The economy of Bush/Cheney failed because :-
It was built on vaporware - a massive increase in the money supply which went into financial speculation not the real economy. It greatly exacerbated the housing bubble and subsequent size of the crash.
Massive reckless spending - most of it on the military and "national security" - i.e. spying on it's own people.
Bush lowered taxes on the very rich quite a lot, but relatively not on the middle class or the poor very much.
Bush/Cheney have the worst record for job creation since the Great Depression in the 1930's (see 2).
Over Bush/Cheney's term (January 2001 to December 2008) only 1 million jobs were created, but there were 2 million MORE non productive government jobs.
If we take account of the fall out from the failed Bush/Cheney years and the housing market crash (as we should) - Bush/Cheney LOST 2 million jobs Jan 2001 to Dec 2009 and LOST 4 million private sector jobs.
Total real wages under Bush Cheney saw a MASSIVE decline.
As did real disposable incomes.
The only reason the economy stayed afloat as long as it did, was because of large scale equity withdrawals from the housing bubble, which made the subsequent bursting even worse.
The housing bubble was greatly exacerbated by massive Federal Reserve pumping and loose monetary policy.
The Bush/Cheney economy was built purely on an increase in DEBT.
Bush/Cheney didn't create ANY jobs - in fact they LOST 4 million private sector jobs.
Bush/Cheney, with the active connivance of the Federal Reserve private bank, was a total disaster for the American economy and America in general.
Under Obama :-
The Federal Reserve has just increased the amount that it is printing from $500bn to $1tn a year.
This too is vaporware and is not going into the real economy (just like Bush/Cheney).
This too is being used for financial speculation - the big banks are hoarding it (they already have $2tn of excess reserves) and speculating with it, which is pushing up the stock market and the prices of basic commodities like food and gas (see 4).
This money printing by the Federal Reserve is actively harming the economy by LOWERING the disposable incomes of ordinary people, which in turn lowers GDP growth and will cause higher levels of unemployment in the future.
This too is vaporware and is not going into the real economy (just like Bush/Cheney).
This too is being used for financial speculation - the big banks are hoarding it (they already have $2tn of excess reserves) and speculating with it, which is pushing up the stock market and the prices of basic commodities like food and gas (see 4).
This money printing by the Federal Reserve is actively harming the economy by LOWERING the disposable incomes of ordinary people, which in turn lowers GDP growth and will cause higher levels of unemployment in the future.
The Fiscal Cliff deal just actively harmed the economy by handing out a massive $200bn tax hike on the middle class and below, thus lowering disposable incomes by the same amount.
There is still massive reckless spending and massive amounts of government waste.
Obama started out spending much more than Bush/Cheney because of the bail outs and the"shovel ready" job "creation" projects that weren't shovel ready and didn't create ANY jobs.
Obama is now spending about $100bn a year less than Bush did in 2007 - wow - sic!
Corporate Welfare has now reached over $1.3tn a year - ALL of which was retained in the Fiscal Cliff deal and ALL of it at OBAMA's insistence (not the GOP who would of cut a trivial $10bn or so).
N.B. Obama chose to bail out the big banks at 100c on the dollar in the AIG bail out. AIG could only afford to pay out 5c on the dollar or less.)
The CBO are projecting a deficit for 2013 of just under $900bn.
But they will turn out to be higher because of the economic slowdown in 2013.
But they will turn out to be higher because of the economic slowdown in 2013.
There are still 3 million less jobs in the American economy than there were at the end of 2007.
Even worse than this, we are seeing a continuation of the trend under Bush where well paid full time jobs are swapped for lower paid, part time and minimum wage jobs.
Deficits are higher under Obama than for Bush in 2007, because tax revenues are lower - there are fewer well paying jobs.
TOTAL WAGES are still massively declining under Barack Obama and the situation is about to get a lot worse.
Even worse than this, we are seeing a continuation of the trend under Bush where well paid full time jobs are swapped for lower paid, part time and minimum wage jobs.
Deficits are higher under Obama than for Bush in 2007, because tax revenues are lower - there are fewer well paying jobs.
TOTAL WAGES are still massively declining under Barack Obama and the situation is about to get a lot worse.
Taking the February jobs report, total wages declined by about $3.5bn just in February - an annualized rate of $42bn which is strongly recessionary.
459,000 mostly low paid part time jobs were created in February.
289,000 much better paid full time jobs were lost in February. See 5.
On top of the decline in Total Wages, we have higher rates of inflation in basic necessities like food and gas. Average gas prices at the pump just hit an all time record for February and there are reports of $4 gas in California.
Walmart's sales for February onwards were reported as "dire" by one of their senior managers as a result of the combination of all the above factors.
Personal incomes fell by a massive $505bn in January and personal expenditures rose by $18bn in January. See 6.
While the fall in personal incomes will have been exaggerated by the last minute political shenanigans over the Fiscal Cliff deal in early January, January's figures still point to what is going to become a substantial downward trend.
Under Obama Total Wages and disposable incomes are falling dramatically at an even steeper rate than they did under Bush/Cheney.
We are about to see the introduction of Obamacare which will be a massive drag on the US economy. (see 7)
It is the equivalent of a 3.8% tax hike on the middle class. But costs are forever increasing so it will no doubt turn out to be more.
The cost of Healthcare is also about to skyrocket (the IRS are predicting that basic minimum Healthcare insurance will cost $20,000 in 2016).
The Healthcare lobby have just announced that it will rise even more - they full intend to pass on IRS fees on to the consumer.
We are already starting to see some of the adverse effects of the introduction of Obamacare.
Businesses have already started raising their prices to cover their expected increases in costs.
Obamacare will raise the price of just about everything and increase overall cpi fairly significantly.
Obamacare will MASSIVELY LOWER the disposable incomes of ordinary people (that is available to spend on everything else except Healthcare). Thus deepening the coming recession.
459,000 mostly low paid part time jobs were created in February.
289,000 much better paid full time jobs were lost in February. See 5.
On top of the decline in Total Wages, we have higher rates of inflation in basic necessities like food and gas. Average gas prices at the pump just hit an all time record for February and there are reports of $4 gas in California.
Walmart's sales for February onwards were reported as "dire" by one of their senior managers as a result of the combination of all the above factors.
Personal incomes fell by a massive $505bn in January and personal expenditures rose by $18bn in January. See 6.
While the fall in personal incomes will have been exaggerated by the last minute political shenanigans over the Fiscal Cliff deal in early January, January's figures still point to what is going to become a substantial downward trend.
Under Obama Total Wages and disposable incomes are falling dramatically at an even steeper rate than they did under Bush/Cheney.
We are about to see the introduction of Obamacare which will be a massive drag on the US economy. (see 7)
It is the equivalent of a 3.8% tax hike on the middle class. But costs are forever increasing so it will no doubt turn out to be more.
The cost of Healthcare is also about to skyrocket (the IRS are predicting that basic minimum Healthcare insurance will cost $20,000 in 2016).
The Healthcare lobby have just announced that it will rise even more - they full intend to pass on IRS fees on to the consumer.
We are already starting to see some of the adverse effects of the introduction of Obamacare.
Businesses have already started raising their prices to cover their expected increases in costs.
Obamacare will raise the price of just about everything and increase overall cpi fairly significantly.
Obamacare will MASSIVELY LOWER the disposable incomes of ordinary people (that is available to spend on everything else except Healthcare). Thus deepening the coming recession.
Obama is continuing the massive reckless spending of the Bush/Cheney regime.
Principally by :-
Keeping ALL of the over $1.3tn of Corporate Welfare.
A massive INCREASE in military spending compared to Bush/Cheney. $1,219bn was spent on the military and "civil defense" in 2012. Military spending is projected to rise by a further over $100bn a year by 2020.
Obama is actually exacerbating the policy of Bush/Cheney in the balance of favoring the very rich over the 99% in tax policy.
All of the tax avoidance schemes of the very rich have been retained by Obama (people like Mitt Romney will still be paying their 15% in taxes while a middle earner will still be taxed at 28% on taxable income above $35,000 of taxable income).
(Obama has stated that he has raised taxes by $67bn a year on the rich - but almost all of that money will come from people earning between $250,000 and $1million a year - i.e. the wealthy NOT the VERY wealthy.)
Meanwhile the middle class and below just got a massive $200bn a year tax hike with the expiry of the payroll tax break and the expiry of some other middle class allowances.) See 8.
The modern equivalent of the Bush era's housing equity withdrawals is just starting.
People have started raiding their pension funds and 401k's.
As with Bush/Cheney it will make the coming problems much worse in a few years.
With current government and Federal Reserve policy, America will go over the REAL fiscal cliff in the next few years and suffer a FAR larger financial crash than 2008.
People have called the Bush/Cheney inspired financial crash of 2008, financial armageddon.
But this next one is going to be 20 or 30 times worse.
The amount of debt involved is 20 or 30 times more than the housing and property market bubble.
Government spending is projected to rise from $3.6tn in 2012 to $6tn in 2023.
Federal deficits will be over $3tn a year in 2023.
The National debt will rise to over $40tn by 2023.
See 9.
This is the REAL Fiscal cliff.
At some point in time the market will wake up to the fact that the Federal government will NEVER be able to repay it's debts (just like Greece can't).
At this point in time interest rates will rise rapidly to 5% and beyond (they are currently 2%).
The costs of servicing the interest payments will rapidly increase. The government just won't be able to afford to pay the interest (just like Greece couldn't).
At this point in time the rest of the world will lose confidence in the dollar (China, Russia, India, Brazil and Japan already have.) See 10.
The dollar will plunge in value by 50%+ within a short space of time.
The price of imports will double almost overnight.
The current annual trade deficit of $500bn+ will have to adjust to zero almost overnight.
Wages will be held down - there will be even more of an over supply of labor, than there currently is, when all this goes down.
Comparing Greece to America
Greece
Greece has even more in common with America than you might think.
It was reported in 2006 that Greece is sitting on $1tn worth of natural resources (a lot of it offshore oil and gas).
The Greek National Debt debt is currently just over $200bn.
The Greek Natural Resource value to National debt ratio is currently about 5:1.
(But it will take a lot of money to get those resources out of the ground, so the real ratio is probably closer to 1:1.)
At some point in time the Greek currency will have to be devalued by 50%+.
And they will have to be refinanced somehow (but not within the Euro - that makes no difference to the long term problems of Greece whatsoever).
At some point in time either :
The Greeks will have to do a deal with an outside party to pay off their debt in return for the rights to their large amount of natural resources. China is the obvious candidate for this. See 12.
Or the Greek debt will just have to be written off in it's entirety.
In both cases Greece will have to leave the Euro for any solution to be possible.
N.B. The reports of Greece having a debt problem didn't start surfacing in the mainstream or markets until 2009, when Greece had a reported debt to GDP ratio of 160%.
The interest rate on Greek sovereign debt went from 2% to 7% within a few weeks.
In actuality Greece had hidden over 100bn euro's away in off balance sheet accounting trickery so the real debt to GDP ratio was about 240%.
(The 100bn+ euro's of off balance sheet debt has now been officially by the Greek government.
100bn+ of debt was written off in a deal with creditors in 2012.)
America
America's Natural Resources have recently been valued at $248tn.
(The Chinese have recently done their own surveys but it is not known what number they arrived at.)
By 2023 America's Debt to GDP ratio will be about 250%.
(This does not include the much higher numbers for future unfunded liabilities for pensions and Healthcare. See 11)
Or almost exactly the same as the true Greek debt position in 2009.
The National Debt will be $40tn+
The value of america's Natural Resources (in the ground) will be 5 or 6 times it's National Debt.
Or almost exactly the same as Greece.
China is looking to get a fire sale deal on large chunks of American Natural Resources in the medium term. Who else will have $40tn+ just laying around?
There will be an increase in tensions and conflict and perhaps an outright hot war with China going forward.
We have already seen the start of this in Syria and now Mali.
At least Bush/Cheney didn't start WW3 - they just started the wreckage of America's economy and relative global power.
With the current policies of Obama, the wrecking of America's economy and it's decline in relative power is accelerating and there is a distinct possibility of WW3 in say 20 years time.
A race for natural resources in Africa has happened before - about 20 years before the start of WW1. See 13
Appendices
Bush/Cheney spending 2007
(1) Total Employment 2000 to 2012
(2) US Employment 1939 to 2008
(3) The total money supply almost doubled under Bush/Cheney (until the housing market crash started)
It increased from around $38tn to $68tn in just 7 years.
The total money supply is equivalent to the total amount of debt.
(Under a fiat monetary system, the only way that the money supply increases is by an increase in debt.)
(4) Why the current massive Federal Reserve printing is pushing up the price of food and gas, thus LOWERING disposable increases and LOWERING GDP growth
http://ian56.blogspot.co.uk/2013/01/the-2tn-of-excess-bank-reserves-is.html
(5) The February jobs report explained and why they confirm recession in 2013, despite the positive media headlines
http://ian56.blogspot.co.uk/2013/03/february-jobs-reports-explained-and-why.html
(6) Personal incomes fell by $505bn and expenditures rose by $18bn in January.
http://seekingalpha.com/article/1241691-incomes-fall-505-5-billion-expenses-rise-can-you-say-stagflation
(7) Obamacare and why it's such a terrible policy for America.
http://ian56.blogspot.co.uk/2013/01/the-affordable-care-act-should-be.html
(8) The Fiscal Cliff deal - a financial analysis. The government's sell out to large Corporations and rich elites. Tax hikes on the rich are a myth.
http://ian56.blogspot.co.uk/2013/01/fiscal-cliff-deal-obamas-corporate-sell.html
(9) CBO spending forecasts through to 2023 and future GDP growth, Federal deficit and National Debt forecasts.
The National Debt will be over $40tn by 2023.
http://ian56.blogspot.co.uk/2013/03/cbo-projections-of-future-gdp-growth.html
(10) The coming of the real fiscal cliff
http://ian56.blogspot.co.uk/2012/02/greek-scenario-and-us.html
(11) America's unfunded future liabilities
Estimates for America's future unfunded liabilities for pensions and Healthcare range from $84tn to over $200tn.
There is a future Demographic time bomb heading America's way (and most other places too).
It has just started hitting in a trivial way, but it will exponentially increase in magnitude from about 2020 on.
The ratio of the number of pensioners to the number of workers will rapidly increase.
People are living longer.
This ratio is projected to double and go from 0.2 in 2008 to 0.4 by 2050. See chart below.
But these future liabilities are greatly subject to any future changes in government policy - e.g. to raise the official retirement age to 70+.
The Social Security Trust Fund is reported to currently have $2tn in it.
But this is $2tn worth of Treasuries not hard assets.
Treasuries that are going to plunge in value by over 50% when the interest rates move to 5%+.
Things like raising the contribution limit from the first $102,000 of income to a higher amount, as Dems like to call for as a solution, would not change the dynamics one iota. There are not enough people that earn over $102,000 to make a difference.
Improving the efficiency of American Healthcare could significantly reduce the cost of Medicare/Medicaid, e.g. by significantly reducing the price paid for drugs, cutting fraud. Obamacare goes in completely the opposite direction though and makes Healthcare even less efficient.
(12) My suggested solutions to Greece's problems
http://ian56.blogspot.co.uk/2012/10/if-i-were-greece.html
(13) The mistakes of history are oft repeated. The collapse of the American, British, Russian and Roman Empires
http://ian56.blogspot.co.uk/2013/02/the-mistakes-of-history-are-oft.html
It increased from around $38tn to $68tn in just 7 years.
The total money supply is equivalent to the total amount of debt.
(Under a fiat monetary system, the only way that the money supply increases is by an increase in debt.)
(4) Why the current massive Federal Reserve printing is pushing up the price of food and gas, thus LOWERING disposable increases and LOWERING GDP growth
http://ian56.blogspot.co.uk/2013/01/the-2tn-of-excess-bank-reserves-is.html
(5) The February jobs report explained and why they confirm recession in 2013, despite the positive media headlines
http://ian56.blogspot.co.uk/2013/03/february-jobs-reports-explained-and-why.html
(6) Personal incomes fell by $505bn and expenditures rose by $18bn in January.
http://seekingalpha.com/article/1241691-incomes-fall-505-5-billion-expenses-rise-can-you-say-stagflation
(7) Obamacare and why it's such a terrible policy for America.
http://ian56.blogspot.co.uk/2013/01/the-affordable-care-act-should-be.html
(8) The Fiscal Cliff deal - a financial analysis. The government's sell out to large Corporations and rich elites. Tax hikes on the rich are a myth.
http://ian56.blogspot.co.uk/2013/01/fiscal-cliff-deal-obamas-corporate-sell.html
(9) CBO spending forecasts through to 2023 and future GDP growth, Federal deficit and National Debt forecasts.
The National Debt will be over $40tn by 2023.
http://ian56.blogspot.co.uk/2013/03/cbo-projections-of-future-gdp-growth.html
(10) The coming of the real fiscal cliff
http://ian56.blogspot.co.uk/2012/02/greek-scenario-and-us.html
(11) America's unfunded future liabilities
Estimates for America's future unfunded liabilities for pensions and Healthcare range from $84tn to over $200tn.
There is a future Demographic time bomb heading America's way (and most other places too).
It has just started hitting in a trivial way, but it will exponentially increase in magnitude from about 2020 on.
The ratio of the number of pensioners to the number of workers will rapidly increase.
People are living longer.
This ratio is projected to double and go from 0.2 in 2008 to 0.4 by 2050. See chart below.
But these future liabilities are greatly subject to any future changes in government policy - e.g. to raise the official retirement age to 70+.
The Social Security Trust Fund is reported to currently have $2tn in it.
But this is $2tn worth of Treasuries not hard assets.
Treasuries that are going to plunge in value by over 50% when the interest rates move to 5%+.
Things like raising the contribution limit from the first $102,000 of income to a higher amount, as Dems like to call for as a solution, would not change the dynamics one iota. There are not enough people that earn over $102,000 to make a difference.
Improving the efficiency of American Healthcare could significantly reduce the cost of Medicare/Medicaid, e.g. by significantly reducing the price paid for drugs, cutting fraud. Obamacare goes in completely the opposite direction though and makes Healthcare even less efficient.
(12) My suggested solutions to Greece's problems
http://ian56.blogspot.co.uk/2012/10/if-i-were-greece.html
(13) The mistakes of history are oft repeated. The collapse of the American, British, Russian and Roman Empires
http://ian56.blogspot.co.uk/2013/02/the-mistakes-of-history-are-oft.html
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