Those who know us well by now here know that we believe in a market driven economy. That the private industry is what pushes the economy, and that the government's role is to set the table for a healthy economy, to monitor it, and to regulate it where needed. It's too bad that folks in DC don't realize this a lot. Much like we overestimate our handsomeness or knowledge of everything, the Fed is again trying not to tinker, but to direct the economy where it should go. Bad things generally happen when that occurs, and we're worried again....
Yep, Ben Bernanke - who's only positive move in life is he was smart enough to leave Dillon and not come back - and his boys are trying to direct a cruise liner with a paddle. About $600 Billion of paddles...in an effort to stop what is called 'underinflation'. So far, it's worked, as long as you consider a 50 cent jack in gas prices good for the economy....
Right now, the economy is stagnant. Nothing is moving, for good or bad. Sometimes that can be construed as a not so bad thing. However, when you work in DC and are under a microscope, you feel that you HAVE to dick around with things. So, while some of us consider right now a time to sit pat, allow consumers to save just a little longer before they finally decide to spend, and wait for a better 2011, The Fed has gone for broke...
Their solution? Selling government bonds in installments, using it to perhaps lower interest rates so banks can lend more, thus creating spending, a healthy inflation rate, and avoiding the 'Lost Decade' that Japan had in the 90's... To our minute brains, this doesn't seem smart, nor effective enough. For starters, take a look at interest rates. If you're looking to buy a home or car, the rates haven't been this good since my parents bought their first house in the 50's... Is another half-point or so really going to make much difference?
Secondly, we'll attack the size of the move: $600 billion is roughly 2/3 the amount of the Stimulus Bill, which was a straight off spending of cash to add jobs, and worked minimally. We're not saying that the amount is too small - we're saying that any amount the Fed or the Federal Government can outlay is insignificant to the size of the US Economy. In short, it will NEVER be enough....
Thirdly, this once again has the potential to ruin the value of the dollar against foreign currencies, which kills Americans' buying power. Poor exchange rates mean less bang for the buck, and we can't afford things even more. It also causes markets to dump paper investments, like stocks, for more tangible assets. Need proof? We suggest going to the gas pump....
Notice the price of gas jumped about half a buck since late September? We did... We wondered what the hell was going on. Hurricane in the Gulf? Nope... Terrorists in the Gulf blew up a platform? Un-uh.... Maybe OPEC of the refiners were rationing production again... No siree, Bob. The reason gas prices went up was on the speculation that The Fed would do this move they are now trying. Yeah, we're all paying about $10 a week more in gas because investors thought this would happen, and the price of oil went up on that word alone. Guess they got it right. So, in short, The Fed was right even before they started this plan. That is actually where The Fed has it's real power: not in it's dollar power, but in it's percieved power. Too bad the market forgets sometimes who really has the power...
It's another case of a desk jockey having a case of putting his finger on the chicken switch too soon. It's a sad day when we think that things like 'too low inflation' exist... We've said it for awhile now: consumers aren't buying right now, and it's not altogether a bad thing. God forbid we should actually save a couple dollars, rather than buy the newest I-Phone or Blue Ray Disc player... When we're ready to buy, we will - and nothing DC can do will affect it, unless adversely. To us, making things more costly will only prolong the Recession- not shorten it.
.
2 comments:
Each bone-headed action by Benny boy and the Fed produces a series of re-actions that neither the Fed nor the Democrats and the current Administration seem to have anticipated. Gas prices go up, people will travel less for the Thanksgiving-Christmas-New Year’s holiday, less money flowing through major travel centers like NY, Atlanta, Chicago, LA and up/down the interstate system. Less cash flow through the economy could be the start of a brutal holiday season.
Further, rising fuel prices will drive an already frightened buying public back home at the time when retailers are most desperate for them to out and buy. Already, the news is talking up the Black Friday sales and the loss leaders many stores are putting out, to try and entice shoppers. It will be interesting to see what the retail numbers look like after the BIG weekend and then at the end of the Christmas season.
If, Black Friday turns out to be less than stellar, I think it will predict a smaller Christmas than previous years (which have been abymissal) with many buyers going spending less and waiting till the last 10days of the Christmas season to spend.
Also, one needs to keep in mind that rising gas prices at the pump will also mean rising heating prices as we get into January 2011 and the heart of winter for most of the country. All that will be needed is one or two harsh winter storms and you could have a cold, hungry and possibly desperate people in the mid-west and northeast.
So what is the end result? 1)Consumers are going to tighten down even further on discretionary buying and will hard pressed on the necessities for daily living; 2)the current administration will see its approval/support numbers drop further from the current 44%. I think we could see approval numbers around 38-39% by the start of spring, much lower if the weather is colder in the Midwest and the northeast.
If #2 occurs, the Republicans in Congress, lead by the Republican House will press Obama and the Democrats for workable solutions. I fully expect Pelosi and Reid to soldier forward with their liberal socialist democrat agenda at the expense of America's financial national security rather than work towards bipartiansan solutions.
If one does any amount of traveling, either around this state or across this country, you can see serious declining moral and confidence out of the average America. Many average Americans now think that the administration is driving this country straight off cliff in pursuit of its liberal socialist agenda. The appearance is one of consequences be damned, we know what best and to hell with the pain of the average American.
I think alot of us can already see 2012 from our house....teg
wtf
Post a Comment