OMG - It Is Up To The Policians

"Politics, it seems to me, for years, or all too long, has been concerned with right or left instead of right or wrong." - Richard Armour 

Taking a look at the various data points available to the Federal Reserve and the rest of the investment world it is clear that while there are some positive signs there are a myriad of negative data points offsetting those.  In order to create a strategy that gets the economy (and for this blog I will selfishly look at the United States economy) out of its current malaise is now out of the control of the Federal Reserve and in the hands of a group of self-serving politicians.  Until the political leaders look inward and consider the implications of all their self-serving policies this economy will continue to stagnate and will continue to benefit a few at the expense of the majority.

So first off, why do I believe that the Federal Reserve is powerless to tinker and save us once again?  In my opinion another round of quantitative easing will not work and will create more pain at a later stage than any perceived current benefit.  Since 2000 and the era of Greenspan the answer has been to print money and in essence this has not worked.  We owe trillions of dollars and throwing a few more hundred billion at the problem will only result in another bubble or worse will result in a loss of faith in the US economy causing untold grief.  Certainly there are some good data points at present, interest rates are low and housing prices seem to have leveled off.  That said housing overall is stable but there are pockets of continued distress where housing prices continue to fall (such as Atlanta) while other pockets are rising rapidly (Phoenix, Las Vegas and San Diego) averaging to a stable market.  This points to a speculative market rather than one based on true fundamentals but that is for another discussion.  The stock market continues to power higher and this week the job market seemed to pick up slightly.

On the negative side the stock market seems completely manipulated and while employment this week looked better, the overall unemployment level rose to 8.3%.  This is after five years of printing money!  Furthermore while the United States seems to have insulated itself relatively well against any exogenous shocks from Europe and China, as those countries continue to struggle the threat of an economic down draft is still high.  Furthermore, printing more money will crowd out the private sector even more and will continue to drag on economic growth.  So for these reasons I believe that another round of quantitative easing will do nothing to stimulate but will do everything to put more money into the hands of the wealthy while having no impact on the overall economy.

So who can change things?  Well I hate to be the bearer of bad news but it appears to me that our fate is in the hands of the politicians.  They have created the mess through their party policies and until these party policies are changed and aligned to repairing the issues at hand there is no way out.  Last week's blog about Inequality showed how the playing field has been radically shifted in the favor of big business at the expense of the innovators and the engine of any economy - small business.  These policies were not done last year or the year before but have slowly been implemented since the 80's (shaped through various laws and influenced by lobbying and special interest groups) and have now created a system whereby it really does not matter who is president as either way their policies end up moving back to the center and back to their funding sources and lobbying groups interests.  As the ingrained political thought process is one of catering to large business, until there is a change in these policies there is little that the Federal Reserve can do to repair the problem and certainly printing more money will not do the trick!

Changing the playing field will not happen overnight (it took over 30 years to get us to where we find ourselves now), but a leader that can actually implement change is needed now.  The people are ready, they were ready four years ago when Obama swept to power with the ideal of change, the shame of it is that after four years little has changed other than we are now more of a welfare state than ever and we have a burdensome heath care system.  Had change come in the form of improving the ability to innovate and compete by stimulating small and medium sized businesses combined with spending money on "shovel ready projects" to improve the countries infrastructure we would be in a far better situation than we are today.  Unfortunately trillions of dollars has already left the building and party politics seems to have become more entrenched than ever.  Furthermore I doubt that either Obama or Romney is the man to do this job!  However while the outlook is bleak there is still time and our only hope is that one of these men will take a leadership role that implements the much needed changes but it appears that the next four years will once again be more of the same.