Stagflation The Challenge of the New President

The US economy is slowly playing out the results of 30 years of Reaganomics. The excesses of the various bubbles created by irresponsible economic policy are wrung out of the system. Everyday brings new evidence of resource dislocations. The dollar trades at historic lows. Gold rises to historic highs. Salaries, adjusted for inflation, continue to slide. Core inflation, the one without food and energy, retains its upward bias. Real inflation, the one that acts on consumers buying power, rises to the highest levels in 50 years. Unemployment, even with the FAUX calculations of the Government, is above 5%. All this data reported by the FED while expectations of GDP are falling. Obviously the FED will not project negative GDP but recent real data is showing negative growth. This is the dreaded STAGFLATION!

The candidates for President of the United States range in their rhetoric from, “times are difficult” to “the economy is on a strong foundation, we need to confirm the tax cuts for the rich.” In some ways I feel sorry for the new President. The President will inherit a disaster that may or may not have become evident by the end of the year. To fix the problem the new President will have to get away from the Pollyannesque view of the US economy and take on business to restructure what and where we produce goods and services. Given the extreme pillaging of the US economy by corporations the fix will also need to be extreme. So many of the current Reaganomic structures will be influenced that it would be prudent to add extra security around the President as this individual will most likely not finish his term.

Many ask, “why so negative?” In reality I am not negative, simply realistic. If we refuse to see the problems we face we cannot fix them. Like a tumor they grow and fester. One day they are so powerful that the only hope of survival is radical surgery and aggressive attacks with radiation and chemicals. Many times the patient still dies. We are coming to the point when the symptoms of the illness will no longer be masked by band-aid type interventions. Interest rate cuts and stimulus packages will do little or nothing just as painkillers mitigate the pain but do not eliminate the cause.

Our new President will need WE THE PEOPLE for support. Sacrifices will be needed by all and public consensus will have to be unwavering to reform corporate and fiscal law.

Many still do not understand what I am talking about. Sure things are a bit tougher than times past but still pretty good. They are more interested in discussing whether or not gays should get married or if the appropriate drinking age is 21. These topics will become less important as the number of homeless increase. Those with homes will face the choices made in the 30s, pay the property taxes or eat dinner. The House Poor will be the new phrase. Times are changing. The data is clear. Save your money and pay down debt if you can. Cash will be king.