The U.S. Commerce Department has released GDP growth figures for Q3, and they are not pretty, After a much trumpeted growth figure of 3.9 percent in Q2, the American economy grew only by a lackluster 1.5 percent rate in the third quarter of 2015. This is essentially stall speed, and far below the nation’s economic potential.
The poor GDP data is undoubtedly another excuse that the Federal Reserve will use to continue its indefinite delay in normalizing (meaning raising) interest rates. Monetary policy continues to be the essential life support the U.S. and wider global economy has depended on since the global economic and financial crisis erupted in 2008. Seven years later, the world-and especially the United States-requires money printing to goose up the GDP growth data, with a diminishing level of success.
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The “Summer of Trump” is now the “Autumn of Trump.” Donald Trump continues to maintain his lead over all other challengers for the Republican Party’s presidential nomination. The latest Reuters poll has the following data:
Trump has been the frontrunner in the GOP presidential race since July. Despite many predictions from pundits, Donald Trump not only has help onto his lead–he is very far ahead of his opposition, with only Ben Carson holding a double digit poll number. Jeb Bush, who was early on predicted to be the early frontrunner, has instead faded into the political sunset.
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The “Summer of Trump” is now the fall, and Donald Trump maintains a commanding lead in the race for the Republican Party’s 2016 presidential nomination.
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Seven years after the outbreak of the global economic and financial crisis, there are growing indications that the temporary solutions that were largely imposed through monetary policy by central banks are becoming increasingly ineffective. In all likelihood, a new global downturn in economic growth is in the cards.
The weakening economic data from China, slowdown in the U.S. economy’s job growth, worsening data in emerging economies and the Eurozone, not to mention Russia, collapse of commodity prices and volatility in the equity markets are all indicators of distress. Furthermore, the continuation of near-zero interest rates by major central banks many years after the “Great Recession” supposedly ended means that there are no more arrows in their quiver when the next major global recession strikes.
One other factor to be assessed are the fantasy employment numbers in the United States. While the official unemployment rate has supposedly been cut in half since the darkest days in 2009, in reality labor force participation is at historic lows (http://www.ibtimes.com/us-labor-force-participation-drops-absence-paid-parental-leave-keeps-women-out-jobs-2124175), revealing that the American economy is functioning well below its potential. In addition wage stagnation, and the latest revelation from the Bureau of Labor Statistics that earlier job creation figures were highly exaggerated (http://www.npr.org/sections/thetwo-way/2015/10/02/445244030/economy-adds-142-000-jobs-unemployment-steady-at-5-1-percent), demonstrates that even the U.S. economy, supposedly the healthiest on the planet, is manifesting growing signs of structural weakness.
In the wake of the global economic and financial crisis of 2008, policymakers in major economies made a bet on the same financial sector that unleashed the worldwide systemic disaster. Their decision was to engage in massive, unprecedented fiscal indebtedness and monetary loosening to prop up the investment and commercial banks, in the hope that this would stimulate reinvestment in the general economy (“main street”) and revive sustainable economic growth. There is growing evidence that this gamble made by decision makers in the world’s major economies is faltering. With staggering levels of sovereign debt, and central banks across the developed world having expanded their balance sheets almost to the point of infinity, the policymakers are left only with hopes and prayers that another massive crisis does not strike on their watch.