When I look at the data, I firmly believe stocks will look better in mid 2009 than they do now, even though we may not  have a full bottom in yet. We could have a tsunami or earthquake hit California or some other unexpected catastrophe, even something economic like GM declaring bankruptcy (which might actually be the way for it to turn around) and then see stocks much lower. (What would be more hurt piled on top during an emergency like Katrina again would be the absence of the National Guard and Reserve since they are deployed overseas fighting whereas their job is to serve at home). Today it drops because people are TOLD they’re in a recession? You mean, people didn’t know it?

The problem is there are no jobs, and no way to stimulate them. Traditional remedies are unlikely to succeed regardless as to what Obama tried. Frankly, he needs some luck. Consumer debt expansion fueled the US market and consumers are overburdened with debt, in what they now realize are shaky jobs, and in what they now realize is a bad economic environment. They will now be saving, no spending. We are at our debt capacity limit.

Which is not to mention the fact that traditional Keynesian stimulus — building roads, bridges, etc. — will only create make-work. (Who will pay for that as well?) There are no new jobs being created. What we outsourced WILL NOT come back because it’s still cheaper over there than here. The Reichs and other economists and “top thinkers” were wrong to believe you can have a strong economy based on services. So they listened to big multinationals and outsourced jobs. They are gone, not coming back. Every time Congress signed a free trade agreement to help some big boy sell more in a foreign country, in return it flooded our markets with products that shut our little guys out of jobs. So we lost employment, the big boys made more money, and then they shielded it from US taxes because they know how! And Congress keeps saying yes to them because ….. “it’s good for the consumer”? Go check my past blog posts — a low price doesn’t matter if everyone’s out of work, because no one can afford it. 

The problem is not a liquidity problem. It is a structural problem now. We need to rebuild the economy from the ground up. Small farming, which employs people, needs to be encouraged. The alternative medicine field, which is powered by disposal income and employs millions, should no longer be persecuted — it HAS to be performed in country, provides a vital alternative to the orthodox way when it doesn’t work, leads to real breakthroughs, and cannot be outsourced. Small manufacturing will not come back because of lower costs, but it may come back if liability laws are dramatically changed. You have a choice — let people sue for anything and have less jobs in the nation, or  sue less and have more jobs and manufacturing. It will come down to that.

Another possibility is incentives (taxwise) for corporations to be taxed according to valued added performed in the United States. 

I still predict the government within the next one or two decades will start to tax the large tax exempt foundations (Ford, Rockefeller, Carnegie, Harvard Trust Funds,…) because historically I’ve seen it in China, France, ….

The bottom line is, a nation cannot survive as a service economy. It needs manufacturing, it needs small shop keepers, it needs small farming dotted everywhere. The best bank is to sotre the money amongst the people. But those at the top thought that a nation based on finance could win the day. No. Just as history has shown over and over that a small country that is the center of a trading route quickly declines when another route is discovered that circumvents it, we’ll find out that you need to innovate, create and manufacture to stay strong and healthy. They goofed, and they goofed big time in their thinking that unguided capitalism would provided perennial profits.

R&D tax incentives by the government are what we also need now, or an Apollo-like initiative for a different source of energy or transportation or something that will totally rewire the economy and will require replacement of the old base in order for people to reap the economies, and that will mobilize the nation’s economy. In the study of Kondratieff waves and Schumpeter economics, that’s the only thing that does.