Where Are We On The Long Road To Economic Recovery?
- President Obama says his priority is to CREATE jobs and to SPUR economic growth, although businesses are hoarding cash and NOT hiring due to the level of uncertainty over how they will be affected by his policies and legislation.
- The Fed has now entered into quantitative easing 2 (QE2) to try and achieve the Obama goal, because the economy shows NO signs of snapping out of the slump it is in. They will purchase an ADDITIONAL $600 billion in bonds from the marketplace.
- QE2 is an attempt to inject even MORE liquidity into an already liquid banking system to jump start borrowing and maintain interest rates at or near 0%.
- Banks, however, were flush with cash BEFORE QE2, but they are not lending and terrified Americans are not borrowing.
- The addition of liquidity will weaken an already weak dollar, a fact that is causing concern around the globe. This apparent weak dollar policy is creating the potential for a trade war with our partners. China, who we currently need to fund our deficits in an ironic twist, has expressed concern over the U.S. economic condition and is not on the President's itinerary for this trip to Asia. Said a Chinese official,
"If the United States can increase the volume of dollars and it can transmit inflation to other countries to lessen the pressure of debt, then it will bring about a catastrophic influence on the world..."
- Paul Volker, chairman of Obama's Economic Recovery Advisory Board and Fed chairman during the Carter and Reagan administrations, discussing the economy and jobs in a speech given in Seoul said that,
"I suspect that it will gradually decline. But the basic fact of the matter is that the economic outlook is for continuing but limited increases in economic activity for the next year or more..."
- It is going to be an interesting G20, that is for sure!