Better Economy?

Image via Wikipedia

The people, who would smile gleefully as their houses burned, are now saying that things will get better in late 2009. I would just like to point out that better is a relative term. If your neighbor's house burns to the ground and yours only loses the roof then you might think you are better off.
This is a depression people and the government refuses to call it what it is, because they don't want to take the political heat. All the signs point to more unemployment and devastating times. You may say this is doom and gloom, but it is really economic reality. When 6 million people lose their jobs, every other job is affected. GM and Chrysler are on the skids and up to another million people could lose their jobs as plants close and their suppliers take a major hit. Bottom line this is going to be a long depression.
Now for the worse news. Inflation is likely to hit double digits when the economy does pick up, because the government has printed money more prolifically than BINGO halls. Too much money in circulation forces the federal government to raise interest rates. Any one who lived through the post Reagan years saw interest rates in the 25% range. The banks raised their credit card rates from 6 and 7 percent to 20 and 30 percent and they didn't come down. Thank you congress.
Stocks may rebound immensely, but their value tied to inflation won't. This is just an economic fact. Deflation results in the printing of money and inflation follows, because there is so much money in circulation that buying power goes down.
People need to buy commodities that are undervalued now as a hedge against inflation, but gold and platinum are at the top of the bubble now and the bubbles is about to break. Those commodities will see a huge drop in value as suddenly a house prices did. The bottom line is that when things reach a price that shuts out people's ability to buy in great enough quantities, there is no market for them and the price falls, leaving the last people holding the bag with any empty bag.

Overdosing the Economy. The consequences.

Image via WikipediaThe government is overdosing the economy with cash. Five trillion dollars so far. This may be good news to Wall Street, but it is a massive problem for Main Street America.
Wall Street loves money. They are used to huge amounts, but as good as it makes Wall Street feel. It is a massive problem for you and I. Why?
When 5 trillion dollars hits the economy it will be like a massive overdose of heroine and the economy will be DOA. The problem is that the more money the Fed infuses into the economy, the more likely it is that massive inflation will result. Interest rates and prices could sky rocket by 100% resulting in less buying power. In an economy that depends on people buying, this would be a massive problem of unprecedented levels.
Imagine that a new 19 inch tv could cost 2000 dollars and the grocery bill is a thousand a week, but your making half as much in real consumption ability. Now you are making money but it's worthless. You need a wheel barrow to buy a candy bar.
This is what happens when there is way too much money in circulation. At the moment we are almost there. Banks will have finished blackmailing the U.S. Government and start lending. The money will hit the economy and things will be good for a year maybe two, but then there will be too much money in the economy and the price of things will start to spike. When they do go up it will be a run away train and the government will be forced to take money out of circulation by the trillions. When this happens expect an even more staggering economic crisis than any economist can ever imagine. Not only will the bottom fall out but the handle will come off. People won't be unemployed. They will be asking what a job is, because there won't be any in this country.
The bottomline is that you can all dillude yourselves that Obama has a magic wand, but reality is going to come to roost real fast.