So let´s see where we stand in the battle to save the economy:

FACT - we have stablized our financial system
FACT - the stabilization has not yet reached into the rest of the economy
FACT - there was a “credit bubble” based on “securitized debt”
FICTION - the impact of mortgage foreclosures cracked the “credit bubble.”
FACT - foreclosures never rose above 3% of outstanding mortgages and the rate of foreclosures is slowing down considerably.
FACT - in spite of reality, the fear of foreclosures caused analists to dramatically devalue “securitized debt,” otherwise known as “toxic” assets
FACT - proof that these devaluations were overblown was amply given by banks begginning to repay funds they received from the TARP last October in May, only seven months later.
FICTION - our economy can operate without “securitized debt.”
FACT - we need “securitized debt” for our highly developed economy.
FICTION - President Obama is wasting tax payer money with his stimulus plan
FACT - while the financial sector has stabilized, we still need to crank up consumption and thus production and thus lower unemployment by putting people back to work, which is the purpose of the stimulus plan
FICTION - Obama´s reckless spending will cause a sharp rise in inflation
FACT - the President´s deficit spending is being paid by borrowing and that borrowing will be refinanced for well into the future. There will be no massive addition of new funds by the Feds to retire the debt and raise inflation. The Feds will continue to sop up excess funds by borrowing.
FICTION - we should reduce spending and live within our means
FACT - the worse thing we can do now is reduce consumption since that will only lead to more contraction of the economy

INTERNATIONAL SCENE

FACT - the European economies have not yet seen their financial sectors stabilized
FACT - this delay will have impact on the Euro and it should fall sharply
FICTION - the worldiwide recession has hurt Africa
FACT - Africa has become the resource center for China and business is booming, more than offsetting whatever shortage there may be in official development funds

Leo Cecchini
July 2009