Monday, March 31, 2008

The economy

The economy is in a slow-down, unlike any seen in last several years. Despite the frequent calls over the last few years, in particular, we've never been in such a state in many a year (i.e. more than 20).

Think of all the jobs created in the last 7 years. Think of the low inflation rates, the record low interest rates, the textbook definition of full employment.

Think of the abundant wealth that ALL people have shared in the last 7 years: yes, I do mean ALL people, for how many people have had disposable income to afford DVD players, MP3 players, GPS devices and one of the popular home video systems? Quite a number of ordinary people have enough cash to afford at least one of these (if not two or three). That speaks to our overall wealth as a nation.

How many people afforded new homes in the last 7 years? Sure, the talk these days is all about the sub-prime mortgages that people cannot afford, but when you consider that a firm 95% of all mortgages are being services on-time, the mere 5% that aren't can be seen in an appropriate light.

This doesn't mean, however, our economy hasn't had challenges over the last 8 years. President Bush started his first term facing a recession that clearly began prior to his administration. The nation then took a huge hit on September 11th. Then two wars, and hurricane Katrina. Along the way was the tremendous outpouring of aid and donations to those affected by the tsunami. All of these events weighed heavily on our nation's economy and the overall disposable incomes of the citizens. Yet where there were valleys in our economy, peaks were often close by.

So what has happened to cause the current valley to run do deep? What has been demonstrably different in the last 16 or so months that has been unlike the previous 7 years?

A particularly glaring difference is that we now have both houses of Congress under Democrat rule. While the only sizable legislation they've been able to pass is raising the minimum wage, that alone certainly does nothing to strengthen the economy (but certainly does hurt employment levels). However there is continued talk of raising taxes, which makes investors nervous. There is the ongoing drumbeat of new, huge government programs, which are the bane of sound economies.

You say you're sceptical of my conclusion? Answer the following: what as the price of a barrel of oil 18 months ago? What were new home sales 18 months ago? How many foreclosures were there 18 months ago? Compare each of those answers were 18 months ago to now and then ask what has changed in that time. If you can point to something more significant thab the Democrats taking over both houses of Congress, then speak up.

I'd like to hear your theory.


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