From here.
A light at the end of the tunnel? Perhaps. At least that is what Lawrence Kudlow thinks.
A tremendous summer rally is going on in stocks, and it’s being driven by better corporate profits and improved leading indicators — including a possible upturn in housing starts and sales, and a major downward spike in weekly initial jobless claims. So you have to believe the stock market is calling the tune for recovery.
The question is why? If we are seeing the beginnings of a turnaround, to what and to whom should we give credit?
While politics is not everything, I do believe that the shrinking prospects for Obamacare have been a big contributor to the stock market’s recent surge. This sweeping new government insurance plan would lead to high-tax-and-spend-and-borrow-and-regulate nationalized health care, a big economic negative. Ditto for nationalizing energy through cap-and-trade-and-tax. If these initiatives fail, it is very bullish for stocks and the economy.
Kudlow also defers to the opinions of others. Thus he provides Senator Jim DeMint’s observation.
Mr. DeMint told me during our interview that the economy is getting better mainly because of the corrective forces of free-market capitalism in the private free-enterprise sector, and not from all this government spending and borrowing. Abstracting from the Fed’s big stimulus effort, he’s right.
By November 2010 (election time), our economy, in spite of everything Obama and the Democrats can do to mess it up, may actually recover a bit. Republicans need to start claiming credit now! To the extent they can claim to have prevented the ravages of socialism, Republicans have scored a huge victory for the national economy — and liberty.
Ideology makes a difference. The beliefs we act upon make a difference. Instead of talking down Democrats and the economy, Republicans need to talk up free market economics. Instead of offering to bring home the bacon, Republicans need to explain what government does best — and then offer to dismantle wasteful, busybody programs that do nothing but empower corrupt politicians.
Stubborn and determined Democrats connive to force socialism upon us. Their schemes began with President Franklin D. Roosevelt’s New Deal and regained strength with President Lyndon B. Johnson‘s Great Society. The Democrats offer Utopia — poppycock dreams and nonsense “rights.”
Nonetheless, we have precious few Republicans with the courage to earnestly fight back. What is the alternative vision Republican vision? Is it bipartisanship and reasonableness? Is it moderated socialism? Too often that has been the case. So it is that spineless Republicans have lost elections. When we can have our socialism straight up, why bother with the wimpy, watered down version?
Before our nation unravels, we now have one last opportunity to reverse the trend. With clear majorities in Congress and a lock on the White House, Democrats have become arrogant. The Democrats have revealed the character of their plans. With only a little effort, we can see that their schemes lead to nothing but tyranny. And that is why they rush in haste to pass legislative bills that would cement their power.
With such deviousness there can be no compromise. When our opponents do not even have the scruples required to honor their oath of office, we cannot negotiate. Republican politicians must either stand for liberty, or we must discard them.
I made an assessment, myself, of the claims that there the economy is bottoming out and may go through a recovery period. Please see: http://www.economicthought.net/2009/07/the-depression-is-not-over/
I conclude that the idea is bollocks. We are not near the trough of the depression.
joncatalan – There is a very old and tired joke about economist. If you ask ten economists their opinion, you will get eleven different answers.
If I could predict future economic activity, I would be a rich man. I am not. There are too many different variables, including human behavior. So I can only hazard a vague guess.
Because the Democrats have both houses of Congress and the presidency, I don’t expect economic prosperity.
Will the economy get worse? I hope not, but the people currently in charge have no capacity for or seeming any interest in making the economy work properly. In fact, these idiots are more likely to get us into a war than they are to make the economy work.
joncatalan – BTW. You have an interesting post. I would just observe that the vast majority of the stimulus bill is yet to be spent. That spending will put us further into debt, but it is likely to create a bubble just when the Democrats want one. Moreover, the Democrats are also playing similar timing games with the health care bill. Undoubtedly, they will also do something similar with cap and trade.
The Democrat’s social engineering schemes will suck huge amounts of money out of our economy. Forget about malinvestment. With our government working so hard to direct — and thereby stifle economic activity — any serious investor will take his money overseas.
It is, indeed, impossible to accurately predict the economy to the extent where you are predicting the aggregate outcome of billions of individual human actions. You can, however, give a general picture. The Austrian School of Thought has been the only school of thought which has consistently been accurate to give a general prediction. But, this is only because they have the most accurate theory on credit and bubbles.
It’s not only relevant to the stimulus bill, but the amount of money creation undertaken by the Federal Reserve (right now, under Bernanke the rate is exponential). Jesús Huerta de Soto covers the effects of an exponential increase in the money supply: http://www.economicthought.net/2009/07/the-possibility-of-postponing-the-eruption-of-the-crisis-the-theoretical-explanation-of-the-process-of-stagflation/
The article I wrote for tomorrow also deals with stifling investment and whatnot, although not specifically (it deals mostly with regulation on lenders).