The Homa Files

Ken’s Take: Q2 GDP growth was 2.4% … 3% is required to hold the unemployment rate constant … that means that next week’s unemployment rate will tick up … unless more unemployeds get discouraged, stop looking for work and don’t get counted in the denominator.

Doesn’t sound like the right direction to me …

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Highlights from WSJ: The 2.4% Recovery, July 31, 2010

Savings by households also increased again, to above 6%, which is back to the range of the early 1990s and is a healthy sign.

The great deleveraging that began with business last year is now continuing with consumers.

While some economists fret that this is bad for consumer “demand,” savings don’t vanish from the economy. They are recycled into lending and investment that can drive future growth if businesses see the right opportunities and have enough confidence.

Ken’s Note: the savings do “vanish” if repaid lenders are also shoring up their balance sheets, i.e. holding the capital in reserve – by law or by desire.

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The Obama Administration, in its Keynesian confusion, is simultaneously saying the economy is so weak it needs more spending “stimulus” but also strong enough to absorb a huge tax increase.

The message of 2.4% second quarter growth is closer to the opposite: The epic government stimulus has failed to produce the robust expansion the White House promised, and the prospect of higher taxes and more regulation is inhibiting the private animal spirits needed for growth to accelerate.

Ken’s Note: the fight over the Bush tax cuts will be fun to watch … my bet: it’ll be another GITMO … lots of rhetoric, but Bush had it right.

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Full article:
http://online.wsj.com/article/SB10001424052748703999304575399490468359832.html?mod=WSJ_Opinion_LEADTop

This entry was posted on August 2, 2010 at 6:46 am and is filed under Budget - Deficit, Economics, Taxes. 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.