There has been a large amount of talk lately about green shoots and an outstanding business recovery. Currently , a paradigm shift is happening. Weve already seen the Private Savings rate hike to over 4% this year and I predict this rate to get back to the previously mentioned 7% historic rate. This shift in consumer expenditure habits will have a surpassing effect on the economy. *More Bailouts on the Way - While the govt. bailouts of the banks and auto firms have been stupefying, there will certainly be more bailouts over the next few years. Why would anybody give away money without expecting anything back? With the economy being what it is, it needed to be a con right? Well is it a scam? - After a little research on the web on Central authority Grants ( for snorts naturally ) I learned something stunning. The Fed Grant and Cooperative Agreement Act of 1977, as incorporated in Title 31 Section 6304 of the US there's a bit of a learning curve.
Public debt is nearly $7 trillion and about 40% of this debt matures inside one year. Its pretty likely $500 bn. or more of the present holders of short term debt won't reinvest their money in U the sole way to draw in anywhere near that number of buyers would be for IRs to extend significantly.
Learn more on the topic of mortgage
It is this very paradigm shift which is necessary for our society to get back to rational behaviors of saving and spending, and remake the economy into something real again.
ReplyDeleteBut as it stands now, none of the imbalances have been corrected, the Fed has merely blown up a bailout bubble to hide the housing bubble. And the stock market run-up is just a by-product of the bailout bubble - 2 trillion in TARP funds (borrowed from future generations) is finding it's way into the market through the back door.
The party in the market will end soon. The green Shooters don't like to talk about PEs, which are running > 100. There simply are no earnings to justify the price, it is definitely liquidity.
But liquidity is such a nice tame name. But that name hides a lot of outrage. We go and borrow 2 trillion from future generations to prop up bad paper in the banks while the American consumer bleeds to death. Then the banks launder that money into the market through the back door. This is a Generational Ponzi Scheme.
It will burst, because it's a phony baloney funny-money market run-up, with no fundamentals. I give to 10,500, then the bubble pops.
And stimulus won't work. It merely pushes against consumers who are refusing to spend. Stimulus only works in a spending environment, all it will do is cause monetary inflation (as opposed to price inflation).
This is going to require time for the 114 million US households to save and finally balance their books. So far the only ones bailed out are the banksters at the top who walked off with the store - again.