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Joseph Stiglitz, in an interview with CNBC has said what we are all probably thinking right now. Even President Obama can’t be foolhardy and ostrich-like with his head buried in the sand to imagine that the US economy is picking up. Hope against hope and all the rain dancing you can do won’t get the economy moving because the wrong decisions have been taken by the people that thought that they had the ultimate solution to the world’s woes. Joseph Stiglitz is right when he says that the economy is not in recovery mode and hasn’t been.
Talk as much as we might wish about growth, it just hasn’t materialized. The lackluster growth with the highest growth rate in the third quarter of 2013 (the highest since 2011, which is nothing in itself to write home about) has not even dented the US economy let alone kick-started it into 2014. We have everything to be still worried about as the problems are just stagnating there as the people at the top take the decisions that are going to bring the economy further down into the doldrums. Just how far can we go?
The US stock market has hardly had a good start to the year. Just about the only thing that is doing well is the banking sector. As usual, some might say. The correction that has been promised now for months looks set to be rearing its ugly head at any moment now. Equities have fallen already almost 2% since the start of this year. Those that had somehow foolishly believed that the only way was up or that the sky was the limit look as if they are going to be in for a rough ride.
The market hasn’t corrected itself now for the last 28 months. The longer the wait, the bigger it will be. Statistics show that there is a correction of the market roughly every 18 months that is in the region of 10%. Yesterday was the worst session for the Dow Jones Industrial Average. It fell 1.1% at the close, down 1.9% for the start of 2014. The S&P 500 is down 1.6% and the NASDAQ has fallen by 1.5% so far this year.
The US employment situation is far from good. Jobs haven’t and just aren’t been created these days whatever the government has been telling us. We get people rejoicing over a few thousand jobs that are created, when we need literally hundreds of thousands of jobs every month. Data from last week showed that 74, 000 jobs had been created in December. We we’re expecting 200, 000.
It doesn’t create uncertainty; it just leaves the bitter pessimistic taste of failure in your mouth, Mr. President.
The participation rate in the US hasn’t been this low since 1978. It stands at just 62.8% for December. The number of people that are actively looking for work or in work hasn’t been lower now for more than 35 years. Stiglitz stated: “We have millions who have given up looking for a job. They’ve looked and looked and there are no jobs…more and more Americans have said there’s no future”.
All of that just brings on the same old story about the Federal Reserve’s decision ti cut the Quantitative Easing and shut down the printing presses after injecting $3 trillion into the US economy to keep it floating. All the bailing out that you can do is not going to plug the hole in the bottom of the boat, is it?
Stiglitz believes that it’s fiscal stimulus that will get the economy moving again and certainly not throwing bad money after even worse money. No amount of printing the greenback will have little if any effect on the economy. They might as well just go, get down on their knees and start praying in Washington. Nothing else will happen.
Fourth-quarter growth for 2013 looks as if it will be mediocre at best. Profits growth for S&P 500 is predicted to reach an increase of 7.7% in comparison with December 2012.
Robust growth, let alone any growth at all, is certainly not on the cards this year. According to Stiglitz, we should start worrying (or at least continue).