Why the Economy Might Rebound
By Joshua E. Stone
Then what is going to account for the recovery? What could be the reasons if it’s true that the economy is already recovering? Two things: Psychology and China.
What was the reason for the bank meltdown last summer? The first response naturally is what we have all been spoon fed by the media: That banks were caught up in a bunch of bad sub-prime real estate deals, trying to get everyone a home, the American Dream. If you look harder some media will tell the tale of how the politicians made all this happen, with the help of unscrupulous bankers. But buried deep in the heart of the fire is a word that came out in the heat of the meltdown last summer: Trust.
Trust is the psychology of the markets. Without going into endless analogies, we all know this as fact. The entire system is based on trust. This is why Presidents get elected; the winner is the one who the majority of people are convinced they can trust.
So when people decide there is no hope and they can not believe anyone or trust them with anything, everything breaks down. Nothing anyone says or does will save anything because everyone is just selling what they can and heading for the hills to get away from it all. The new President has restored the trust. People believe he can fix these crises and they trust him to do so. That’s all it will take, with some help from China of course. But it has to be noted, nothing close to trust has developed so far between investors and the banks. This remains a big problem, and Obama will have to address this issue.
China can not be underestimated, the recovery in their economy will provide the octane needed to boost not only the global economy; but perhaps make it take off. We still have yet to see a global economy working in cohesion. This crisis will bring it all together and provide the foundation for a possible run on global prosperity unparalleled in its relatively short history.
These facts combined the reality that this crisis was manufactured and not really that bad in the first place, set the stage for a surprising rebound in the economy. Sadly all of the intervention and massive debt being piled on top of all the problems is setting us up for much larger and very real problems later on down the road. Especially if they pass Cap and Trade; that will insure everything derails and breaks down at the seams eventually. As usual the media is derelict in reporting those sides of the story.
In the end this is all that matters, that people have not given up no matter what the reason, even if it based on false hope, or a source of trust they have placed their hope in that is at the same time insuring there own demise in the long run. So keep that in mind during the next crisis: we will survive, all we have to do is believe we will.
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Comments
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Sorry, its a nice story, but the reality is much different. The amount of traders that will be washed out of the market by this multi-year bear market, and now bear market rally due to the lack of intellectual rigor, will be astonishing. The S&P will trade with a 5 handle before January 1, 2010. The "data", and "silver lining" that everyone wants to believe in are clearly a result of government manipulation and market tampering. We no longer have a free market system, so tools used to define 'recovery' can no longer be used as they have been in the past. [B]Ignore everything, it all boils down to THIS: The government's "plan" for recovery is just that, recovery, growth, inflation. It boggles the mind to think that most market participants, and to a greater degree, most regular Americans have been convinced by the governments sweet talk and complicated mathematics, errrr, did I say complicated? I mean ASININE. During what may have been the greatest housing boom in history (2002-2006), our economy only put TWO quarters together of back to back GDP growth in excess of %2.8, and only ONE quarter of %3.5+. Nobody looks at the glaringly obvious fallacy of the government's recovery 'plan', which is that in order for our country to recover and service the mathematically un-serviceable debt that has been created during this crisis, we must put together 12 (yes TWELVE) back-to-back quarters of %3.0+ GDP. [B] So, essentially their plan is to create the worst inflationary, low interest-credit boom in history, all on the backs of ordinary tax-paying Americans, and somehow this is A) supposed to actually happen and B) supposed to go off without any backlash...OKay...Sold to you. Just wait for Fall 2009. You haven't seen anything yet.....Posted Sun Apr 26, 2009 at 9:01 am by Hawaiitrader
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Oh yea...and the China theory...Yea, that was just destroyed last week when they came in with their worst GDP #'s on RECORD....So much for the makers of a bunch of plastic crap that nobody needs, saving us, not to mention that they own 25% of our country's debt. That's just a whole other ball of wax....Posted Sun Apr 26, 2009 at 9:03 am by Hawaiitrader
