Economy Falls Apart Faster Than Expected
Posted by Michael A. Kamperman on August 2, 2011
Well, it turns out the economy is slower than I thought and falling faster than I thought it would. That’s a mouthful considering I continuously predicted for months that the Federal Reserve would start QE3 before the end of 2011 because of a rapidly slowing economy in the second half of 2011. It turns out government data has missed the mark and now has revised most of the positive economic news down for the first half of the year. So far the data for July has been abysmal and that is after the months revised down. The reason I have predicted QE3 is the economy had already been perceived to be particularly slow in the first half despite extended unemployment benefits, the 2% payroll tax cut, quatitative easing 2, and the tail end of stimulus spending such as aid to the states to help with their Medicaid expenditures. Quantitative easing 2 and aid to the states for Medicaid both ended at the end of June. Unfortunately, the economy has probably already gone negative with extended unemployment benefits and the payroll tax cut still in effect, both of which are scheduled to expire at the end of 2011 along with most of the rest of the stimulus spending. As Washington congratulated itself for agreeing to budget austerity, the markets woke up and realized that fiscal help for an ailing economy from Washington will be all but non-existent in the near-term. All eyes have turned to Ben Bernanke’s Fed.
On Agust 9 the Federal Reserve will either move in to save the day with a quantitative easing program that dwarfs QE2, or we will begin the next leg down in the new great depression. It’s 1937 all over again, deja vu. FDR’s great economic error of prematurely cutting federal spending has just been repeated. In fairness to FDR, and in fairness to Hoover, they didn’t have history as a guide and our leaders do.
Make no mistake, President Obama has not been forced into a position he didn’t want. In my opinion he wants to tackle the debt and the defict more than he wants to tackle jobs. The President had multiple options to reject spending cuts with no aid for jobs. He could have threatened and followed through with the 14th Amendment, or better yet he could have minted coins and simply printed money to keep the wheels of the federal government humming along. If he wanted jobs he could have then negotiated from a position of strength rather than from a position of perceived weakness. Afterall, President Obama never seriously pushed for more stimulus. Instead he set up his own outside Deficit Commission headed by Simpson and Bowles almost two years ago. He has used the debt-ceiling “crisis” to orchestrate what he has wanted all along under the political cover of having no choice because of the Tea Party. He has turned out to be the Manchurian Candidate. But the cruel joke is on the Progressives who put him in power and not on the socialist fearing right who have fought him all the way. Sadly, it is the younger generations who will have to pay for Washington’s madness. It is the younger twenty somethings who face the worst brunt of the enployment crisis, it is the kids who suffer from the cuts to education, it is everyone under 50 who will not see the benefits of the older generations, and it is all of these people who will be left to pick up the tab for the fools who turned from Keynesian Economics and embraced Austrian Economics. Maybe the Federal Reserve will step up and be counted and save us. Or maybe they have been too busy buying canned goods, guns, and properties with secret caves to care about the plight of the rest of us.
