All Things Political: U.S. economic future – murky at best

0
72

First, the good news — the price of energy this winter is at a multiyear low, not seen since the beginning of the turn of this century. 

Now the bad news — because oil prices are so low the banking industry has been negatively affected by the many energy companies who are struggling and defaulting on their loans. 

This is just one of many factors negatively impacting the national economy.

If you’re a Bernie Sanders fan, your first thought is “The banks deserve it! Wall Street has been screwing us for years!” 

The only problem is when banks get hurt in one sector, it affects lending in other parts of the economy. 

In banking, there will be a coming reluctance to loan money to riskier segments of the economy, like small business, which in turn will hurt the economy as a whole. 

Banks will also be reticent to provide mortgages to homeowners at low interest rates, which will negatively affect housing and construction industries.

On a global scale, low energy prices destabilize foreign economies that rely on crude oil and natural gas to balance their budgets. 

Russia, Brazil and most Middle Eastern countries are literally screeching to a halt because they don’t have the petro dollars to balance their budgets. This will affect U.S. exports because there won’t be excess financial capacity overseas to purchase American made goods.

In the last few years, many countries in the European Union and Japan have central banks pushing negative interest rates. 

This means instead of earning interest on savings, it will actually cost customers money, to keep money in the bank. 

This poor fiscal policy is trying to encourage consumers and businesses to spend today to stimulate their local economies. The only problem, it isn’t working.  Hopefully, central banks throughout the world will wake up soon, and realize they can’t control their economies with magical fiscal policy. 

China is just beginning to realize this and when their financial problems fully come to light it will be sobering for all. 

Like it or not, when China sneezes the rest of the world catches its cold.

In other news, United States national debt just topped $19 trillion, and nobody seemed to notice.  

What is the plan to pay this back? 

None of the Presidential debates on either side of the aisle has addressed this frighteningly important issue. Many states and local municipalities are also hopelessly in debt, tightening their budgets and cutting back on capital improvements. 

Look no further than our beloved Nassau County to see evidence of this. Go to http://www.usdebtclock.org/ to see a host of America’s financial deficits neatly summarized.

Foreign countries also have structural financial imbalances, and are running up their debts without a plan to pay them back. 

They have the same fiscal problems that we do, and the composite size of all these deficit numbers is incomprehensible. Feeble foreign economic growth and ballooning deficits adversely affect America, because all economies in the 21st century are interconnected.

But, aren’t we being told the U.S. economy is humming along with unemployment under 5 percent? 

That’s a great headline. Unfortunately, it isn’t true. 

The labor participation rate, which measures the percentage of people in the workforce, is down below 63 percent. 

It averaged over 66 percent for decades, before the great recession in 2008. 

Factor that in, and unemployment is really around 8 percent.  Wages, pretty much flat for the last several years, indicate many are underemployed, working longer hours for less pay. 

If unemployment were really at 5 percent, wages would be rising; and, inflation would follow.  That’s just not the case. 

The Consumer Price Index for last year was close to zero. 

In fact, we shouldn’t want inflation. How then would the federal government be able to pay back or refinance the interest on $19 trillion in debt? 

For every 1 percent increase in interest rates, the cost to refinance the national debt goes up $190 billion per year.

So how do we begin to address the overwhelming burden of our vulnerable economy? 

Here’s one solution. Stop corruption. 

Billions of dollars in America are wasted through illicit contracts, back room self-dealings and outright theft. 

All of which has a corrosive and destabilizing effect on us all. Open any newspaper on any given day, and you will read about corruption. Long Island, New York State and our national government are filled with corruption. And if you think corruption is bad here, it pales in comparison to overseas. 

Corruption has been conservatively been estimated at over a $1 trillion worldwide.  The best way to fight it is to decide not to tolerate it.

I dream of a day with more optimistic financial headlines, like “U.S. Economy – Back in Business” and we’re truly able to believe it. 

Unfortunately, I just don’t see it.

NO COMMENTS

LEAVE A REPLY