An Economic Forecast (Maybe?)

This article implies that there was a sharp Braking action last Fall in the Economy, to which aim is an attempt to press for the remedial action of easy Cash. The spate of economic activity of the summer was actually a basic Contract fulfillment on basic Orders already negotiated the previous year, and in the 1st Quarter of this year. Contract Orders had already been slowing since the start of this year, and will only speed up upon appearance of Profits-making potential, easy Cash or not. Reality presents a picture where Land values are too high, Residential and Commercial Properties are too expensive, Utility Costs are too extreme, Advertising for Market capture more expensive than Oil, and a saturated Consumer market possessing reduced Consumer Demand. Fundamentals restrict Business expansion at Present, and no amount of Government Fuel will alter this Fact.

I mention this Post by Menzie Chinn because it is excellent, and cancels the Propellent claimed for State and Local Government Spending. This Spending has always presented a counter-Keynesian bias, local legislators of the realization that the limited Revenue-generating capacity of their Taxing arms would not get them Preferred Status from Money lenders. State and Local Governments simply lack the Size and Capacity for Pro-Keynesian policy.

I will discuss the prior Four rationales listed in Menzie Chinn’s piece. The Fed is currently afflicted by an over-sized Economy, already over-packed with Cash. More Cash will not provide greater Productivity, only secure temporarily the Profit ratios of earlier years. A Monetarist approach to the current Economic trend will only generate Stagflation. The Housing downturn has not even started its retardation of economic growth as yet, because of Government and Banking intervention. Foreclosures will come; it is simply a question of how much Money We will waste trying to prevent the Foreclosures, before We allow the Mess to clear. The Job market is a bright spot because of the lean and trim Job Hiring of the Boom; Business cannot exercise Layoffs and Downsizing without losing productive capacity. Exports will not fuel the Economy as long as Imports increase faster than Exports; the Equation here remains Production Costs continue to rise faster than effective Export pricing in real terms. The Hedge against Recession is more illusionary than fact, but We should still get another Quarter of real growth, and Spring will cut Energy Costs next year (I predict that the current decline in Miles traveled will continue throughout the next year). lgl