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    Wednesday, December 23, 2009

    Economy Re-Tanking. Thanks Dems.

    Back on December 20th, a fellow sub-blogger posted about how the "recovery" is just around the corner and how the Right would ignore it.

    Among his proof, he cited:
    • Foreclosure filings falling 8% in Novermber
    • Slowing unemployment increases
    • GDP improvement
    • Narrowing Trade deficit
    • Stock market rising
    Just this week, we have these new numbers:
    • November new home sales sank an "unexpected" 11%.  Seems these days there's a lot of "unexpected" bad news in the Obamedia.  Existing homes sales were up, though. 
    • Even those foreclosure numbers were qualified.  Much credit was given to government programs that will eventually run out.  Still, not foreclosing is a good thing.
    • That "GDP" improvement was revised downward from the original 2.8% to 2.2%, with 1.45% of that attributable to Cash for Clunkers.  So, without the artificial CARS program, growth was 0.75%.  It's growth, but it's rotten growth..
    • Since that December 10th post, the latest jobs figure showed new jobless claims still growing faster than expected.
    • Not sure where Rob gets his trade deficit numbers.  In Q3, the US trade deficit rose by $16.2B.  Almost a 20% increase.That's actually taken as a good sign - that more Americans are buying foreign products.  It can also reflect fluctuations in the value of the dollar.  The dollar has generally been tanking for the last year. 
    • The stock market.  Hard to understand the market except in light of the fact that it precipitously crashed and is slowly getting back to its correct level.  I will also add that it was way overvalued at 14,000 and due a crash, so a recovery is not to be unexpected.  I would posit that there is relative safety in the established companies that are traded on the Dow and NASDAQ (to a lesser extent).  These companies will mostly benefit from the Fascist policies of the Obama administration, as opposed to small businesses, who will suffer and I think the market understands this.
    • Comsumer Sales - this is good news - consumer spending is up significantly.
    So, the economy is a mixed bag. The economy is also responsive to things other than fiscal policy.  So, it's not ALL about Obama, though he certainly has much influence, though barring absolute major policy initiatives (like health care and cofiscatory tax rates), there may not be that much he can do besides tinker.  it is a long held belief that the Fed via monetary policy, wields a much larger stick, and, of course, the participants in the economy asolutely determine its direction.

    Right now, we seem to be enjoying decent consumer spending, though not on the big ticket items (cars, homes) that are going to sustain any recovery.  Unemployment remains way too high with no real decreases in sight.  Deficits threaten to force the Fed to launch more money into the economy to increase the money supply and use inflation to pay off debt.  The massive regulation (at the least) or complete takeover (at the worst) of the 1/6 of the economy that is health care is not going to help, especially funded as it is by increased taxes and a reduction in doctor payments for Medicare patients (a reduction that will not happen, adding some $500B to the deficit over time.

    Cap and tax is, fortunately, most likely dead, so that won't drag the economy down.  But, the EPA's decision to treat CO2 like a pollutant may do the same thing.

    So, the administration is taking bold steps. Bold steps to throttle a fragile economy.  People have a right to be scared and apprehensive, and until the people see the light at the end of the tunnel and are willing to become entrepreneurs again, the turnaround won't happen, or, we're in for another lost decade, just like the Japanese are suffering through.

    The answer is something completely different.

    1 comment:

    reddog said...

    Economy is going to tank no matter what. We are heading into a multi generational economic depression. We won't see the end in our lifetimes but we will become used to it and make ourselves useful.

    On the bright side, should be quiet times, until they fluff up World War III.