By: Michael D. Jacobsen
Everything is on the rise and our country could not be doing better! That has been the mantra as of late. In fact even in news articles from many media outlets that are hostile to our president you can hardly find a harsh word spoken about our economy. You would figure that with all this enthusiasm that there could not be anything wrong, nothing to question, all is well so to speak, and yet the warning signs are there but no one is raising the alarm.
The truth is that there are some rather alarming indicators that are happening but you are just not hearing about them in the mainstream news. For example the news that inflation has wiped out wage gains for the last 10 years. While it is said that this is a sign of an improving economy, the decrease in purchasing power can only be viewed as a negative. There is also the knowledge that while the GDP has gone up wages are not on the rise. So why are we being lead to believe that our economy is doing great? Well to understand part of the problem, we need to look into what the GDP actually represents and why it is not always a great indicator of growth.
The GDP or Gross Domestic Product is an equation that is derived from the following formula. It is calculated by taking personal consumption expenditures(consumer spending), plus business investment, plus government spending, plus (exports minus imports). As you might already be able to see with our current increase in government spending you might understand how we can have an increase in GDP but the economy as a whole may not be doing as well. While an increase in government spending is a temporary fix the fact is that our government is on pace to borrow the most money sine the 2008 financial crisis. This is a problem not only because of the debt interest our country has to pay but also for the rise in inflation that comes with it. A good economy has inflation due to the amount of money the average worker has, it is not due to how much money the government pumps into the economy. While normally inflation would be considered a sign of a healthy economy, it is growing as a result of government borrowing and spending, not because there is more money in the average consumers hands. It is also worth noting that our government cannot continue to spend and borrow the amount of money that it has been for very long.
While business investment may be up, it really is only a result of the government spending and an expected increase in domestic business related to the new tariffs going into effect. These tariffs will only be a short term help and once they are phased out business will suffer for their expansion without a market to sell in. This will help cause yet another recession as most American businesses will be forced to scale back their size once the tariffs go back to normal, and government spending ceases to make up the difference.
Some have pointed to unemployment as a factor for determining how well our economy is doing, however those same people will not tell you that while our labor force has remained steady, the percent of people in that labor force that participate in our economy has dropped by 7 percent in the last 10 years. What this means is that since we measure unemployment by the amount of people looking for work,we do not measure the growing number of people not looking to work, but are able to. This was the same counter that republicans had regarding the lowering of the unemployment rate under Barrack Obama, however current republicans have forgotten about that and ignore the very same argument they used only a few years ago.
Another ominous sign that our economy is heading towards a downturn is the housing market. As of the end of July there have been 3 months of declining sales of previously owned homes.This is due to homes not being affordable to first time buyers, there is a shortage on the market of homes due to people deciding to stay put rather than try relocating and having to risk a large expenditure.
In short, I believe that you will see the GDP stay over 4% for at least another quarter, possibly two. After that the bubble that has been created by high government spending and increased inflation will pop and we will see a major downturn in our economy as a whole. The only way that I can see this being averted is if we start another war, because war, while terrible, is always good for the economy. Do not be surprised if war talk starts to happen in the next few months.
And that my friends is the Uncensored Truth. Thank you for reading.
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