QE2 as a percentage of the economic was about 4.2%, so if we had 2% organic growth then we should be putting up 6% numbers on GDP. We're not; we are in fact putting up negative numbers when one subtracts out the QE2 component, and the so-called "stimulant" effect of the payroll tax cut is a big zero as well, despite adding nearly $500 billion to the deficit this year alone. When debt accumulation becomes negative to economic outcomes you're in big trouble and I believe there's an argument to be made that we're either there or damn close.
Eventually this dynamic forces you to stop and take your medicine.
Coming into an environment where the most-recent stimulative tax cuts didn't stimulate, this is likely to bring us some interesting economic releases. My expectations are for serious profit declines which should become apparently in the first quarter reports and lead to a full-on profit collapse by the end of 2011. Exactly how long the markets will ignore these realities is difficult to determine, but I will say this: If you've made some nice money in the stock market on the back of so-called recovery, your "use by" date has expired and in my view you're now living on borrowed time.
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