The Economy: Looking Ahead at 2010

In case you where busy with the Christmas holiday and didn’t get the latest news about the 3rd quarter GDP it was significantly revised downward to 2.2% from 3.5% The 3rd quarter GDP is false reading of the economy because it included the surge in auto sales from the “Cash for Clunkers” government program. Auto sales have literally disappeared in the 4th quarter.

Last month the White House declared the recession over based on positive growth in the 3rd quarter and we may even have some positive growth in the 4th quarter which means that we have a statistical end to the recession, but statistics have been known to lie.

This recession that began in December 2007 is like none other that the country has experienced in the past. The average recession in America last about 16 months and as far as I am concerned the end is nowhere near in sight after 24 months.

Much to-do is being made about the spike up in the Yield Curve and in normal times this can be taken as a sign that growth is coming, but once again I must reiterate that these are not normal times.

The steep yield curve in this economy is NOT a sign of recovery, in fact it signals a brake to recovery because it encourages banks to own Treasuries rather than lending on assets. The Big Banks are swimming in money and have nowhere to put it except into the Treasuries and what are seeing is government created assets by the Fed’s printing presses this has given us a false reading in the yield curve.

The country needs two things to happen to climb out of this recession and they will not happen because government intervention has caused a cloud of “uncertainty” to hang over the country.

1. The credit crunch for small business is getting worse, right now small business is flat on its back which means employment will not come back in the near future. Any recovery in 2010 will be a “jobless recovery.” Small business faces the “uncertainty factor” in the areas … healthcare costs, energy costs, new government regulations regarding emissions, new taxes and tax rates that are do to change.

2. In the past it has always been the American consumer that has led the country out of recession. The American people lost six trillion dollars of home equity since 2007 and again here the “uncertainty factor” comes into play. Until the housing market stabilizes consumers will tend to be cautious.

The housing market showed a severe downturn in December after a few good months of upticks. The upticks are false readings because they can be directly attributed to government intervention program of “tax credits for first time homebuyers” and not a sign of recovery.

The Bottom Line – Until the “uncertainty factor” is removed from this economy the country will struggle along in economic limbo because what we have in Washington today with a Socialists Democratic Congress and Administration is a bunch of Marxists economic ideologues who believe that government is the solution to all problems.

    Government is not the solution, government is the problem – RR

Related

The Jobs Recession

Economy: Most economists agree that the U.S. left its recession sometime last summer. Yet with each passing month, the employment news remains grim. Looks like we’re in a jobless recovery.

Read more from IBD Editorials

AP Confirms: Government Infrastructure Spending Does Not Create Jobs

Read more here…


Speak Your Mind