A message to the Kool-Aid Sippers - What Recovery?

I don't see where anyone can honestly believe that we are in a Recovery or that an Economic Recovery is on the way. I have been a student of Finance and Economics all of my life. I can separate the hyperbole from the substance. I do not profess to be perfect in my interpretations, but there is a thought process behind them.

I think there are individuals that want to predict the Economic cycle like a weatherman. If you change the forecast enough times eventually something will stick. The cool thing to do right now is the New Year's Resolution forecast, "It's the beginning of the year, so if we don't say anything bad, sing Kumbaya, cross our toes, and talk about green shoots; then maybe our dreams will come true.

I think that if you are in a leadership position of public trust and you take the above approach to economic forecasting, then you are responsible for fiduciary malpractice. There are people that depend on leaders for solid information. Two years ago people voted for hope and all they are left with now is change. We cannot afford anymore of this approach. It is time for a honest, realistic, reliable, and focused approach to get this country and this community back on its feet.

The Trends:
Retailers report surprisingly weak December - The News & Observer - 1/6/2011
Jobless claims rise more than expected - MSNBC - 1/6/2011
GALLUP: Broader underemployment worsened to 19% in December -- up sharply from 17.2% at end of Nov - Gallup - 1/6/2011
IRS tax liens jump 60% - USA Today - 1/6/2011

The Hound suggests, don't read the headline, read the story!!! Most of the time the headline is a psychological message meant to program the readership. In the end, the story speaks for itself. I am not a person whose opinion is easily swayed by the strategic wording of a headline. I look at a story and if I find it interesting, then I look elsewhere for a second opinion and dig deeper into the subject material.

The economy is not in good shape. We are in the beginning phases of an inflationary event that at the least will be similar to the 1970s. Oil is not up due to demand. Oil is up, because of the systematic devaluation of our currency by the Federal Reserve's actions. Look at the commodity prices of Gold, Silver, Wheat, Cotton, Sugar (Look at the stories related to this).

What initially kicked us into the funk we have been in was when Oil prices soared in 2008. At its current rate of increase, the price of oil will be back to $150 per barrel during some point in the upcoming year. that will mean $4 gas and all that goes with it. Have we learned from the 2008 Energy Crisis yet? NOPE!

The housing crisis kicked into gear, because people did not have a cushion. The housing market was affected by bubble demand associated with easy monetary policy associated with the Federal Reserve and easy lending practices associated with mortgage lenders. These lenders did not follow their fiduciary obligations and 100% only worried about a role as salespeople. They worried about fees and commissions. Who appraises the houses? The Banks. The salespeople, including bankers and brokers, encouraged people to buy houses that were too high of a percentage of their income and net worth. When the energy crisis hit, the people with little to no cushion were the first to tumble.

That is what has precipitated the events that have followed. This event has fed off of itself and the Federal Reserve, politicians, and bureaucrats have conspired to paper the reality over with more cheap fiat money. That is what has led us to the inflationary event that we are now in. The beginning of this event will mimic a recovery, because the increased prices of goods and services will reflect an increased percentage of sales, but what you have to look at is the underlying cost of those sales associated with wholesale prices (a direct reflection of the cost of commodities).

I know that people don't have time to look at the big picture. I can lay this out to you on a macro or a micro scale. What has to happen is that we need to realize that we have given away the farm. We have to have a productive capacity in this country. That would help us on the local level also, because we are a manufacturing center. I believe we need balance and we don't need a 50%+ manufacturing based economy like we have had in the past, but free-for-all trade has not and will not work for the viability of the United States of America. It is time to start discussing tariffs!

The discussion we need to have should be one that offers solutions and brings all of the issues to the table. Fair Trade, Tariffs, Financial Re-Regulation, and rebuilding the middle class are in my opinion necessities to getting the economy back on track. In order to make this economy work, we need to gear it back towards the American people and not the elite 1% and the corporations they represent!!!