Is America a Deer in the Headlights?
No one quite knows what is going on.
Interest rates are at rock-bottom levels. But banks are reluctant to lend—both afraid of shaky borrowers and loathe to get tied down with low-interest obligations if inflation roars back. “They” say inflation won’t return, but the people know that it will, since expanding the money supply by two trillion dollars per annum, as interest rates are near zero, does not seem a stable scenario.
Millions of Americans are dutifully paying their under-water mortgages each month, but getting peeved when they hear of all sorts of new programs to ensure others do not. Indeed, the message seems to be that the government cares for the hyper-wealthy or the very poor, while merely talking about the middle class, as it wages war on those who seek to be rich.
No one is getting much of a return on cash in the bank. But most are still paranoid about investing in Wall Street, given the hit that their 401(k)s took last September.
Real estate should be a good investment, but cash is scarce, and no one knows where the property bottom actually is. So those employed with income and capital are more likely paying off debt or hoarding cash for an emergency to come, than buying and hiring.
California property should be a good buy, given dramatic drops in home prices. But with 3500 upper-middle class dissatisfied leaving a week, and 2500 rather poorer arriving, it seems at some point there simply will no longer be an affluent, big-income, big-home, pay-lots-of-taxes upper stratum left.
We should be in a natural cycle of rebound, but it looks instead like what the Democrats used to call a “jobless recovery.” The President has hosted a job summit, and jawboned businesses to expand. But most are terrified of an array of new taxes and regulations, and are instead hunkering down. Caricaturing surgeons and the Chamber of Commerce didn’t help. Talk of new cap and trade taxes hurt. So did promises of higher payroll, local, state, and federal tax bites.
We know the federal borrowing (nearly $2 trillion this year) cannot go on much longer. Yet we seem to want to get as much cheap money at 1-2% interest as we can still from the Chinese. The result is that the more the administration and Congress talk of fiscal responsibility, the higher they set the new debt ceilings.
Enjoy It While It Lasts?
There is almost an end-of-the-century / ‘after me the deluge’ madness in the Congress. With rock-bottom congressional approval ratings, a President with freefalling polls, and a public angry at almost every piece of proposed legislation—from socialized health care to cap and trade—Congress's mood seems to be “let us race to cram through this statist agenda and get it institutionalized before we all get thrown out in 2010.”
We went from Duke Cunningham, Jack Abramoff and “the Culture of Corruption” to Charley Rangel, Chris Dodd, and John Murtha without a blink. What a strange time when we harangue CEO grandees for flying on private jets, while Nancy Pelosi flies to and from San Francisco on a monstrosity.
In short, I am not so worried about the recession, it's the recovery that terrifies me, given looming energy hikes, inflation and interest sure to rise—overseen by a government intent on redistributing income.
Then there are things overseas . . .
We are in a similar holding pattern of uncertainty abroad. For a year we reached out to the South American Marxists, Ahmadinejad, Putin, Assad, and other unsavory characters. We professed an end to George Bush’s war on terror, and even renamed its protocols.
But so far, it doesn’t seem that any of our enemies reciprocates. Chavez brags of his new nuclear plans and taunts the democratic Colombians.
Putin smiles, but does little to help us with Iran. There is no progress in the Mideast. Only George Bush’s Iraq warfront seems stable.
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