The Triple Dip, When and Why

We are slowly slipping into the double dip in this Government perpetuated recession.  In 2008 and 2009 we had some choices to make to end this recession.  The choice was, are we going to give Americans capital, opportunity, stability, and a framework from which to rebuild the economy, or are we going to reinflate the bubbles, slowly bleed out anyone who has capital, throw money at pet projects and bribes, consolidate political power, and provide trillions in dollars of unfunded social programs that encourage economic depression.  We chose the later option.

The result, as predicted, is that now that the government has run out of bubble inflation capital and we have destroyed hopes for future stability and growth with crushing and ineffective debt, we are entering the double dip.  But there is still hope.  With a solid pro private growth energy policy, extension of current tax rates, repeal of the socialism, subsidies and taxes of the Healthcare plan, end to welfare unemployment benefits, and sale of government interests in any private company, we can make this double dip short, bitter, and done.  Instead, we will continue to head directly into a triple dip.

Why a triple dip?  Things are going to get better in the fall.  They will get better for a couple of reasons:

1. Democrats need to win in December.  The portion of our recession that is dependent solely on moods and perceived economic conditions will be affected by massive propaganda from the left, media optimism, and all sorts of economists coming out declaring victory over the bear.  This movement will be short-lived because with 10% unemployment you can only maintain your credibility so long.

2. Taxes are going to jump significantly for successful businesses, and for most small businesses regardless of whether they are successful.  The result is that companies will move money around and play the shell game to report as much income as possible now instead of later.  Profits and GDP will spike in November and December as companies switch from cash to accrual, defer depreciation, push capital towards debt repayment and distributions, hold off on purchases and bill payments, and leave the mailbox full of bills so that they don’t have to report them until January.

3. Stocks are in correction mode right now, but when they slip into full on bear mode, many of them will become undervalued this Summer.  Oil is trading at $75 during a Summer where millions of barrels have been lost in the gulf.  Citigroup remains cheaper than a Happy Meal.  Good dividend paying stocks have become so cheap that their dividends alone provide a better return than most bank CDs.  People will get back into the market in the Fall.  We may even see the Dow flirt with 11,000 by December.

4. The Christmas retail season will be better than last year and the year before.  It doesn’t take much.  Expect more Democrat stimulus programs to help drive this.  States as well will run sales tax holidays and many stores have slashed prices to accommodate the 10% unemployed.  With the other good news, consumer sentiment will skyrocket, even if their actual purchases don’t.

Then comes January and the triple dip.  Here is why:

1. Government economists, media outlets, and the administration will no longer have credibility.  Just as with the double dip, we will have heard “unexpectedly”, “below estimates”, and “surprisingly” so many times that nothing will surprise us anymore.  The same thing is happening with this double dip, where Obama touts 431,000 new jobs but then we find the truth.  400,000 are churned census temp jobs and the private sector is losing jobs.

2. The shell game will be over.  Companies will record and pay their bills.  They will write off bad receivables.  They will recontribute money into their company and use it solely for write-offs.  They will lay off employees whose insurance they can no longer afford.  Their income statements will become dismal and it will create a downward spiral.  They will sell underperforming stocks, properties, and other investments at discounts up to 45% in order to offset capital gains rates of about 45%.

3. Just as the bear market produces underpriced stocks, a bull market does the opposite.  The optimism of the election season Fall will produce stocks of banks teetering on the edge that are worth twice what they were in the Summer.  Oil will be at $78-80 going into a Winter season where it typically hovers between $65-70.  Medical industries will be finally reporting net profits after the higher embedded taxes.  Stocks will crumble back into the low 10,000s, perhaps even below 9,000.

4. With the power they have left, Democrats will pass tax policy that brings back higher tax brackets, higher capital gains rates on upper incomers, higher embedded taxes on energy, and probably a VAT tax on all Americans.  On the other hand, there will be no room for error left with the debt.  Even still, the jump in tax revenues from the Fall will inspire the Left to spend stimulus dollars near the election.  But the drop off of payroll taxes in January and embedded taxes will sink the budget.  The withdrawal of stimulus and crushing taxes will leave the government out of solutions and a spiraling upward debt that they already have no control over.

Recession recovery is not difficult.  Eventually, people with no employment and no money will either start drinking and begging, or they will start a business, invent something, or work for someone who did.  People who once made 60k as a computer programmer will make 25k flipping burgers for a while.  Or they will become millionaires by inventing a device that picks up popcorn without getting your fingers greasy or pierces ears rather painlessly.

What prevents them is outside influence.  If you have the option between making 25k flipping burgers or 30k taking extended unemployment benefits from the government, any fool or wise-man is going to take the 30k.  If you can’t get a job because your employer has to pay 7% of every dollar he pays you to the government and buy your health insurance and pay you a minimum of $7.65 an hour to mop the floor, then recovery will be difficult for you.  If you can’t start your own business because you have to pay start up fees to your state, and then over half your income in taxes to the state, local and federal government, then you won’t.  And you won’t hire anyone either.

If you specialize in oil drilling, but think the government might shut you down, you won’t invest in the process.  If you are a doctor, but can’t afford to pay the majority of your income in taxes and still pay off your student loans, you will be out of luck.  If you have a small business and want to invest in your business, but can’t because you have to pay 50% of every dollar that goes back into the business in taxes, you will not experience growth.

So far, this administration has done the opposite of everything they could to produce growth.  Unless the pattern changes, the third recession could be worse than the first.

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