Obama's Way Out of the Recession Could Lead to Inflation
By Bonnie Erbe, Thomas Jefferson Street blog.
We're all searching the financial horizon for good news on the economy. But this is good news I don't particularly like. Last month, housing starts jumped 17 percent above the year before, exceeding expectations in a market that seems to have bottomed out and is now starting to rise.
That's the good news. The bad news is, if this keeps up, inflation is on the way. We've all been watching in despair as oil prices climb back toward last summer's ridiculous high. They're already double what they were at the end of last year. If our economy picks up too quickly, price cuts for food, real estate, and consumer goods due to the recession will fizzle quickly and be replaced by soaring inflation. The Obama administration has intelligently created tax breaks for first-time buyers and the Fed is trying to keep down otherwise soaring interest rates, but I smell an economy that is on the verge of overheating.
Falling prices are bringing homes within reach of more consumers, and the Obama administration's economic stimulus plan included an $8,000 tax credit for first-time buyers for purchases completed before Dec. 1.
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Mortgage rates have climbed, even as the Federal Reserve works to trim borrowing costs by purchasing Treasuries and keeping the benchmark interest rate close to zero.
Conservatives are right that the Obama stimulus package spends WAY too much money--especially now that it looks like the economy won't need much of that money (most of which has not yet been spent or released to create jobs) to enter recovery.
Liberals are correct in that the economic mess was created by the prior administration. But that doesn't mean President Obama has to overspend his way out of that mess. If I were advising the president, I'd tell him to put the brakes on government job creation for a while, and see if the economy keeps doing more to pull itself out of recession. With high oil, soaring interest rates, and unfettered consumer demand (which we do not yet have but seem to be on the verge of), one word comes to mind: stagflation. That (and the Iranian hostage crisis) are what pushed Jimmy Carter way down in public opinion polls.
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Reader Comments
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Obama has not taken a wise decision..
What about many international students who dream about America, take huge education loans back home to pursue their higher studies in America? They are jobless, failed and returned back home with heavy debts? Spending money brought from back home in US only with the hope that they could do better in life and achieve their goals and ambitions has now left in the minds of every international student that they had taken a very bad step in their life. If Obama doesn't take a wise decision soon no body would dream about America in future.
Atleast people who spent huge money to complete their education in US should be considered and given a chance to get a job and work in US untill their loans get cleared.
Extending the OPT 12 more months for STEM students was a wise decision but students are still jobless and many returned back home without a penny. Many students who returned back home during their OPT period have to go through the whole new process of finding an employer and waiting for the employer to sponsor. There are many fake employers who collect money from students and still dont give their H1B's.
Moreover Obama's decision not to provide jobs to H1Bs and to stop outsourcing is not wise. If new rules keep coming up whenever the leaders change what happens to the commitments made by the people who had great dreams and hopes.
A decision should be taken on international students who spent a lot of money to pursue their studies and who are in heavy debts now and returned back back jobless.
If something is not done soon no body would ever prefer going to USA to pursue studies.
Let's Get Out this Mess First, Then Gladly We Can Confront Inflation
At least you're looking ahead and there is sign that the economy is at least stabilized if not starting to recover. Inflation would be nice only to worry about, but we have yet to put out all the fires let over from the Bush Administration and his rubber-stampin' GOP congresses.
If you really want to worry about inflation, get on board in making healthcare reform happen.
Healthcare costs in the US have been rising at 15% to 20% a year. The average American has not seen wages increase in the last ten years, but their companies have been having to cover the 20% increase in Health insurance costs - essentially eating wage increases in the black hole of healthcare costs. We're paying twice the cost of any other western industrialized country and still millions here are uninsured. Healthcare should be one of the elements factored into the equation that inflation is calculated.
Healthcare will continue to be an anchor on our economy unless we can get the resolve to fix it now.
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