We've been accused of being Pollyanna-ish in our views,
which tend toward the optimistic when it comes to the flexible, naturally
buoyant U.S. economy.
And, to be sure, the stronger employment growth — payroll
jobs increased an average 230,000 a month last year — and the decline of the
unemployment rate to 5% are both positive signs.
But not everything is going so well — starting with the
stock market. The S&P 500 has skidded 8% since Jan. 1, its worst start
ever. As USA Today reckons, $2.3 trillion in shareholder wealth has been wiped
out — a huge hit that will be felt across the economy.
Even before the market decline, however, clouds were
gathering. Retail sales fell 0.1% in December and were up just 2.2% year over
year. And Friday's announcement by Wal-Mart that it's closing 269 stores — 154
of them in the U.S. — can only be bad news.
Then there's China. Its stock market index has plummeted
more than 40% since the middle of 2014 as the nation's once-booming export- and
investment-driven economy goes bust. Around the world, factories and businesses
built to satisfy China's insatiable demand for raw materials and capital goods
have fallen silent.
For the U.S., that was a lot of lost momentum going into the
new year.
The Atlanta Fed's widely followed gauge of current economic
output suggests fourth-quarter annualized GDP growth was just 0.8% or so —
within spittin' distance of recession territory.
So, yes, as we start 2016, a recession is a real possibility.
Add to that the likelihood of three or four Fed rate hikes this year, and the
economy's brakes will be on.
What do we do? The standard Keynesian answer is to boost
consumer spending by redistributing money from the 1% to the middle class and
by more government "stimulus." After all, consumers are two-thirds of
all spending. So they need to be stimulated for the economy to grow, right?
Wrong. This would be a huge mistake — as it was in 2010.
What really ails the economy right now is a lack of business investment. That's
real stimulus. Investment creates consumption by making products to consume,
and the income with which to buy them.
Unfortunately, orders for nondefense capital goods, a proxy
for business investment, have fallen 11 straight months, averaging a 3.4%
year-over-year decline every month in 2015 — a sign of extraordinary weakness.
How can this be after years of record-low interest rates and
stock market gains?
Obamanomics has created the most anti-business environment
in postwar history. Businesses face a record onslaught of regulation, a
world-high 35% tax rate, higher minimum wages, hostile legislators who
routinely demonize profits and success, an erratic Fed and growing uncertainty
about the U.S.' political future. Why invest?
The bigger point is, recessions don't just happen; they're
made. And it looks like we're making one now.
Read More At Investor's Business Daily:
http://news.investors.com/ibd-editorials/011516-790183-us-economy-loses-momentum-going-into-2016.htm#ixzz3xVPHamYJ
Follow us: @IBDinvestors on Twitter | InvestorsBusinessDaily
on Facebook
No comments:
Post a Comment