Governments Are Destroying The Pillar Holding Up Their Recovery Plans

March 19, 2013

The major reason the market is moving up while the economy is moving -at best- sideways is the confidence America has in its political leaders to do the right thing, to solve our economic problems. Our politicians, our economists and the media have sold us on the expectation that we are out of recession, slowly recovering now but recovery will speed up in the second half of the year. The market trades on expectation.


If we loose confidence in our political leaders to do the right thing, expectations will change dramatically.

Yet, at the same time, they don't seem to know or think or care what we think as long as they can keep the status quo until the next must win election. What happened in Cypress this weekend is important because we are globally connected. It is an example of destroying the rule of law and destroying confidence in the government. The President of Cypress two weeks ago said the government would not even discuss an asset tax. Then on Friday night, the ATM's are shut off (to protect the banks) and news of the asset tax spread, person to person, by Twitter.

We have seen act after act in Europe where the government has stated one thing and done another. We are doing the same thing here: the continuous bailout of the banks, the disregard for the law in the GM bankruptcy, the crony capitalism, the fake hysteria over a small increase in budget (also known as sequester.)

If our politicians do not face the real cause of our problems, and stop treating the symptoms, we will loose confidence and the assumptions we have now will have to change and it may not be for the better.