The U.S. economy is now doing much worse than just tanking, and I blame it on a Federal Reserve that seems not to understand the basic principles of economics and a Federal government (both the Executive and Legislative branches) that seems to not fully understand that the entire world has now lost confidence in our economy and our ability to (at some point) get our economic house in order. Frankly, I can't blame anyone who bails on the U.S. right now: http://online.wsj.com/article/SB120571257905240327.html?mod=djemEditorialPage.
There are some basic, common-sense principles that are being ignored by the Fed and the Government. For one, you don't get yourself out of debt by creating MORE debt, which shows the stupidity of an economic "stimulus" package that will stimulate absolutely nothing. Second, cutting interest rates time and again is nothing but a series of "quick fixes" which temporarily reassure Wall Street until the cooler heads there realize that the reasons that we are in an apparent economic freefal haven't changed one bit. What those interest cuts do is drive DOWN the value of the dollar, which hits historic new lows against virtually every other currency in the world on almost a daily basis. That in turn makes it harder on us. Everything becomes more expensive. Food, transportation, clothing, you name it. It's all affected by the dollar collapse. Third--and I thought that this was a basic lesson in Economics 101--you can't keep spending more than you take in without it eventually messing up everything else. In other words, and as a corollary to my first point, until we balance our budget and endure whatever hard choices have to be made, the situation will only get worse.
How's that for a cheery way to begin the week?
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