Triple Whammy

The US economy seems to be doing quite well at the moment, historically low unemployment, blowout durable goods orders and an upwardly revised 2019 GDP estimates by the IMF. And it seems that at least one Fed rate cut this year is now baked into the cake. Next, the Democrats do what they invariably do (they can’t help themselves) ... they negotiated with the White House fire-house federal spending increases next year in exchange for raising the debt ceiling for two years (until after the next presidential election). Do they not realize that this is fiscal stimulus in an election year? And this will do nothing but help the president’s economic braggadocios?

If China has any smarts, it will realize that fiscal stimulus on top of monetary stimulus will mean that it would be best to cut a trade deal with Trump before he gets re-elected for the best terms possible. And, if it does so capitulate, this will be a a triple economic whammy ... one which could easily drive US GNP growth to over 5% — almost an unimaginable number for the world’s biggest economy!

Now, dear reader do you understand why America’s stock market keeps making new highs day after day?

Headlines

Female House candidate withdraws over sexual harassment claim

Report: Lisa Bloom promised cash to Trump sexual harassment accusers

Trump to remove 'climate change' as a national security threat ...

Trump: 'It's a shame what's happened with the FBI'

Trump: [Roy] Moore should concede

Facebook just admitted that using Facebook can be bad for you

UNHAPPY KINGDOM: DisneyFox merger likely to cost 5.000-10.000 people jobs ...

Adam Schiff Twitter meltdown: Worries Russian probe will end too soon ...

Democrats want to know why Justice Department released FBI texts

Far right party to enter Austrian government after coalition deal

WH: Western Wall has to be part of Israel ...

Trump boom: NY Fed projects 4% [GNP] growth

China's Ghost Cities

This Spring, while on vacation in Croatia, I had some interesting conversations with a Sri Lankan international consultant. He told me some shocking news that I had never heard ... that China has built several "ghost cities" of large apartment buildings and factories without their utilities turned on ... capable of housing 7 to 8 million people. Since then, researching this subject, I have seen much larger estimates of 'ghost' housing capacities ... up to 30 million.

This, to me, is astounding news ... see: BBC Story. And this article suggests that the central planners in China had anticipated massive migration from rural areas to these new cities.

The obvious question is, Was this the only reason for such a waste of resources. Such ghost cities smack a lot like digging millions of holes and then filling them in. And I do wonder how much all this empty economic activity has contributed to this country's impressive GNP growth? My guess is that it added close to a trillion dollars ... ironically, about the size of Obama's stimulus program in 2009,

For some more views of these empty cities please go to: Business Insider Gallery.

The fellow who put me onto this phenomenon also told me that this year 10 million Chinese will be passengers on airlines ... and, by 2020, this number will grow to 50 million. Wow!

Rose-Colored Glasses

Yesterday President Obama released his budget … over two months late, but who’s counting?  The Senate and the House have already passed their budgets.  And, in typical Obama fashion, he is “leading from behind” or, maybe better phrased, “leading from his behind.”  Much of the left-leaning media is so impressed with the mere fact that he has done this rare feat … that they have given this document the benefit of the doubt on most of its lame assumptions. But this financial flight of fancy still grows our nation’s debt into the stratosphere … by almost $9 trillion over ten years (see: Breitbart Story).  And, in his patented “I don’t give a spit.” fashion, Obama even said that this budget doesn’t contain “a lot of smoke and mirrors” (see: Another Breitbart Story). Not a lot of smoke and mirrors?!? Wow!  Does anyone believe that it should contain any smoke and mirrors?

Senator Patty Murray was the architect of the Democrat's Senate budget which was seriously flawed by unrealistic GNP growth rate assumptions (see: Pattycake).  And Obama is following suit by also looking at the United States’ economic outlook through rose-colored glasses.  Even Politico points this flaw out in the following passage from its news blog: 

The faster the economy grows, the more taxes will be collected. At the same time, unemployment and low-income spending will decline. So good growth is a key to a better budget outlook. This administration projected growth of 3 percent in 2013, 3.6 percent in 2014 and more than 4 percent in 2015. Reality paints a different picture. Growth in 2012 was 2.2 percent and 2013 looks on track for another disappointing 2 percent. The gap between forecast and reality will not, however, stop another round of rosy assumptions.

To read more of this, see: Politico Story.  But, since the President’s budget was, apparently, not a serious policy document … but was, like most things he does, purely political, such Pollyanna-ish pronouncements were only meant for the Peanut Gallery (apparently the majority of U.S. voters) anyway.

The Fiscal Cliff

I’m taking a chance by opining on the threat of the looming fiscal cliff before the President’s press conference today, but what the hay. Such considerations have not stopped me before. Here goes.

I think that the best option might well be to go off the fiscal cliff. The reason being that our petulant President’s only proposed solution to our current fiscal problems is to raise the tax rates on those who make more than $250,000 per year. He has scrupulously avoided talking about spending cuts or entitlement reforms. It is blatantly clear that we cannot fix our monetary morass only with such a tax rate increase. And, if the Democrats run true to form, any promised spending reforms will never occur once the tax rate increases are approved. I admit it is dangerous … but only by accepting the pain of the fiscal cliff are we going to begin to address our government spending problems.

Yes, our free-fall off of the fiscal cliff will cause income and capital gains tax rates to go up on us all, but we will also get concomitant substantial government spending reductions. And yes, this will probably push us back into a recession, but it is also likely that tax rate increases on those earning more than $250,000 will also put the (albeit smaller) kibosh on our GNP growth. Besides, I strongly suspect that our legislature will quickly fix the more egregious of the spending cuts (such as for the Defense Department) with emergency appropriations. In a strange way, one might look at the fiscal cliff as a form of zero-base budgeting … to me, a good thing.

I also could accept Mitt Romney’s suggestion of a cap on personal income tax deductions and “loopholes” of say $35,000 … IF accompanied by meaningful government spending cuts. This would effectively raise federal revenues without the messy business of a total overhaul of the tax code … and all the lengthy political haggling that would go along with picking and choosing among which deductions to keep or which to axe. But simple solutions never seem to be favored by Washington insiders, so I am not too sanguine about this option. Ergo, grab your parachute and yell with me “Geronimo.”

Fishy

For those who read this blog site regularly it is clear why the unemployment rate in the recent Bureau of Labor Statistics (BLS) release “unexpectedly” dropped to 7.8%. Since this statistic has become so politically sensitive, the Chicago-style of political gamesmanship is to “fix” the number, not the problem. So last March, Obama broke a long tradition and named one of his political operatives to head this government agency (see: Funny Business). So shortly after this hack was confirmed, U.S. employment numbers were suddenly revised upwards by 453 thousand. Now, the September official BLS release shows a phenomenal one month increase in employment by 873 thousand (the biggest one-month jump ever, see: BLS Release and click on the HTML version of the A-1 table under Monthly Household Data). Wow!! This comes at the same time that second quarter GNP growth was revised downward to 1.3%. Realistically, this two things can’t happen simultaneously.

Watch the Obama administration and its stenographers in the Main Stream Media blare these phony unemployment rates from the roof-tops and in 18-point agate type … and demean those who question these shenanigans. This is extremely fishy and stinks up this election cycle even more. It is really unfortunate that our government now feels privileged to manipulate such statistics for political gain.