even worse crash. Such a crash in inevitable, as the demographics are still shifting in a negative fashion. We still have a solid 10-15 years to go before we peak on the drain of Social Security payments to all of those retiring Baby Boomers. So far, none of the declared presidential candidates have offered any real solutions. Only Chris Christie, who has yet to officially declare, has raised the specter of dialing back Social Security by raising the retirement age and adding more means testing. But, as the ZeroHedge math explored, even that action may now be too little, too late.