The Money on the Sidelines

One of the biggest effects that the global economic crisis has had on the US economy is the shakeout of billions of dollars from the markets.  Without a real direction and given the large amount of pessimism that exists currently, millions of investors, including some very big names are reluctant to park their money anywhere right now.  Names like Warren Buffet and Jim Rogers, both men having made literally billions from their insights and savvy market calls over the years have both come out recently to state that right now is not a great time to prognosticate, and that they have much of their investment capital on the sidelines right now, primed to be injected at the right moment.  Does this sidelining of investment cash have a lack of leadership to blame for its existence?  Or is it there because like so many other economies, there is very little in the way of market signs hinting about the future of the global economy?

The Dow has recovered almost 50% since its March lows yet we have not yet seen the full force of the economic stimulus.  Only a small percentage of this stimulus has been used, and the US economy has been “saved from the brink of certain peril” according to Ben Bernanke.  Whether or not you buy his version of history is not what concerns me.  What concerns me is the fact that there are billions of dollars out there waiting for the markets to show some real sign of honest to goodness improvement and optimism.  If the FED other governmental organizations truly believe that an earnest economic recovery is occurring, then why not stand up and shout it from the mountaintops?  This would serve to instill more optimism and more investors would turn out to feed the flames of recovery.

It is with this logic that I firmly believe that the recovery has not yet happened in earnest, in fact, it’s not even begun.  We have used about $100 billion of the stimulus money to prop up the economy like a straw man, trying to scare away the real causes of this mess.  There has been very little if any real economic and financial reform since the economic crisis began, leading me to believe that another, equally as severe recession is not far off, or we may perhaps be experiencing the calm before the real storm, and what we’ve seen up to this point has been just a hint of what’s in store for the next few years.

The government needs to take more of a leadership role in trying to show investors and consumers that they are doing everything they can to avert further economic ruin.  They need to believe in their own fixes and understand that the injection of the sidelined cash could lead to a real recovery, catalyzed by people who are willing to put their money where their mouth is and trust the US economy once again.  Until real reform occurs, and true leadership emerges, real recovery will be nothing more than a pipe dream.