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Thursday, April 28, 2005

Economy and GDP Slow Down

If you believe what the government says, we have an excellent, healthy economy. Think again. The economy has slowed to is slowest pace in 2 years. What is most alarming in this scenario is the fact that President Bush's economic approach has created an extraordinary set of conditions that make virtually impossible for any economist to accurately predict the economy's direction. These conditions are at odds with past trends, and history is more and more becoming less of a source for accurate predictions. Examine this: we are financing 2 wars. Normally, during wartime taxes are higher to support expenditure and usually it jump starts the economy if handled correctly. But Bush has not raised taxes, he has cut them extremely (a majority of the cuts going to richer folks). Don't get me wrong, I like lower taxes, but not at the expense of the economy and my salary. As a result of cutting taxes, the government is running a huge federal deficit. Because Bush refuses to curb his tax cutting, the 2 wars are being financed through deficits. The dangerous size of the federal deficit in turn affects everything from the value of the dollar to inflation. It is a chain reaction that trickles down to consumer prices rising and the dollar value declining. They head in oppossite directions intensifying the overall effect. As an example: China and Japan hold a large portion of the U.S. debt. As the dollar continues to weaken and these two countries begin feeling the pressure to pull their money out before they lose more imagine this: Were China and Japan to sell all the U.S. debt they hold, at maturity the country (with a huge federal deficit) could not pay it back. Unless the treasury printed money to pay back the debt. This would create an excess amount of bills circulating in the economy that would trigger tremendous inflation in the U.S. and weaken the dollar even further in the world. This is just one of many possible scenarios that could potentially happen. This ill conceived economic plan has thrown the economy into a tailspin that is so unpredictable that professionals cannot say for sure if today the markets are going up or down, GDP rate higher or lower, job creation one month good the next bad. It is like mixing a bunch of explosive chemicals in a bowl and waiting to see what happens next. It is so volatile and unpredictable that finding a solution to the problem is a huge undertaking in itself, specially when the government does not provide the necessary ingredients to attemp to fix the problem. High gas and energy prices, a weak dollar, inflation, record trade deficits, record federal deficits, sluggish GDP, sluggish job creation, expensive health care, is this the recipe for a healthy economy as they would have you believe?
Economy Grows at Slowest Pace in Two Years


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