Stumbling and Bumbling

While it will take some time to determine what the fallout will be in total, for now it appears that Washington's decision to kick the can down the road is having a negative impact on the economy. What has become abundantly clear is that we have a lack of leadership in all parts of the government. The S&P 500 had its worst month in over a year in July. As stocks and bonds suffered losses,US and foreign investors lost confidence. One Congressional representative put it very well: "The Greatest Generation passed the ball to us and we dropped it." Looking forward, the reactions of voters in 2012 will be interesting. For now, both small and large businesses have been left in limbo, which usually results in no business expansion. Consumers also hunkered down with a reported drop in consumer spending for June. The GDP report for the second quarter of 2011 came out showing an annualized growth rate of 1.3%, while the anticipated rate was 1.8%. This shortfall, along with lower revised figures for the first quarter from 1.3% down to 0.4%, shows an economy almost at a stall. The bottom line may well be higher unemployment and less job creation. Investors may see a loss of value for the time being. The good news is that most people have short memories and, as the press moves on to other events, we are likely to see a rebound in stocks and bonds, because by most indicators they are underpriced. We will wait and see. Ed Mallon