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8/01/2011

It’s a deal…and what a joke of one.  But we’re not even going to bother with the details.

The breaking news late Sunday evening was that a compromise deal was reached regarding the US debt issue.  Initial reaction from the marketplace has been exuberance in the Japanese stock market and this may filter through to the US markets on Monday.  However, in case you’re getting excited about this news, take a step back and look at reality. Reality is that there is absolutely nothing to be excited about regarding this plan and plenty to be disappointed with as the preverbal can is getting kicked further down the street and in a more complex way.  But we’re not even going to focus on this issue anymore because there is another issue that is far more important and this considers the recent economic data that describes the state of the US economy, more specifically GDP.

Second quarter US GDP came in a pathetic 1.3% rate while the first quarter pace was drastically revised downward to 0.4%.  This pace is alarmingly slow in light of the massive stimulus activities launched into the system (including the illustrious QE).  So that gives us a 9.2% unemployment rate with little to no economic growth.  That brings up another interesting point.  Given this anemic growth rate and little change in unemployment… why is it that the major stock indexes have posted nearly 100% gains from their lows set back in 2009? Simply put…the stink continues on a number of fronts. 

Reality is that there remain no talks regarding a realistic plan to create jobs.  Remember, one of the keys to the US unemployment problem is simply to put a stop to job destruction due to globalization.  There are hundreds of thousands of US jobs that have been sent overseas, perhaps even in the millions.  You can try to create jobs domestically in the US all you want, but if the job destruction process is not addressed, it’s all a waste of time.

Budget deal you say?? And the positives are no tax increases and a reduction in overall uncertainty… Did you listen to the details of that plan?? Then think about whether uncertainty has been reduced or perhaps increased.