Thursday, March 26, 2009

Cassandra's Back

The stock market has been going up and we here that home purchases have been on the rise and thus the talking heads boldly announce the end of the crisis is in sight. People I meet and talk with in daily life bring up, from time to time, the notion that perhaps things aren't all right and are going to get worse. The rise of the cost of a barrel of oil has been noticed by some- above $50. Predictions that oil might drop to $20 have not yet come to pass. The Baltic shipping index, a previously obscure measure of the cost of renting a freighter has started to rise a little indicating to the optimists that trade is picking up. The pessimists argue that China has been importing and stockpiling steel, accounting for the very modest rise in the cost of ship rentals.
.
When our leaders announced the multi trillion dollar efforts to sustain our banksters it seemed to me, in my modest capacity as man in the street, that the "stimulus" might keep our chins above water for a few more months and allow our rivals in misfortune, the Europeans and the weaker Asian nations to sink and allow us to stand on their shoulders for a while. I think that may be what is happening, but unfortunately for us, those very same rivals have seen the effect and are getting pissed off. They view the stimulus efforts in the US as bad for the world economy, not good. The calls are starting to go out demanding the US dollar be replaced as the world's reserve currency. Oh dear.
.
The problem is one of fundamentals. By papering over the banking failure, by trying to buy off ruined assets and treating them as objects of value we are postponing the day of reckoning and not dealing with the fundamental problems. Inflation is our enemy and inflation ruins currency value. The rest of the world is getting anxious about the value of our currency and we should too. Instead we keep on throwing good money after bad.
.
The stimulating efforts have now surpassed the value of all primary residence mortgages in the US. Had the president decided to give everyone in the US a free home we would have had more stimulus and less stark poverty and more unemployed banksters. Instead we have a debased currency, plunging confidence and enriched crooks in power in our financial system. Things are going to get worse, not better but not everyone wants to understand this.
.
A look back at the true trajectory of the Great Depression shows it was not a vertical plunge but a series of jagged lurches to the bottom. Our economy is zigging up, in a holing pattern right now, but common sense tells us the fundamentals are skewed and another zagging lurch down is only a matter of time. I am not optimistic and I might as well go on the record as such.

No comments: