Obama's Foolish, Inexplicable and Predictable Economy

John Ransom
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Posted: Apr 04, 2013 12:01 AM

The best recovery in the history of mankind has once again been put off indefinitely while government economists continue the search and rescue efforts to find the jobs that they created by rosy forecasts, but which seem to be missing from the real world results.

“Private-sector job creation was considerably less than expected in March,” reports CNBC, “indicating that the labor market's improvements could begin stalling. A joint report Wednesday from ADP and Moody's Analytics showed 158,000 new positions, well below economist expectations of 200,000. The report serves as a precursor to Friday's nonfarm payrolls report, so the miss could cause economists to lower their projections.”

Amongst the losers were construction and service jobs, which as of late have been leading the charge amongst job creators.

Amongst the winners will be the stock indices, which will benefit from continued stimulus efforts by the firm of Bernanke, Barack, Lew & Associates. 

While some analysts have speculated that the inflationary risks of easy money polices would force the Federal Reserve to at least temper its quantitative easing policies, a poor jobs report means that it’s full-speed ahead for monetary stimulus.   

Just one month ago president Obama was trumpeting the February jobs report as “evidence that the recovery that began in mid-2009 is gaining traction.”

I wonder if today he’ll back up and say “It’s apparent now that the recovery is losing traction.”

Yeah, probably, but only if he can blame: 1) congressional Republicans; 2) George Bush; or 3) gun violence.

If it’s any consolation however, consider with me for a moment a scenario where the optimistic predictions of 2.5- 3 percent GDP growth are operative and jobs are created in quantities to offset unemployment.

Despite lower demand and much higher inventories oil stands at $95 per barrel.

The price of oil could easily reach $140 per barrel with even modest, sub-par 3 percent growth in our GDP.  And expect no less for basic materials, food and other energy supplies.

Just as a quick history lesson: It was oil prices, not subprime lending that finally, officially broke the back of financial markets in 2008 and caused not just a run on the bank, but a run on ALL banks.

Although subprime defaults did get things rolling.  

“Eventually, the declines in income and home prices raised mortgage delinquency rates beyond a threshold at which the overall solvency of the ?nancial system itself came into question,” writes James D. Hamilton of the Brookings Institution, “and the modest recession of 2007Q4–2008Q3 turned into a ferocious downturn in 2008Q4. Whether those events would have been avoided had the economy not gone into recession, or instead merely postponed, is a matter of conjecture. Regardless of how one answers that question, the evidence to me is persuasive that had there been no oil shock, economists today would be describing the economy in 2007Q4–2008Q3 as growing slowly but not in a recession.”

But that doesn’t mean we won’t get more subprime lending in the bargain too just to salt the wounds.

I mean if we are gonna finish off this economy, we might just as well FINISH OFF THIS ECONOMY. 

At a time when banks have more concentrated assets, with more concentrated risk, the administration, foolishly, inexplicably and predictably is leaning on mortgage lenders to lend to people less likely to be able to pay back loans.

The Department of Justice just wrapped up $25 billion settlement against these same mortgage lenders for…taking back houses that people couldn’t afford and didn’t make payments on.    

“The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit,” says the Washington Post, “an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.”

No kidding.

The Post article, acting as a fully deputized press assistant to the White House, is full of unintended comedic gems- my commentary in parentheses- such as:

1)   “Administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.”  (Insure them against default? Why didn’t we think of that before? Oh, that’s right. We did)

2)   “Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.” (Oh, there’s no way that could end badly. Why not lend everyone 120 percent of the value against their home? Especially when the federal government won’t let you foreclose.)

3)   “Deciding which borrowers get loans might seem like something that should be left up to the private market. But since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80 percent and 90 percent of all new loans, according to the industry publication Inside Mortgage Finance. It has done so primarily through the Federal Housing Administration, which is part of the executive branch, and taxpayer-backed mortgage giants Fannie Mae and Freddie Mac, run by an independent regulator.” (Ha, ha, ha, ha. I’d cry but I have no tears left.)   

Seriously: Expensively educated idiots run the country.

We can only hope they just keep looking for those “missing” jobs and stay out of the way.

Ok, put that down as a dream, not a hope.