Updated Notary Economics
In Late 2009, I wrote what follows in the Notary Economics section. Looking back at it now, it is scary to see how correct my analysis of the situation was. What I said then, still holds true now. The underlying numbers of our economy are not good. We have had a real estate bubble burst, a stock market bubble burst (currently being re-inflated by Fed policy, although it will not work much longer), a private debt bubble burst (you cannot get a loan) and now we are facing several other bubbles that we are seeing go bust now.
Read the book Aftershock by David Wiedemer, Robert A. Wiedemer and Cindy Spitzer. It is eye opening.
Rush was and is Right (as usual)
Rush Limbaugh, nationally cyndicated talk show host and simply the best at what he does, was and is right. There is no recovery. You simply cannot look at the underlying numbers and say that we are anywhere near recovery status. What is being reported on the national news, or as Rush says "drive by media" is no more than wishful thinking. Aftershock calls it "cheerleading." I call it pathetic reporting by those who make money telling people that stocks always "go up" in the long run. They want you to hold your money in the market for a period of years to stabilize the market. While you stabilize the market with your money, earning little return, the so called wizards of wall street make money trading the ups and downs.
Trading happens in miliseconds, with only a few hundred traders having access to the programs that drive the market daily. You, the average trader sitting in front of your computer trying to make an informed decision, have no chance.
I think more and more we are all now instictively feeling that we are no more than pawns. Pawns to those connected in wall street, pawns to those who try to drive opinion in the drive by media, and pawns to those in the political class who tell us one thing and then do whatever they think will get them re-elected.
It is sad really. Sad that we have gotten to the point where truth looses out to manipulation. That honest discussion of issues gives way to talking points designed to tell you what you are supposed to think. That instead of leaders doing what is right for the country, we have politicians that have only 2 goals: get re-elected and get others in their party re-elected.
Change is Coming
The good news is that change is coming and it cannot be stopped. Commentators like Rush and others have the knowledge and access to the truth and they are spreading it like wildfire. Internet and all the access to information that it brings, talk radio, more TV chanels, all available at home, work, or on your phone, gives us the opportunity to really understand what it going on and understand it instantly.
The truth can be manipulated, but not forever. Funny thing about the truth, it always comes out in the end.
The truth is that our country is on the brink of disaster. We cannot hide from it anymore. Politicians, wall street insiders and the media cannot hide it much longer. All economic indicators are down and falling. There has not been enough rise in the income level of Americans to support the level of buying on Wall Street, homes and credit among other things. The laws of economics demand it be fixed. Unfortunately (or maybe fortunatley), these laws will be obeyed at some point. That point is soon.
No amount of cheerleading, wishful thinking or tweaking media reports will change this outcome. The manipulation will no longer work.
Now is the Time
Now is the time fix this problem for good. This is a once in a generation opportunity. We cannot loose it to voices of those who protect the status quo. Those lying to us to keep things as they are (that's right, I said lying, the truth demands that I all it what it is). We can and must take serious steps to prevent this from happening again. Serious tax reform, serious entitlement reform, serious regulatory reform and let's fix this economy for good. We will initially send this economy through the roof and then on we will be on a steady, slow and smart growth. After all, smart growth is what we need, not the bubble growth we have had.
Below is what I said in Late 2009
Notary Economics is a term I use to describe basic economic information that will keep you well informed. As most of you know, hardly a day goes by that a client will not ask you about what is going on in our financial system. So it is helpful to have a basic understanding so you can carry on a meaningful conversation at your closing or at the office.
Our notary economics section is here to help.
We will give you here some insight into what is really happening in our economic system. Why what is happening is important to your notary life and what to look for when reading economic news.
Like all current events, the situation changes rapidly. So we update this notary economics page several times a week to keep you up to date. We hope you will take advantage of the information contained here so you will be on the cutting edge of developments.
The Economic Disconnect
As a notary, I am sure you have been asked often what is going on with the economy. This is difficult to analyze because the stock market is on a Bull run (going up) since March of 2009. However, all other economic indicators are either going down or are pretty much flat (staying the same). What is the disconnect? How can the market be going up when other indicators are going down or are flat.
Let's consider several factors for our notary economics discussion:
Federal Reserve's Monetary Policy.
The Federal Reserve (Fed) has had a policy of near zero interest rates. This is the interest rate that it charges banks when they go to the fed and borrow money. Actually, in real terms, the rate is a negative number. This means that the banks make money by simply borrowing from the fed.
This policy creates lots of money in our system. The law of supply and demand dictates that the more money in the system, the less value the money has in real terms. The dollar becomes weak.
A weak dollar in turn boosts the value of foreign currency. This means a foreign investor can spend less money buying assets in the US economy. Thus, they can invest in our market at cheaper rates, playing the currency exchange market.
Where do they invest? Stock markets and commodities (oil, gold, wheat etc.). More investors mean higher prices (supply and demand) and our markets go up.
Until inflation kicks in sometime this year or next, this will continue to be the scenario.
Notary Economics in General
Meanwhile, the economy in general is continuing to drop. Banks make money (although granted not much) for simply borrowing money from the Fed. They do not need to lend it and have not (except to the highest quality borrowers where there is little or no risk).
The money then bounces back and forth between the Fed, Banks (and other financial institutions) and high quality borrowers (usually large corporations). All of whom are either making money or using the money to balance the books.
The Fed uses our tax money so it has no risk and does not need to show a profit.
Very little money is getting into the economy. Therefore we are seeing no growth or negative growth.
Continuing our notary economics discussion, let's look at the stimulus package(s).
Notary Economics and The Stimulus Package(s)
The stimulus package sold to us by Congress and the Administration has had little or no effect on the economy. There are some very basic reasons for this.
The US Economy is so big that any spending by the government would have to be in the 10's of trillions of dollars just to make a small dent. Simply, the government cannot spend enough.
Even this is not correct. Because in order for the government to spend money it has to have money to spend. This means it will have to tax citizens and companies to get it the money it needs. By taxing its citizens, the government is taking money out of the economy in order to turn around and spend it on "stimulus." The effect is a net "wash." The money comes out then goes back.
In fact it is a negative "wash" because of the inefficiencies of government. It actually costs the government money to spend money. Thus, a negative effect on the economy.
Therefore, all "stimulus" spending is doomed to failure from the start (if it's objective is to stimulate the economy). Besides having an effective negative impact on the economy, any stimulus spending only gives the government more power and control. It cannot, by its very nature, stimulate.
Notary Economics and the Housing Market
As our brief overview of notary economics continues, we need to take a closer look at the housing market.
The housing market in most of the country is in negative growth with housing values declining. Again, the culprit is supply and demand. There is more supply on the market than can be absorbed by the currently available buyers. Sellers must adjust their prices lower to attract potential buyers. Thus we have the slide in the market.
As mentioned earlier, the overall economy is down considerably. High unemployment, negative growth in business, and a weak dollar combine to make for bad economic conditions. The economy simply cannot create enough buyers for the homes available on the market.
To make matters worse, for those willing to buy, credit is tight. Without near perfect credit scores you will not get a loan. This puts a further strain on the real estate market.
Let's continue our notary economics by looking at what is next.
What's Next in Notary Economics
Unfortunately, given our current political climate, there is little chance for improvement in our notary economics. As the US continues its slide into socialism, and other countries repeal socialistic tendencies, our economy will continue in negative growth while other countries grow and eventually pass our standard of living. Take a close look at China and India as they will be leading the way.
Furthermore, if Health Care legislation or Cap and Trade (tax) passes, this will further take money out of our economy and reduce our overall wealth of our nation. More money will be in the hands of the government. This means, you guessed it, negative growth.
Further, higher taxes and greater dependency on government will reduce incentives for people to work harder and create jobs. This will compound the decent of our economy.
Our greatest hope is our people. We are a resilient bunch. We always seem to find a way to thrive no matter the circumstances. But I am afraid we may be in for too much headwind from the government. Only time will tell for sure, and I have great faith in our citizens, but we need to push for some policy changes if we are going to survive as an economic super power.
The hard part for me is the understanding that this is all intentional on the part of our current government. It must be intentional as there is no other explanation for the current policies. Even a basic understanding of economics will lead to the understanding that current economic policies are bad for our economy.
So why do them? Unfortunately, the only reason to do them is create the outcome that is destined by the very actions being proposed by our government. That destiny is negative economic growth, weaker world standing and a citizenry dependent government. This is hard for me to take, but I see no other explanation to these actions.
I realize that this notary economics is bleak. However, we must continue to create ideas and push for the changes that will take us back to prosperity.
Notary economics, or any economics, is participatory. We must all play a part if we are to succeed. Let's all stay informed and on the cutting edge.
As always, feel free to contact us with your thoughts and ideas.