Football season is back! Fans everywhere are making sure their HDTV’s are in fine working order, cleaning their BBQ grills, and reviewing rosters and schedules, hopeful that their team will win it all this year, or in some cases, win any of their games (Joe-Detriot Lion). In football, a team is assessed a penalty if one of the offensive lineman moves prior to the ball being snapped to the quarterback. The lineman then looks embarrassed, shakes his head like he’s done nothing wrong, and the team moves back five yards. Metaphorically speaking, politicians and banking executives (does anyone really trust either source anyway?) may be guilty of a false start in calling for an end to the recession of 08-09. Sure, the stock market is up roughly 50% since March, and the 200 day moving average of the Dow appears to be on it’s way northward for a change. The housing market appears to have turned the corner, and July’s jobs report came in with fewer unemployment claims than Wall Street expected. (Click here for more on the unemployment report) Attention Joe Shareholder: Break out the champaign and let the partying begin! Ah… wait a second… What I meant to say was ah… see what had happened was…
Enter Joe False-Start
July also saw the largest number of home foreclosures in the history of America, and although values have ticked up slightly in parts of the country, there’s no guarantee that the trend of foreclosures will slow in the near future, as more Americans become unemployed. The up-tick in housing and auto sales is likely a direct result of legislation including the tax credit for first time home buyers and Cash for Clunkers, which can’t and shouldn’t last forever. These programs are great for the beneficiaries, but they worsen the budget deficit and consequently put a strain on the value of the dollar. (Click here for more on the budget deficit) Current and future foreclosures could lead to further devaluation of real estate in November when the tax credit is scheduled to expire, due to more aggregate supply on the market (Joe econ 101). Banks, Credit Unions, and home improvement and home furnishing industries will likely continue to suffer as a result. On Friday August 14th, five more banks were shut down by the FDIC, bringing the total for 2009 to nearly 80 failures. Fannie Mae and Freddie Mac, the secondary mortgage agencies who sell and package mortgage backed-securities will also continue to feel the strain of home foreclosures, as well as those who buy these MBS instruments (Joe’s Wall Street firm).
Joe’s Stimulus Package
Much of the credit for America’s ability to pull out of the great depression in the 30’s is given to government spending… perhaps too much. In the 1930’s, government spending helped the economy recover from the depression as the United States was forced to prepare for World War 2 by plowing money into defense. By contrast, a lot of this current stimulus package goes to bizarre funds like government pet projects and special interest groups. Instead of putting a short term, economic band-aid on the economy under the guise of a "stimulus package", America needs to focus on balancing the budget, stabilizing the dollar, and decreasing the national debt. A government option for health care would be nice, but we cannot afford it right now, especially since funding for the proposal is completely up in the air. This has the potential to send the current budget deficit completely out of control…(Joe hang glide during Hurricane Katrina). Finally, the Fed needs to keep interest rates low (Joe Bernanke) to stimulate lending and encourage business and entrepreneurial investment, and this will help to sustain a long term approach to creating and keeping jobs that really build and stimulate the economy. (Joe teach- a-man-to-fish-instead-of-giving-him-a-fish).
Are we optimistic for the future? Absolutely. Unnecessary pessimism depresses markets (Joe or Johnny Rain Cloud), and is unhealthy for an economy. It will likely be a long and slow recovery, as many economists predict. America has shown resilience that has helped us become the world economic leader for nearly 100 years. There’s not a more suitable country that fosters economic opportunity to create jobs and businesses. We’ve repeatedly shown that when we trust in capitalism, we can pull ourselves up after getting knocked down (Joe Austrailian one-hit wonder band), dust ourselves off, and look forward to a better future. But before you quit your day job to invest in the stock market and drink Coronas at the beach (Joe Commercial guy), pay attention to the warning signs lurking beneath the surface. Let’s give the stock market a five yard false-start penalty, and then let’s trust in capitalism to run its course so that relatively soon we’ll be able to enjoy a nice long economic touchdown drive!
Enter Joe False-Start
July also saw the largest number of home foreclosures in the history of America, and although values have ticked up slightly in parts of the country, there’s no guarantee that the trend of foreclosures will slow in the near future, as more Americans become unemployed. The up-tick in housing and auto sales is likely a direct result of legislation including the tax credit for first time home buyers and Cash for Clunkers, which can’t and shouldn’t last forever. These programs are great for the beneficiaries, but they worsen the budget deficit and consequently put a strain on the value of the dollar. (Click here for more on the budget deficit) Current and future foreclosures could lead to further devaluation of real estate in November when the tax credit is scheduled to expire, due to more aggregate supply on the market (Joe econ 101). Banks, Credit Unions, and home improvement and home furnishing industries will likely continue to suffer as a result. On Friday August 14th, five more banks were shut down by the FDIC, bringing the total for 2009 to nearly 80 failures. Fannie Mae and Freddie Mac, the secondary mortgage agencies who sell and package mortgage backed-securities will also continue to feel the strain of home foreclosures, as well as those who buy these MBS instruments (Joe’s Wall Street firm).
Joe’s Stimulus Package
Much of the credit for America’s ability to pull out of the great depression in the 30’s is given to government spending… perhaps too much. In the 1930’s, government spending helped the economy recover from the depression as the United States was forced to prepare for World War 2 by plowing money into defense. By contrast, a lot of this current stimulus package goes to bizarre funds like government pet projects and special interest groups. Instead of putting a short term, economic band-aid on the economy under the guise of a "stimulus package", America needs to focus on balancing the budget, stabilizing the dollar, and decreasing the national debt. A government option for health care would be nice, but we cannot afford it right now, especially since funding for the proposal is completely up in the air. This has the potential to send the current budget deficit completely out of control…(Joe hang glide during Hurricane Katrina). Finally, the Fed needs to keep interest rates low (Joe Bernanke) to stimulate lending and encourage business and entrepreneurial investment, and this will help to sustain a long term approach to creating and keeping jobs that really build and stimulate the economy. (Joe teach- a-man-to-fish-instead-of-giving-him-a-fish).
Are we optimistic for the future? Absolutely. Unnecessary pessimism depresses markets (Joe or Johnny Rain Cloud), and is unhealthy for an economy. It will likely be a long and slow recovery, as many economists predict. America has shown resilience that has helped us become the world economic leader for nearly 100 years. There’s not a more suitable country that fosters economic opportunity to create jobs and businesses. We’ve repeatedly shown that when we trust in capitalism, we can pull ourselves up after getting knocked down (Joe Austrailian one-hit wonder band), dust ourselves off, and look forward to a better future. But before you quit your day job to invest in the stock market and drink Coronas at the beach (Joe Commercial guy), pay attention to the warning signs lurking beneath the surface. Let’s give the stock market a five yard false-start penalty, and then let’s trust in capitalism to run its course so that relatively soon we’ll be able to enjoy a nice long economic touchdown drive!
1st, a government health care option would be nice. . . are you kidding me? Tell me how Medicare and Medicaid are doing and you'll see how "nice" a government health care option would be.
ReplyDelete2nd, be careful about keeping the Fed rate too low, a low rate means a cheap dollar. Cheap dollars equal inflation. We must keep value in our currency or no one will want it, including Americans. This has already been evident in the price of gold (a common alternative to the dollar.)
3rd, the quickest, easiest, most effective way to create jobs and encourage investment is to cut taxes. The rich fuel our economy, we all work for rich people. The more money they have the more work there will be.
Just a few thoughts from an old friend.