It’s the Economy, Stupid!

The O’bama administration does not understand wealth creation.  All of the debt being folded into health-care, energy, and pork are the polar opposites of what our country needs to right itself.  As someone on the web noted, “it’s as if a bald, obese pedestrian were hit by a car while crossing the street and had to be taken to the hospital.  While there to fix his broken leg, the doctors decided to give him weight reduction surgery, hair replacement, and a coronary bypass… the patient died.”

A great article in the Wall Street Journal about the direction of the economy:

Just about every policy move to right the U.S. economy after the subprime sinking of the banking system has been a bust. We saved Bear Stearns. We let Lehman Brothers go. We forced Merrill Lynch, Wachovia and Washington Mutual into the hands of others. We took control of Fannie and Freddie and AIG and even own a few car companies, pumping them with high-test transfusions. None of this really helped….

Like it or not, the stock market is bigger than the Federal Reserve and the U.S. Treasury. The stock market anticipates only future profits and prosperity, not government-funded starter fluid. You can only fool it for so long. Unless there are real corporate profits from sustainable economic growth, the stock market is not going to play along. It’s the ultimate Enforcer…

But I think what really bothers the market is that the structural problems that got us into trouble in the first place still exist. We took the easy way out and, with the help of Treasury Secretary Tim Geithner’s loose “stress tests,” swept banking problems under the carpet. We waved off mark-to-market accounting and juiced bank stock prices to help them recapitalize, but all those toxic mortgage assets on bank balance sheets are still there as anchors on lending. All the pump priming and stock market flows didn’t get rid of them.

The same issue of the WSJ has an article from Mort Zuckerman, where he notes that the economy is even worse than most people realize:

Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period…

This process is nowhere near complete and, until it is, the economy will barely grow if it does at all, and it may well oscillate between sluggish growth and modest decline for the next several years until the rebalancing of excessive debt has been completed. Until then, the economy will be deprived of adequate profits and cash flow, and businesses will not start to hire nor race to make capital expenditures when they have vast idle capacity.

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