Oil is pegging above $75/barrel for Sweet Crude. Existing Home sales declined by 1.3%, and year over year House prices rose only 0.9%. The biege book is supposed to be released tomorrow, covering Production in the Midwest. Bad numbers here could mean a poor Third Quarter and miserable Christmas season. Are bad numbers expected? Economists say No, but they say it like they were sucking on a sour Pickle.
What do I say?
I have been to exercise and muscles are tired, the sky is overcast, and I am on a Diet. The Consumer Confidence numbers are up in spite of high Oil prices (Translation: the Soccer Moms are again out in force, mainly to keep the kids quiet), putting on a probable 75 miles per day on their Gas-guzzling SUVs. Credit Cards are tapped, and as a consequence of Consumer buying, Production Costs for Businesses are going up. Consumer Credit can be as inflationary as Government debt, and as addictive as Gambling. The Fed sounds like it is going to continue the insanity of raising Interest rates.
Interest rates hikes do not even touch the two basic causes of Inflation. Government spending will continue, Tax revenues or not, until Voters get the gumption to throw Legislators out of office, or reactionaries are convinced to start Sniper attacks against them (that was no call for Terrorism in an way, shape, or form). Credit companies respect the Demand/Supply curves and set their rates high, but in the service of high Sales, refuse to raise their Interest above their maximised Sales levels--totally indifferent to Fed impulses.
The Solution: We need those same Legislators to repeal the honored (totally undeserved) Tax Cuts granted since 2000, and force them to pass legislation granting the Fed the right to set Credit Interest rates over a legislated range--one spread enough to encourage or retard Consumer Credit expansion. lgl
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