|
May 17, 1991
Long term interest rates crawled up another notch this week, and have broken out of the narrow range in which they have been since January.
The big economic news was a revision in March Retail Sales. Initially reported down .8%, the final figure is up .4%. The swing in durable Retail goods was even bigger: the early figure was down .9%, the revision up 1.3%. Remember the postwar recovery that was supposed to happen that didn't happen? It happened after all.
April Retail Sales lost a modest .1%, and the Consumer Price Index increased only .2% (even at the core rate). In other signs of recovery, Industrial Production had its first uptick in six months, gaining .1% in April, and New Housing Starts jumped 6.2%.
The assumption here for months has been that the economy would recover by summer, and mortgage rates would rise as a direct result. We still think so, but this recovery will be unusual.
The odd element will be a recovery without the typical "assistance" from Congress. By now in previous recessions, Congress would be a river of jobs programs, tax cuts, tax rebates, and subsidies "Pump Priming," as it used to be known.
This time, Congress has nothing to give away. We are already running a $300 billion deficit (give or take $50 billion). "Fiscal stimulus" is a runaway freight needing no new push from Congress.
If you believe most politicians (mostly Democrats), the economy can't work right without the expert assistance of politicians. This time, the economy is on its own, but that is probably good news.
The recovery will not labor under rescue efforts from Congress that arrive too late to help. By the time Congress has gotten organized, past recessions have been pretty much over. In past recoveries, new inflation has always gotten a boost from delayed goodies.
Market economies really can do well if left alone. Not completely alone: Congress has a proper role in holding capitalism back from its tendency to make the rich richer and the poor poorer. And the Fed has its antiinflation, lenderoflastresort, and depression prevention jobs to do.
But political efforts to improve the performance of the economy as a whole are more often counterproductive than useful.
|
