The recession is either over, coming to an end, bottoming out or about to start anew. Take your pick and realize that if you study the proposition long enough, you will start having funny thoughts. One of those comes from a Townhall reader who compared and contrasted Bernie Madoff's operation to the government's handling of social security and came up with little difference, except for the outcome. Madoff is, of course, in jail. As for my thoughts on the government, call me!
I want to take a moment and review what is happening in this economy that lends itself to the above plethora of choices. The earnings season on Wall Street is in full swing for quarterly earnings of all the listed companies. The financial companies have done well and exceeded estimates, partially because of the TARP money they received. Low cost of materials (in this case money) tends to yield incredible profits, so nobody should be that shocked. The industrial companies were a different story. They also showed good earnings for the most part, but generally lower sales. The larger profits came from cost cutting and belt tightening, and thus their profit margin increased in an unsustainable way.
The government is still spending on everything imaginable and some things that nobody could imagine. The results from a dollar and (non) cents perspective: $1.086 trillion deficit for nine months ending June 30, 2009, versus a $438 billion deficit for all of fiscal 2008. Looking at it in another way, GDP is still negative, at last blush, and unemployment is rising. Does anyone remember the stimulus bill? These results would portend nirvana for a Marxist thinker. There are currently several large projects waiting for congressional approval, cap and trade and the revamping of the health industry, which can make current results look like a miracle recovery. That gets us squarely to a catch 22 predicament, a great book, but a terrible place to be in the middle of a recession.
Deficits must be financed and that becomes a major stumbling block in the recovery of the real estate market. Without a vibrant real estate market, you cannot have a successful economic recovery in this country. Real estate provides jobs directly and indirectly, for example contractors and tradesmen directly, and furniture manufacturers, flower and tree farms and satellite television companies, indirectly. Real estate provides property taxes for local governments and funds for schools around the nation, as well as wealth for the owners through amortization of their loans and appreciation of their holdings. Two-thirds of Americans own their own homes and a large percentage of these homeowners will rely on the equity in their houses for their own retirement.
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.