Posts
March 1 2010
Hi All,
Today we are wondering, where is the economy going? It appears to be trending upward but almost as fitfully as the Wright brothers early attempts at flight. I have written before and I will continue to write that the secret to restarting the economy is to clean up the housing mess. When real estate prices become stable then the consumer will return to the market place and jobs will reappear.
One thing to consider, especially as we look forward to midterm elections, is that the longer instability remains in housing the more pent up demand grows for just about everything that we held off buying because we were uncertain. That pent up demand may be the next bubble.
What if the government waits for the market place to finally sort it all out, and it eventually will, and the pent up demand continues to expand for an extended period? When it is unleashed it will create a round of inflation not seen since the days of Jimmy Carter. Remember those days of 16% mortgages and double digit inflation? Remember how government responded to that with wage and price controls? Now I’m a free market guy, but we have not let the free market work on its own so we have prolonged the agony. We are letting the bubble build just as sure as we did when we encouraged lenders to find creative ways to raise capital to lend to high risk individuals who bought homes they couldn’t afford. Consumer demand is always there in the United States. We are a nation of spenders, not of savers like Japan. We can and we will spend our way out of this recession…as soon as we have confidence in our circumstances.
15 million plus workers are looking for jobs today. Many more have quit looking and filed for early Social Security. Many others have taken jobs well below their ability and training just to feed their family. If this situation continues for a long period of time, we may once again become a nation of savers like those who lived through the great depression. That would resolve the inflation worry but if you believe that you can’t shrink your way to greatness then where does that leave us? Worldwide economic expansion is the surest weapon we have against another World War. The have-nots have always risen up against the haves and the haves have always tried to dominate the have-nots. The Romans expanded by conquering weaker peoples who didn’t have the economic power to resist. Germany in WWII conquered peoples of weaker economic power, building an empire built on economic control. It was a strong economy that provided the funding to expand armies and weapons systems. The USA was able to assist in that great struggle because we were a large landmass filled with natural resources and manufacturing might and were such a large economic power that we could push back. If we fail to engineer this recovery properly and soon, our ability to push back will become suspect. And countries, like sharks, getting very aggressive when they smell blood.
Think about your representatives this midterm election. Is he /she representing your best interests and the best interests of this state/nation or are they protecting their own position and furthering the agenda of a single political party? Once you decide that for yourself, then you can cast your ballot intelligently. Ballots, cast by informed voters, are the one thing that has always made this country great.
