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On The Other Hand...

Friday, February 5, 2010, 9:42 AM
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Executive Summary

  • Recent economic news comes in three flavors: good, bad, and ugly.
  • GDP, retail sales, and manufacturing surveys point up.
  • Petroleum use has dropped to the same level it was at in the late 1990s, pointing down.
  • State sales tax receipts, unemployment, and the federal budget deficit are ugly.
  • The current expansionary track of monetary printing and deficit spending will continue until something external forces a contraction.

Today we are experiencing many confusing and conflicting signals in the economy.  Perhaps conflicting signals are normal at a major turning point, and therefore we might be tempted to believe that we are about to embark on another vigorous leg of economic expansion.

Here we'll explore these conflicting signals and see what we can make of them.

Before we do, I want you to recall that I am of the opinion that the trillions of dollars (and yen, and euros, and rubles, and yuan, and so forth) will someday come racing out of their big-bank holding pens and ignite something that will look and feel just like an economic rally.  For a little while.  Then, raging inflation and an energy crisis will ensue.  Given this outlook, I view any economic respite from the decline, no matter how falsely derived, to be a gift of time, allowing us the opportunity to continue to build the economic, physical, and emotional resilience in our lives and the lives of those around us.

You should be using this time to get ready for the next period of adjustment, which I expect to be both longer-lasting and more profound than the previous one.

However, in terms of parsing our existing situation so that we can maintain an appropriate outlook on where we are and where we are headed, there is much to be gained by keeping a close eye on current economic statistics.

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