Do you remember the science experiments you saw as a kid? There are two that come to mind. One is where the rats are stimulated via electrical impulses to do things? Another is where the frog is dead, but when electricity is used to stimulate the muscles, the leg moves?
That’s where I see us economically today.
Financial websites are awash in conversations this week about all the recessionary signals we are seeing. The Federal Reserve is meeting this week. Expect nothing of significance. From Zerohedge to the Wall Street Journal to David Stockman, Peter Schiff, and others, the headlines are ll the same
The Central Banks just do not get it.
There are many people who will also tell me that I just do not get it. But I think I do. And from local issues to international issues, there is a common thread that runs through them all.
Economic opportunities are drying up. Sales are declining. Profits are falling faster than than the leaves on the trees. Central banks around the planet are trying not to panic but they are ready to. They cannot get things moving forward whatsoever. Why is that?
If you step back for a moment, ask yourself what was the original point of all that the Central Banks hoped to accomplish with their policies?
Stimulate. They wanted to stimulate someone to do something today that they would not have had the money to do so until tomorrow.
QE programs have left the planet awash in money . Economies are receding anyway.
They wanted to generate demand. Who is “they”? It’s not just Central Banks. It’s the Federal Government. It’s State Government. It’s Local Government. How do they accomplish this stimulation? They are raining easy money anywhere and everywhere.
Stimulate Stimulate Stimulate
But it’s not that simple. They pulled demand from tomorrow into today. Then they pulled demand from next month into this month. And when that was exhausted, they pulled demand from next year into this year.
Everyone everywhere all stimulating and pulling future demand into today.
You get the picture.
And then BAM! We hit the wall when we got to the future where that demand was from, and there was no demand left. There is no future demand to pull into today.. A vacuum exists. A really big vacuum. And today that vacuum is like none we have ever seen.
That vacuum, which cannot be filled by magic, will have to be endured. Unfortunately, they do not believe this to be the case.
There are ways to lessen that vacuum, but that will not happen either.
Reduce and eliminate rules and regulations.
Cut business taxes dramatically.
The Powers that Be will never let that happen.
They continue attempting to stimulate and show us that things are great.
Yet the economic numbers(which clearly have an upward bias) paint a very different picture.
I have a unique spreadsheet that calculates a weighted per share performance from companies that are followed by Valueline.
While we still have 56% of the companies reporting higher profits than 1 year ago, overall for all the companies, profits are now down 2.31% for the most recent quarter. The same quarter last year was up 7.84%.
That’s a very large drop for an economy that is supposed to be gaining speed. No wonder the Federal Reserve is afraid to raise interest rates even 1/4 of a point.
And so we wait….
