Maybe President "A failure to act, and act now, will turn crisis into a catastrophe" Obama doesn't need to be quite so gloomy. Larry Kudlow points out some reasons for optimism:
Mustard seeds planted a while back are now pointing to economic recovery. The huge energy tax cut is one such mustard seed. The related inflation collapse is another. By the way, in today’s jobs report, wages rose again, and now stand nearly 4 percent higher than a year ago. With zero inflation, that’s a real increase in worker purchasing power for the 92.4 percent, or 135 million workers, still employed.
Then, of course, the Federal Reserve has been pumping in money to offset credit and asset deflation. The old Milton Friedman M2 money measure has grown by $590 billion since early September for a 20 percent annual rate of increase. ...With all the fiscal mania and Keynesian government-spending-multiplier talk in Washington these days, most folks have forgotten Milton Friedman’s dictum that money matters. Indeed, money growth could well produce the biggest economic surprise this year. And as Art Laffer has taught us all, taxes also matter—a lot. In fact, the only real stimulative part of the behemoth stimulus package is the simple fact that marginal tax rates will not be raised.
So cheaper energy, bundles of new money creation, zero inflation, and no tax hikes could very well combine to produce a stronger economy as the year progresses — to the great surprise of the majority of economic pundits. That may well be the message of Friday’s stock-market rally, which shrugged off yesterday’s painful slide in jobs.
And here are some rays of sunshine from Jim Cramer:
1) The Fed will do whatever it takes
2) Other nations are ramping up their stimulus spending.
3) The Baltic Freight Index, a measure of world trade, is surging.
4) The Chinese stock market is up 20 percent this year.
5) Both Cisco Systems and State Street rose sharply this week despite some bad news.
6) Strong sales from Wal-Mart.
7) Government action on the housing market, as well as the impact of greater affordability.
8) Hedge fund seeling seems to be winding down.
9) New market leadership in Apple, RIM, Google and Amazon.com.
10) A decent quarter from UPS, a positive economic harbinger.
Me: I would worry about 1) rising oil prices, 2) the Fed pulling away its monetary stimulus when the economy strengthens and 3) the eagerness of Team Obama to raise taxes ASAP.
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Dean of MN 11:20PM February 07, 2009
mp of WY 1:25PM February 07, 2009
Muser of NM 10:23AM February 07, 2009