I believe you also know that a 2.4% number is a 2.4% growth rate over a quarter earlier. Meaning, the economy in the Second Quarter grew on a rate of 2.4% over where the economy was in the First Quarter. This means, if the economy contracted sharply (steep recession) for a year or two, and then we have growth rates of 2-3 percent, it is much smaller in actual economic activity than if we have 2-3 percent growth rates following a strong or modest year of economic growth.

Once you know this, you ‘get’ a few things regarding the 2.4% of the recent quarter:

1)      Economic growth is still VERY bad, considering that we are coming off a VERY steep decline in economic activity yet the growth rates on average of the last four quarters were a mere 3.1% (quarter over quarter).

2)      The economic growth during the Clinton-Bush-Parrot election year of 1992 was doing just fine, considering that the average quarter-over-quarter growth rate was 4.3%, in addition to the fact that it followed a very light recession a year earlier.

3)      The average quarter-over-quarter growth rates of 1983, which followed shortly after most Reagan Tax Cuts kicked in, was 7.7%. This means, Reaganomics were WAY more affective and productive – in terms of GDP – compared to what the Stimulus has to show for itself, despite the fact that 60% of it is already out the door.

Next Time a Dem tells you “it could have been worse,” tell them “it could have been better.”

While most political people foresee the Dems going through hell this coming November, in large part due to the weak economy, I think the Dems have a positive sign by looking back to the last midterm elections.

Back then, going into the November 2006 elections, the economy ended twelve months of gaining monthly almost 200,000 jobs; the Unemployment Rate was at a mere 4.5%; the three equity markets (DJIA, S&P, and Nasdaq) each gained 15 percent-plus in the twelve months ending November 1, 2006; the national average of a regular gallon gas in late October 2006 was $2.21; and the federal budget deficit of the previous fiscal year (2006) was $248 billion, which was almost half the size of the largest deficit that the 12-year Republican Congress ever produced. Despite all these positive numbers, Republicans lost thirty seats in the House, and six in the Senate.

Fast forward to the 2010 Midterms: The Private Sector economy lost on average 37,000 jobs in the twelve months ending/including June; the Unemployment Rate is at 9.5%; the equity indexes – while up year-over-year going into the July 4, 2010 weekend – are down for the last six months; gas prices are hovering close to $3 a gallon; and we are now in a federal deficit three times larger than the smallest Pelosi/Reid deficit (FY 2008, $455 Billion), which was larger than any annual deficit that the Republican Congress gave us (FY 2004, $412).

Just as good economic news in 2006 didn’t translate into Republican Congress gains; the current weak economic numbers will not necessarily mean spectacular losses for the Dems. This is the good news for the Dems.

The bad news for the Democrats however is that if Republicans get their PR act together by contrasting how the economy was when they last had Congress versus how bad things are when the Dems have larger control of Congress, few sane people will vote for a Dem in November.

The 600,000 people that stopped looking for work, pushed down the U-R to 9.5%, which is still higher than before the Stimulus Bill.

By passing the Stimulus and other “jobs” bills with no Republican votes, the Dems own now this job market 18 months after Obama took office; 16 months after the Stimulus; and 42 motns after Dems took control of Capital Hill when the economy under Republicans gained monthly 200,000 jobs; Unemploymant Rate at 4.5%; and that year’s (FY 2007) TOTAL deficit was less than $170 billion.

The short and long answer is: No, it is not.

In 2008 we were two months before an election, therefore a national party and a media-loved candidate and later President Elect did everything they could to talk-down the economy and scare everyone to death for political gains, and then to get the Stimulus passed. Killing confidence made things worse by the day.

Now however, we don’t have these political factors, and Republicans sure don’t have a powerful mouth piece with the ear of the country to his/her mouth scaring everyone into a second depression. Therefore, the markets are not Tanking so fast as they did in late 2008 and early 2009.

What is sad about this bailout, is this: Some of the other ‘helping’ countries are also deep in debt, and… Need to borrow now money on their own in order to have money to lend for Greece to pay off its own debt.

To get a better sense how crazy this is, read the following, which I saw Monday early morning on a Blog from Reuters:

“Under the agreement… Italy may be called upon to disburse about 5 billion [Euros], a figure proportional to its economic weight in the euro zone. Germany, the European Union’s biggest economy, would have to provide a little over 8 billion euros.

“If Italy, which already has national debts in excess of 100 percent of GDP, issues more debt to raise money to help Greece get over its debt problems (Greece has a debt-to-GDP ratio of 120 percent),  then, in theory, the yield [I.e. The interest paid] on Italian bonds is likely to rise as investors factor in the increased risk. And since almost all members of the euro zone have severe budget deficits (and therefore little free cash), potentially all of them are going to have to issue more debt to raise the funds to pay Greece to overcome its even more serious deficit problems.

“It’s spreading the risk around.”

The Reuters Blog piece continues:

“By the same token, if Greece asks for and gets the help it needs, its bond yields can be expected to fall if investors (or speculators) believe that the worst of the crisis is over and that the risk of a Greek default has now passed. Multiply that scenario across the 16 members of the euro zone and what you get — again, in theory — is the risk profile of 15 member states increasing slightly in order to allow the 16th member, Greece, to lower its profile.”

So… Is it a 50-50 chance that things may work-out the ‘better way?’ Well, no. As Reuters continues. The second theory of what may happen is “like the water in a vast dam being released to save the one village next to the lake, with the result that all the villages in the valley get flooded equally.”

Things are really messed up!

The economy in some areas is now better than a year ago. A main reason is, that businesses and people in general have confidence that the Democrats will lose their working majorities in Congress or perhaps be pushed into the minority. In turn, Democrats won’t be able to inflict more damage on business. This is good news for the public  turns into better spending and investment moods, thus turning the economy in the right direction.

For the same reason, but with an opposite results, did the economy slip into a long recession less than a year after the Democrats in 2006 won control of Congress for the first time in twelve years. This also explains why the failure of a few firms in September of 2008 sent the economy into a tail spin: more saw an Obama victory on the horizon in addition to expanded Democratic majorities in Congress, thus increasing worries what leftist policies will hurt the economy.

But now that things are looking up again for Republicans, it automatically improves the economy, just as last time around the Republicans had control of Congress the economy was very good: an Unemployment Rate close to 4%, just to mention one statistic.

This excuse if junk and needs to be shot down once and for all: The 9/11 attacks which happened during a recession, was initially more devastating to the economy than was the financial meltdown (you remember how much the Dow lost when the markets opened almost a week after the attacks?). Yet back then, the unemployment rate rose only one and a half percent to peak at 6.3%, not like the current rate which rose a few percent to be at 10%. In addition, the deficits in the two years following 9/11 totaled a few hundred billion dollars, not TRILLIONS like we have now. You know why? Because the tax-cutting policies of the Republicans back then did its job to save the economy, vs. the policies of the Dem majority following the meltdown did NOT do its job. The Dems were and still are more focused on wasteful spending and ideological agendas than to actually save the economy.

Does this sound like a talking-point for Republicans? It sure does, but it spells the truth.

•To keep up with a healthy recovery, the economy needs to have a net gain of 150,000 jobs each month. We are not close to that. (Losing ‘only’ 11,000 jobs in November was largely due to thousands of part-time jobs that people got for the shopping season. Wait until the season ends to get a clearer picture of the job market).

•A big junk of ‘new jobs’ in recent months, don’t pay as good as jobs did in the past. With weaker pay, more people have less to spend and less to pay off mortgage and credit card debt. Both are demaging to the economy.

•The highest the unemployment rate went following the last recession, was 6.3%; few people liked it. Now it is at 10% and IS still rising. It pulled back in November cuz it jumped too fast in October. But all in all, the UR is still on the rise, too high for this economy to keep on growing strong.

•Consumer Sentiment indexes rose in early December, which was good news. However, it happened because people got fooled with the Unemployment Rate “going down.” Wait a month or two when the UR will rise again, and consumer’s sentiments will tank again, and with it their appetite to keep this economy going.

•Despite some general retail sales statistics that appear good, retailers claim that the current shopping season is weaker than last year. Plus, to those who it DOES match last year’s numbers, it is still a mess considering that any statistic of 12 months ago was in the midst of the crisis, hardly an era that one would measure success against it.

•Credit is still difficult to get these days. This keeps the economy, and consumers’ moods, down.

•The 2009 federal deficit was $1.4 trillion, triple the $455 billion of a year earlier, which in itself was three times larger than the 2007 deficit of $163 billion. These deficits kill the US dollar, which in turn keeps oil prices higher than it should be, and it also increases the interest people need to pay when they want to borrow money. Both kill the economy.

All in all, in a year from now, the US will still be in trouble
Economically speaking, (yet one should now decide what the word ‘trouble’ means). Politically speaking, the economy will bring trouble for the Dems next November. The only thing that can really help the economy and the Dems, is more tax cuts. The Republicans’ idea of putting into the Stimulus tax credits for home buyers, helped stabilize the Housing Market, and thus helped the economy in general. More tax cuts will do even more to kick the economy into a lasting recovery.

Some weekly and monthly economic statistics are not as bad as they were 10 months ago, yet that era is hardly one to measure success against it. In fact, most economic reports are still as bad as they were last year summer or before, which means: better than prior to the crisis, yet still recession-type figures. Therefore one sure wonders, why are the markets continuing to climb?

Something I heard and read about it, appears to hold truth: Investors, small or big, do not have where to place their money with a chance of good returns but the stock market. The way I “get this” is, having gains through the market is your best bet these days; it is easy money, and it takes just minutes to get in or out of it. Therefore, the markets keep rising endlessly, and as a result, the long-anticipated “correction” has yet to arrive. Why? Because the rise in the markets since March, 9, 2009, are not the same type of increases the markets had in the past, thus a regular correction didn’t hit the markets, yet.

Let’s be real here. If you are self employed, chances are that your business isn’t doing well these days. In this case, why should the bank trust you with money? If you are employed by a firm that recently fried (yes, fried) people, chances are things will get worse and your head might be next. If you are at a firm that did not cut any jobs in the last year or two, you should really watch your head because every industry and business felt this recession, and your place will likely be next. In this case, why should the bank lend you money to buy a car or a house?

The banks shouldn’t lend money, and this is exactly what they are doing. Of course you will say, “If we want a recovery, we need to get the credit flowing again.” I don’t disagree, but if we get credit flowing the way we did until last year September, we will be flowing straight into another crisis, and this is what banks want to avoid.

If you don’t understand the Bank’s point of view, no problem, go ahead and leave me your phone number, and I will send my friend to you. Let me please know in advance how much money you are ready to lend him.

p.s. Banks bailouts were not made for them to lend money without you knowing how to pay it back. Bailouts were installed to keep banks away from bankruptcy, which in turn held back the public from making run- on-banks, which would have caused people to know that the money they think is in the bank, isn’t really there. In turn, we would have had a REAL crisis. No I am not a conspiracy theorist. Read up on the way banks keep and lend money, you will learn startling facts.

Considering that the US dollar is plunging, I think Gold is indeed a valued commodity, but if you don’t have money, i.e. U.S. dollars to cover your weekly and monthly bills, why would you stash up on Gold? To be protected for doomsday? You don’t have money as is, so why does it make a difference to you if the dollar slides even more and Gold rises to $1,400 an ounce? Furthermore, Gold is an investment, so as long you don’t have money to buy stocks, or whatever thing you dream of investing, you should not be carried away by the talk of GOLD. It is just not made for you. End of discussion.

My point here is, that if you are a poor man out there with no extra money, the Gold Rush is not cut out for you, regardless in what context it is: If you look at it as a safety reserve for a doomed era, you will be better off stacking up on food, drinks and medications, or perhaps going on with life as is and wait for Pelosi to help you. If you look at Gold as a rising investment, you had and still have a better chance of doubling and tripling your money faster by jumping into a few good stocks available on Wall St, rather than buying Gold.

All in all I am saying, If you are an average earner, do yourself a favor and let the Gold rise or fall without your participation, just as the price of AIG shares went this year from $22 to $9, before rising again to above $37 a piece without your participation. Ouch, I just killed you: The AIG stock doubled and quadrupled at a time when Gold didn’t even do half as good.

Politically speaking, those on the Left will say that the current jobs report is better than in January when “we lost 700,000 a month.” I wrote already once that this excuse is lame, and the claim is false altogether. Besides, rest assure that those who lost their jobs this month don’t care for a dime how many more or less people lost jobs in this same month.

Those on the Right knew all along that the disasters job market is here to stay, and to get worse than what it was a while ago. On May 15, three months after the signing of the stimulus; a time when people were seeing “green shoots” and expecting wonders from Obama’s Stimulus; a time when the unemployment rate was at 8.9%; a time when Fed Chief Bernanke said that the unemployment rate won’t hit the 10% mark, and two months before Buffet warned of an 11% Unemployment Rate, I wrote the following on lohud.com (the article has been pulled since then):

“Sure, these and other statistics are “better” than November’s numbers, yet November and the immediate months after it were “depression era,” hardly an index against which to one would want to measure “better” times. Add to that the disastrous lagging indicator (jobs) that can itself destroy the economy. This leads me to conclude that for regular people on the street, though economic times have yet to reach full scale, and an unemployment rate of more than 11 percent might be here before we get to count the next twelve months.”

I know we are not close to 11 percent; however we are not yet at May ’10 either. Frankly, I was surprised that the Unemployment Rate didn’t crack the 10% figure two-three months ago, considering that so many things in the economy are still very bad. Yes, they are portrayed as “good” just on the basis that it’s not as bad as a year ago. But as I wrote in May, November of 2009 is hardly an era that you want to measure success against it.

As long Obama’s economy does not show a net gain on a monthly basis, and as long the unemployment rate doesn’t cool off, a spin of “saving or creating” jobs will, politically fall on death ears, and will economically keep the recovery down.