Checking the markets.

In a way, the US economy has become a measuring stick of the consequences of political decisions made by the electorate in 2006 and 2008 and the resulting ascension of leftist radicals into the highest echelons of government. So, in order to try to gage the consequences on the economy, we must look at the political trends that reflect on the economy.

I have already discussed how the Obama regime came to power through the manipulation of money velocity. The regime then proceeded in a predictable way: followed Keynesian economic theory and injected fantastic sums into the economy and embarked on a distributionist path. For a time, the inflationary forces unleashed by vastly enlarging the money supply has been balanced by the deflation caused by the takeover of the mortgage and automobile business and part of the banking sector. The vast increase in the money supply can be regarded as wealth distribution, because it is used by the regime to enlarge the government. The regime operates on a neo-Marxist idea that the upper earners have stolen their wealth from those who earn less and that, therefore, wealth must be either destroyed or returned to the lower earners in order to equalize earnings. It is one thing to have goals and another to set up the instruments of achieving them, though. While, the regime has achieved its dream of socialized medicine, even the implementation of that will run into difficulty. First, a number of States will resist implementation of ObamaCare in the courts and second, because a number of States are taking steps not to comply with ObamaCare. In addition, the legislative battle to achieve socialized medicine in its current form has damaged the Democrat Party and its chances at the Fall elections. The declaration of Stupak from Michigan to not run for re-election converts a safe seat into a tossup, for example. Another rung of the redistributionist scheme, Cap and Trade, languishes in the Senate and is not likely to get anywhere by November.

In the short term, while the economy has come off the bottom, it has done so by increasing unemployment and increasing the national debt. The constant harping on the need for more taxes dampens investment and the government's presence in the capital markets reduces the availability of credit. This would tend to tell us that we are about to see a repeat of the Carter years, known as STAGLATION. And see it in spades (no pun intended, just a suggestion that this round of stagflation will be far worse than the Carter years).

The internal contradictions of the economy are increasing. While, further increases in foreclosures in housing and commercial real estate would seem to allow the regime to balance deflation against inflation, the forces of inflation are getting the upper hand. BarChart rates investments as a percent BUY or SELL and it rates gold as 72% BUY, silver as 80% BUY and oil as 88% BUY. All these point to increased inflation. While the inflation side is getting sturdier, the FED is mulling tightening credit. Part of that is necessitated by the poor results at Treasury options and the increased rate the bonds have to pay. The drop in TLT has reflected this, but TLT rallied back right along with the dollar. These rallies can only be regarded as temporary, an escape from the Euro into dollars and Treasuries. As the catastrophe of the economies and finances of the Social Democrat West unfolds, European and US currencies will suffer. In fact, some Analysts predict the demise of paper currencies.