As I said in an earlier post this morning, Obama's comments from a post-G20 press conference were stunningly frank.
Regarding exports, he said "Countries with large surpluses must shift away from unhealthy dependence on exports and take steps to boost domestic demand. As I've said, going forward, no nation should assume that their path to prosperity is paved simply with exports to the United States."
Note the bolded text. I interpret this to be a loud and clear admission that, yes, we are not coming out of this anytime soon. It is my feeling that a skeptical stance towards all the so-called good news about the economy is warranted. It should be regarded as nothing more than feel-good PR.
Defending QE2, Obama made this stunning admission (emphasis mine):
"From everything I can see, this decision was not one designed to have an impact on the currency, on the dollar. It was designed to grow the economy," Obama said. "And there's some legitimate concern that we've had very low inflation, that a huge danger in the United States is deflation, and that we have to be mindful of those dangers going forward because that wouldn't be good for the United States or for the rest of the world."
For once I wholeheartedly agree with him. The public is being conditioned to believe in inflation (what the Fed so desperately needs), while the real underlying danger is deflation. Furthermore, it's happening right now. Outstanding credit is contracting, yet the public is told that rising milk prices portend inflation.
The world does not run on milk. Sadly, it runs on credit. We are awash in an ocean of credit that is rapidly evaporating while the Fed tries to fill it back up with a garden hose.
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