The “Road to Serfdom”

Wednesday, August 11, 2010
By Paul Martin

By Dan Amoss
The DailyReckoning.com
08/10/10

The stock market still has further to fall to catch up with the slowing economy. US GDP will keep decelerating – likely approaching a zero percent growth rate by 2011 – for the following reasons:

1. The long-term trend back towards consumer frugality and higher savings rates remains in full force. This will dampen consumer spending.

2. A double dip in housing prices is likely, because subsidies are ending and the backlog of foreclosure resolutions is about to accelerate.

3. The impact of the Obama administration’s stimulus plan is fading, and is not leading to any real “multiplier” effects because most of it went to plug holes in state government budgets.

4. European and Chinese GDP are slowing for well-publicized reasons.

5. Those who create jobs in the US fear rising tax rates in 2011, rising energy prices from cap-and-trade legislation, the pro-Wall Street “financial reform” bill, and a laundry list of other anti-business policies.

In short, if the status quo remains in place, the US economy will be lucky if it experiences a fate similar to post-bubble Japan. The US government is pursuing the same misguided strategy that has failed for twenty years to revive Japan’s economy. This strategy consists of squandering taxpayer dollars on failed financial institutions, and prop up unaffordable federal and state spending programs.

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