Three Reasons to Be Worried About the Economy
On January 12, America’s central planner-in-chief gave his State of the Union address. The president promised nothing less than to feed the hungry, create jobs, shape the earth’s climate, and make everyone a college graduate. There’s nothing new here, though. We’ve heard variations of this silly song and dance every year under both Democrats and Republicans. The president lambasted naysayers as fear-mongers that were too partisan to admit we have a booming economy. The fact that the Dow Jones cratered roughly 9 percent in the same thirty-day period President Obama gave his address did nothing to quell Obama’s optimism about America’s future. In fact, he labeled the US economy “the strongest and most durable in the world.”
Despite our leader’s unwavering confidence in America’s fortunes, a quick peak under the hood reveals a pretty grim state of American commerce.
1. The Federal Reserve and US Government Have Warped the American Economy
In just the past decade, the Federal Reserve’s balance sheet has grown from roughly $800 billion to over $4 trillion. Our central bankers engaging in massive asset purchases to pummel interest rates downward is not news to anyone. We’ve been living in a world of falling interest rates since the 9/11 terrorist attacks. Yet, few mainstream economists have taken a good look at the destructive effects of this unprecedented monetary expansion. The calamitous distortions Fed policy has created for actors on both Main Street and Wall Street since 2008 have laid the groundwork for yet another crash.
Low interest rates stemming from a growing money supply are the only reason the US government has managed to service its gargantuan debt in recent years. The Congressional Budget Office itself has pointed out that even a slight rise in interest rates could potentially result in anywhere from $700 to $900 billion in annual tax payments just to service the interest on our debt.
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