“The economy has effectively landed—nothing to suggest further overall weakening growth, nothing to suggest a rebound either.”
~Steve Blitz, ITG Investment Research’s chief economist
As of today – investors can purchase U.S. Government 30 year treasuries for 2.49%. When factoring in inflation … investors are willing to pay America in order to keep their cash protected (source). It’s expected that the U.S. economy grew only 1.5% in the 2nd quarter (source) and inflation was meek with prices rising only .7% in the 2nd quarter (source). The EuroProject i.e. the Euro has been a mess and it’s not helping our economy although it is driving lower borrowing costs. And the people who have been worried about inflation need to finally own this – they’ve been wrong. There has been no hyperinflation; there hasn’t even been moderately high inflation. Inflation under Obama has been lower than under Bush (source); that has nothing to do with Obama … but it does say we don’t have an inflation problem. We need MORE inflation.
So here’s what that leaves us with. Corporations and wealthy people are sitting on tons of cash, but we have significantly higher unemployment than we can afford to continue. The only way to prevent this unemployment from being the new normal is to grow the economy, but we’re only growing at 1.5% in the 2nd quarter (which is better than was predicted due to a much better than predicted 4th quarter). When everyone is trying to cut on spending …. SOMEONE has to step into the void to prevent economic collapse. Normally – that would be government who can build roads and bridges – pay for teachers etc borrowing money at NEGATIVE interest.
All it takes is a Congress willing to build infrastructure by borrowing money at negative interest. But “conservatives” say that government does not create jobs. ”Conservatives” say the only way to address this is through tax cuts for the rich so their wealth can trickle down on us. Conservatives have blocked or slowed down infrastructure bills, student loan bills, farm bills, middle class tax cuts, etc etc. The only way out of this mess is for government to rev the engine. And that’s why the Federal Reserve must step in and do something like many have been calling for for months.
Krugman writes HERE:
A funny thing happened on the way to the predicted fiscal crisis: instead of soaring, U.S. borrowing costs have fallen to their lowest level in the nation’s history. And it’s not just America. At this point, every advanced country that borrows in its own currency is able to borrow very cheaply…So what is going on? The main answer is that this is what happens when you have a ‘deleveraging shock,’ in which everyone is trying to pay down debt at the same time.
Household borrowing has plunged; businesses are sitting on cash because there’s no reason to expand capacity when the sales aren’t there; and the result is that investors are all dressed up with nowhere to go, or rather no place to put their money. So they’re buying government debt, even at very low returns, for lack of alternatives. Moreover, by making money available so cheaply, they are in effect begging governments to issue more debt. And governments should be granting their wish, not obsessing over short-term deficits.
So when you read all of this …. do you ask yourself which party has presented a plan to FIX IT. Do you think cutting government programs like Medicare, Social Security, Medicaid, Pell Grants etc in order to pay for tax cuts for the rich so that wealth can trickle down ala the 1929 Republican party solution will work? Do you think cutting child free lunch programs are going to help push us forward?
Looking at the two visions – who do you believe is going to fix it? If America is undecided and votes 50/50 … this will continue. There needs to be an overwhelming mandate by the people like there was in 2008 before something happens either way.
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