Digger Cartwright comments on the state of the U.S. economy – Feb 2009

Orlando, FL (PRWEB) February 1, 2009—The office of Digger Cartwright, mystery novelist and industrialist, released the following statement by Mr. Cartwright on the outlook for the U.S. economy.     

“The continuing decline in economic activity has set a serious tone for the U.S. economy in 2009. Based on the most recent data, it appears that the economy is poised to experience a protracted recession throughout 2009 and likely into 2010. This comes at a time of massive government bailouts, the certainty of expanded federal programmes, stealth tax increases, further contraction in the real estate markets, and a crippled banking system and Federal Reserve.

“The current economic crisis here in America, and by extension throughout the world, has been caused by the banks and the weak banking system. Just as most other historical financial crises have been caused by the banks, so too has the fear this time of a massive global economic and financial system meltdown. Much of this ‘panic’ is, I believe, greatly blown out of proportion. The pending doom in the financial system has been a convenient excuse to provide private enterprise with a massive taxpayer funded bailout, in essence rewarding and not penalizing those companies for their bad decisions. It is a travesty and a gross injustice to the American taxpayers.

“This situation all began with the overly accommodative monetary policy by the Federal Reserve back in the early 2000s, which fueled a lending bonanza by the banks and a frenzied real estate market. Banks, eager to loan out virtually free money from the Fed to mortgage seekers at reasonable rates, let down their conservative lending practices and started a financial lending orgy. Anything went for quite some time during the boom in real estate. The Fed failed in its duty to take away the punch bowl before the party got out of hand. Now, everyone involved in a little rum dumb as a result of their excesses.

“Then, of course, the banks cried for help for the ‘credit crisis’ back in late 2007. There was a credit crisis for sure; the banks didn’t have any money to lend out. The Fed pumped hundreds of billions, and ultimately trillions, of dollars in liquidity into the financial system to no avail. Credit did not start flowing again as anticipated or as needed. Ben Bernanke and the other Fed governors looked like a bunch of Johnny-come-lately but they still continued to pump money into the system.

“Then, we get word that we have to bail out Fannie Mae and Freddie Mac for their bad mortgage loans. This would be followed by AIG, the banks, and the auto industry. The tally involved trillions, not billions, but trillions of dollars in taxpayer funds but no one seemed to question the need for the bailout, or those who did were not listened to. Fear and panic were enough to ramrod the stimulus through the Congress in late 2008.

“Now, we have a new administration but the same old Congress, both preparing to stick it to the taxpayers again with another trillion dollar stimulus plan. This time, however, the new president claims the money will go to shovel-ready infrastructure projects to get the economy going again and other projects. Yet again, the administration and the Congress are playing on the fears of the American public. Yes, this is a serious situation, but not nearly as bad as is being suggested. There are plenty of options available to the failing financial companies, auto companies, mortgage companies, etc. The best option is called bankruptcy reorganization. But no, we can’t have that according to the administration. We need to pay for the bad decisions made by the executives at these companies. We need to buy the toxic mortgages from the banks so that they can be solvent again. What an excellent use of taxpayer funds.

“FDR famously said that ‘all we have to fear is fear itself.’ Let us not forget that right now. Americans are fearful for a lot of reasons. Jobs are scarce. Companies are laying people off left and right. The bad news is ubiquitous on the television every day. The media and the administration are breeding an artificial panic.

“The economy is in a recession. It is a necessary and natural economic phenomenon. Yes, it hurts many Americans in many different ways. There is no avoiding that; it is simply part of the painful process of adjustment. We have to slow down for a while from our gluttonous ways of recent years and get back to some basics.

“Having said this, it is definitely going to get worse before it gets any better. This year, 2009, is going to see more job losses, slower economic activity, a lot of businesses going under, further drops in the real estate markets, and a lot of belt tightening by all Americans. Unemployment will probably hit 10% by the end of the third quarter and may well rise to 12% in 2010. Oil prices should decline as economic activity tapers. Let’s look towards $20-$25 per barrel by year end. The stock market will probably continue to experience volatility—-jumping on any signs of positive news and falling on negative news. All in all, the DJIA is probably going to bottom out around 6,500. Prices in real estate will likely continue to decline; look for another 20% drop this year or more. Interest rates are probably going to remain low for now, but don’t be surprised if we see an uptick in inflationary pressures. The CPI may rise about 3% for the year. Credit is going to continue to remain tight.

“America needs to get its finances under control. The consumer has no credit for the most part. Many consumers have maxed out their credit cards. Most Americans have mortgages. The banks have loaned out beyond their means. The federal government has let its spending get out of control. Its credit is getting stretched. Bloated programmes continue to expand our spending requirements. The states and local governments have spent beyond their means as well. Everyone is apparently running low on cash and funding. This is a debt crisis for America. We need to all clean up our balance sheets and prioritize our spending. It won’t be easy or delightful, but we have to get that under control before we can start to recover.

“Once we get a grip on that, we need to get back to some of the basics that have made America strong. We need to revitalize our manufacturing base here at home so that we don’t rely on other countries for all our goods. And we must remain on the cutting edge when it comes to technology. We must continue to lead the world with our technological breakthroughs and not give this up to other nations. This all require that we remain competitive for companies to base here. That is going to necessitate cuts in the corporate tax rates. And we must make it competitive for workers with tax cuts for all Americans as well. Every time our government has cut taxes, the Treasury’s coffers have filled like never before. Tax cuts incentivize production, whilst tax increases stifle production. This is tried and true, and it works magic for an economy. Let us not forget that.

“But to be sure, we must not panic. We must realize that our situation will improve, even though it is going to take time. We must believe in America and all that we have stood for. We must not give that up. We must look to the vast future, beyond the short-term here and now. We will pull through this together.”

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