Break out the Champaign again because it is time to celebrate; the GDP numbers are out and they show the U.S. economy grew by 1.4% in the fourth quarter. Yep, we can now all stop worrying that the world’s largest economy will slip into a recession; we can all go out and spend our cheap oil windfall on shinny bobbles we don’t need. Okay, I admit that sarcasm is difficult to get across in print so before I go any further I just want you to know that I am being sarcastic. Put back the bubbly and leave your wallet alone. Yes the U.S. economy grew by 1.4% in the fourth quarter but that is down considerable from 2% growth seen between July and September. For the entire year the U.S. saw its economy expand by 2.4%. That is disappointing, considering that the historical average is around 3%. Worst of all, it doesn’t look like we will see even that 3% level any time soon.
Welcome to the new anemic normal!
There is not much optimism that 2016 will be a game-changer for the U.S. economy. Economists are expecting to see weak 1.3% growth in the first quarter of 2016 and expect annual GDP to be around 2%.
Even the Fed has lowered its forecasts. In December, they expected to see the U.S. economy expand by 2.4% in 2016. Now they say it will expand by 2.2%.
Fed Head Janet Yellen has been pretty confident that economic recoveries don’t die of old age; however, the recovery that we have been in for five years is once again look frail and infirmed.
What is worse is that with interest rates hovering between 0.25% and 0.50%, we have nowhere else to go. The Fed is backed into a corner and if the U.S. economy continues down it current course, I think there is a very good chance we could see negative interest rates.
Unfortunately, I am not convinced that this will work. Just look at Europe and Japan. They have been pumping money into their financial systems like crazy and it doesn’t seem to be working. They are just getting deeper and deeper into debt.
I think it is probably about time we get back to basics. We need to forget about “Too Big To Fail.” Instead of trying to bailout a leaky boat I say we let the boat sink but make sure there are enough lifeboats so everyone is safe.
You are now probably wondering where I am going with my metaphor well here it is.
The government needs to stop bailing out big corporations and instead focus on providing support where it will be needed the most, average people.
We need to let companies go bankrupt no matter how big they are. Instead of throwing money at these corporate fat cats, put that money aside and make it available to the people who would lose their jobs. Use that money to offer people free education so they can learn and upgrade their skills that will make them employable in our new digital economy. The government could also provide better loans for small business to grow and fill the hole left by the corporation.
For example, instead of throwing money at General Motors in 2008 and rewarding them for their incompetence, how many smaller auto companies could have stepped up and established themselves in the marketplace? How many of those smaller companies would have hired out-of-work GM employee as they grew and expanded.
If we want our economy to be healthy again we have to acknowledge that there are boom and bust cycles. You can’t have one without the other. As we have seen, preventing one is now preventing another.
Yes, I realize that this is not an easy path to take and it requires strong leadership (sorry Trump you just aren’t it). I know that some people will probably get hurt, some will lose their jobs and their homes and it won’t be pretty. But let’s face facts: that is already happening.
We’ve tried everything else so maybe we should try something new; we should be looking at create a strong safety net for average consumers, offer them a sturdy lifeboat to get them back to shore so they can start rebuilding their lives.
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