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July 7, 2011 / 74

A Green Shoot? (Signs of Recovery?)

“Green shoots” – http://en.wikipedia.org/wiki/Green_shoots

One of the difficulties of watching the economic environment is figuring out what’s REALLY going on. It’s difficult because virtually EVERYONE in the system, and out of it, lies. The banks lie because they want people to think they’re sound and honest – while many of them are neither and they want you to trust them with your money and your business.

At the same time, you have the government lying about everything and hiding things and just ignoring things in the economic world. So it’s very difficult to figure out what’s REALLY going on – so that you can make economic decisions and plan for the future.

One of my sign posts of economic direction used to be banks and credit cards. Was credit easy to get? Or was it hard. Were banks using fixed interest rates, or variable? Are banks going from one to the other? (Fixed to variable) Were banks offering inducements to get customers to change the type of card they have and how would that inducement affect how much money the customer would have to pay them?

For example – if most banks used variable interest rates, it was an indicator that interest rates were on the way up – because the bank didn’t want to settle for a low rate as rates increased. And if banks then started to switch to fixed rates, that meant that the rates were at or near peak, and would go down before they went up any more. That way the banks could lock-in high rates as rates fell.

The whole interest environment was rendered temporarily unreliable as an indicator over the last few years due to several factors – such as the FED’s gaining complete co0ntrol of the US Banking industry. So now interest rates can change because of a desired effect in the political arena. For example – if the FED and the Neo-Liberals want Obama to get re-elected, they must promote an easy money environment to encourage people to spend, causing a business expansion, so that things seem to be improving on election day. Since the FED has been maintaining an effectively negative FFR for several years, they can’t create an easy money environment by lowering the FFR as Greenspaz did for Bill Clintoon, and tried to do for Al Gore. They’ve already tried to “prime the pump” by flooding the world with US Fiat Dollars – and that didn’t work either. What’s left?

They can twist a few banker’s arms (and since just a few banks now own about 80% of the US banking world, that has become pretty easy) and get the banks to lower their prime interest rates, and make credit easy to get again. The whole bubble atmosphere of the last 20 years or so was created with low interest rates and EASY CREDIT. We already have low interest rates. But when the bubbles started collapsing, they had to cut off the easy credit – and *poof* no more booming economy.

In my email today, I received a rather interesting little message. It was from one of the issuers of one of my credit cards. They said, “Whoo HOO! Because you’re such a GOOD customer, we’re giving you MORE CREDIT!!! ENJOY!”

The last time I got one of these unsolicited credit limit increases was about five years ago.

So I put it to you. Is this perhaps a “green shoot” – or is it a last gasp of the incompetent buffoons running our economy into the dirt?

(Comments encouraged – just keep ’em on topic and clean.)

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