The news from the stock market is good. The Dow closed over 8,000. Stocks are up, even Citibank is reporting profits. Sounds great, except it is all an illusion.
Citibank's profits? The only reason for the profit is that the Federal Government poured $45 Billion in bailout funds into the company.
Meanwhile, unemployment is 8.5%- the worst since 1983, one in ten Americans are receiving food stamps at a cost of $3.6 Billion a month, and even the Fed says that they are worried about the large amounts of money being printed. Meanwhile, the Obama administration is busy answering questions from obviously planted questioners- tough questions like why he has not gotten a dog, whether he regrets being President, and asked if he knows that his name means peach in Hungarian.
The Obama administration hit an improtant milestone this week- the government increased the National Debt by a half a trillion dollars since inauguration day. It took 70 days to hit the $500 billion mark. It took George Bush 20 months to borrow that much.
The danger here is that the spending spree initiated by the Republicans and continued by the Democrats has injected trillions of dollars into the economy. This has had the effect of more money chasing a dwindling supply of goods and services. (They are dwindling as the economy cools, after all people are saving their money right now instead of spending it.)
Once spending begins again, prices will climb. they will skyrocket. That will cause wave two of this crisis. I think we are looking at another year before demand picks up, and then depending on how bad the inflation is when the economy does start to move again, a period of double digit inflation.
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