The most recent economic data that has come out shows that the GDP for the United States has shrunk by .1%, shocking many economists who had predicted a slow growth moving into 2013. Why they predicted this, we shall never know, as it would have seemed quite apparent that the factors leading into this year were stacked against the economy.
Not only has Obamacare’s mandate for workplaces to provide coverage for full-time employees caused some businesses to alter their employment models, but additionally Obama allowed the payroll tax cuts to expire, increasing the tax burden on the middle class by 2%. This has had a huge impact on families and individuals that should have been foreseen.
During a period of increased costs for food products and gasoline, a tax hike was beyond foolish and has caused Americans to tighten their belts even more than they had previously. The FED’s money printing has already caused existing savings and wages to drop in value, trailing the marketplace adjustment and upping the cost of living, as it always does. Corporations and Businesses saw this coming, and lowered their orders for stockpiles of goods or cut back on manufacturing, which impacts GDP. If it was so clear to business, why was this a shock to our government?
In spite of this, Keynesians are already calling for another round of economic stimulus. The never-ending cycle of Keynesian economics continues! The solution, no matter what the situation is, is always a stimulus for the Keynesian Economist. While a government check for $300 to every American may boost the economy for a brief period (and I personally doubt it would even do that, as most Americans are still living in a state of debt and will simply put the money into savings or to credit bills), it is far more likely to simply decrease the value of the dollar once more, cause further inflation and push the prices in the marketplace even further north.
Of course, amidst all of this are the constant reports of the Chinese government stockpiling gold for what looks to be a potential move to back the yuan with the precious metal. Some are theorizing that this would then translate to the yuan becoming the world reserve currency, due to the yuan’s new-found stability. This is a possibility, even though the Chinese would stand to lose trillions of dollars not only in the debt they hold for the United States in our dollars, but also due to the potential for a crash of the Dollar. A worthless Dollar would then have a massive impact on China’s economy, as we would no longer be a viable export market for them. So it’s not likely in all reality. Still, every time we devalue our currency by printing money out of thin air and “The Amazing Bernake” pulls more billions out of his bottomless top hat, we spit in the face of our creditors. There will eventually be a breaking point.