Proud To Be A Delegate - Unity08.com

Friday, January 23, 2009

 
What the Economy Could be

The economy will be worse in May. We have not hit bottom yet. We can afford another trillion as long as people and the world still have confidence in the dollar. No one can predict where that amount is. There is no precedence that large. My prediction is that the world believes the US economy will remain solvent give or take a few more trillion. Where else are they going to go?

There is an unexplained fundamental problem underlying the economy that keeps us locked to about 2% growth in GDP per year. The ups and downs average out. We should have no downs. People have just grown to accept them. This down is going to be large and long because the congress made a huge mistake giving mortgage money to people who were unable to pay back. Greedy capitalist on Wall St. bought up a bunch of these squishy packages spreading the cancer through the wholesale financial market. The losses in the stock market erased 7 trillion in wealth that won't be invested.

The question is where do investors go? The US stock market for the long haul. Real estate for the mid term and traditional short term packages like bonds and treasury paper. Treasury paper is worth nothing today because the interest rate is near zero. Wait four years. Foreign investment is still coming here. I will tell you an anecdotal happening now. Two years ago I tried to sell my 2 timeshare weeks for 5000 each. I paid 7500 for each. Not a single call. Yesterday I got an offer from an investment firm for 51,000. The money is coming from the middle east.

I am convinced the underlying problem with the economy is taxes, especially corporate taxes and capital gains taxes. They are a large part of the flight of big business from the US taking jobs with them. If we want jobs we need to eliminate the corporate taxes. They account for 1/3 of the revenue today. If we open up public land to mineral prospecting the royalties will more than make up the difference in the corporate losses. If we sit on the public land until alternative energy is financially viable, 25 years, we forfeit 10 trillion in revenue forever. The greens and the tree huggers have held sway for 30 years now. Obama is one man who can break the stranglehold. I think he is smart enough to do it.

Dave

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