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Conditions continued to improve in the U.S. over the past quarter, suggesting that the economy is reaching the point where monetary easing can be pulled back, according to the most recent assessment from the Federal Reserve.
The central bank said growth was moving at a "modest to moderate pace" with improvements coming across all the Fed districts.
"Consumer spending rose in most districts, reflecting, in part, strong demand for automobiles and housing-related goods," the Fed said in its Beige Book report.
Increased activity also was reported in travel and tourism, nonfinancial services and manufacturing, which the central bank said had grown "modestly."
True, the jobs situation is not so good but the people who have jobs are spending more money. But if the new immigration bill goes through the economy could have 4% growth and unemployment would still sky rocket with 38 million more people in the country. In fact this would create more wage competition and cost of labor would go down as this would effectively make us look like a third world country, labor wise. It does not seem like a good thing to me but the Democrats seem to love the concept. Before you know it they will have us all eating out of dumpsters and blaming the Republicans for it. And they will get elected by promising us cleaner dumpsters to eat out of. You have to love it. Need any snake oil? It does wonders for what ails you.
"The definition of stupidity is doing the same thing over and over again and expecting different results." — Albert Einstein After three cycles of QE, the economic recovery continues to be much slower than after past downturns. The Fed should come to realize that it fits very nicely with Einstein's definition.
Now we are debating whether QE will end quickly or slowly, but the debate arises only because QE3 has been such a failure. It would be nice if the Fed displayed some leadership by pointing in the correct direction; that is, if they have any idea what that direction is. For those who believe interest rates will rise over the coming months, there is much to support that position. For those who believe the economy is too slow to support higher rates, you have strong arguments also. It appears that there is a rough balance between proponents of both positions, giving rise to the high volatility level of late.
It's interesting to imaging the consequences if the economy continues on the present course. The employment rate for individuals of working age continues to decline. Our consumer driven economy requires increasing consumer debt to expand, but there's inadequate personal income to support that debt. We continue to increase our debt to foreign entities by 10% per year, which is much faster that our economy is expanding. Consumer debt is very sensitive to interest rates, so any meaningful increase in rates will reduce economic growth from a dismal level to a vanishingly small level. This is one of those situations that can't continue, and so it won't. I don't know when it will end, or what will trigger the change, but it's likely to end badly.
Why should anyone try to find a job when you will pay them not to work? Bubbles create inflated wages and recessions are supposed to fix that by creating wage competition but when people are getting paid to stay at home it doesn't happen that way. All you do is prolong the misery.
Basically we have an economic imbalance where the pool of money available for wages is being divided among a smaller number of people and the politicians aren't allowing a condition to be created that would result in everyone getting a share but at a slightly lower wage. It's really rather simple to understand so I have to assume that the politicians know and don't care or that they simply are not the sharpest tools in the shed.
I mean if you have $1000 dollars to give 10 people but you give 9 people $111 instead, obviously one person has to get close to nothing. What is so hard to understand about that?
The politicians don't want to be the bearer of bad news and thus they won't do what gets these recession over with in the shortest possible time. Now whether that is a good thing or a bad thing depends on your nature. If you like a less misery stretched out over a very long time then maybe it is a good thing. If you would rather get it over with so you can get back to the boom times ASAP then then it is a bad thing. I guess it depends on how much courage you have.
THIS IS AN INFLECTION POINT. Computer trade programs/algorithms WILL RESPOND. Not saying like in one day, but they will be taking profits, hedging and shorting anything that pops up in the algorithms. The cycle has changed, we are taking off on interest rates. My algorithm expects a 30-50 percent decline in stocks is doable, hence shorting etf stock funds make sense, time you purchases with the Chinese hedge funds.