How do you like that quote ? It comes from a CNBC piece on whether we will have a “double dip” recession. I am very pessimistic about the economy and will be as long as Obama is in office and has a Congress in the control of Democrats. The Democratic Party once understood economics but those days are gone. The “Baby Boom” generation seems to live in a fantasy world of their own making.
But Gluskin Sheff economist David Rosenberg also took up the 1930 theme in his daily analysis Thursday. He, too, noted the crash in 1929 was followed by the rally in 1930, followed by asset deflation, credit collapse, a natural disaster, geopolitical disagreements and threats, low interest rates, high gold prices and several other common characteristics.
The two analysts differ somewhat on how dire things could get for the stock market-Zimmerman is far more bearish-but both see troubling signs in the surging bond demand.
“At current yield levels (1.9% on the 5-year?), the Treasury market is screaming deflation,” Rosenberg wrote. “If it is right, not only is the consensus estimate of a new peak in corporate earnings in danger, but so is the key 1,040 technical threshold on the S&P 500.”
The yield on the benchmark 10-year note has slipped below 3.10 percent and is trending towards levels not seen since the March 2009 stock market lows.
Even as the government continues to pile up debt and deficits and supply keeps raining on the debt markets, investors are unwilling to walk away from the safety bid.
“That shows two things: People are concerned about safety and there’s no demand for credit,” Zimmerman says. “It’s demand for credit that drives the 10-year rate higher and it’s demand for safety that drives it lower. Evidently the world doesn’t like what it’s looking at.”
This analysis does not mention the poisonous atmosphere of the Obama administration for business. Even an election that devastates the Democratic majorities in both houses may not protect us as once free of the need to appeal to independents, Congress may go on a spree of bad left wing legislation.
Spending could re-explode in a lame-duck Congress because all decisions on how much to spend next year have been delayed. Neither house of Congress has adopted a budget resolution (for the first time since 1974), and none of the appropriations bills have even cleared a subcommittee.
Retiring House Appropriations Chairman David Obey (D, WI), typically a staunch defender of following regular order, could see his final year blemished if the spending is rolled up into omnibus bills with who-knows-what policy riders tacked on.
A lame-duck session would offer a last-gasp chance to enact some form of carbon tax, energy tax, cap-and-trade, or requirement that utilities must use politically-correct wind or solar power rather than more consumer-affordable fossil fuels. Or card-check measures. Or the Employee Non-Discrimination Act. Or any of a multitude of provisions that now cannot pass on their own but could be stuffed into a massive last-gasp hard-to-stop appropriations omnibus.
A stake through the heart of this malignant Congress may not even do the trick.
The 1929 crash was followed by a gusher of spending and protectionism by Hoover, a good Progressive. Roosevelt actually ran against Hoover from the Right in 1932. Of course, he then flipped and followed a Progressive agenda until World War II pulled us out of the Depression.
Remember another component of the world wide Depression was a series of defaults by European countries on their war debts.
Sort of like the Euro crisis today.
“I am very pessimistic about the economy and will be as long as Obama is in office and has a Congress in the control of Democrats. The Democratic Party once understood economics but those days are gone. The ‘Baby Boom’ generation seems to live in a fantasy world of their own making.” So if the Republicans come into power, you will become optimistic. The Republicans will understand economics because we all know they were economically fiscal, and the baby boomers will disappear in a puff of smoke! Can’t wait for that magic show!
The Republicans may have learned their lesson but, on their worst days, they were more informed on economics than the Democrats. If the Republicans take both houses of Congress this November, I will become less pessimistic but it will take years to undo the damage and Obama is still there. The source of optimism, if any is to be found, will come when I see American voters, at least the majority of them, recognizing that bills must be paid and the economy requires some prudence in what is attempted.
I predict a new meme of ‘blame Obama’, that will replace the ‘Bush Derangement Syndrome’. I don’t think either parties have any interest in our country, other than what money they can make it their side deals. I think it is a useless exercise to predict that debt will be the focus of either parties. Business conceived this hand-out disaster and big business will still be there in November.
Blame Obama may become popular because he has failed at every task he has attempted as president. Health Reform is a disaster. The oil spill probably could not be prevented but he has bungled the cleanup. The financial crisis began with the delusion that housing prices would always rise. In the 1990s, both Democrats and Republicans suffered from this delusion.
What made it so dangerous was the nexus between the big financial institutions and the Democrats. Franklin Raines and Jamie Gorelick made hundreds of millions running the GSEs of Fannie and Freddie. Not so long ago, those institutions bought only low price mortgages. That’s what “conforming” meant. If your mortgage was too big, it was “jumbo” and you had to pay more interest.
Then, the “conforming” mortgage started to get bigger and bigger. There was a huge moral hazard problem. Even I saw it about 2006 when I realized what had happened to housing prices. I even briefly considered selling my house and renting for a while. By not doing so (I had a daughter in high school), I lost about $250,000.
The cause of the collapse is clear to anyone who wants to look. The new financial regulation bill does nothing about that problem just as health “reform” does nothing about the cost problem.