It seems that this concern is finally becoming more widespread, as many others are writing about it. In fact, some say the world economy is drowning.
“For optimists, these are all signs that might point towards the beginning of the end of the 'Great Recession'. Headline writers, and those who are urging stockmarkets to continue rising, will continue to talk of hopes of recovery. Yet a closer look at the detail of the latest figures suggests that hope springs eternal and will latch on to what it can—even when a more sober analysis would suggest there is a long way to go before recovery sets in.”
One of the major portions of the situation, and one which PresBo hammers constantly, and used as a justification for seizing control of banks, is the credit market. Credit must flow, we are told… and they’re right. Well, credit has eased up a bit… but beware the historical precedent of 1980 when the same thing happened. And then interest rates rose and the flow of credit was cut off again. It appears the same thing may be happening now.
“But enthusiasm may still be getting ahead of reality. Government-financed credit has its own problems, which will grow. The banks still have toxic assets on their books, and the number of bad loans is rising. Moreover, the world economy, which was so dependent on America’s borrow-and-spend behavior, has not found a replacement. “Have we put into place a new engine for global spending, or even repaired the old?” asked Robert Barbera, the chief economist of ITG. The enthusiasm of markets is even creating its own problems, pushing up long-term interest rates and thus the cost of mortgages.”
How dangerous are rising interest rates? Even PresBo acknowledges they can be dangerous to our economy.
“Treasury Secretary Timothy Geithner, National Economic Council chief Lawrence Summers and Office of Management and Budget director Peter Orszag said in separate interviews that the administration was acutely aware that rising interest rates pose a threat to the improving U.S. economy.”
But the two major factors responsible for the rising interest rates, massive deficit spending and printing more than $1 trillion to “stimulate” the economy, are both actions taken by the Obama administration. So I’m not inclined to cut him much slack on the subject.
So, as I’ve said before, don’t look at the current trends and think the economy is on the mend and that the recession (depression?) is over. It most likely isn’t, and therefore we probably have more bad times on the way.
Read the rest...
