Do I know what I am talking about?

What is the value of Tax breaks? This article will give an efficient rundown of the economic data on the economic growth rate of the last Expansion. The key element of the data may be missed, which is that Tax breaks are good for Corporate Profits, but show less welcome effects elsewhere. The last Expansion was slower to increase, was smaller in increase, and dropped off more rapidly. The probable cause of these Results probably appeared due to the high draft of Investment resources from the matrix as Corporate Profits–issued both through Dividends and Corporate Executive Salaries, Benefits, and Stock Options. Integral Investment potential was distributed through non-productive dispersions with lack of measurable return. The rapid decay of the Expansion can be attributed to realization of the above dispersion of Profits through massive absorption of outside debt against business assets, which again reduced the viability of integral sources of Investment. The visualization can be expressed as Businesses deliberately dropped their desirable Credit ratings to scam the Companies for the benefit of Corporate leadership.

I basically agree with Tim Duy, having already said in a previous Post that I believe in a L-shaped Recession. I worry about Fed policy, thinking it may be as equally Short-Sighted as it’s policy in the 1930s, though from the opposite direction. They are already pouring Money into the Markets, when Commodities are on an inflationary spiral; they have already let Inflation get out of hand, and are set to give it spare funds to grow. No Economist seriously expects extra and cheaper Cash will incite heavier Business investment, in the face of declining Consumption Demand for advanced Product (means that they are paying their bills and buying only Necessities). The current optimum approach is to force fiscal conservatism upon Businesses, making them follow Consumers in paying down their debt. I advocate setting the Fed Funds rate at 4.2%, and leaving it there forever, as I have always doubted the power of Monetary policy to aid, though its power to injure is massive.

Menzie Chinn is willing to give President Bush the benefit of the Doubt, though I think there may be more Politics in his Statement, than there is Economics. It all comes in the definition of a Slowdown. I am of the persuasion that the GDP will not increase for a lengthy Period, though it may not classify as a real Recession. I do know that both American Consumers and American Business must clear ageing debt, before there is likely to be significant Gain in the GDP. Time will tell, and floating at current levels could be the best hope. lgl