The Same Old Song
The government shutdown is a sure fire way to reduce government spending, while temporarily cutting the pay checks for millions of Americans… Obama Care is designed to reduce the amount we pay for health care impacting a huge profit-center industry that has been milking businesses and individuals for years with the highest costs in the world. Time will tell if the new health care plan will work… One way or another the federal government will temper its spending when the political parties work out some deal—actually shrinking spending is not in the cards… States and local governments, meanwhile, curtail services and eliminate what have been good paying jobs with generous benefits... And those public pensions are the next in the cross hairs as we have been pointing out.
So when you assess what’s happening to government and government spending the trend lines clearly point to less—and that means less flowing into the economy whether to pay doctors or insurance companies or to compensate as many public employees and government contractors.
Federal Reserve workers—the most essential of government employees--keep the whole system afloat meanwhile with the low interest rate tonic swallowed hook, line and sinker by the stock market… Housing gets better, but in most markets—save the ultra-premium neighborhoods in 24-hour gateway cities—prices are still well below peaks and rising mortgage rates may snuff out some of the demand momentum.
Can you really feel good about the rest of the world? China? India? Russia? Brazil? Why is so much Chinese capital looking for a home in U.S. real estate? Is it simply for diversification of new found wealth? At best, Europe is sideways and expensive (if you are an American on a vacation which I was recently—the Euro cannot come down fast enough for U.S. tourists).
Now my loyal readers know that this is “The Same Old Song” (Four Tops 1965) I have been singing on this blog for quite a while. And some ask why cannot I find some silver linings and be more positive? Well, I do believe a continued slow recovery is more likely than a severe correction as long as the Fed stays its course. How’s that for positive?
But the reality is assets, including notably real estate, remain overvalued, too many people still have too much debt, and although the unemployment rate edges down, compensation has stagnated and benefits are being slashed. Again there is less to stoke the system. And there are no forces in place to alter the ugly landscape.
The latest counterproductive Congressional antics are just more of the same, adding to the economic inertia and raising the stakes for a downturn. Americans have learned not to expect solutions from their leaders who are more interested in ideological bloviating and staying in office than serious public policy proposals. Many business heads, meanwhile, are too busy protecting their tax breaks and personal wealth to be interested in serious change to help sustain everyone else even if overtime the decline will impact them as well.
Oh well. Sorry to be such a wet blanket. Can you blame me?
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