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What Goes Down Must Come Up

After Wednesday’s brutal day on America’s major stock markets President Donald can no longer brag about their record highs, but if he wants to attempt a complicated and counter-intuitive argument he can claim some credit for the rosy economic conditions that have caused the recent swoon.
The markets tanked because the Federal Reserve Board now intends to slightly raise the artificially low interest rates that fueled the markets’ record run, which is because by now they’ve successfully brought the economy to below full employment and a potential 4 percent growth rate in the gross domestic product, and for now it’s more worried about an inflation rate that’s slightly outpacing the long-awaited wage increases that have lately occurred. According to the perverse logic of the stock markets, good news is bad news, just as back when high unemployment and low GDP growth were bringing interest rates down and raising the indices up bad news was good news.
All of this damnably good news started shortly after the big financial meltdown of ’08, which was caused by the subprime mortgage social engineering of President Bill Clinton’s administration but came to fruition in the final days of President George W. Bush’s administration. Bush and most of the Democrats and Republicans in Congress — including both both of the party’s presidential nominees — responded with a big bailout of some major banks that annoyed people on both the left and the right, and the Fed started printing money at a rate that alarmed any conservative old enough to remember the hyper-inflation of the ’70s. In retrospect, though, the center-left and center-right compromise seems to have more or less worked.
The economy was already officially out of recession by the time President Barack Obama was elected by a scared-to-death electorate and passed a pork-laden “stimulus package” through the overwhelming Democratic majorities in Congress, and after that a historically slow recovery slogged along on the easy money the Fed was printing. We’re still convinced that Obama’s anti-business regulatory and tax policies slowed the recovery, and that only the Fed’s foolhardy money-printing sustained it, but after a scared-to-death electorate elected a Republican majority in the House of Representatives in the “tea party” wave of ’10 there were no more “stimulus packages” or other major interferences and thus things improved slightly. As much as we still disdain Obama-nomics and hate to give the guy credit for anything, we have to admit that during the last two years of Obama’s presidency the economy was on a clearly upward path.
By the time a scared-to-death-of-something-or-another electorate gave an electoral majority to Trump, the unemployment rate was a respectable 4.8 percent and the GDP was growing at a not-great-but-not-bad 3 percentage points or so. As much as we disdain Trump’s trade wars and attempts to restore the coal-driven and low-tech economy of the ’50s, and as much as we hate to give the guy credit for anything, we also have to admit that economy has been on pretty much the same upward trajectory ever since Trump’s inaugural speech promise that “The American carnage ends right here, right now.” Trump’s exceedingly business-friendly regulatory and tax policies have no doubt helped, and his stupid trade wars and economic nostalgia haven’t yet hurt much, and by now the economy is rolling along at a rate we can’t blame the Fed for applying some slight pressure to the brakes.
Trump is already grousing about it, though, as he’d much rather be bragging about record stock market highs and new land speed records in economic growth and how nobody has ever seen anything like it. As much as we hate to give the guy credit for anything, we have to admit it’s another brilliant political ploy. If your stocks are down it’s because of that damned fellow who’s Chairman of the almighty Fed, that quintessentially quasi-governmental institution that actually runs everything according to all the leading “deep state” conspiracies since the days of President Andrew Jackson, and has nothing to do with Trump, who is surely an innocent bystander and fellow victim.
Trump did in fact appoint Jerome Powell as the chairman of the Fed, and Powell was confirmed by a Republican Senate, but so was Attorney General Jeff Sessions appointed by Trump and confirmed by a Republican Senate, and for now both are suspected conspirators in a “deep state” plots to overthrow Trump. Those smarty-pants know-it-alls at the Fed have a darned convincing case for raising the prime interest rate to a few notches lower than historical norms, tough, and if it keeps the economy chugging along at a optimal if not the-greatest-anyone’s -seen rate without inflation we’re sure Trump will be glad to claim the credit, and boast about how great it could have been if only he had been in charge. At this point the labor market is tight enough that further economic growth will require an increase in immigration, and Trump should also be grateful if the Fed spares him that dilemma.
These days our only interest in the stock market is in the long run, and over that dreary amount of time it’s survived the Great Depression and Stagflation and the Dot.com and subprime bubbles, and it’s even survived Obama and we figure it will probably survive Trump. We give some of the credit to those smarty-pants know-it-alls at the Fed, but most of it to all those anonymous schmucks who get up every morning and go to some office or factory or shopping mall and make the decisions and do the work that keeps our still mostly-free economy slogging along through good times as well as bad times.

— Bud Norman

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Something to Crow About

The latest official economic reports were released last week, and all the big news media began singing “Happy Days Are Here Again.” There was enough hoopla to make one forget about Obamacare and Iranian nukes, if not the government shutdown and sequester budget cuts that were supposed to cause economic catastrophe.
The “headline numbers” did sound good, with the third quarter’s gross domestic product increasing by a respectable 3.6 percent and the unemployment rate ticking down to five-year-low of 7 percent, and most of the news stories were content to leave it at that. Those obsessively curious sorts who read past the headlines were likely less impressed, however, as the underlying numbers don’t show the economy has stopped being lousy.
Although the jobs report brings good news for the 203,000 Americans who found work last month, there are still 1.1 million fewer Americans working than there were when the recession started in 2008, and 3.6 million fewer with full time jobs than in 2007. While the unemployment rate might have dropped, the more telling employment rate — the percentage of the country’s potential workers who are employed — is still stuck at November 2009’s rate of 58.6 percent, and at the current rate that is being celebrated by the media it will take another five years to get back to pre-recession levels. Also worth noting is that most of the new jobs were in the public sector, which is a mixed blessing at best and not a sign of robust private sector growth, and that the record numbers of long-term unemployed seem to have found little relief.
That supposedly surging growth in the GDP also looks less reassuring on closer inspection. The report reveals that private businesses increased their inventories by $116.5 billion to account for 1.68 percent of the increase, and if this is true the most likely explanation is that the goods customers aren’t buying are starting to pile up on the shelves. Some smart people suspect that it isn’t true, and that the government has overstated the growth until the less-watched revisions are released in some future and perhaps more friendly news cycle, and in the wake of revelations that the pre-election unemployment numbers were fudged such conspiracy theories no longer seem at all far-fetched.
Still, the numbers are good enough that the president and his remaining loyal supporters in the news media will shout them loudly enough to be heard over all the grumbling about Obamacare. They’ll boast that the progress comes in spite of those stingy Republicans and their sequestering and shutting-down ways, ignoring the possibility that even such a feeble amount of fiscal restraint by assuring jittery investors that the nation’s bankruptcy might come a little later rather than a little sooner, and argue that it proves the need for ever more “investments” in phony-baloney “green energy” and community-organizing scams and infrastructure projects that never seem to be shovel-ready. After five years of slow growth and high unemployment and rapidly expanded government this will be a hard sell, but it beats talking about the rest of news.

— Bud Norman