By Mike Whitney
It’s amazing how Obama was able to dupe the American people into believing that the weakest expansion in the postwar era, was an “economic recovery.” Frankly, it boggles the mind.
Think about it for a minute: Productivity, business investment, personal consumption, inflation and growth have all been either sputtering-along at half speed or at historic lows for the entire period, and yet, President Flimflam has been out taking bows and high-fiving for his stellar performance as premier steward of the world’s biggest economy. It’s ridiculous. The whole storyline is completely fake.
So let’s settle this once and for all. The economic machinations that transpired under Obama cannot be accurately called a ‘recovery’, which is merely the public relations handle he used to conceal what was really going on below the surface.
And what was going on below the surface?
Why structural adjustment of course. The economy was being rejiggered in a way that deliberately kept growth weak (by withholding fiscal stimulus) in order reduce upward pressure on wages that would have pushed inflation higher forcing the Fed to raise rates. That may sound complicated, but it’s actually a very simple and straightforward way to keep inflation at bay.
But why would Obama deliberately want to slow growth merely to keep inflation low?
It’s obvious, isn’t it? Because if inflation began to rise, then the Fed would be forced to raise rates and stop shoveling trillions of dollars to the big Wall Street investment banks which, by the way, happened to be drowning in red ink at the time. In other words, the economy was deliberately strangled in order to save the banks. But then you probably knew that already, didn’t you?
Tell me you haven’t noticed how all the money has been flowing upwards for the last eight years while the economy has languished on life support? Tell you haven’t noticed how the chasm between rich and poor has only gotten wider under Obama?
Do you seriously think it was all an accident? Do you really think that physically stuffing the coffers of banks with truckloads of cash behind the silly Madison Avenue-coined moniker “Quantitative Easing” was supposed to trigger more lending, boost hiring, and stimulate growth??
C’mon now, let’s be serious. The whole idea is preposterous. We the People have been corn-holed bigtime, that’s what really happened. There’s no other way to put it.
Why do I bring this up now?
Because on Friday the Commerce Department released its report on 4th quarter GDP, so now we can evaluate Obama’s economic record en toto and put the whole matter to rest. The new data essentially cuts through the bullshit and allows us to see what a complete catastrophe President Snake-oil really was. Here’s a clip from an article in the Wall Street Journal:
“The U.S. ended 2016 on a familiar trajectory of roughly 2% economic growth, the lackluster trend that has prevailed through most of the current expansion… Gross domestic product, a broad measure of the goods and services produced across the economy, expanded at an inflation and seasonally adjusted annual rate of 1.9% in the fourth quarter…… That has made this the slowest expansion since World War II.”
(Economy Returns to Lackluster Growth, Wall Street Journal)
This is the flaccid, underperforming, pathetically-anemic economy about which Obama has been doing handstands and cartwheels for the last eight years. What a joke. No president in modern times has ever squeezed so many accolades out of– what amounts to –a complete failure. Here’s more from the Journal:
“So much for that economic “boom” that President Obama was supposed to have left his successor. That has been the spin among Democrats and progressive economists, but Friday’s GDP report for the fourth quarter provided another in eight years of reality checks on the Obama economic record…
Growth for all of 2016 clocked in at 1.6%, the slowest since 2011 and down from 2.6% in 2015. That marks the 11th consecutive year that GDP growth failed to reach 3%, the longest period since the Bureau of Economic Analysis began reporting the figure. The fourth quarter also rings out the Obama era with an average annual growth rate of 1.8%, which is right down there with George W. Bush for the lowest among modern Presidents.
…You have to work hard to suppress growth after a deep downturn… (Obama) achieved the remarkable feat of slower growth and more inequality.” (About that Obama “Boom, Wall Street Journal)
Sounds pretty grim, eh? But we haven’t even gotten to the punchline yet. The real kicker is the fact that, had it not been for swelling inventories– that is, the excessive and unwanted growth in accumulated, cobweb-strewn widgets piling up to the ceiling in warehouses across the country– forth quarter GDP would have crawled in at a measly .9%. In other words, Obama’ great recovery would have been stretched out stiffly on the emergency room gurney with a sheet over its face before being rushed off to hastily to the nearest belly-puncher. (Mortician)
This is the crapola economy Obama is now passing off to Donald Trump who promises to strengthen growth by cutting taxes, boosting fiscal stimulus and purging all those onerous regulations that protect the public from increasingly-frequent financial meltdowns. Trump figures that all those niggling rules just get in the way of good old profitmaking. (Where have you heard that before?)
In any event, Trump promises to lift GDP to a mighty 4% by spending $1 trillion rebuilding America’s dilapidated bridges, roads and infrastructure. Regrettably, neither the Fed nor the Senate are prepared to support his plan. “No Growth” Janet Yellen has already indicated that –at full employment with inflation gradually rising– she sees no need for additional stimulus which could lead to “overheating”, while Senate Majority leader Mitch McConnell has given the spending strategy a big thumbs down unless the plan is “revenue neutral” which is a sobriquet for deep cutbacks in Medicare and Social Security. If McConnell doesn’t get his blood money, Trump won’t get his stimulus, it’s as simple as that.
So, it’s gridlock once again, right?
Right. But why would Yellen and McConnell want slower growth when a little splash of stimulus could rev up activity, boost business spending, turbo-charge consumer spending, and get the economy sprinting again? Why?
Because the basic wealth transfer mechanism is different now. Fatcat CEOs no longer make their bones by scraping the gains off worker productivity. Those days are over. The way they beef up profits now is buy hustling cash from the bond market that they pump into their own shares sending stocks into the stratosphere. That allows them to rake off hefty sums from their executive compensation packages while cheery shareholders walk away with a bundle. That’s how the game is played now. Ripping off workers is passe’ while financial engineering is all the rage.
But like we pointed out earlier, the game can only be played as long as inflation is kept in check. (so the Fed can keep interest rates low) When inflation takes off, the Fed has to raise rates, which means CEOs can’t get hold of all that cheap cash floating around the bond market to buyback their own shares. When that happens, the whole scam goes kaput.
Bottom line: Neither Yellen nor McConnell can allow Trump to kickstart the economy, because stronger growth puts upward pressure on wages which lifts inflation and pushes up interest rates. Higher rates are the death knell for cheap money which is the secret ingredient that keeps the nation’s wealth flowing upwards to the glorious 1 percent. That’s the whole deal in a nutshell.