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August 19, 2004
Financing the Future

The markets are the message

Commentary: Signposts point to economic slowdown

Never mind what the Federal Reserve says. Never mind what the politicians assert. And never mind what some economists opine.

If you really want to know what's going to happen, look at the financial markets.

Opinions are fine, but unless they are backed by money, they don't count for much. In the markets, people put their money where their mouths are, so markets-based views are more important.

Whether it's stocks, bonds, currencies, commodities or precious metals, people who participate in the markets must be as close to the real world as possible or else they risk losing big bucks.

And just what is the markets' message today? The same as the one I first began giving you in these columns a little over three months ago: Namely, the economy's slowing down, not picking up as the Fed, the politicians and the pundits think.

(Requires registration, sorry.)

This is a matter of concern for all of us. While the Bush Administration's policies haven't done much to create an economic turnaround, the problem is larger than that. Jump-starting the economy is usually done by lowering the Fed's rate and by increasing domestic spending,

The Fed has cut interest rates until we were nearly at rock bottom, we've waited out the usual lag time, and we've seen little or no effect.

Increased domestic spending frequently comes in the form of extended benefits for the unemployed, an excellent economic jump-start because that money goes directly into the economy, but the little the Bush Administration did (too little, and too late for many) isn't doing the trick.

It can also come in the form of other government spending projects, but the Bush Administration can't afford to pay for those because of their repeated tax cuts and they wouldn't fund them if they could afford them.

I think it's going to be a long, hard slog to get the economy moving again. It's not going to happen under another Bush Administration because they can't and won't do what it takes. Even with Kerry in office, it's going to take a lot of work to get us back on the right track.

See also: Bush's House of Cards.

Posted by AnneZook at 01:19 PM