We have heard gloom and doom about a "double dip" for several years and it has failed to appear. The stock market has now had another big rally. People are being led to think that raising taxes and cutting government spending will add to the recovery. As is often the case, when the general public begins to think one way, the prospects begin to change the other way. Consider that production is slowing down in Asia because of lower demand in the US and this as their inflation rates are rising. There is concern that some Chinese banks may be in big trouble as the stimulus spending they begun in 2009 peters out now. Also, consider that any deflation would lead Greece into default and be followed by the same in Portugal and Spain. This would accelerate the course of deflation. Finally, here in the US, it is beginning to look like a tax increase and a huge cut in government spending will accompany a raise in the debt limit. All this is deflationary. It would mean a collapse in the price of gold, commodities, and tax revenue. The more prices drop, the more people go unemployed and hence the less they buy. So, prices drop more. And with dropping tax revenue, government help withers. It is this sort of economic disaster that the Bush/Obama stimulus spending avoided. Now that the Republicans have turned public opinion against sstimulis spending and the Fed has finished flooding the system with money by buying government bonds, there is little to prevent a real 1930-32 like slide. It seems to me the top of this stock market rally has been about reached. The stock market tends to fortell business conditions due to begin chaning about six months in advance. What do you think? It might be interesting for me to save this and see what actually does happen in the year or two ahead. brough civilization-overview dot com
It depends on how they handle the debt and deficit because if they really want to reduce it many things will no longer be funded that rely upon the government or reduced by allot. If they don't do much and extend the debt ceiling then another thing will happen and nothing much changes. So I can't really say much until this is taken care of because it has a very dynamic impact upon the way the economy goes.
