Courtesy of Pam Martens.
The “thriving” U.S. economy as reported in a Bloomberg News headline this morning – a characterization which supports the U.S. central bank’s position and little else – was further undermined by the 8:30 a.m. release of retail sales for January, which dramatically undercut analysts’ estimates and came in at a decline of 0.8 percent. January’s drop followed a negative 0.9 percent reading in December.
Consumer spending represents roughly 70 percent of Gross Domestic Product (GDP) growth in the U.S. If the consumer is retrenching, despite all the prognostications for all that extra money sluicing through their bank accounts from cheaper gas at the pump and lower heating fuel bills, the economy can hardly said to be “thriving.”
The troublesome headline at Bloomberg News this morning was this: “Who’s Afraid of the Rising Dollar? Not the Thriving U.S. Economy.” The article, by Shobhana Chandra and Christopher Condon, delivered the comforting message that you needn’t “believe everything you hear about the corrosive effect a more expensive dollar has on corporate America. U.S. businesses and the world’s largest economy can handle the greenback’s strength just fine.”
After dismissing a notable list of America’s largest companies who groused in their earnings announcements that the strong dollar had indeed crimped their profits in 2014, the authors write: “The bigger picture is hardly so dire. Viewed as a whole, American business is much less vulnerable to the dollar’s rise than are the U.S.-based multinational giants. The exchange rate poses an even smaller threat to U.S. economic growth, which wrapped up its best year since 2010. While a strong dollar may weaken exports, it also means cheaper oil, less costly goods from overseas and continued low inflation — all good things for an economy that’s powered by consumer spending.”
The authors breeze over a long list of serious problems being delivered to the U.S. economy from the strong dollar. The U.S. dollar is being talked up by the Federal Open Market Committee of the Federal Reserve on pronouncements of “solid” economic growth which warrants a rate hike from its zero bound interest rate policy which went into effect an unfathomable six years ago on December 16, 2008.
After using the bully pulpit to convince other countries to adopt its favored remedy of quantitative easing to crawl out of a lethargic economic growth pattern, it won’t be pretty if the U.S. has to admit that the Fed ballooned its balance sheet to $4.5 trillion dollars, has little to show for it in the way of economic growth, and now has to dive into massive stimulus spending to ward off deflation.
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