We are being told that something good, or at least less bad, is starting to happen. The fear of a depression has faded. Certain of the institutions that received monies from the government have repaid these sums, with interest. Unemployment figures, while still deplorable, are not growing so rapidly. There is much additional stimulus money that has not yet found its way into the system. Those monies should further assist in reversing the slide.The cash for clunkers program has breathed a hint of life into an otherwise dying auto industry. The frightening tailspin in the stock market has been halted and the bulls have begun to run once more. At least on a modest level, there are signs that the effort has produced results. Why then does everything seem to be so bad?
The message that is being delivered to us is of a government that is not in control of our destiny. The health care reform fiasco, the uncertainty surrounding how we proceed in Paki -Afghanistan, the lack of contrition by, or punishment of the wrongdoers in the financial upheaval, the do we or don't we attitude involving chasing down perceived criminals in the Bush administration, all contribute to a general uneasiness.
We are not being persuaded that there is a method to the seeming randomness of what is happening. Is Obama really like the Wizard, hidden behind the curtains and pulling strings that we just don't see? I know he is brilliant, but show me that he is a brilliant strategist and not just another politician playing a game that we don't approve. We see the answers to some of these questions and we know, or believe, that he has the same sentiments. Why then, don't we hear the confident assertive tones that were so prevalent during his run up to the presidency?
I keep telling myself to be patient. We are inherently a people that are not willing to take our time. We are a fast food, fast talking, fast answering bunch. The President has counseled us that all does not come easily or quickly.
The President's approval ratings are plummeting, as do all Presidents once the brief honeymoon after taking office has ended. I know he can't govern to please all of us, every day. But, for the sake of our well being, please just give us a morsel we can chew on to feed our worried souls. Come out from behind the curtain.
1 comment:
Yes, the fear of a DEPRESSION has faded, but:
1. Unemployment is still rising in the US and Eurozone.
2. This is a crisis of liquidity and solvency. Real deleveraging has not begun because the losses of the financial institutions have been socialized and put on government balance sheets, thus limiting the ability of banks to lend, households to spend and corporations to invest.
3. Foreclosures in both residential and commercial real estate are rising.
4. In countries running current account deficits, consumers need to cut spending and save more. These debt burdened consumers face a wealth shock from falling home prices and stock markets and shrinking incomes and employment.
5. The financial system, despite policy support, is still severely damaged. The banks (look at the rising bank failures) are saddled with trillions of dollars in expected losses on loans and securities while still being seriously undercapitalized.
6. Weak profitability due to high debts and default risks, low growth and persistent deflationary pressures on corporate margins will constrain them from producing, hiring workers and investing.
7. The releveraging of the public sector through its build up of large fiscal deficits crowds out a recovery in privaqte sector spending. The effects of the stimulus will fade out early next year, requiring greater private demand to support continued growth (but the banks are not lending).
8. There are grave risks associated with an exit strategy from the massive monetary and fiscal easing (money printing-quantitative easing). Policy makers are damned if they do and damned if they don't. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into recession. If they maintain large budget deficits, bond market vigilantes will punish policy makers and inflation expectations will increase, longterm government bond yields would rise and borrowing rates increase leading to stagflation.
That's just part of the reason everything seems so bad. When you stop to think about the war in Afghanistan, the Iran crisis showdown coming and its relationship to Isreal it seems worse. You start out with "We are being told..." well think about that for a moment.
As for the wizard, I would not listen to what he says, but watch what he does.
Post a Comment