This weekend I'll be rooting for I'll Have Another to win the Belmont and become the first horse since 1978 to win the Triple Crown. The stock market is also rooting and saying I'll have another but for the moment the Federal Reserve has joined with the European Central Bank with keeping the covers on money-printing machines until legislators get their act together. I still think these central banks will try to do something if for no other reason than eventually there is a pop in the economy and they can take credit. Let's face it, Ben Bernanke has taken more bows than anyone this side of President Obama for saving the economy.

At some point it would be wise for Presidents and Fed chairmen to wait for the patient to walk out of the hospital before proclaiming the operation a success.

Considering there is an election in November it's unlikely anything can be done in this country to give Bernanke the green light so it's all about Europe where there is a countdown to a flat line. The ball is in Angela Merkel's court and she must take care not to blink. I've written about her resolve but those folks in other countries demanding the earnings of Germany also have resolved (in part because they don't have anything else to do) to get that money. I read yesterday where the top Tweeter hash-tag in Spain was #stopmerkel as if somehow all that stood between that country and bliss was the leader of Germany.

Yet, when we do have another typically it's part of a string of things and soon thereafter we want another again.

The point is we are already in the midst of a series of quick fixes that simply do not work. Here at home there was debate over a survey of economists where 86% agreed it stopped the job bleed in 2010, but when it's all said and done will it prove to have worked or not was it a different story?

46%: costs will exceed the benefits so that means higher taxes to pay for the plan
27%: not certain what will be higher when it's all said and done
12%: agree the benefits, even in the end, outweigh cost

This is a difficult time in the world and also the perfect opportunity for real solutions instead of Band-Aids designed to deliver votes instead of paving metaphoric roads for real future prosperity. There are a few important things coming up in Europe over the next two weeks that could seal their fate or open the door to real reform. The thing is, walking through that door will be painful. Yesterday Wall Street salivated at the possibility the Fed would print more money and even after Bernanke said he wouldn't, conventional wisdom held he will sooner or later.

Consumers Join Voters

For all the hype of money money-printing at the Fed, this week will go down as the one when it was revealed that the general public gets it more than government and short term traders. You can't keep spending what you don't have. Moreover, it might be wise to clean up balance sheets even more. Yesterday, the rally finally ran out of steam right after the latest consumer credit number was posted. The report is backward-looking and the media doesn't cover it despite the fact that 70% of the economy is consumer spending. The number was less than expected and down a lot from the previous month.

I think consumer are looking for elbow room and not using their credit cards with the same vigor. Perhaps it's intuition or a built in clock of sorts, like the one that awakes a cicada after years of slumber, but consumers are doing the right thing. The implication for retail and the overall economy is worrisome. For the last couple of weeks retail spending has surprised as wages have remained flat while and savings have plunged. While it's not great to see people dip into savings to hit the mall, it's better than hitting the credit card. Of course this is all about confidence as well. Consumers are sending the same kind of message as voters in Wisconsin about not trusting government officials.

While revolving credit decreased by $3.44 billion non-revolving credit surged by $9.96 billion as the federal government pumped out $6.10 billion in college loans and looked the other way as subprime loans drove auto sales.

It's not a good mix.

This goes to show it's not just banks and corporations hoarding money. Everyone is hoarding money and I'm beginning to wonder if the real rich have run out of money or are they just worried as Election Day comes. (Lululemon is the latest retailer where stuff isn't cheap to see its shares get crushed after posting earnings). This economy needs a lift that only comes from confidence or short-term elixirs- free money, anyone? The only place this can play out is in Europe.
Of course China is a player, too, as witnessed with the reaction to a tiny rate cut that got the US stock market popping early. The idea is this is the tip of the iceberg and definitive policy change in China that sees the focus shift from a myopic worry about inflation to a maniacal desire for growth - at any cost. Nobody said slowing down their economic locomotive would be easy. There is no doubt China has the horsepower to carry the world but so, too, does bunch of fresh cash from Fed & ECB.

There is a source of horsepower greater than all those things—America's economic might! It has to be unleashed. The dark clouds of higher taxes and punitive action for succeeding and returning money to investors has to be removed. I know it's not happening, not even close. So, we are back to the drama in Europe, hoping for central banks and maybe China to save America.

We are drunk on temporary solutions but at this point I think I speak for most people that would like to see their retirement stop bleeding and stocks to trade on merit not emotions when I say "I'll have another."

There is an interesting piece on Yahoo Finance that covers the decline in debt to GDP by everyone in America but the federal government. This speaks to responsible actions by many but also debunks the notion that citizens will fight austerity when in fact once pushed to the wall they enact it on their own.

http://finance.yahoo.com/news/22-000-apply-877-hyundai-220100236.html

In eleven quarters since the end of the recession, domestic debt increased $702.0 billion or 1.4% versus the eleven quarters before, when debt increased $10.7 trillion or 28% of GDP.

Today's Session

Today will be an exclamation point for a week of dashed hopes. The Street was unrealistic if it believed Bernanke would step to the mic and break out his keys to the helicopter. I think it's clear the Fed and ECB will print, but they aren't going to do all the lifting. I sense resentment from the Fed for the temporary bump in the US economy coming mostly from their efforts but the media fawning over the White House. We are back to going into weekends wondering what's going to happen in Europe, this time Spain replaces Greece. Several reports say Spain makes it official and ask/begs for a bank bailout. I'm not sure if that helps the market or hurts the market. It wouldn't be news that their banks need a bailout, and such a plea moves the ball forward (for what it's worth Spain's stock market is actually inching higher).

Stocks appear indifferent to all the news this morning, including the big same-store sales miss at McDonald's and so-so trade deficit news.

Comments

#4 without a doubt!!! Anything else just keeps feeding the beast until it explodes and we all go down with it..(Do you think Congress, coached by NYC's Mayor B might get upset enough to pass a law to stop feeding it?) Marie C on 6/8/2012 9:33:32 AM

should we "no", but we will print money and add debt, until we back ourselves into a corner and we have "no choice" but to socialize our natural resources like every third world country ends up doing. bill deshurko on 6/8/2012 9:51:38 AM

Strongly disagree George Seager on 6/8/2012 9:57:18 AM

4-Stongly Disagree Grace on 6/8/2012 9:59:38 AM

The family of 6 that were killed in a plane crash,theBramlage family, in Florida on their way back to Junction City where friends of mine, I am devastated, the whole family gone. I am on the way to their house now.Imagine, mother Becky, father , Ron and the 4 kids, all gone. Charles never take your whole family on one private plane...never..... Saw Jeb Bush on Charly Ross last night, there is the man that should be running for president on the Republican ticket and no one else. In reply to your question and finally No. 4, inflation is really going to get us at some point. tom wayne on 6/8/2012 9:59:59 AM

The Fed has already cheapened the U.S. buck since Wilson signed off on the Fed Res Act in Jan., 1914! Look at Gold price in January,1914, versus today or worse the $1,923 high not long ago! Dr. Ali Khan on 6/8/2012 10:31:10 AM

I do not agree with printing money. As an aside from lacking political will and any thing that comes close to long term vision, it really is the only way forward in the short term. It probably will be the way that we go. We really need a comprehensive tax overhaul, closing loopholes for large corporations like Apple and GE to name two. We need to have a slight increase in the Social Security tax along with advancing the retirement age to fit our longevity. We need to cut salaries, benefits and retirements of government works, limiting the amount of government retirements a single person can have. We also need to put some money into Medicare fraud prevention and stop the war on drugs. That war sucks money that should be put into education and rehab. In the end we will print money, Germany will resist, but in the end to save the Euro the ECB will print more. The Fed likes having this solution, eventually we will all be millionaires, however it will be meaningless. David Huber on 6/8/2012 10:31:18 AM

If "X" is worth $5 in todays's market with today's currency and the gov't doubles the amount of currency in circulation tomorrow, then "X" will cost you $10 tomorrow. Is there something I'm missing? Gary D. on 6/8/2012 10:44:01 AM

Yes - it will guarantee that we get a new President in Nov and my gold stocks will go up! Carole Sawyer on 6/8/2012 10:49:07 AM

NO: this will result in higher prices on everything. Tom S on 6/8/2012 11:14:49 AM

FOUR! Gary Brandin on 6/8/2012 11:25:46 AM

Hello Charles, You left out one very important choice in your questions: Should the FED be abolished? :o) My answer is a resounding YES! Take care and keep up the great work. Larry Klepinger Lawrence Klepinger on 6/8/2012 11:29:38 AM

No more government spending. As REGAN said, " Government is not the solution, government is the PROBLEM ". DARRELL on 6/8/2012 11:46:01 AM

Increasing ammount of money in circulation dilutes the value of currency and leads to inflation. What this country needs is a balanced budget and start fiscal conservative policy. George Husa on 6/8/2012 12:01:56 PM

#4 DO NOT PRINT MORE MONEY! BALANCE THE BUDGET! Try the "A PLAN" (Arevalo Plan) CAP SPENDING AT CURRENT LEVELS PASS A 10 YEAR BALANCED BUDGET AMENDMENT Take the difference between our current revenues and our current spending level. Say its now at 2 Trillion. Year 1, Make a net cut of 5% ($100 Billion)Implement a 5% net tax increase. (Net revenue of $100 Billion) Year 2, Make a net cut 10% ($180 Billion)Implement a 10% net tax increase. (Net revenue of $180 Billion) Year 3, Make a net cut 15% ($216 Billion)Implement a 15% net tax increase. (Net revenue of $216 Billion) Year 4, Make a net cut 20% ($201.6 Billion)Implement a 20% net tax increase. (Net revenue of $201.6 Billion) Year 5, Make a net cut 25% ($151.2 Billion)Implement a 25% net tax increase. (Net revenue of $151.2 Billion) Keep increasing the cut/revenue 5% each year. In year 10 you will have a balanced budget. KEY POINTS: 1. Equal Pain 2. Cuts are "NET" cuts 3. Revenues are "Net" revenues 4. Each year if parties can not agree on the cuts/revenues, cuts are across the board. Revenues are across the board.(All tax brackets) 5. Caps National Debt at 23 Trillion. Paul Arevalo on 6/8/2012 1:06:33 PM

had an insight last night: the reason God put Himself in the body of Christ on the cross. He loves us so much that those of us who do not love Him back cause Him pain, great pain, pain that we cannot imagine. He went through the ordeal of the cross to show us just how much pain He feels for all the people who do not love Him back freely, for all the people who reject His very existence. of course He was put on the cross by people, by all of mankind really, and that physical pain was nothing compared to the pain He feels for each soul which rejects Him and will be lost forever. two verses I John 1:23 (Whosoever denieth the Son, the same hath not the Father) and I John 4:8 (He that loveth not knoweth not God for God is love) why would God who wants our freely given love for Himself instruct us to love a being other than Himself..... people wonder about the soul....whether it even exists....i would say it is the soul that expresses pain when it is distanced from God..... depression is what we call that pain ... i have said many times faith and depression are mutually exclusive.. i would also say depression is directly proportional to our distance from Christ and only a weak mirror of the pain God feels from that distance meyerhoff on 6/8/2012 2:01:01 PM

What should be done and what can and what will be done are all separate answers. No we should not continue printing money. We are now like a heroin junkie on QE. But a huge concern for me is how exactly is Ben Bernanke going to end all this QE AND successfully wind down the programs and withdraw the money without triggering an economic collapse??? The real answer is that we need a growing economy, one that creates jobs and opportunities for people. And that will only come with a new administration. Michelle Johnson on 6/8/2012 2:23:33 PM

Strongly disagree. 'Ouch' now beats 'amputate' later. Tangent of the day: Thanks for the Botticelli the other day. It's great that you bring deep, classical historic references into things so we remember we weren't just dropped here with pixie dust or from a lopsided meteorite. It's taken centuries of incremental gains to get where we are today, and we need to realize that we aren't working in a vacuum, but as part of a large universe. Patricia Flynn on 6/8/2012 3:07:23 PM

Fed is wrecking the country and the dollar, but it is doing so at the behest of the government and the American people, who are to greedy to care about anything but TODAY. Fed should be abolished and a lot more time should be spent on studying Andrew Jackson, the ONLY President who had no debt for the United States. Must have been a wonderful feeling. Jon Hedges on 6/8/2012 8:46:53 PM

It amazes me how well the fast-talling politicians have engrained their lies into the American psyche. How many responses to this question included a comment about a "balanced budget"? That is just where the spendthrift clowns (both parties) want the discussion. A balanced BUDGET is where PROJECTED spending does not exceed PROJECTED income. Actula numbers do not need to be considered. Furthermore, a balanced budget can inclde a revenue line for borrowed money (borrowed money is income to an annual budget just like paying it back is a cost). Obama lives by this formula, where he can half the cost ESTIMATE and inflate the revenue ESTIMATE to match, knowing full well that the actual money will never come close to a true balance. So he can spend us into slavery and get headlines in favor of his balanced budget. Bob G on 6/8/2012 10:30:10 PM

Strongly disagree.It is time for us to face the problems we have head on and stop kicking the can down the road.if you look at problems around the world ,you will see that politics is the root cause James on 6/10/2012 10:06:29 PM

I strongly disagree Paul Blount on 6/11/2012 3:00:00 PM

Strongly Disagree. Stop printing money except to replace worn or damaged bills. Every time one more dollar is printed (other than to replace dollats removed) ...each of our Congressman's salary should be reduced by one dollar. David Zorychta on 6/11/2012 4:27:27 PM

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