My New Blog

Will we enter a recession?  Some say 50-50.  Goldmen Sachs believe we will.  Here are the following issues?

1)  A signficant over supply of houses with no buyers.  This has cut into people's confidence and equity as values drop.

2)  A devalued dollar has resulted in higher energy costs.  When people have to pay $200 per month more to drive their car and heat their homes it simply means they have less to spend on other things.

Solutions?  Some have suggested tax rebates of $500.  Will that help?  It won't solve the housing crisis because $500 is a drop in the bucket.  It might help the retailers out there, but people aren't going to make major purchases with $500 more in their pocket.  So the durable goods industry will likely be unaffected in the short run.

Slash interest rates?  Well the problem with that is that it devalues the dollar and makes oil more expensive which is the very thing fueling (pardon the pun) the problem.  I believe the FED was too slow in cutting rates in the first place.  Now they are too late, and cutting rates more may simply aggravate the situation.

Bail out mortgages?  Wait a second.  It is not the government's responsibility to bail out stupidity.  If people knowingly took out ARMS and knew the ramifications then why should we bail them out.  How about giving me a lower interest rate on my mortgage! 

I hate to say it but we probably should have a recession.  It will bring back equilibrium. 

I am making a prediction.  By March we will be in a recession.  How deep and how long it will be is uncertain.