Bill Bonner, reckoning today from Poitou, France...
We marvel…we wonder…What is wrong with these people? We refer to the staff at Newsweek …who came out with this insipid headline story:
Biden Saved the Economy and Launched a New Age of Prosperity. Why Isn't He Getting Any Credit?
The current economy is in terrific shape—especially compared to what most economists expected. Every day, confidence in a soft landing increases, and even the Fed seems convinced, despite an unprecedented rapid rise in interest rates.
…current GDP growth of 2.4 percent, well ahead of expectations. Inflation is at 3 percent, down from 10 percent just last year. Unemployment is at a 54-year low, at 3.7 percent, despite predictions that unemployment would substantially increase. Wage growth has been particularly strong at around 4 percent, and most commodity prices are down some 50 percent, with some down considerably more.
Saved the economy? New ages of prosperity?
Why doesn’t he get credit? Why not give Harry Truman credit for the urban renewal program in Nagasaki after 1945? Why not give Chief Sitting Bull credit for reducing payroll costs in the 7th Cavalry?
Plague of the Black Debt
Wage growth is not ‘particularly strong’ at all. Because there is none. Adjust the 4% growth to inflation, using the ‘core’ measure, and you get real wage growth at MINUS 0.8%. And how about that 2.4% GDP growth? Strip out the feds’ transfer payments and boondoggles, and growth flattens out. Because what Biden did was nothing more than continue the bonehead policies of his predecessor: stimmies to the voters, subsidies to crony industries, gifts to Zelensky et al…and enough weapons to keep the killing machine in gear.
This is ‘fiscal inflation.’ It helps delay a correction…for a while. But it gives us a Banana Republic deficit at 8% of GDP…national debt accumulating at $5 billion per day…rising bond yields…and an upcoming headache that is going to be one for the record books. All of this debt will eventually have to be rolled over at higher rates…and inflated away.
Thirty years ago, we published a small booklet, written by our friend, James Dale Davidson, entitled ‘Plague of Black Debt.’ We warned that US debt was getting out of control.
Back then, 1993, US federal debt was just over $4 trillion. There was still time to bring it down. And for a while, in the late ‘90s, it actually did go down as the Clinton Administration ran a few serendipitous surpluses. But then, along came George W. Bush with his ‘War on Terror’…and the debt pile grew quickly.
In 2005, with Addison Wiggin, we wrote a book, ‘Empire of Debt.’ Our theme was that the attempt to bring the whole world under the US thumb – funded by borrowing money – would lead to big trouble. The accumulated debt would end up making us weaker, not stronger. By then, US debt had doubled to $8 trillion.
And now, empire spending – including money for soldiers, spooks, the World Bank and embassies, et al – has risen to $1.5 trillion PER YEAR. Total US government debt is nearly $33 trillion. And you can forget about stopping this runaway train…there is no plausible way to put on the brakes. It’s ‘inflate or die.’ And nobody wants to die.
Looking back, maybe there never was a way to stop it.
Fish gotta swim, birds gotta fly…and empires gotta rise and fall. Unseen, unheard, unhinged…deep, megapolitical currents drag us all along.
Stuff happens, in other words…but not always what you want or expect.
In US history, 1971 seems to have been some sort of fulcrum. Before then, life in the USA improved for most people. After then, it only improved, significantly, for the people on top. Wage gains ceased. Debt rose. GDP growth slowed. Inequality increased. Everything seemed to get worse…young people even began moving back in with their parents, stopped getting married and had fewer children.
“The American economy is rigged,” writes Nobel-winning economist Joseph Stiglitz. He’s right about that, but dead wrong about how it works.
He shows the usual evidence. In the period running up to the 70s, the top 1% got about 8% of national income. Today, it gets 20%. Incomes for the top 1% have roughly quadrupled since 1970. For the 90% of the middle class, they have been stagnant. And for those with only a high school diploma or less, real incomes have fallen.
Generational Dividing Lines
If you were born in the 1940s, you were almost certain to earn more than your parents. But as the years went by, the Industrial Revolution became much less potent and the feds gummed up the economy. If you were born after 1970, you had barely even odds of earning more than your parents.
What caused these things is a matter of much debate and speculation. So far, we’ve presented two hypotheses.
The phony dollar. The new, post-1971 dollar was basically fraudulent. It was a dollar that you no longer had to get by providing goods and services. Economic power shifted from people who created real wealth in the Main Street economy to the financialized, fake wealth of Wall Street. Asset prices soared. Output lagged. The rich used free money from the Fed to get richer. But most people got nothing.
The fading Industrial Revolution. By 1971, the immense power in fossil fuels was reaching its point of declining marginal utility. The big gains – the ‘life-altering innovations’ – were in the past. GDP growth slowed. Incomes stagnated.
Stiglitz ignores both of them. He’s got another idea…and another crackpot ‘solution.’
Joel’s Note: As readers can plainly see, through their rose garden-colored glasses, Bidenomics has arrived to save us all…
…from sanity, rationality and the consequences of our actions. Yippee!
Sure, the economy is humming… or at least, so claim the Pollyanna press. But wait… Here’s Dan Denning, BPR’s macro-analyst, noticing some inconvenient facts from his bolthole up in Wyoming.
“If things were so good,” reasons Dan, “credit card balances wouldn't have finally gone over $1 trillion in the second quarter.”
Here’s the story, from the New York Fed’s Report on Household Debt and Credit:
Household Debt Rises to $17.06 Trillion Led by Credit Card Balances
Total household debt rose by $16 billion to reach $17.06 trillion in the second quarter of 2023, according to the latest Quarterly Report on Household Debt and Credit. Credit card balances saw brisk growth, rising by $45 billion to a series high of $1.03 trillion. Other balances, which include retail credit cards and other consumer loans, and auto loans increased by $15 billion and $20 billion, respectively. Student loan balances fell by $35 billion to reach $1.57 trillion, while mortgage balances were largely unchanged at $12.01 trillion.
Where does that fit into The Message™ as delivered by our toady press/elite mouthpieces? In short, it doesn’t… which is why this message will self-destruct in 5… 4… 3…
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Bill, this is some mighty fine writing: "Why not give Harry Truman credit for the urban renewal program in Nagasaki after 1945? Why not give Chief Sitting Bull credit for reducing payroll costs in the 7th Cavalry?" Always informative and always entertaining :-)
"Because what Biden did was nothing more than continue the bonehead policies of his predecessor: stimmies to the voters, subsidies to crony industries, gifts to Zelensky et al…and enough weapons to keep the killing machine in gear." -- Bill in Today's Missive
I hate to nitpick our fearless leader, but the gifts to Zelensky et al and the weapons to Ukraine were not continued policies of Biden's predecessor (Russia didn't invade Ukraine until Biden was in office over a year). In fact, it could be argued that Biden's predecessor's policies kept Putin out of Ukraine.
Bill, this is some mighty fine writing: "Why not give Harry Truman credit for the urban renewal program in Nagasaki after 1945? Why not give Chief Sitting Bull credit for reducing payroll costs in the 7th Cavalry?" Always informative and always entertaining :-)
"Because what Biden did was nothing more than continue the bonehead policies of his predecessor: stimmies to the voters, subsidies to crony industries, gifts to Zelensky et al…and enough weapons to keep the killing machine in gear." -- Bill in Today's Missive
I hate to nitpick our fearless leader, but the gifts to Zelensky et al and the weapons to Ukraine were not continued policies of Biden's predecessor (Russia didn't invade Ukraine until Biden was in office over a year). In fact, it could be argued that Biden's predecessor's policies kept Putin out of Ukraine.