The economy is still weak. Retail sales are lagging and home sales can not get past start. The media and more importantly the financial media is just flat out ignoring those facts. The Fed fortunately is not. Note that home mortgage rates refuse to go past the 4% mark for a 30 year loan. Move above that 4% and home sales drop every time. That in turn keeps a lid on housing values as those two elements are linked. Add in that many young people can not afford a new home while working as a service worker, which are the only jobs being created presently. Retail sales too are not growing as noted by the continuing closing of stores by chains such as Target. Those two financial facts alone dictate the truth that employment is still way below where it needs to be in this country. Despite the headline seeking below 6% unemployment rate the fact that there is no wage pressure tells anyone who has been a long term observer that there are lots of employees seeking the few jobs available. Now much of this labor weakness is the lack of marketable skills and the unemployed not matching the jobs that are open. Many just refuse to take a job, any job, to keep the money flowing. The UNDERemployment rate is still over 10% and reflected in federal data.
So with these weaknesses the Fed is unable to push up rates with no demand for loans and no demand for business expansion. This economy is also being restrained by huge regulatory burdens and high taxation of SMALL business put on by the Obama administration where the mass of new job creation always comes in the economy. The jobs that are there are entry level, which again many young folks will not take due to being over qualified. The ones that are taking jobs are jobs in the service and restaurant industries as we noted earlier where the wages are low. The Fed also sees a world economy as weakening and Europe, China, Russia, and Japan in economic trouble. Finally the political angle, no way the Fed raises rates in an election year when they need a Democrat to win the White House to keep them appointed to the Federal Reserve Board.
We again touch on the generational theft that is occurring with the twin issues of low rates which constitute the financial engineering of allowing big corporations borrow debt to buy back stock and the continuation of mega corporations to use profits to buy back more stock and reward those who are shareholders. Obama's huge deficits and mountain of national debt are rewarding those who are the ultra rich and just want 2% or 3% interest from US Treasuries for their huge asset bases to throw off nice sums of interest to live on. These ultra rich, like the shareholders noted above, tend to be older gentry rich or the retiree rich in lifetime accumulated assets. How long we will continue to vote in the people who keep this generational theft going who knows. The electoral control is now mostly in the under 35 year old voters who seems to be clueless in their foolish actions of electing those who continue the generational theft of using government to pad the rich and retired and take jobs and opportunities for the young.
In the end those who continue to own stocks, and we continue to suggest large corporations, will prosper and be comforted. Seems we now afflict the already afflicted and comfort the already comforted. We who own assets are thinking another eight years of Hillary Clinton and we will be nearing the end so who cares who the Republican nominee is if we can run out the clock doing life this way. Think of it like this, if you hold AT&T and Verizon, both paying above 4.5% dividends you are getting a nice return on your savings. All the while with the solid safety of knowing the young folks hooked on iphones and such are using their precious few dollars in pay to support you by being coddled and amused with their toys. The beat goes on.
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