WE SAY IT HERE…IT COMES OUT THERE

Frequent readers will recognize the concerns about the economy, now apparently shared by St Louis Fed President Bullard, that we have been calling attention to for months. Just a year ago, political leadership, policymakers and economists the world around were calling for a full blown recovery to be underway by Q2 or Q3, 2010.

Using the paradigm of previous recessions, assuming that the current calamity was cyclical, it was concluded that direct stimuli and programs designed to spark spending should be sufficient. What they were, of course were misallocation of resources.

Sluggish job creation, dwindling housing activity, decelerating retail sales, stagnant M2 growth and a declining CPI four months running is called what? Deflation, of course. The classic understatement is Chairman Bernanke's comment that the outlook for the United States economy was “unusually uncertain.”

The policy choices are few, with political forces of every stripe aligned against further spending as November approaches. A visitor to our weekly energy strategy meeting commented that the discussion surrounded the macro economy and not the fundamental elements of the marketplace. This is what we have been saying when we refer to the intellectual divide; bizarre correlations the fourth estate dreams up notwithstanding.

 

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