-- Posted Monday, 13 September 2010 | Digg This Article
| | Source: GoldSeek.com
Rick’s Picks
Monday, September 13, 2010
“Phenomenally accurate forecasts”
Dick Morris thinks the pundits are underestimating the odds of a Republican landslide in November. Although most are predicting a GOP pick-up of 40-50 seats in the House and perhaps 8-10 seats in the Senate, the astute Morris, who was Bill Clinton’s closest political advisor, thinks a blowout is possible, with Republican gains of as many as 100 seats in the House and 14 in the Senate. However, if Morris’s forecast proves correct, we’d suggest that conservative voters not get their hopes too high for a return of good times, since, arguably, the problems besetting the economy are so profound as to lie beyond political remedy.
We don’t mean to suggest that those problems our insoluble – only that no politician would be able to muster the votes necessary to do what needs to be done. For starters, the government would have to let the big banks fail, since they are eventually going to fail anyway. However, even politicians who understand this wouldn’t dare appear to countenance it. The only Congressman we can think of with the guts to push for the “nuclear option” is Rep. Ron Paul. Mr. Paul is also one of very few office holders who understands economics well enough to explain with perfect clarity why removing the banks’ supposed safety net is the only solution that will work. By allowing derivatives markets that have been brain-dead for years to clear, the “anti-bailout” would give the economy a fresh start, albeit one providing a significantly lower standard of living for most Americans. It would be a very tough sell, for sure, and no matter how compelling Rep. Paul’s argument, he’d be bucking a status quo that clings more and more desperately to the hope that the markets will return to health by themselves. Under this scenario, the more than trillion dollars in worthless mortgage securities the Fed has been warehousing for the banks would magically rise in value, surfing the wave of a real estate boom brought on by resurgent buyers.
Pounce on That Uptick
In reality, there is little immediate prospect of a property boom – more like the opposite, since there is so much inventory waiting to hit the market on the faintest uptick. As for curing deflation, no remedy short of universal amnesty for mortgage debtors will do the job. You might think we’d have learned this, so obvious has it become that the multi-trillion dollar stimulus attempted so far has failed to induce even a blip of inflation in the housing market. But that won’t stop politicians from trying yet again, egged on by Keynesian quacks like Paul Krugman who think yet more stimulus is the answer. And while it’s possible a Republican majority will be able to resist the siren call to stimulate by running up yet more trillions of Federal debt, it seems unlikely that even the most conservative Congress will embrace the massive wave of bankruptcies that alone can clear the way for a sustainable recovery.
Assuming the economy is in far worse shape in 2012, it’s difficult to imagine the voters swinging back to the Democrats. If it turns out to be the year of the Tea Party, let’s hope they’ve got some good ideas by then.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2010, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Monday, 13 September 2010 | Digg This Article | Source: GoldSeek.com
