Where we're headed

I remain bearish in regards to the US economy, despite the recent stock market rally. I simply don't see how our economy can undergo a recovery with 10% unemployment. Our GDP was inflated by consumer credit and full employment. Now that the credit bubble has burst, and employment levels are lower, our country's production will remain suppressed for quite some time. Fewer people with jobs mean fewer people spending money, and fewer people spending money means less profits for companies - large corporations and small businesses alike. It appears to me that it is a vicious cycle, with each effect becoming the next cause. With lenders such as CIT having trouble staying afloat, many small businesses in America will struggle to maintain the financial strength to continue operating in an environment of lower sales. As we have seen, bailout money has certainly saved the "financial system" - take a look at Goldman Sachs' latest 10-Q. But did it save America? Ask small businesses.

Here is an update to the stock chart idea from a few months ago, comparing recent market action with that of the Great Depression.

First, a picture of the stock market from 1928 - 1932:



And now 2007 - today:



I am not simply saying that history will repeat itself here with regards to the stock market rallying, then completely collapsing. It would be rudimentary to say that because Chart A happened, Chart B will turn out the same way.
All I am presenting is evidence against those in the media that use the stock market rally as their own 'evidence' that an economic recovery is underway.

And, the greater point of all of this is that government has failed us by inflating a bubble that has now burst. If our elected officials would get out of the way by reducing or eliminating the income tax and cutting out all of the waste in all levels of government, our capitalistic economy could once again rise to occasion and better our standard of living.
By continuing its policy of deficit spending and increasing taxes (if you believe Obama's pledge not to increase taxes, you may want to read up on what economists are saying about his health care plan, or what his policies will do to the value of your US Dollar in savings), our government is damning us to a decreased standard of living.