Taxes, Clunkers and Benefits
Stocks soared on the news of manufacturing data. (It was down, but stocks went up). Bond interest rates soared too.
The Dollar lost 2 cents – a massive move, and portends inflation.
Oil and gasoline rose significantly – you can now bet that gasoline will be rising at the pump. Go fill up now.
Gold rose slightly.
In the news today…..
New Taxes for Middle Class??? – Treasury Secretary Geithner and Larry Summers cannot rule out a tax increase for the middle class – a discussion they had this last Sunday. What are the ramifications of this announcement?
- Politically – President Obama is stuck with trying to not look like a liar from his declarations about no new taxes. I think this will become a political hot potato in the near future.
- Economically – the statement makes complete sense. The deficit spending must be paid for somehow – and the choices are first increased taxes, and second inflation.
- Internationally – the Chinese have put the heat on the Administration to keep the Dollar strong, and interest rates low – and Geithner’s statement certainly makes the Chinese happy.
Cash for Clunkers – used up its $1B budget sometime last week, or over the weekend. The program is a wild success as people scramble to turn in their clunkers to get the “free money.” How much money was committed to these buyers?? Who knows??? No one, apparently, as the government just can’t add up the numbers – what complete incompetency. The House voted to add $2B more to the program. Before more money can be added to the program, the Senate must approve the funds, and then the bill would go to the President. There is no doubt the President would sign this bill – and take complete credit for the giant success the program has in providing “stimulus” to the car companies. However, the Senate has not passed the bill, as some Senators have reservations about spending more money while we are creating world shattering deficits. And, the Senate problem can’t be blamed on the Republicans, as the Democrats control the Senate. This is a giant fiasco in the making. If the government can’t run this program, do you want that same government to run your health care, or “cap and trade” for energy? If the Senate passes the bill, the President’s ratings will soar. If the senate doesn’t pass the bill, the President’s ratings will tumble further. Fun, fun, fun.
Unemployment Benefits – as many as 1.5 milliion people receiving unemployment benefits will be coming to the end of those benefits. If this happens, these people will add to those who won’t be able to pay for them homes, and pay their other bills. The government is looking at providing some additional support to these people. Whether more benefits are provided or not, the fallout is negative for the economy. More benefits = more deficits. No more benefits = housing and credit impact on economy.
Manufacturing – did fall as fast as prior months. So, this is why stocks shot up today. Get this straight – manufacturing is still declining, just not as fast. The organization who takes these measure predicts that manufacturing will grow next month. It is very possible that manufacturing will increase next month – but the real question is “Will there be new jobs coming out of this increase?” No one can answer that question, and my prediction is ‘no’.
Here are the last numbers for today:
Dow Jones 30 Industrial – 9287 (up 115 points)
10 Year Treasury Bond – 3.64% (up 0.14%)
Euro – $1.4416
Gold – $959 (up $3)
Oil – $71.58 (up $2.15)
Gasoline $2.07 (up $0.06)
