Mittwoch, Juni 10, 2009

If You're Wondering When The Recession Will Be Over...

...then you need to read this first.

Fundamentally, the recovery will be riding a very, very narrow and dangerous path: to get economic recovery, you have to get consumers, who now have to restart savings seriously, to spend their money, coupled with the willingness of banks, who are facing significant losses not yet realized, to lend money without demanding onerous interest rates.

It can be done. There will be a recovery.

But the policies of the Obama Administration - which will lead to higher interest rates, inflation and taxes - is not helping.

Why? Not merely because higher taxes and inflation will lead to, at the very best, stagnant real income growth, but more fundamentally, weak demand, coupled with higher taxes, will hit profitability: weak profit growth means that investments will weaken, reducing competitiveness and innovation at a time when these are needed...and this means that just at the time when folks are out there looking for work, there will be little hiring.

While there is light at the end of the tunnel, it's a lot, lot further off than most think. It's not that it isn't there: it's just that the Obama Administration appear to be doing its best to make it as distant as possible...

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