The economists were looking for 180K new jobs in May and even that was revised lower from a much higher number. We got 54K!! Now the debate and fear is whether the economy just reversed from growth on our way to a "double dip" recession. It could be reversing in a very big way and if it does we have congress and President to thank for spoiling a good thing we've all been calling a recovery. Politicians in Washington are playing political chicken over the debt ceiling and deficit and the suspense is going to kill us before the crash does.
Some blame rising commodity prices for the economic slow down. Oil prices and commodity prices are no doubt putting a strain on both businesses and consumers. Rising commodities have more to do with speculation that supply & demand. Does anyone really believe that oil went from $70.00 a barrel to $115.00 because in the last 6 months we used so much more of it? Seriously! While inflation is a concern, I share Bernanke's opinion that it's transitory. If you look back a few posts in this blog I've already addressed my view on inflation and why I don't believe it's all bad. The reason the jobs and other economic data have just recently indicated that the economy is on the skids is because everyone put on the brakes for fear that we're going broke. What's new? The USA is broke. Not only is the USA broke, so is most of Europe and the civilized world. Being broke is nothing new and fortunately even that issue is not the problem TODAY! The problem today, the problem that produced the horrendous jobs report in May is all the fear that congress is stirring up because they can't do their dam jobs!
The problem is that delays in taking serious action on the deficit/debt and raising the debt ceiling have frozen the leaders of capitalism. CEO's, CFO's, and entrepreneurs across the USA are sending a loud message to congress - fix the f'n problem!! With literally what could be weeks before financial Armageddon what company wants to hire new workers or add inventory?!
Fortunately there is a solution. Unfortunately, the solution runs contrary to what you and I were taught when we grew up. You and I have been taught that money does NOT grow on trees. We been taught that money doesn't come out of thin air either. Well, we've been taught wrong! Last time I looked dollars and euros were made with material that comes from trees. And, the really large amounts of money are transferred on computers which is about as close as you can come to thin air. But seriously, the reason our economy hasn't already reverted to a time when we traded animal skins for meat carcasses is the because of the greatest invention since the wheel - currency. Currency in common denominations that flows easily across hands and across seas enables economies around the world!
For a period of time the conventional wisdom was that currency, being worthless paper, had to be "backed" by something with more intrinsic value - Gold & Silver. Those days are long gone and all that really backs currency today is "faith" and credibility. So for the sake of brevity can we simply say that a worthless country has worthless currency.
Hopefully you're with me on my next point. America and Europe are not worthless. Granted there are some serious questions about credibility, but I wouldn't call any of us worthless.
We're not worthless and the real reason the economy did a 180 degree reversal in May is because of the growing concern in the world of business & finance that the folks with the printing presses in the USA and Europe have all decided that there's too much currency floating around and they're afraid to print more of it. The inflation hawks aren't willing to move a few more trillion dollars into the economy for fear that it will devalue the currency and thus create inflation. HELLO! Have you considered the alternative??!! If you really want to "control inflation" and see some major devaluing don't raise the debt ceiling! You ain't seen devaluing till the market digests that idea! If that happens we really will be back to bartering because we'll all be out of work.
The economy needs more money circulating, not less! Negative inflation is still a bigger threat to our economy than inflation. Try to sell your house! Or maybe we should ask the 18% unemployed and under-employed if they think the economy is too robust and needs more tightening. The inflation hawk cries look at hirer oil prices. To that person I say buy a new car with a 1.9% rate car loan and replace your 10 year old car that get's 19 miles to the gallon with a new safer and better quality car that gets 30+ miles to the gallon and then come show me your gas bill compared to last month. In addition to reducing your net cost of transportation you'll also be helping the economy! To the hawk who points to the huge increase in the cost of cotton I say have you shopped at Kohl's lately?! You can practically buy a whole wardrobe for $500.00. To the person who complains about food prices I say split a dinner at a your favorite Italian restaurant where the portions are large enough for two anyway. Inflation is not the problem we are afraid it is.
What we need is for Washington please stop playing political chicken over taxes and spending cuts because you're about to crash into one another and kill us all. Republicans and democrats are playing political chicken in order to get the positions they want going into the 2012 election. Most games of chicken end without a crash because there is at least one chicken. And all the chickens in Washington better shift their focus from their own party's political survival to the survival of the world's financial system. We are getting to the point where none of the chickens or all us barnyard animals will live to see the next election if they don't do so very very soon!!
It's time for both republicans and democrats to veer off and announce a plan that combines fiscal austerity with more reckless borrowing and spending. How's that for an oxymoron. It is moronic because ultimately only a moron can think that the government can afford to cut the deficit to zero by August. Nor can we survive without more monetary stimulus to offset the fiscal austerity that really is needed. It is not a question of whether we will continue to print money we don't have. Forget what you've been taught growing up - money does grow on trees and come out of thin air. But so long as we use our money fabricating superpowers responsibly it can be OK. History is proof of that. And the last time we forgot it we pushed the economy into the Great Depression! Nobody knows that lesson better than Bernanke, thank goodness!!
The big unknown if you ask me is whether we (Washington and Europe too) can print money responsibly. And that is a question for, dare I say it, Wall Street. Yup, the same Wall Street wolves that some folks believe created the last financial crisis and the Great Recession will be the same ones to decide whether the world will be saved by the plans that the chickens in Washington come up. So here we are waiting for the chickens to be thrown to the wolves. Talk about the proverbial wolf guarding the chicken coup.
I just wish they'd get it done and announce whatever backroom deal they're coming up with because in the game of chicken it's typically the suspense that kills you. And, in the case of the political chicken in Washington suspense is killing the world economy.
