Snap Shots of the Big Picture
February 14th, 2010The headlines in The State Journal Register Business section this past Thursday gives us a snap shot of what is coming in the big picture. “Bernanke predicts less stimulus, higher rates.” In 2010 jobs, consumer confidence, and interest rates are the Big 3 regarding the performance of the housing market.
Less stimulus from the Fed would be a good thing. The $1.3 trillion that Bernanke pumped into the bond market has to come from somewhere. If he just printed the money monetizing the debt, that leads to inflation. If he borrowed money to borrow money, that would be paid back in taxes with interest.
Less stimulus would be a good thing elsewhere too. As in president Obama’s stimulus plan. The now over $800 billion boondoggle slush fund has accomplished one major thing, oppressive debt for our children and grandchildren. The be all, end all Keynesian theory that government spending can create jobs proves to be an objective failure. Without any evidence of any jobs being created, Obama claims the unprovable, 2 million jobs were saved.
If spending money by the government creates jobs, the tripling of the largest annual deficit in history to $1.4 trillion dollars in Obama’s first year, we would have jobs raining from the skies. Now Obama wants to increase the deficit in year two to $1.8 trillion. At the current trajectory the interest payments will approach $1 trillion by 2019. If interest rates remain low. Yes stopping any further stimulus, whether you call it a jobs bill or not, would be good for the economy.
The economic illiteracy of this administration continued this week when economic adviser Larry Summers said on Fox Business News; “the White House plan to tax entrepreneurs and small businesses was economically smart.” Huh? Aren’t those the people that create jobs?
Then through executive order, after failing to pass in congress, president Obama is forming a deficit reduction panel. When asked if Obama would support tax increases he said; “I will remain agnostic toward their conclusions.”
Translation; all you folks that voted for the promise that taxes would not be raised on anyone earning less than $250,000 a year are about to see the lie that the rich can pay for all this profligate spending. You’re going to have to help. It was worse than they thought, the budget Obama wrote is Bushes fault. Just as Scott Brown’s election was Bushes fault.
If Obama’s budget is passed he will have amassed more debt through deficit spending than all presidents before him combined. Quite an accomplishment in less than two years. You could confiscate 100% of every dollar earned by those earning over $250,000 a year and never dent this man made Armageddon.
Bernanke; “rates will go higher this year.” The $1.3 trillion bond buy down will end this March. Interest rates on mortgages to car loans will be determined by the open bond market. Due to the precarious finances of the U.S. government, Moody’s is talking about the United State’s credit rating falling below AAA. Bet that will attract a lot of buyers to the bond auctions.
Nobody knows how this will play out, however it can’t be good. Increases in interest rates depresses consumer spending, weakens purchasing power for home buyers driving home prices down, and could have catastrophic implications when debt collectors like China come calling. Is it possible the currency will be inflated to pay this unsustainable debt? Soothsayer economist Rubino says the dollar will fall at least 20% in value. That buck in your pocket is now worth 80 cents.
Little snap shots of what is occurring in the economy that morphs into the big picture from the headline; “Bernanke predicts less stimulus, higher rates.”
Less stimulus is good, higher rates are not. Happy Valentines Day from the Obama administration’s economic policy geniuses. Larry, Moe, and Curly must not have been available. Instead we get Larry (Summers), Roe (Romer), and Squirrelly (Geithner).
The opinions expressed here are solely those of Fritz Pfister, or identified sources, and not those of RE/MAX Professionals Springfield, or RE/MAX International.
