Thursday, January 17, 2008

My prediction on the economy

Many of you have been hearing about the collapse of the housing market and the coming recession, and the horrible oil prices, and oh my God, we're all going to lose all of our money to the coming depression. My opinion is that we are in the middle of a strong economic climate - unemployment is low, housing is fundamentally strong (HUH?!). Yes. We are still building new homes, and people are still buying. But the prices are decreasing, and foreclosures are a problem, but that is due to the irrational exuberance of the past few years' housing spree. People bought houses they shouldn't have. Banks gave them loans they shouldn't have. So those irresponsible moves are what is causing this current "crisis" and the fall in house prices. But fundamentally, the economy is strong. The US GDP is larger than the next six countries combined (I think). New housing starts are down - but they are down when comparing it to the insane buying spree. but we still made over a million new houses this year. And people still need homes to live in (and they can pay for their home with their jobs - remember the low unemployment.)

So what can cause the recession if we are in a strong economic climate? The US dollar can. The US dollar has the power to pull the rug out from under us all and out from all of our industries. We sell cars in dollars. We get paid in dollars. We buy oil in dollars. And the dollar will bottom out at is current low state and stop declining and turn around, if only Bernanke would stop lowering interest rates! If he reduces the interest rates further (which is essentially the appeal or the demand of the US dollar), the dollar will collapse, and throw our country into a real recession. The bad news is that he already has said he is willing to substantially reduce the interest rates. But there is still hope. There is still hope he will look to the longer term health of the country and not the short term level of the stock market or the short term health of the irresponsible financial entities.

Here's to hoping. But unfortunately, I predict that he will reduce rates. If he does, and you heard it first here at Digital Irony, we will go into a recession. If he doesn't touch the rates (please God), our fundamentally sound economy will inexorably turn around the sinking juggernaut and return our economy and dollar to normal and healthy values.


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