Sunday, October 10, 2010
Bad times yet to come?
The US Economy is Faltering. An Inflationary Depression is in Progress
In spite of the disinformation, misdirection and outright propaganda the economy is faltering without the addition of stimulus and quantitative easing. The benefits of inventory accumulation over the past 17 months, which accounted for 60% of the strength in the economy is at an end. We either get more stimulus either governmental or from the privately owned Fed or growth is going to continue to drop. We are looking at indexes that for the most part are at or near their lows. We see short reactive rallies but certainly nothing that leaves us to believe that any kind of a recovery is at hand. The longer we have to wait for Congress and the Fed to act, the more difficult it will be to regain upside momentum. It could be the plan is to simply go sideways for the next two years. The problem with that is that it will cost $5 trillion to accomplish. Production is starting to fall with the exception of a temporary increase in automotive manufacturing. Inventory build is retracting and both the absence of further build, and production should herald a 2-year low by yearend. The administration had other priorities and they missed the boat on getting support. The Fed as usual was too far behind the curve. Consequently we are actually looking at the distinct possibility of economic crisis and higher unemployment soon.