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It feels like 1973 ...
If the only thing you watch is corporate profits & housing prices, you'd think the US economy is doing great! So why do most Americans (54%, a record high for this Prez) disapprove of the way President Bush is handling the economy? Why do only 39% of Americans think their Congress critters deserve re-election? I think it is because most Americans aren't taking part in the profits. 44% of Americans are most concerned about the high price of health care and prescription drugs. The average non-supervisory hourly wage is not keeping up with inflation. Gas prices!!! Half of the population doesn't own any stocks, and they are increasingly pissed off about CEOs making millions while shipping manufacturing jobs to China. Credit card companies are raising fees, minimum payments & interest rates, while reducing grace periods. If you don't own a home, you probably feel like you'll never be able to afford one. College keeps getting more expensive, and student loans are mounting (at higher interest rates). General Motors & many airlines look like they are going under, along with their pension plans and unionized jobs. Big companies are starting to lay off thousands of middle-class employees to maintain profit momentum. I keep sorta hoping my crystal ball is wrong, but ahead of us I see a repeat of the years between 1973 and 1983, only perhaps with worldwide deflation instead of worldwide inflation. ----- I see too many parallels ... Second term of a wartime President who used unprecedented budgetary and foreign exchange stimulus to recover from a stock market bubble, including the use of negative real interest rates by the Federal Reserve and full scale military conflicts in small Asian countries. The stimulus created a secondary bubble in commodity (oil!) and real estate prices, which the Federal Reserve attacked by reversing course and pushing rates higher. Unemployment fell, almost as low as it had been during the prior boom, and stock prices rose, almost as high as they had been during the prior boom. However, once real interest rates started to bite again, profits & employment crashed harder than during the prior bust.
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