Bubble trouble

If you've watched any mainstream news outlets recently,you've heard it proclaimed that the recovery is fully underway.That the "Great" recession ended in June of 2009.The stock market is marching relentlessly forward.That housing has bottomed.That unemployment has bottomed out and that we are now adding jobs again.

Sounds pretty darn good.To be fair,most of these reports are tempered with the statement that "we have a long way to go".Those on the left point to the Obama stimulus and the actions of the Federal Reserve as the reasons for the recovery.

The reasons for the recession have been discussed and debated like no other before.We have a whole nation of "experts" now on economics.The blame for the recession doesn't follow standard partisan lines.Some blame the federal government regulations,some blame the evil,greedy corporations,some blame irresponsible consumers.Most blame some combination of these.

Why is it then that so many refuse to believe what they are seeing today?Armed with their crash course knowledge of economics and why the meltdown occurred hasn't translated into recognizing the building of the next crash.The American spirit has always been a can-do attitude and one of optimism.It's an intangible that this country was built on.However,it also can blind you to reality.

People love to buy into the logic of 'if we had just done a little bit more'.A little more regulation.Invest a little more here and there.That this time we will get it right because we have now have hindsight to teach us.Yet we react in the same predictable manner which allows the boom/bust cycles to continue perpetually.

We must keep in mind that all bubbles don't need to burst to have a negative effect on the economy.Just like a boil on your skin,it's painful as it expands,but if it doesn't get infected it may just drain on it's own without breaking.

The bubbles that we have are almost always created by government policy which allow and enable them.Consumers and borrowers than impact the size of the bubble.Certainly,these are generalizations and there may be many complicated factors as to how big and how long a bubble exists.

But the point is that they are dynamic.They impact the economy at varying levels over time.Some get too big and burst causing a dramatic crash.Some don't reach the point of bursting and instead act as a drag,or anchor,on the economy.We are seeing both play out today.

Remember,this minor recovery was also predicted a long time ago.It's going essentially as predicted.Read Harry Dent's "The Great Depression Ahead".All of this was foretold from the crash to the minor recovery we're seeing today,to the eventual big crash to come.

Again,no surprises here.Yet,so many are now beginning to wonder,is it real?Is the Obama stimulus really starting to work?Such poor students of history we are.The spike in temp hiring from the census was projected.The peak in worker productivity as well which means as we regress from being pushed to the extreme and everyone being as productive as possible,more hiring MUST occur to fill in the gaps.That will,however,be at the expense of net profits as payroll will increase.This will be a future drag on the economy.For every action,there is a reaction.

You will also see the part-time workers,the temporary workers and the people who quit searching for work drag down the unemployment numbers for a long time.All of those people want to return to full time employment and will stunt any new job creation.

Just keep a wary eye toward all of the "positive" economic news sure to come spilling out of Washington with the mid-term elections upcoming.It will sound much better than it really is.Remember,you were warned ahead of time just like before.More to come...