The Economy Guy

Bonds and the Dollar gained as money poured into the US for safety from Europe.

Oil and gasoline moved sideways.

Gold continued its power forward in an unending up channel.

 

In the eews……

More Stimulus?? – New spending, tax relief proposed by Obama to spur growth. Obama called on Congress to approve a six-year public works program that would spend $50B upfront on upgrades to roads, rail lines and airport runways in an effort to combat unemployment. The administration said it will work with Congress to fund the plan without adding to the deficit, perhaps by cutting subsidies on oil and gas exploration and production. However, lawmakers preparing for the midterm elections may not provide the zippy approval Obama is hoping for. Obama is also expected to announce this week an expanded tax incentive to encourage business investment.  Where is the trick?  Well, besides more spending by the government which you can argue can’t be done efficiently, here are the problems:

1. Obama can propose all he wants – but only Congress passes legislation.
2. Congress is out of control in spending, and would load this bill up with more ridiculous pork barrel projects as they did in Obamacare, the first Stimulus and the massive Financial Reform bill.  You can’t trust them – and the average American doesn’t
3. The Republicans will probably stop this legislation just because of the politics involved.  It’s another chance to call the Democrats “Big Spenders.”  Obama has admitted that the $50B is only a first installment needed to accomplish his proposals for roads, bridges and airport infrastructure – so this would be a commitment to ongoing big government spending.
4. A new Congress is an unknown today, so waiting until January doesn’t necessarily help.  Besides the President wants it done today.
5. While Obama is calling this a jobs bill – the money won’t be spent this, or next year.  It is stretched out over 6 years.  Another trick to have money for the next Presidential election???
6. My question is “If these projects are so good, why weren’t they included in the last Stimulus bill?”  Or, “were they held back purposely?”  “Was politics being played by the Democrats with the American recovery and jobs for the people?”  I don’t think the administration can stand these questions.
7. Remember to throw all the bums out in November.  I know you must vote for the person you think will do the best job, but if there are two equal candidates, and one is an incumbent – they him or her out!!!!!
   

HUD Spending – is going up.  It is very clear that HUD has an alternative agenda besides helping poor people with housing through Section 8.  Here are just a few of the things going on, and you can see how pervasive their reach is across our economy.

1. FHA has existing rules that allow a person with a 500 FICA score to get a 100% mortgage through FHA if they live in a “disaster” area.  Guess who picks up the bill when this 500 FICA score person defaults on their mortgage??  YOU, that’s who.  What a dumb rule.
2. HUD is causing all home escrow fees to go up, so they can get more income from everyone who is buying a home today.  This is just a tax in another guise, and I don’t see the press calling out the President for hitting middle class and lower class Americans between the teeth on this one.
3. There are only about 1/6th as many mortgage agents out there after HUD has instituted its “licensing” requirements.  But, those same requirements don’t apply to banks who have their own inside agents.  Why?  Are the banks getting a break from the government (again.)
   

Problem Banks – there are now 829 problem banks according to the FDIC.  Well, you know that the FDIC is closing 2 to 6 banks each Friday, and they are re-opening the following Monday with a  new owner.  But, the number of problem banks is growing in spite of the closure of the “worst” ones.  Here is a graph showing the growth in problem banks as defined by the FDIC.

 

Is there going to be an end to this problem?  Not until the real estate problem (both houses and commercial) is solved.

Tonight’s Dinner Conversation…..

Our economy projected into the future.  Where is the President guiding the economy?  Well, the answer is pretty obvious.  He is a SPEND president, and he hasn’t shown himself to be a TAX AND SPEND president yet.  Naturally, we all know this leads to massive fiscal debt, and possible default.  In fact, I would contend that it leads to a definite default of our debt.  This is an unthinkable thought in the world (and I mean the entire Earth) of finance.

So, what are the Republicans going to do when they get into power in the House, and possibly the Senate?  Well, let’s prognosticate a little.

1. The Republicans will control the House – there is little doubt of that unless something very dramatic happens in the next 8 weeks.
2. The Republicans may control the Senate, or they may not control the Senate.  In either case, neither party will have a 60 seat filibuster proof majority.  The only difference is which party determine the agenda the Senate.  
3. If it is the Republicans, the Democrats will filibuster the contentious bills – and those bills will die.  The Republicans would like to pass bills that embarrass the president – so that he would have to Veto them.  But, we probably won’t get to that point.
4. If it is the Democrats, the Republicans will filibuster the contentious bills – and those bills will die.  The Democrats would like to pass more SPENDING bills.
5. Either way, there is a stalemate.  So, who cares who wins the Senate.
6. So, we will have a House that controls the creation of bills sent to the Senate, but the Senate will stall on the big ones.
7. More importantly, the House controls the purse strings of the government, and it may (and better if the members want to be re-elected) defund a bunch of previously passed Obama legislation – with Obamacare at the top of the list.
8. The President will point to the Republicans and say they are stopping the US economy from growing by NOT passing the Spending bills that he will trot out on a continuously.  This will be the basis of his 2012 platform for re-election.  (The only way Hillary will get a shot at running is if Obama decides not to run.)
9. But, will the REAL PROBLEM in the US economy be solved?  The REAL PROBLEM is the BUDGET DEFICIT.
10. Republicans may try to reduce spending by the government, and might be successful at the margins, but basically they will fail because Obama has all the money already signed into law – that is why some of the original Stimulus money, Obamacare Money, and Fiscal Reform Bill money won’t be spent until 2012.  Get the picture?
11. So, my projection is that we will have a stalemate in government for the next 2 years, AND we will have a BIG GOVERNMENT continuing to spend BIG MONEY, and we will have a GROWING BUDGET DEFICIT.  So, the Republicans better get a grip on this next election, and do something that demonstrates they can govern, and that governance actually will help the average American, and not just big business.  Otherwise, 2012 gets real interesting.
    

So, how does the American federal government ever become smaller?  Only one way.  In 2012, Obama must be defeated, AND there must be real leadership in both the House and the Senate who WANT to have a smaller government.  Then legislation must be passed to create a SMALLER GOVERNMENT.  This is a tall order for the bums who are currently sitting in the House and the Senate.  They would never do this.  So, in addition to the above, all the bums must be thrown out of office.  2010 is just the start of cleaning up the mess that exists in Washington.

I purposely have excluded the action of the US Federal Reserve in this diatribe, but I will have future efforts to include them.  The Federal Reserve has MORE POWER than the House and Senate combined in the above scenario.

Here are the closing numbers for today:
Dow Jones 30 Industrial – 10,341 (down 107)
10 Year Treasury Bond – 2.61% (down 0.10%)
Euro – $1.2695
Gold – $1057 (up $8)
Oil – $73.67 (down $0.93)
Gasoline – $1.93  (up $0.01)