Posted on 06/26/2012 4:24:14 PM PDT by blam
It’s extremely bad out there with oil prices crashing and other commondies following suit. The oil industry will be devestated and we have no idea how far the price of oil will drop.
It is darkest before dawn, when all of the Chicken Littles are convinced that the end is near. Then the Sun rises.
Private Investment is up 10%.
Web 3.0 is revolutionizing the online world.
Fracking is increasing U.S. oil and natural gas production that is driving down gasoline and electricity costs.
In other words, the Recovery has begun with investment and major tech revolutions.
no
I do a lot of travel, domestically and internationally, as a consultant to manufacturing and investment firms. While there may some positives that can be found, they are growing fewer and fewer. There is a significant slow-down occurring, and it is gaining speed. The question before any real recovery happens, is how hard the stop will be before we reverse direction, and what type of damage will be left in the wake.
I appreciate your anecdotal insight.
All those toxic and non-performing real estate loans out there, which have still not been foreclosed or written down, continue to deflate much of the wealth, because their presence continues to depress overall real estate values. Once these toxic mortgages are drained out of the system, the real price of real estate may then be re-established, and we shall have a “new normal”. This allows a slower but more orderly growth of new construction, or rehabilitation of existing housing, both major drivers of any employment recovery, leading back to a healthier overall employment picture. But first, enormous numbers of restrictive government actions will also have to be reversed, both as regulations and as taxation, and imposed mandates that have no rational basis in fact. In fact, there are a LOT of toxic factors that are paralyzing recovery right now, much like what fed the Great Depression from 1933 through the Second World War. The New Deal kept trying to “fix” things, and only made the mess worse and more tangled, until the demands of wartime mobilization made much of the regulations either dead letter, or modified so much as to remove most of their former restrictiveness. After the war was over, a lot (though by no means all) of the New Deal was repealed, often over the objection of then-President Harry Truman. The effects of that boom were felt through most of the Eisenhower years (which had a couple of slowdowns of its own, but only for a year or two at a time).
In retrospect, that was kind of a “Golden Age”, though not recognized at the time.
Then we got Kennedy-Johnson and the “Great Society” the effects of which STILL drag on the economy, through a vast expansion of the welfare state. For example, the “War on Poverty” contributed almost the entire cost of our national debt (yes, the $16 trillion or so), essentially, we have done it all on borrowed money, and what do we have to show for it. The money is still borrowed, and hanging over our heads like the Sword of Damocles.
The writer of this piece surely doesn’t go to the grocery store, buy auto and health insurance and most definitely isn’t putting any children thru university.
If there is one thing you can count on, it is that they will do ANYTHING to inflate/devalue the currency.
What we really have is a form of late 1970s stagflation. Prices of what you need (oil, food) are on the rise (although WTI is now under $80) while prices for your biggest asset (your house typically) is shrinking and looks to do so for a while. Add that it looks like taxes will go up and the middle class is getting squeezed big time.
schu
“The writer of this piece surely doesn’t go to the grocery store, buy auto and health insurance and most definitely isn’t putting any children thru university.”
Yep. Spot on.
We have inflation on what people have to spend money on. (Food, Medical, etc).
Were having Asset deflation right now however.
Someday when the Economy truly does pick up is when were going to have lots of inflation across the board. (Velocity of Money).
That is only half the story -- the demand for loans was minimal, because business was contracting because of the lack of consumer demand for their products.
There is both deflation (in housing and other assets, in employment and average income, etc.) and inflation (food, energy) going on at the same time.
None of those are related to the amount of money in circulation. “Inflation/deflation are always and everywhere a monetary phenomenon.” ~ Milton Friedman
There is a lot of cash waiting for 0bama to be gone before it is spent/invested.
I’d rather see runaway deflation than runaway inflation. In deflation, there is a bottom. In inflation, there’s always more inflation. Plus, if you are a saver, deflation makes your savings worth more.
You'll be turned upside down and your last change will be shaken out of your pockets before the psychos who run the financial system let you have a penny. The politicians haven't put all that 401K money in a "lockbox" yet. Whatever it takes to screw the Muppets will be done. Deflation may make somebody's savings worth more but your probably not on the right family tree.
Liberal beliefs about wealth guides their thinking about Americans being resource and energy pirates, stealing from the rest of the world, especially the Third World. We could not have all that expansion/inflation unless we stole it from other countries.Liberals/Keynesians do know that inflation effectively sucks in to the government the value from holders of the money.
Keynesians/Liberals have split minds. On the one hand they are frantic to have inflation and on the other hand they are appalled at the expanding/inflating USA stealing resources from poor third worlders. Thus they are frantically trying at the same time to expand the American economy by inflation and raging about America starving the less developed countries.
Your facts are true, however all of the pluses you detail are under assault by this administration. We need a good November outcome to lift the national mood and our credibility in the world.
What we've seen for the past going on four years has been liquidity finding its way into those areas with reliable demand. There has been speculative excess, driving up commodities and creating a situation with food, oil, precious and industrial metals that is for all intents and purposes inseparable from actual inflation as far as the general public is concerned, as the difference is purely academic. The consequence is the same.
Those areas without reliable demand have suffered. Housing, non-necessary consumer goods, etc. have fallen in value, ie deflated. Stocks are widely suspected of being propped up via government intervention.
Absent the bizarre, almost unfathomable spending spree we've witnessed, we'd be experiencing a deflationary depression far worse than the Great Depression. Technology has enabled the appearance of normalcy, no soup lines, very few people literally forced out into the streets.
As we see with Greece, however, that possibility does still loom. It hasn't been eradicated. Government spending does have a practical limit, even if that limit is imposed from outside.
How all this will ultimately pan out is unknown but there aren't many potential good outcomes. It looks a lot like penury in store for all but the very wealthiest few no matter which way this shakes out, sad to say.
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