A lot of people are wondering if the stock market rally or rebound of the last six weeks is real or not. Not real in the sense of 'did it actually happen?' but rather in the sense that is it sustainable? Is it a bear bounce (a blip on a downward trajectory)?
Or rather, is it really the beginning of a sustained recovery? There's valid points to be made for both sides. There are signs that the worst is past, and signs that the worst is yet to come. If you had a crystal ball right now you could make yourself quite wealthy. The truth is no one knows for sure. Economics has been described as trying to drive your car using only your rear view mirror as your visual input. You can tell what happened, but you don't know for sure if there's a big curve up ahead. You have to react to clues from the past.
But
there's a political point that is critical not to be overlooked. If the recovery has started already then how did it happen? All that you can be sure of is this - it wasn't because of the stimulus package (the
American Recovery and Reinvestment Act). Most of that money hasn't made it anywhere yet. So if the recovery kicks into high gear, it won't be because of anything the Democrats and the President have done. That's important to understand and to remember, because they will surely try to take credit for it.
The BIG financial corollary to this point is that if the ARRA money is not needed, kill it before that money makes it's way into the system and stimulates massive inflation and tilts the economy into another problem. There is a huge risk here that the Democrats will be undoing the decades of low stable, inflation rates that managed to be achieved during the Reagan administration and stayed quite stable through the Bush 41 administration, 2 Clinton terms, and 2 Bush 43 terms.
The market is up over 20% in the last month and a half. If it's a bear bounce, it's a substantial one. Recovery may be on it's way. After all the conventional wisdom is that steep recessions are shorter than shallow recession. This one was certainly steep - at least by the time it became known (arguably the recession started in 2007). The most important thing to remember however is that if that is the case, the recovery pre-dates Obama's massive spend. And if that's true he must be denied credit for it or it will just lead to more of the same spend your way to recovery thinking.
Ironically, America does need change. The problem is that it is still somewhat blind to the type of change that is really needed. The President believes his change is the right change but what America needs changing is in it's thinking. It needs in many quarters to lose it's sense of entitlement. It needs jobs. It needs manufacturing. It needs to have a better mix of consumer, investment and research and development spending. It needs to curb it's current account deficit with real and fair free trade deals and competitive domestic products. It needs to mitigate it's dependence on foreign energy through use of domestic drilling, nuclear power, natural gas, and clean coal technology. Sure throw in solar, battery, geothermal, and wind power but don't expect them to pay off by 2012 or 2030 - they won't.
Most importantly America needs to slash it's government debt at all levels. This will not get done with trillions more in federal debt. It requires the killing or massive overhaul of discretionary and non-discretionary spending. In other words Medicare, Medicaid, Social Security and possibly defense spending (though preferably not the latter). All that incremental Obama debt might do effectively is potentially reduce state debts. In case some states decide they want to secede from the mess the union is in a few years down the road, they'll be in a healthier position to do so. Wonderful. What a great way to destroy America from the inside. Maybe that's been the plan of the ultra-left all along? Nah, couldn't be.
