Well, nearly anyways. We still have the formality of a couple votes and Barry’s signature, but the end is right around the corner. Now don’t get me wrong, it is certain that this stimulus is detrimental to the country in the long-term, I don’t think we even need to debate that. But, it will work to get us out of the current situation.
Let me first recap the so-called recession that began in Dec. 2007. It was so bad, that the GDP actually plummeted to a staggering increase of only 1.3%. Unemployment has skyrocketted to 7.6%, as of January 2009. The 25-30% rates of the Great Depression surely would have hit us by the end of March if not for the Stimulus.
In all seriousness, the recession never really was. Yes, we had major banking problems caused by the collapse of housing. Housing prices have now dropped and are stabilizing. Month-to-month real estate sales are now on the rise.
Banks are indeed lending, especially those that chose not to partake in the subprime mess. The markets have had a few bumps, but there is strong evidence that they bottomed out in November. Up until midway through 3rd quarter '08 GDP was cruising along at a 3% growth rate, perfectly acceptable. The Tech industry was strong, retail was steady, and manufacturing was no worse than any recent years.
We are currently in the midst of what I am calling a pseudo-recession. When banking came unglued, the Media and Obama took their love affair to a whole new level. All we have been hearing since October is how bad the economy is. The media hit on it relentlessly.
Now, everyone under the sun has an opinion on how bad things are out there, whether or not they actually have any economic sense. Obama has even changed his tune from “Hope” to fear-mongering. All he has spoken of this week is how catastrophic this crisis is.
Central to this issue is the consumer psyche. The market has already corrected for the actual problems in the economy. Consumer psyche isn’t something to be ignored and is a part of every recession. It is one of the major reasons as to why retail sails are the last thing to pick up after the stock market corrects itself.
So the question is why, after corrections were naturally made, is retail not picking up, despite even having the Christmas shopping season to help out? Because every time we turn on the TV, open the newspaper, or hop on the internet all we hear about is how bad of shape we are in.
You tell people that a few times and they start thinking twice before spending money. This uncertainty (or maybe I should say certainty of doom) that has been driven into us is exactly what is hurting us. You would think the POTUS would speak highly of things to boost psyche and get people to start spending money again, but apparently that was against his plan.
So now we sit here with an $800 billion stimulus in the midst. One of two things has to happen over the next few months. Either the media keeps reporting that the economy is in dire shape and that the stimulus is not helping, or they give up on it and hail Obama and his stimulus as the redeemer of the economy.
The first scenario would require the media to throw Barry under the bus already. I find this highly unlikely and don’t feel it even deserves comment. The second is much more likely, and it will work. Temporarily at least. The MSM loves this package and will continue to speak very highly of it.
As soon as we start hearing that things are getting better and that the stimulus is working, consumer psyche will begin to rise. Spending will increase and we will be out of the woods. Everybody will be happy and Obama will be the savior once again. 2009 GDP will be up, comparisons to FDR will abound, and the New New Deal will be written up as a country-saving piece of legislation.
And then comes the inflation…