On The Verge Of Recovery

There’s a lot of news out today about statements Bernanke has made about the recession nearing an end, home sales rising, and other general talk of economic indicators reversing their slide.

If I am not mistaken, it is direct government stimulus which is fueling those, and unless we keep printing money indefinitely the strength of the recovery is questionable.

After all, minimum wage was increased – so a rise in wages will show. And cash for clunkers was a successful program (from the perspective of moving cars off the lot) – so a rise in vehicle sales and industrial activity will likely show. We have a first time homebuyer tax credit, and interest rates next to nothing, so sales volume should stabilize and rise.

But the cash for clunkers program expires on Monday, the homebuyer tax credit goes away at the end of November, and the FED has also announced that sometime in September, it anticipates pulling back the reins significantly on its purchases of paper (so rates should rise).

So when all this goes away, that will be when we can see whether the economy has truly healed, or if it is still on life support.

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