It's the economy stupid...

As we grind closer the the November elections, I don't think the quote, "It's the economy stupid" could be ringing any louder....today's job report was brutally ugly and shouldn't really be a surprise....

I’m going to break down the overly complicated state of the Economic times in a hopefully easy to understand manner.  We hear so many, statistics….from jobs numbers, to housing numbers, to what the stock market is doing to what interest rates are doing and on and on and on….we get “lost in translation”.

So here’s my translation:

The U.S. economic troubles boil down to this.  Currently there are about 7 million working-age people and 5 percent of the nation’s industrial capacity sitting IDLE and not producing what they "could".  In good times, nothing is sitting idle and we have full employment around 5%....this what is called Maximum Capacity or Full Output. 

Today, the gap in workers who want to be employed and the factories, etc that aren't producing what they could, due to lack of final demand is what is called an Output Gap: the divide between what the United States “CAN” produce and what it “IS” producing.  The output gap is currently $900 billion which is why it still feels like a recession even though technically, you are hearing we are in recovery.  So....MILLION DOLLAR question:  How does this “Output Gap” get filled?

3 scenarios, which telegraph just how difficult it is to move the needle on an economy as large as ours….

If GDP grows at 6% - (very unlikely), but worth depicting nonetheless.  Output gap would be filled by 2012 and unemployment would return to 5%.  We could all sit around the camp fire and sing “Cumbaya”….after arriving to the campsite by flying unicorn’s….after purchasing them from my Unicorn Ranch…..well you get the picture.

If GDP grows at 3% - Output gap would be filled by 2020 and unemployment would return to 5% in 2020….Ouch that’s a long process….

If GDP grows at 2% - (a tad Above current growth rate).  Output gap would be filled by…..wait for it......NEVER….that’s right…..it WON'T keep up with pace of increased productivity and population growth.  Therefore, unemployment wouldn’t get better….and would actually rise to 12% by 2020…..

I just gave 3 scenarios of Positive GDP growth....2% growth looks pretty dire....what if god forbide we actually contracted....or double-dipped?

There are 14.8 million Americans that are unemployed.  Full Output and an unemployment rate of 5% means 7.8 million Americans need to find jobs......Problem:  2010 has averaged on a monthly basis an average of about +40,000 jobs per month….I hate to mention that most of the + was Census hiring by the Gov’t, but I’ll give the benefit of the doubt and even round up to a positive 50,000 jobs per month.  At that rate to get 7.8 million back to work it would take 156 months or 13 years…..that coincides with the Output Gap never getting filled and Sub 2% growth....

Don't give up hope....Our "Lord and Savior" of Change and his pro-business stance just came on the tube and blasted Republicans for not wanting to save Public police, fire, and teaching jobs....shame on them for wanting to save over $4 million per job cut....thats right.....that's what it costs to employ one Policeman for life....this is what we are dealing with....maybe, just maybe if you got those costs in-line with the Private sector, job Cuts wouldn't be needed!

Please forgive me for the lack of humor today and the serious tone....but im just to PO'd, I just can't find the energy from hearing such garbage being thrown around....I'm just sick and tired of today's society turning into the "Zero Accountability" generation....It is always somebody else’s fault….how is the next generation going to be if they grow up always hearing they are never wrong, and they can never fail....failure is what you make of it.....it is how you pick yourself up and perservere....how can you learn without failure?

Shame on "Us"...

Asset Astrology...

Hoorah!!! ....Every “Asset” is going up, and up and up....Stocks to the moon!  Oil to Mars!  Gold to Saturn! Copper to Jupiter!  The Dollar to Uranus! .....wait....Hold on, I don't like the ring to that....

Mr. Dollar...well, he's growing real tired in his old age....he's going down to a place where he can't be spent or used as a medium of exchange outside our border...

This is your hard earned moola getting squashed by all other countries: Dollar Index Chart

Memo to the FED: Trading Asset price inflation for Debt will end very, very badly....Look no further than Mr. Greenspan and his "No Recession on his watch" philosophy, which ended pretty well right?

I feel terrible for the last "retail investor" in the pool again this time....2007-2008 might look like a "walk in the park"....Good thing Uranus doesn't have a currency...