The Homa Files

Ken’s Take: With the stock market down and politicos running around saying that the sky is falling, it’s easy to tailspin into pessimism.  While everybody feels some worry about job security and older folks fret about retirement … the fact is that more than 9 of 10 folks are still doing pretty well, and there are some signs that things have bottomed out.

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Excerpted from Rasmussen Reports, “Jobs Down, Stocks Up?”, Lawrence Kudlow, Saturday, February 07, 2009

Broad stock indexes are up 15 percent to 20 percent from their November lows. How can this be? Well, the stock market is telling us that the economy’s future is a lot brighter than its past.

For the 92.4 percent, or 135 million workers, still employed, wages now stand nearly 4 percent higher than a year ago. With zero inflation, that’s a real increase in worker purchasing power

The Federal Reserve has pumped almost $600 billion to the money supply to offset credit and asset deflation … a 20 percent annual rate of increase. Increases in the money supply historically kick in (to help the economy) somewhere between six and 12 months. Money growth could well produce the biggest economic surprise this year.

And while the quantity of money is rising significantly, the quality of credit is improving, too. All the credit-fear indicators — from LIBOR all the way out to corporate-bond spreads — have declined substantially.

And, there’s the simple fact that marginal tax rates will not be raised. Obama seems to have shelved that notion — at least for 2009.

So cheaper energy, bundles of new money creation, zero inflation and no tax hikes could very well combine to produce a stronger economy as the year progresses — to the great surprise of the majority of economic pundits. 

Full article:
http://www.rasmussenreports.com/public_content/political_commentary/commentary_by_lawrence_kudlow/jobs_down_stocks_up 

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This entry was posted on February 9, 2009 at 7:59 am and is filed under Economics, Financial Crisis. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.