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Economic Outlook

Here’s how the next recession begins

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Posted by Simon Black - Sovereign Man

on Tuesday, 22 August 2017 12:24

7b33d51709dbedc590c38fc9cb37fe98In 1886 there were only 38 states in the United States. 

Electric power was still cutting edge technology that few people had ever seen. 

The Statue of Liberty hadn’t even been dedicated yet. 

But it was that year that a man named Richard Sears founded a small retail company in Minneapolis, Minnesota that would grow into a retail juggernaut. 

Sears was truly the Amazon of its day. 

Even in the late 1800s the company was able to deliver just about any product you wanted right to your doorstep. 

This was no small feat considering the first delivery truck wouldn’t be invented until 1895. There was no transportation infrastructure. And two-thirds of the population lived in remote rural areas. 

Yet despite those challenges, Sears was still able to put any product you wanted in your hands. 



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Economic Outlook

Obamacare Finally Repealed

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Posted by Martin Armstrong - Armstrong Economicsn

on Thursday, 10 August 2017 07:26

TAX-CUTThe American Health Care Act (HR 1628) finally passed by the House yesterday reducing taxes on the American people by over $1 trillion. The bill abolishes the most abusive taxes imposed by Obama and the Democrat party back in 2010 known as Obamacare. The Democrats helped the insurance companies and burdened the youth trying to force them to pay for insurance they did not need to get insurance companies to cover people they would not.

Obama as a presidential candidate back in 2008, had promised repeatedly that he would NOT raise any tax on any American earning less than $250,000 per year. That was an outright lie. As always, they claim they will only tax the rich, but it never ends up that way.

In KING v. BURWELL, 576 US –  (2015), the Supreme Court upheld Obamacare claiming it was a tax. There was no constitutional power for Congress to punish someone who did not buy health insurance. The only way to uphold such a power was under the taxing powers. Justice Scalia wrote in his dessenting opinion:

The Act that Congresspassed provides that every individual “shall” maintain insurance or else pay a “penalty.” 26 U. S. C. §5000A. This Court, however, saw that the Commerce Clause does not authorize a federal mandate to buy health insurance. So it rewrote the mandate-cum-penalty as a tax. 

With the repeal of Obamacare, tens of millions of middle income Americans will get tax relief from Obamacare’s long list of tax hikes that have oppressed so many. The taxes that will be abolished are:

  1. The Obamacare Individual Mandate Tax which hits 8 million Americans each year.
  2. The Obamacare Employer Mandate Tax Together with repeal of the Individual Mandate Tax repeal this is a $270 billion tax cut.
  3. Obamacare’s HSA withdrawal tax. This is a $100 million tax cut.
  4. Obamacare’s 10% excise tax on small businesses with indoor tanning services. This is a $600 million tax cut.
  5. The Obamacare health insurance tax. This is a $145 billion tax cut.
  6. The Obamacare 3.8% surtax on investment income. This is a $172 billion tax cut.
  7. The Obamacare medical device tax. This is a $20 billion tax cut.
  8. The Obamacare tax on prescription medicine. This is a $28 billion tax cut.
  9. Obamacare’s Medicine Cabinet Tax which hits 20 million Americans with Health Savings Accounts and 30 million Americans with Flexible Spending Accounts. This is a $6 billion tax cut.
  10. Obamacare’s Flexible Spending Account tax on 30 million Americans. This is a $20 billion tax cut.
  11. Obamacare’s Chronic Care Tax on 10 million Americans with high out of pocket medical expenses. This is a $126 billion tax cut.
  12. The Obamacare tax on retiree prescription drug coverage. This is a $2 billion tax cut.

...also from Martin:

French Elections – A Sell Signal Long-term for the EU Regardless of Who Wins



Economic Outlook

Car Sales Have A Long Way To Fall

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Posted by John Rubino - DollarCollapse.com

on Wednesday, 05 July 2017 05:26

The past decade’s historically low interest rates convinced millions of Americans to buy cars they could only afford with hyper-cheap credit. This made auto sales one of the drivers of the recovery, but it also left far too many people with underwater “car mortgages” that will limit their spending on other things and prevent them from buying their next car until sometime in the 2020s. 

Like all artificial (that is, credit-driven) booms, this had to end eventually, and it’s looking like now is the time: 

U.S. Auto Makers Post Sharp Sales Decline in June

(Wall Street Journal) – Detroit’s car companies reported steep sales declines in June, capping a bumpy first half of the year for the U.S. auto industry and setting a bleak tone for the summer selling season.

The reports, released Monday, come as analysts expect overall auto sales to have fallen more than 2% in June compared with the prior year, according to JD Power. The firm said the industry’s selling pace hit its lowest point since 2014 over the first six months of 2017, and traffic at dealerships—measured by retail sales—fell to a five-year nadir in June.

Edmunds.com, a consumer-research company, said buyers are stretching more than ever to afford cars and trucks that are growing increasingly more expensive due to a barrage of safety gear and connectivity options. The firm estimates the average auto-loan length reached a high of 69.3 months in June, with the average amount of financing reaching $30,945, up $631 from May.

General Motors Co. GM +2.91% said U.S. sales fell 5% to 243,155 vehicles, while Ford Motor Co. F +4.07% said sales totaled 227,979 vehicles, down 5.1% from a year earlier, and Fiat Chrysler Automobiles N.V. posted a 7% decline to 187,348 vehicles.

The following charts show a steady rise in car sales and inventories from their 2009 low to a 2015-2016 peak. If they’ve shifted into a cyclical decline the bottom, based on history, is a long way down. 

Auto-inventories-July-17



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Economic Outlook

Proof That This Economic recovery narrative is false

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Posted by Sol Palha - Tactical Investor

on Friday, 23 June 2017 10:21

A hallucination is a fact, not an error; what is erroneous is a judgment based upon it.

Bertrand Russell

The financial media has provided reams of data trying to lay out the case that this economic recovery is real. Many of the statistics provided do indeed support the theme that the outlook is improving. One must, however, keep these two facts in mind when looking at the data:

  • The Fed poured huge amounts of money into this market. Minus the money, this so-called economic recovery would have never come to pass

  • Due to the low-interest rate environment, corporation borrowed money on the cheap and poured billions into share buybacks since the crash of 2009.

Hence, while some of these statistics paint a rosy picture, the outlook is far from rosy as two key leading economic indicators have failed to confirm this recovery from the onset.

The Baltic Dry index is trading 92% below its all-time high. Now imagine the Dow was in the same position and the press instead of calling it a crash, made the assertion that we were in the midst of a raging bull market. You would think they were insane. Well, the same analogy applies today; this index clearly indicates that there is no recovery on a global basis and that hot money is creating the illusion of one. Remove this excess cash from the system, and the economy together with the stock market will collapse.

This once highly effective leading economic indicator appears to no longer work as the playing field has been altered. However, it is working, as it is indicating this recovery is nothing but a sham. It can longer be used as a tool to gauge the direction of the stock market or the strength of the economy because as stated hot money has altered the landscape.

Baltic Dry Index 2017

Copper another leading economic indicator also clearly illustrates that this recovery is a sham.



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Economic Outlook

Merkel Wants G20 Global Taxation of Internet

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Posted by Martin Armstrong - Armstrong Economics

on Thursday, 15 June 2017 07:51

Merkel-Explains

Markel is calling upon the G20 to regulate the internet. While she if pretending to be concerned about cyberattacks, which no regulator can prevent, you have to look into the finer details. Chancellor Angela Merkel called for a global regulation sayying: “Industry 4.0 will have to go through the process that we have already gone through at the World Trade Organization (WTO) with real trading operations that we have gone through in the G20 process with financial market regulation.” 

She noted that the “concerns” include “cyberattacks, the responsibility of social platforms to tax issues in international trade, and growing concern in the world Of policy. “

In other words, she wants to tax all sales on the internet. So anyone from Germany buying anything anywhere would have to pay VAT and every online merchant would have to comply with global regulation. Additionally, governments are increasingly becoming concerned about blockchain technology and the avoidance of taxes.

As always, government pretend to be concerned about security, but it is always about the money. She also wants to shut down anyone who talks against government in the social media.

....also from Martin:

Annual Growth Rates Have Dropped from 13% to 2% Since 1947 but Bill Gates Blames Robots?

First of all, robots are killing jobs because taxes and demand for benefits are going crazy. Health Care costs are consuming the net disposable income and government taxes, and the combination is conspiring to lower annual economic growth rates dramatically. Real GDP growth rates have been declining ever since World War II and the dawn of big government. These people just do not get it. They are the problem. GDP annual growth has declined from 13% down to 2%. Just where has big government helped?

....continie reading HERE



Economic Outlook

Visualizing the Jobs Lost to Automation

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Posted by Visual Capitalist

on Tuesday, 30 May 2017 13:55

What types of jobs will be lost to automation?

Today's data visualization applies probabilities from a well-cited study to current U.S. job numbers.

The end result: the most common jobs of today will not likely be the most common jobs of tomorrow.

View Larger Version "Visualizing the Jobs Lost to Automation"

automation-and-unemployment



Economic Outlook

How Long Can The Great Global Reflation Continue?

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Posted by Charles Hugh Smith - Of Two Minds

on Wednesday, 24 May 2017 08:32

balloon-sunset-169676768.jpg

And what will happen when it ends?

Every now and again, it’s good to take stock of the Great Global Reflation that has been marching higher (with a few stumbles and scares) since early 2009, over eight years ago.  

Is this Great Reflation running out of steam, or is it poised for yet another leg higher? Which is more likely?

Keynesianism Vs The Real World

Let’s start by reviewing the systemic contexts of the economy.

This Great Reflation is embedded in two basic contexts:

  1. The dominant socio-economic structures since around 1500 AD are profit-maximizing capital (“the market”) and nation-states (“the government”).
     
  2. The dominant economic theory for the past 80 years is Keynesianism, i.e. the notion that the state and central bank must aggressively manage private-sector consumption (demand) and lending via centrally planned and funded fiscal and monetary stimulus during downturns (recessions/depressions).

Simply put, the conventional view holds that there are two (and only two) solutions for whatever ails the economy: the market (profit-maximizing capital) or the government (nation-states and their central banks). Proponents of each blame all economic and social ills on the other one.

In the real world, the vast majority of Earth’s inhabitants operate in economies with both market and state-controlled dynamics in varying degrees.

The Keynesian world-view is doggedly simplistic.  The economy is based on aggregate demand for more goods and services.  People want more stuff and services, and as long as they have the means to buy more stuff and services, they will avidly do so (this urge is known as animal spirits).

The greatest single invention of all time in the Keynesian universe is credit, because credit enables people to borrow from their future earnings to consume more in the present. Credit thus expands aggregate demand for more goods and services, which is the whole purpose of existence in this world-view: buy more stuff.

But credit, aggregate demand for more stuff and animal spirits make for a volatile cocktail.  The euphoria of those making scads of profit lending money to those euphorically buying more stuff with credit leads to standards of financial prudence being loosened.  In effect, lenders and borrowers start seeing opportunities for profit and more consumption through the distorted lens of vodka goggles.

Lenders reckon that even marginal borrowers will earn more in the future and therefore are good credit risks, and borrowers reckon they’ll make more in the future (i.e. the house they just bought to flip will greatly increase their wealth), and so borrowing enormous sums is really an excellent idea—why not make more money/enjoy life more now?

But the real world isn’t actually changed by vodka goggles, and so marginal borrowers default on the loans they should never have been issued, and lenders start losing scads of money as the value of the collateral supporting the defaulted loans (used cars, swampland, McMansions, etc.) falls.

....continue reading HERE



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