Bitcoin price today: gains to $120k, near record high on U.S. regulatory cheer
Let me be blunt. I do not see any way that the US economy can rebound back to its average yearly income growth of 5 percent after inflation from 1982 through to 2007. Remember coincident with that rapid growth in incomes, the value of all US stocks soared from $1 trillion at the end of 1982 to $22 trillion in 2007 - A 22-bagger. However, since the economy bottomed in 2009, nominal growth in wages and salaries has averaged about 3 percent per year, and that’s before, not after inflation. Yet, despite the current slow growth environment stock prices again are at record highs.
One way to get a real picture of the sorry state of the economy and its meager growth is by looking at the withheld income and employment taxes from the 135 million of us with jobs which flows into the US Treasury daily. It shows that the US economy is barely growing. After-tax incomes including capital gains and the like will be up by $300 billion this year. That is pretty meager results compared with the trillion dollars of new money created this year by the Federal Reserve and $800 billion in US government deficit spending.
Therefore given the realities as I see it, I am amazed by the financial community’s consensus that the US economy is in a sustainable recovery and therefore the Fed can taper off its $85 billion in monthly new money creation.
As I see it, the bulls’ evidence for a sustainably growing economy is first, there has to be a significant wealth effect as the stock market soars. Second, housing is back. Third, lots of jobs are being added. And fourth the deficit is shrinking because tax revenue is surging, both for the US government and the states, and fifth, therefore that must mean the underlying economy is improving.
All five points have some truth to them but lead to the wrong conclusion about the economy.
Yes, there is a wealth effect since the stock market is up by $2.5 trillion so far this year. Definitely high end retailing and NY condos are doing well. But that is not the US economy. Individuals are not playing here, so while the rich are getting richer, the wealth effect is only having a marginal impact on the total economy. And when stocks stop rising, the impact from a negative wealth impact is likely to be much worse.
Second, while housing is picking up, it is having only a limited impact on the overall economy. Foreclosed properties are clearing the market and is being acquired by investors. But for housing to rebound, there has to be a move up market. And for various reasons including a quarter of all mortgaged homes still underwater and many buyers still cannot qualify for a mortgage, there is no move up market. So yes, housing is better, but nowhere near as important as when hundreds of billions of dollars a year came out of housing in the mid 2000s.
The third item on the list is that the Bureau of Labor Statistics guesses that 300,000 new jobs were added in March and April. The BLS jobs number is just a guess based upon an incomplete survey of 150,000 employers. Those 300,000 new jobs over two months is way more than what tax collections say is possible, Once reality sets in about the true nature of the job market, the bulls will be very disappointed.
Fourth and fifth, the bulls who tout spikes in tax collections for the US and states like California as a sign of a real economic recovery are just wrong. As I said in prior videos, the boom in tax receipts is mostly due to late last year stock sales and bonus income to avoid 2013′s higher tax rates. That is bad news for California and other states with booming collections when reality sets in and receipts plunge.
Meanwhile Japan is the canary in the currency debasement coal mine. Japan is discovering that debasing its currency faster then the rest of the world could have a major downside, starting with Japanese Government Bond (JGBs) going down in price and up in yield. As JGBs have been declining in price the US government longer term bonds are also going down in price as the 10 year now yields over 2%.
I have been bullish since the start of this year, but worried about what will happen when reality shows up. It could just be that the decline in Japanese stock and bond prices despite massive money creation; combined with a decline in US government bonds is a warning sign that the smelly stuff, AKA reality, could be about to hit the fan.
Below you may find the video.
One way to get a real picture of the sorry state of the economy and its meager growth is by looking at the withheld income and employment taxes from the 135 million of us with jobs which flows into the US Treasury daily. It shows that the US economy is barely growing. After-tax incomes including capital gains and the like will be up by $300 billion this year. That is pretty meager results compared with the trillion dollars of new money created this year by the Federal Reserve and $800 billion in US government deficit spending.
Therefore given the realities as I see it, I am amazed by the financial community’s consensus that the US economy is in a sustainable recovery and therefore the Fed can taper off its $85 billion in monthly new money creation.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.
As I see it, the bulls’ evidence for a sustainably growing economy is first, there has to be a significant wealth effect as the stock market soars. Second, housing is back. Third, lots of jobs are being added. And fourth the deficit is shrinking because tax revenue is surging, both for the US government and the states, and fifth, therefore that must mean the underlying economy is improving.
All five points have some truth to them but lead to the wrong conclusion about the economy.
Yes, there is a wealth effect since the stock market is up by $2.5 trillion so far this year. Definitely high end retailing and NY condos are doing well. But that is not the US economy. Individuals are not playing here, so while the rich are getting richer, the wealth effect is only having a marginal impact on the total economy. And when stocks stop rising, the impact from a negative wealth impact is likely to be much worse.
Second, while housing is picking up, it is having only a limited impact on the overall economy. Foreclosed properties are clearing the market and is being acquired by investors. But for housing to rebound, there has to be a move up market. And for various reasons including a quarter of all mortgaged homes still underwater and many buyers still cannot qualify for a mortgage, there is no move up market. So yes, housing is better, but nowhere near as important as when hundreds of billions of dollars a year came out of housing in the mid 2000s.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.
The third item on the list is that the Bureau of Labor Statistics guesses that 300,000 new jobs were added in March and April. The BLS jobs number is just a guess based upon an incomplete survey of 150,000 employers. Those 300,000 new jobs over two months is way more than what tax collections say is possible, Once reality sets in about the true nature of the job market, the bulls will be very disappointed.
Fourth and fifth, the bulls who tout spikes in tax collections for the US and states like California as a sign of a real economic recovery are just wrong. As I said in prior videos, the boom in tax receipts is mostly due to late last year stock sales and bonus income to avoid 2013′s higher tax rates. That is bad news for California and other states with booming collections when reality sets in and receipts plunge.
Meanwhile Japan is the canary in the currency debasement coal mine. Japan is discovering that debasing its currency faster then the rest of the world could have a major downside, starting with Japanese Government Bond (JGBs) going down in price and up in yield. As JGBs have been declining in price the US government longer term bonds are also going down in price as the 10 year now yields over 2%.
I have been bullish since the start of this year, but worried about what will happen when reality shows up. It could just be that the decline in Japanese stock and bond prices despite massive money creation; combined with a decline in US government bonds is a warning sign that the smelly stuff, AKA reality, could be about to hit the fan.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.
Below you may find the video.
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