[nathanbedford]

I think we have just barely escaped a double-dip and I think that we are going into a Japan type muddle. That means that the worst is over. It does not mean that employment will improve soon. It means that Barack Obama has heaped such staggering load of debt on generations of Americans that we will be swimming against the tide, laboring as my parents did to emerge from the great depression. They bought a home in 1938 which today is worth somewhere between three quarters and $1 million. In those days it cost them $7,800.

They were terribly worried about making those mortgage payments so they doubled down on the payments. That is what America is doing now on our credit cards, on our corporate balance sheets, and, yes, on our mortgages when they are not underwater.

It takes a long time to lift this burden. But, as I have posted time after time, it is a disservice to our readers, to conservatism, and to our reputation, to see economics through a political filter. Even worse is it to judge the market through a political prism. George Soros got to be a billionaire by going the other way. Anyone who invests on the basis of his political instincts is a fool. George Soros is evil but he is not a fool, neither should we be.

The market, like the Holy Spirit, is no respecter of persons or politics. It is a giant mistake to conflate politics with finance. One must maintain an open mind, free of political prejudices, when predicting markets. Keynesians do not maintain an open mind. Milton Friedman, on the other hand, is the essence of the open mind. Nevertheless, Friedman in academia is despised and John Maynard Keynes is holy writ.

Unemployment is a laging indicator. My suspicion is that we are coming to the end of the starker losses in employment, that picture will now stabilize, but the economy as a whole will not recover vigorously, but languidly.

Politics keys off of the unemployment statistics. But that is a whole different matter from the course of the economy. As a lagging indicator it is like trying to analyze the market by looking at the rear view mirror.

[Poison Pill]

we are coming to the end of the starker losses in employment, that picture will now stabilize, but the economy as a whole will not recover vigorously, but languidly.

I think you have that right. Politicians are the ultimate followers. I will be interesting to see what direction the electorate pulls them in November. In the mean time, flat is the new up.

[Recovering_Democrat]

Nathan,
Do you think is there anything valid to this rambling I posted earlier? I’d like your thoughts.

http://www.freerepublic.com/focus/f-news/2583158/posts

[caww]

Hello Nathan.....

There are several speaking out now about this “lame duck session” coming up.... where the Democrates will push thru just about anything they want to since they know they are going to go down anyway...I think there is good reasons to be concerned as well. The American people can and have protested and as we have seen ignored or at best appeased the uninformed. So what’s your take..am interested in your opinion.

You know they could leave such a mess by 2012 that even if we take the leadership it will take years to just get our heads above water...then the Democrates can come in for the “kill” in the next elecction... and take the credit for pulling us on out of all this muck and mire...yet continue with their agenda anew.

[schu]

The market, like the Holy Spirit, is no respecter of persons or politics. It is a giant mistake to conflate politics with finance.

The would be true, except it is difficult to make the case that we still have a free market with all the bail outs and TBTF efforts put forth by our government and the Fed. We really have a version of crony - capitalism that is much more like Europe.

What these means is that politics and economics are now effectively and completely intertwined, the relationship between business and government is an uneasy partnership.

Both sides, the Fed/money center banks and the Federal government want more spending, they buy into these Keynesian ideas that we can borrow and stimulate our way out of this economic mess. This is a fool's errand, the marginal utility of debt and government spending are now very low or negative, it just will not work.

Congress is scared stupid to spend more money of any significance, the Fed will not do it for them right now. We are stuck in this stagnation, they will not let the market work and can't spend the amount that would make a difference. Government has completely perverted the market, this effectively leads us no where.

schu

[Danae]

I think you are correct with one caveat. If the Fed starts printing money or uses some mechanism which amounts to the same thing, we will face Hyper-inflation. If that happens, and I think we are perilously close to just that, all bets are off.

I think this could easily get worse, given the absolute idiocy in control of government and the monetary system as it stands.