Goldilocks Is a Fairy Tale
Rodney Johnson | May 07, 2019 | Employment numbers came out last week and showed unemployment at a 50-year low. Average hourly earnings are up 3.2% over the past year. Add in the equity markets at record highs, GDP at 3.2% in the first quarter, and 10-year bonds at 2.5%, and you might be forgiven for thinking we’re in economic nirvana. But this is no fairy tale. There’s no Goldilocks story where everything is “just right.” We haven’t achieved some beautiful equilibrium where growth is free and everyone gets rich. We’ve simply transferred wealth to those who could buy real estate or intangible assets after the financial crisis, and now we’ll have to claw it back from them to pay for everything from social services to infrastructure. There’s no free lunch. It’s been more like an all-you-can-eat buffet… and we’ll pay at the end. If you’re not seeing this gathering storm, you’re not paying attention. Neighborhoods south of mine are still recovering from Hurricane Harvey, almost two years later. Hurricane Michael flattened Tyndall Air Force Base near Panama City, Florida. Neither area can get to disaster funds at the moment. As the Wall Street Journal reported over the weekend, they’re hobbled by the same thing: Puerto Rico. A One-Way Street The commonwealth spent its way to bankruptcy, only to be hit by Hurricane Maria, but then squandered recovery funds, and now the Feds aren’t dispensing any recovery dollars. As for the bankruptcy, the committee overseeing Puerto Rico’s finances just declared two bond issues from five years ago invalid. If you own the bonds, you’ll get a letter demanding you return all interest received. But you won’t get your investment back… it’s a one-way street. Detroit did the same thing in 2014. This exact situation is coming to a town or state near you, especially if you live in Chicago. READ MORE »
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