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 Richmans' Trade and Taxes Blog

Are We About to Experience the Obama Recession?
Raymond Richman, 1/2/2014

In the week ending December 28, 2013, the advance number of actual initial claims for unemployment insurance, unadjusted, totaled 443,513, an increase of 25,875 from the previous week. The Department of Labor and the media reported a “seasonally adjusted” decrease of 2,000 and 399,000 claims. As we have reported in this site a number of times, we know no reason for a seasonal adjustment of weekly data. The actual number of claims totaled was over 100,000 more than the “seasonally adjusted” figure and is a cause for alarm. It is a harbinger of bad economic news.

Taking into consideration 1) that the Gross Domestic Product increase reported in the fourth quarter showed a big  increase in inventories that will have to be reduced in the following quarter, the usual means for making the reduction being to reduce production, plus 2) the huge burden that Obamacare will impose on the middle class–the huge increase in monthly health costs imposed by Obamacare is equivalent to a huge increase in income taxes on the middle class, 3) the prospect that the Federal Reserve Board will reduce  the rate of money creation (called "tapering", and 4) an expected bursting of the stock market bubble generated by the Fed’s keeping interest rates at an artificially low level, it is not unreasonable to expect a serious economic shock to the economy, not unreasonable to expect another recession.

 Nearly all commentators have been repeating the administration line that the economy is improving. Sure the stock markets have boomed as a result of the low interest rates and the influx of foreign capital that bid up stock prices.  What real  improvement there has been has been due to the expansion of oil and gas drilling from our huge shale deposits, opposed by Obamaa to appease his enviro-fanatic supporters.  The President has still not authorized the pipe line to be built from Canada to the Gulf of Mexico and forbids drilling on federal land. We have been arguing since 2010 that the administration's counter-cyclical policy has succeeded only in economic stagnation. Only the wealthiest classes have benefited while the majority of Americans have had their incomes reduced.

The administration has done nothing about the chronic trade deficits we have been experiencing which has cost us millions of jobs, and nothing about the out-sourcing of factories and jobs. It has been a dismal record and we believe it will only get worse.