What’s the best way to get through a debt crisis? Straight through was our advice last week. For at least a thousand years, the business cycle went round and round without help from central bankers or economists. It is only since these geniuses have been on the case that really serious problems have arisen.
Not much happened yesterday. The Dow fell 47 points. The newspapers attributed the reversal to surprisingly low consumer confidence numbers. Apparently, consumers aren’t so sure this crisis is over. As we reported yesterday, they’re saving money… maybe even at an 8% rate.
Yesterday, the euphoria on Wall Street broke for a while as investors paused for thought to digest crappy July retail figures. Even with the feds funneling borrowed cash into the economy and high-profile government boondoggles such as the “cash for clunkers” program working, Americans are still doing the sensible thing and cutting back on spending. July retail sales dipped 0.1%, and the Dow, the S&P 500 and the Nasdaq all took lumps.
So where are we now in the 19th month of the recession/depression? Perhaps not where we expected we’d be. The Dow finished its best gain for July since 1989. The index was up 8.6%. The S&P 500 also had a good month. It finished up 7.4%.
The Fed is flooding the system with as much funny money as it can. US monetary base has shot up by over 100% this year. It’s the largest increase in 50 years by a factor of 10. This build up of freshly printed dollars threatens a dangerous inflation… but not yet.
James Dale Davidson’s latest special report, “The Plague of the Black Debt,” went live to Notes readers yesterday.
Our faith is weakening. That is, our faith that the government will be able to cause inflation, sooner or later. Let’s review our own narrative: deflation now, inflation later.
This is the age where politicians get their chance to run up huge debts. “Politics is about what works,” said Hillary Clinton. At least, we think it was Hillary Clinton. Someone said it. Someone who is an imbecile.
Banks aren’t getting out of the TARP as easy as they got in. According to Bloomberg, the feds have demanded that banks “raise specific amounts of new capital before repaying taxpayer funds, applying a more stringent assessment than the stress tests in May.”
It’s clear to at least some that banks can’t subsidize the banks forever. So where does that leave bank share prices? It’s a valid question, even if it can’t be heard right now over the din of champagne corks popping and the chorus of Hallelujahs wafting up over Wall Street and the White House.