If you believe in Government Statistics – Where do we go from here?

I don’t believe the statistics put together by federal government employees but it is however the only way to judge the nation’s economy as a whole. Over the years the baseline for each statistic has changed since they change the parameters, criteria or definitions

We do however know of our own economic turmoil and that felt by our sphere of influence.

We really don’t need statistics to tell us that we are in a national downward spiral only to get worse. But the media and statistics are telling us a positive economic story – so who is correct?

I understand why you might not buy into my theories after all it is only me and like-minded people against the IRS, BLS, EPA, DOJ, HUD, Administration, Congress, main stream media and 24-hour cable news.

Is the economy getting better for you? I pray that it is but for most of us – not so much.

Can we not reach out to those in need or have we lost our own hearts and souls along the way?

Regardless of your circumstance, let’s consider the nation as a whole and review some statistics. Bureau of Labor Statistics is the source for most of the data. You have to draw your own conclusions based on your own research but comparing current data to 1980 should open your eyes!!

For ease of reference, in the late ‘70’s and early ‘80’s we had a deep recession; the worst since the Depression until now! The early 80’s was a devastating period of time for housing and is in stark comparison to now except for a few key stats.

                                                                      1980            2010           2012           2014

Employment to population Ratio           60%                  58.5% (3/10)         58.5% (3/12)     59.2% (12/14)

Calculation of the Ratio:                                                Labor Force Employed  /  Total Population

1980 Population                                             230,176,000

Employed                                                     138,000,000

2014 Population                                                                                                                        325,127,000

Employed                                                                                                                                 192,000,000

This is a half full or half empty conversation. The problem is that there are about 100,000,000 more Americans in 2014 than in 1980. Of this population increase, only 50% are employed.

More importantly, the 1980 statistics represent a deep recession and in 2014 we are 6-years into the “recovery”.

Median Income                                       $17,710                 $53,469    $52,117          $52,250 (2013)

2014 median income data will be released in September 2015

4^th quarter 2005 median weekly earning $658

4^th quarter 2014 median weekly earning $796

The spin – Median income has increased over 20% since 2005.

The reality – WHEN is the last time you received a raise? Income has remained flat over the past 6-years.

National Debt                                              32.5%          87.1% (1/10)          99.4% (6/12)        101.5% (12/14)

as Percentage of GDP     

USA debt OVER                                   $17,000,000,000,000

World population                                             7,000,000,000

If every human on the face of the planet contributed $2,400 to pay off our debt, we could start over! However, the world median income is less than $2,000 PER YEAR!

Reality – are your credit cards charged to the maximum? What do YOU do? (a) add another credit card to your wallet and start buying more stuff OR (b) start paying off your credit balances

In most cases, the interest rate for a credit card stays constant but extremely high.

For the nation’s debt the interest rate can change – what will happen if the interest rates goes up 1%?

      1980           2010               2012            2014

Inflation Rate                                   14.8% (3/1980)      1.24% (7/10) 1.41% (7/12)         0.8% (12/13)

Ground Beef $ / lbs                              $1.29                  $2.49                        $3.08               $4.15 (1/15)

Interest Rate                                    18.10% (7/1980)      4.75% (2/10)            3.50% (7/12)         3.65% (1/15)

Housing Starts                                    888,100               587,000                 780,000             947,000

The Great Recession ended in June 2009.

Over the past 30-years on average, inflation has been below 3.0% and interest rates above 6%

Please tell me that you see a stark difference between 1980 and 2014 for inflation, interest rates and housing starts.

What will happen to housing as the Fed starts to raise interest rates? We will see a jump start in sales because buyers will get off the fence but then we will hit a brick wall – enter another recession or worse!

The pent-up demand for housing and the lack of housing supply are staggering.  

Median price *                                 $67,000 (12/80)     $241,200 (12/10)     $258,300 (12/12)   $298,100 (12/14)

of Ex. Homes

* Source: Census.gov

For historical reference: the median price of homes peaked at $262,600 in March 2007.

I had a weekly series of posts on why there was a 15.4% housing price increase over the past 2-years if you are interested in knowing more, let me know and I will send you the information.

At what annual salary do you need to buy the 2014         $298,100 median priced home? 

                        3.5% down payment                              $18,800 (+ $6,000 for closing costs)       $25,000 cash needed

Mortgage amount                                                          $279,300

@3.65% interest rate     Salary needed between:             $59,600 - $99,400          Median Income: $52,250 (2013) 

1. Buyers do not have the cash for a down payment.

2. Buyers have too much debt

3. Buyers have been lulled into a comfort zone and have lost the best time to buy a home.

4. Interest rates will eventually have to be raised and housing affordability will turn into “Where will our children live”?

Inflation

Source: Wikipedia, the free encyclopedia

Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.

The consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.

Deflation

Source Wikipedia, the free encyclopedia

Deflation discourages investment and spending, because there is no reason to risk on future profits when the expectation of profits may be negative and the expectation of future prices is lower

A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. NOTE: has the drop in gas prices changed your driving habits?

A combination of excessive money supply and over regulation can lead to stagflation.

What statistics do you believe?

Are you complacent and could careless?

Do you think we are in an economic dilemma?

Do you believe anything our inside the beltway elected officials tell us?

Consider my conclusions which you may or may not agree with. Your opinions are valuable to the discussion:

We are turning into a “What about Me” society

Our personal responsibilities are being eroded away daily

The Fed is between the sword and the wall.

My economic expertise is limited to my experiences during past recessions and analyzing current data to form an opinion:

We are in a deflationary period but once the Fed raises interest rates, the Fed will not be able to stop inflation which in turn will lead to another deep recession.

This will happen before the next Presidential election.