Monday, December 13, 2010

Our Economy at the Brink

Not really, but the potential is there, either for real growth (which we had little of in the past two years), or a real slide into a second dip, next year. On the other hand, we seem to have a knack for choosing the route in between. Payrolls, factory orders and the stock market seem to agree on nothing.

If you ignore the temporary jobs for the Christmas shopping season, there has been a loss of both jobs as a whole and factory jobs for the past several months.

Congress continues to debate whether to raise taxes or not, and I don't think, in the long run, they will go up. But if they do, we will slide into another recessionary dip, possibly lasting a couple of years. If the renew the "Bush era tax cuts," we will continue to drive forward into a better economy. But how much better is anyone's guess. A lot of that has to do with how much of Obamacare can be killed off, and whether of not the carbon tax monster can be killed dead.

Gas prices have begun to rise in December. I believe the era of a price drop each winter is gone. China is now a major price driver in the gas and oil markets. And in all other commodity markets as well. Coal, Copper, Food, Gold, Iron, Silver.

Bernanke thinks it will take years, maybe five years, to recover to a "normal" unemployment rate, and thinks the threat of inflation is overblown. I think he is very much an optimist. My thoughts are much more along the lines of Tom Dennen, who bills himself as a Paranoid Historian.

The dollar continues to weaken, although it has leveled off for the past few days. The government insists there is no inflation, but the price of energy and food have been going up for more than a year. I have some news for the government. Prices going up are a sure sign of inflation. Just because you can juggle the numbers to count out all the factors that go up doesn't mean they go away.

This coming year might be more than interesting.

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