Posted tagged ‘correction’

It’s All About Unemployment

April 27, 2009

There can be no recovery until the free market is allowed to complete the correction we are now facing. And until the correction is complete, unemployment rates will continue to come in at record high numbers.

I’ve said before that it seemed foolish to start looking for anything like “recovery” until unemployment numbers dropped significantly. Finally, someone else is saying the same thing:

Defaults among prime borrowers are really starting to pick up. Why? Cause even solid borrowers can fall behind if they lose their jobs.

Credit card companies see much deeper charge offs than they’d foreseen just a few months ago. Again, unemployment.

While the talking heads insist that unemployment is a “lagging indicator”, it’s pretty clear that the financial system is highly levered to this numbers, so it’s hard to imagine a real turnaround unless the economy stops bleeding jobs.

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Speaking of Ponzi Schemes…

January 7, 2009 reports that the┬ácost of federal bailouts to date┬áplus estimated costs for Barack Obama’s economic stimulus plan may total near $8 trillion.

The $8 Trillion Bailout

Many details of Obama’s rescue plan remain uncertain. But it’s likely to cost at least $700 billion — and that would push Uncle Sam’s bailouts near $8 trillion.

Sitting down? It’s time to tally up the federal government’s bailout tab.

There was $29 billion for Bear Stearns, $345 billion for Citigroup. The Federal Reserve put up $600 billion to guarantee money market deposits and has aggressively driven down interest rates to essentially zero.

The list goes on and on. All told, Congress, the Treasury Department, the Federal Reserve and other agencies have taken dozens of steps to prop up the economy.

Total price tag so far: $7.2 trillion in investment and loans. That puts a lot of taxpayer money at risk. Now comes President-elect Barack Obama’s economic stimulus plan, some details of which were made public on Monday. The tally is getting awfully close to $8 trillion.

Obama’s plan would combine tax cuts with infrastructure job creation efforts. Economists say it could serve as an integral piece to the government’s remaining economic recovery puzzle.

“This plan will be the first direct tool to make additions to disposable income,” said Lyle Gramley, an economist with Stanford Group and former Fed governor. “None of the other efforts have done that directly.”

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For one thing, I will be very surprised if the Obama regime will be able to limit its stimulus spending to less than $1 trillion in its first 100 days.

And, more importantly, all of this conveniently ignores the fact that all efforts to “stimulate” and “stabilize” the economy are doing the same things that caused the problems in the first place – easy credit and excessive spending without savings.

Don’t listen to the mainstream media. Repeat after me – it’s not a crisis, it’s a correction. Efforts to prevent an economic correction only prolong and wosen the pain.