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Election Year Economic Data

February 16, 2012

“The number of Americans filing new claims for unemployment benefits unexpectedly fell last week to a near four-year low, suggesting the labor market recovery was gaining steam.”

“Other government data on Thursday also pointed to sustained momentum in the economy, with builders breaking more ground on new residential projects in January and little signs of a pick-up in inflation pressures.”

Do you know why I don’t think positive economic data is unexpected? Because it is an election year. You should expect more ‘surprise improvements in the economy,’ at least until the election. It is interesting that CNNMoney.com reported, “Number of foreclosed homes climbed in January.” This story finds that fallout from the “robo-signing” scandal slowed down the foreclosure process and created a backlog of foreclosures. This overhang of foreclosures will likely become un-kinked and begin flowing into the market. So if I were a builder, this would make me just a bit nervous.

If I were a financial reporter this is the question I would be asking: With all this positive and unexpected good news about the economy, is it safe to assume our central banks no longer need to manipulate monetary policy? No more QE’s; no more purchasing long-term bonds and mortgage-backed securities; and no more zero-rate interest policy? Hmmm, we can’t accommodate the change in interest rates because our Federal Reserve has already promised that through 2014!

If we see anymore accommodative easing, we have to wonder why, given all this positive news. Here is my prediction: We will continue to see “an improving American economy” until something ‘unforeseen’ knocks us off the tracks. Something like sovereign defaults, war, or a natural disaster. Then we will hear, “Oh, we were so close to seeing a sustainable recovery if it hadn’t been for ‘______’!” But it is the “_____” that sustainable economies must be able to withstand.

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One Comment
  1. Tammy permalink
    February 23, 2012 9:18 am

    Great post!
    Fundemental predictable government manipulation exposed with clear motive and opportunity.
    Follow the money and power.
    We have only taken one bite out of the housing turd, next administration will serve up the last bite once they take office.
    Thanks!

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