Anything is possible in a presidential election year; even the impossible. Take the fact that consumers are short on money and add the solution of the government sending them a short supply (emphasis on short). There is also the little detail of the FED going into emergency session just 8 days prior to a regular meeting for the purpose of lowering Federal Funds Rates and then dropping the rate again, just 8 days later.
The implementation of desperate moves such as those described above would seem to tip our leaders hands. They aren't even holding a low pair. But pull your seatbelt tight, because there's some low down dealin' coming up, and as the old showman said; "You ain't seen nothin' yet."
It seems that jump starting America's dead economic battery has become more of a challenge than originally thought. We have an endless war that is pumping billions into the economy. Government in general is employing as many people as the law will allow. Interest rates are low...and still, our economy is sputtering on empty.
Not to worry, get ready for the old "end around play." Running up the middle is meeting strong resistance, so why not re-run the residential housing play? I hear what you are saying, "That's the one that got us into this mess." And you are so correct, but remember, we're talking about reelection here, not what is best for Middle America.
Here are some of my predictions for the next year. We will see the FED continue to lower the Federal Funds Rate to around 2%. The government, with the assistance of three willing participants named Fannie Mae, Freddie Mac, and FHA, will come up with new programs that provide low interest loans to not only those already in trouble, but new loans to those who want to be in trouble later on.
In the mean time, we will begin to see a failure in commercial real estate loans as consumer spending diminishes and marginal retailers hit the bricks. Savior programs will also be made available to this failing commercial sector.
Unemployment will increase as the spring building craze doesn't spring at all, and in fact, just sort of lays there like rug. At this point unemployment benefits will be extended because Americans don't like unemployment. There will be growing tension regarding illegals (and anyone who looks like an illegal) that is thought to be doing the same work that they have been doing for the past 17 years.
A growing number of the formerly exempt educated sector of our economic ladder will now find themselves unemployed and unemployable. Those who mistakenly believed that unemployment was for the working class, will be available for a job in the working class.
Macy's Inc. is currently cutting 2300 management jobs and GM announced today that they will offer buyouts to their remaining 74,000 U.A.W. workers. This is the tip of the iceberg as engineers, architects, surveyors, and others who were at the upper end of the building business find themselves suddenly without work.
The federal and state governments will introduce work projects similar to the depression era WPA to soften the unemployment figures and hopefully keep the stock market from a free fall. These new welfare jobs will wear the mask of rebuilding America's infrastructure for America's strong future of growth and for the future of our children and grandchildren.
This announcement will be given by some high level government figure, who is tall with good hair. The Star Spangled Banner will be playing in the background. The rebate checks will hit the mail boxes the week before the speech and people can watch it on their new big screen Chinese TV.
By this point in my scenario it will be nearing election time, which is purely a coincidence. Bin Laden will be captured, thought to have died of old age, or no longer interested in war, as he will be hosting a new reality show, Ultimate Survivor Afghanistan.
Here's where the end around play really kicks in. By 2009, the inflation induced by the FED will have had the time to work its magic. Homes will seem cheap again as it takes $10.00 to buy a gallon of milk and $4.00 for a gallon of gas. Wages will be increased to pace inflation and debts will be reduced by the wonders of printing bazillions of inflated dollars.
The main stream news and financial channels will suggest that everyone better buy a home while the getting is good as homes can only go up in value. The American public will believe them. Those who bought the foreclosure and bankruptcy homes and commercial buildings will be thought to be brilliant as their holding make them instant inflation millionaires. Of course a million dollars won't be worth spit.
And then; we lived happily ever after. Not really, we actually entered the last leg of the race to the end. There are several things that could go terribly wrong, such a fumbling the ball. I'll write that chapter in the next couple of days, so stay tuned. There are moves that you can make at this point that will make you appear very smart; and you will be!