Posted on 08/04/2011 8:31:21 AM PDT by SeekAndFind
Stocks and bond yields are sinking as Wall Street disses the debt deal and instead focuses on a likely double-dip recession.
Everyone is gloomy. But is this pessimism getting a little overbaked?
Granted, the economy is sputtering, with less than 1 percent growth in the first half of the year. But if there is a recession in the cards, it will be the first time one occurs when the yield curve is steeply positive (an ultra-easy Fed) and corporate profits are strong.
And since we do have ultra-easy money and strong profits, I don't believe we're heading into a recession. Nor do I believe stocks will continue to swoon.
The principal reason for the sub-par first-half economy is the rise of inflation, which severely damaged real incomes and consumer spending. We experienced a mini oil shock, which has dampened the whole economy. Actually, it's worth remembering that oil shocks and inverted yield curves, along with falling profits, are the most important leading indicators of recessions. We don't have this right now.
Fortunately, oil and gasoline prices have come down well below their highs. That's going to take pressure off the economy.
Of course, QE2 backfired as the dollar sank and the inflation rate temporarily jumped 5 or 6 percent. However, as energy prices have eased back down, the inflation rate as measured by the consumer deflator has fallen, and is up only 1.3 percent annually for the past three months. If the dollar can hold its current level and energy prices remain quiescent, the economy will be okay.
Not great. The second-half economy could grow by 2.5 to 3 percent. There are so many tax-and-regulatory threats out there that it's hard to expect much more growth. But at least it's not recession.
(Excerpt) Read more at realclearmarkets.com ...
Corporations can make profits, up to a point, by cutting costs. Profits have to be combined with growth to be meaningful.
Why is this guy still around?
Has he ever been right on anything?
One of the few faults of the Reagan administration was that it had scores of hangers-on at lower level positions who in later years were able to use that “worked in the Reagan administration” on their resumes to make people overlook their other failures and treat them as conservative wizards.
Kudlow, Colin Powell, David Gergen, are examples of these losers now being given credence yet totally unqualified to give anyone advice.
Kudlow’s back on the blow.
Isn’t this the guy that helped Mugabe in Zimbabwe fix their economic problems??
RE: Isn’t this the guy that helped Mugabe in Zimbabwe fix their economic problems??
I googled and names of Larry Kudlow and Robert Mugabe and I don’t see anything of significance coming up. You might be confusing Kudlow with someone else.
The communist kudlow speaks... satan smiles.
LLS
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.