Friday, May 29, 2009

So Why All The Spending?

California home prices were up 1.4 percent in April. Unemployment claims fell last week, surprising market observers. Consumer confidence had one of the most dramatic one month increases in history in April. New home sales rose in April. The stock market will today complete one of its best two month's runs in its history.

So, what's the bad news? The US Treasury market is the bad news. Treasury yields are spiking up due to the 400 percent increase in the fiscal deficit. The rating agencies are poring over the possible downgrade of the US government's credit. State government budgets are in a state of collapse. The dollar is cascading downward.

So, the good news is that the private sector is turning around and is very close to a bottom. The government hysterics that began with Paulson and Bernanke and continues with Obama, Geithner and Frank is no longer enough to keep the free market from working.

The bad news is that government spending is spinning out of control at an historic clip and the big union-dominated state budgets are completely out of control and verge on bankruptcy.

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