NEW YORK – A Bureau of Economic Analysis report released Wednesday by the Commerce Department indicated the U.S. economy could be entering a second dip after the 2008-2009 recession as U.S. Gross Domestic Product slowed to a disappointing annual rate of 0.1 percent growth in the first quarter of this year.
Still, the Dow Jones Industrial Average closed on Wednesday at a record high, a phenomenon WND has reported will likely continue as long as the Federal Reserve continues its Quantitative Easing policy under which it buys billions of dollars of U.S. government-generated debt every month.
Perversely, investors on Wall Street interpreted the bad GDP growth numbers as confirmation the underlying economy remains so weak that the Federal Reserve would not dare stop pumping dollars into the U.S. economy.
Almost immediately after the BEA reported the dire GDP growth numbers, the GOP jumped on the news, with House Speaker John Boehner’s office issuing a press statement charging the report proved the failure of Obamanomics. The House GOP leadership interpreted the unexpected low number as a reflection of the “real economic despair in the sixth year of the Obama administration.”
The report was made public as Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, announced a third hearing on the government and the poor. Ryan argued that the poverty rate is stuck at 15 percent, reflecting a failure of President Lyndon B. Johnson’s war on poverty declared in 1964 and continuing federal government spending on some 92 federal programs designed to combat poverty that amounted to approximately $800 billion in fiscal year 2012.
In what has to be regarded as unfortunate timing for the White House, the BEA report of barely positive economic growth in the first quarter was made public at the same time Judicial Watch provided records documenting the travel costs of the Obama first family and the Biden family. The costs have surpassed $40 million, with the Air Force reporting that two golf outings by President Obama this year cost $2.9 million.
The news was perhaps only encouraging to Republican candidates facing election for the House and Senate in November. Bad economic news likely will make the mid-term elections, typically difficult for the political party controlling the White House, even more difficult for the Obama administration. Democrats already are struggling to manage the news of polls showing prospective voters reacting negatively to a problematic and politically difficult Obamacare rollout.
The coming depression
Economist John Williams, author of the ShadowStats.com blog, has been warning that the economy since the 2008-2009 has not entered the type of economic recovery the Obama administration has boasted was under way.
“The official story of U.S. economic activity of the last seven or eight years – one of plunge, full recovery and new economic expansion in business activity – is a statistical illusion created by government statistical bureaus understating the pace of inflation in recent years,” Williams warned in a report entitled “Hyperinflation 2014 – Great Economic Tumble,” published on his website April 8.
“The year ahead will be an extraordinarily difficult time, with a confluence of already-intensifying crises and likely panics pummeling the moribund economy, roiling the markets, and destabilizing the financial and political systems.”
Williams puts much of the blame on the Federal Reserve’s continued policy of Quantitative Easing.
“With the federal government and Federal Reserve locked into their respective systematic-destructive fiscal and monetary policies, a related, continuing massive loss of global and domestic confidence in the U.S. dollar should lead to an outright dumping of the U.S. currency in the global markets, setting the initial stages of a hyperinflationary great depression,” he warned.
As one indicator of an economic turndown resuming, Williams points to the continued decline in existing-home sales.
“Except for a one-month bounce of 0.8 percent in December 2013, existing-home sales activity has been sliding since July 2013, with the March 2014 annualized sales pace of 4,590,000 down by 14.7 percent from the post-recession high of July 2013, and at the lowest level seen since July 2012,” he noted.
“The March 2014 sales level still was 36.9 percent below the July 2005 pre-recession peak in activity. As with the new-home sales series, existing-home sales activity never came close to recovering peak pre-recession activity and now the numbers are turning down again.”
In recent economic reports, Williams has analyzed at length the impact of free trade agreements that have driven millions of high-paying jobs offshore. The result has been a rapidly shrinking middle class, as the government tries to hide the real impact of unemployment by generously adjusting employment statistics to increase dramatically the proportion of previously employed workers who have simply dropped out of the labor force.
“Until income growth picks up substantially relative to inflation, and/or credit is flowing freely enough to boost willing consumption, there is no chance for sustained economic growth or economic recovery in the United States,” he continues to warn.
Williams’ predictions are dire: “The contraction of business activity so far in the extreme downside since 2006/2007 is the most severe and protracted since the first down-leg of the Great Depression in the 1930s. As the hyperinflation breaks and the regular domestic commerce become severely impaired, the downturn likely will evolve into the worst great depression in U.S. history.”
Dire economic straits for middle-class America
In recent days, headlines on the Drudge Report have been peppered with reports of a severe decline in the U.S. middle class.
On Monday, CNSNews.com reported that in 20 percent of U.S. families, not one member of the family was employed.
On Tuesday, Bloomberg.com reported the homeownership rate in the U.S. declined to the lowest point since 1995 as rising property prices and mortgage rates held back demand.
On Wednesday, the New York Times reported nearly half of New Yorkers are struggling just to get by economically.
Perhaps the statistic that most describes the decline of the middle class under Obama economics is the increase in the number of American households on food stamps. The U.S. Department of Agriculture reported in January that in the average month of fiscal year 2013 there were 23,052,388 households receiving food stamps, representing 20 percent of all American households.