IMF


October 12, 2015
We are not doomed to accept the downturns . . .

This week the IMF announced they have downgraded their global outlook for economic growth in 2016. Before the end of the year, we will probably see another downgrade. Of course, one of the problems with global growth is China.

Everybody is trying to assess China's economic data. However, little of their economic data can be trusted. We have to examine exports and imports. We can also consider a couple of other data points that cannot be manipulated by the markets. Examples include currency to the global markets and imports of raw materials for construction and machinery for manufacturing. Overall, it is difficult to get a real handle on any economic data coming out of China. I think the more analysts try to do so, the more confused they get. It's communist China there is no transparency.

We are starting to see some shifting in the agricultural side of things. We will watch this closely as we check commodities around the globe. Brazil is dramatically affecting global commodities. The focus is on the U.S., where the economy still looks good. It may look good-but compared with what? It looks good compared with economies around the globe that are suffering dramatically.

We talk about how wonderful our housing industry is, yet we are building half the number of houses we built the last 20 years because the demographic of home buyers is changing substantially. We continue to look backward instead of forward. For example, we look at what the unemployment rate in 1977 and back to 1994 to get any real housing number that compares with where we are today. Because today is better than in 2008/09 the heart of the recession, we are excited about the progress that we are making.

We look at candidates like Bernie Sanders, who continues to take the lead and is gaining strength among young people. This is a Socialist who believes deeply in redistributing everything. Have we figured out yet that it is impossible to redistribute wealth and have growth at the same time? They are diametrically opposed to each another. The expectation of prosperity is changing significantly. So is the expectation of what one can earn coming out of college. These changes bring people almost to the point where entitlement programs don't look so bad and the way we can get ahead is for the government to pay some of our expenses.

Some companies are creating jobs based on equity prices of those companies. People are being paid based on equity and growth in the company. Of course, their bottom line comes from financial manipulation instead of revenue. In the past, when companies made more money, so did their employees. Anybody out there who has started a small business understands you pay people based on how much money the company can create in sales - revenue - not just because the value of the company is going up.

I think America is upside down in defining what it takes to drive a growing economy. If we can hang in long enough to get to November 2016, we may see a turnaround in Washington begin to take place. Oh, it will take years - maybe even a whole generation - to get a complete turnaround. This will only happen when we are 100 percent focused on creating opportunities for people to excel and innovation to thrive. When entrepreneurship and creativity are encouraged.

The global market may be slowing and the U.S. market is a part of that. However, it is not too late. It is something we can change. It is not something we are doomed to accept. But we will have to fight for change. We will have to urge our legislators to vote correctly. And we must be as informed as possible about what made America great and what can make America great again.

The economy is about what is happening on Main Street-not Wall Street, K Street, or Pennsylvania Avenue. However, we will need and welcome the help of a congressional body that is willing to begin redistributing good, old-fashioned growth, work ethic, and opportunity.

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