Look for the fact that deflation has won out (as predicted here for last 18 months) to cause 4 key things to happen.
1. Today Obama extended the house tax credit for 3 months. That will be extended indefinitely.
2. Stimulus bill 2. Mostly due to states fiscal conditions getting worse and potential insolvency in 23 states looming.
3. QE2 (quantitative easing or in its real name printing money) in the fall just after the elections. This will have to be much larger in its second edition. Thats a characteristic of deflation money pumps. Think $5 Trillion in coordination with other central banks.
4. No rate raises except maybe in the 2 year.
5. Unemployment will go back to double digits by 4th quarter and the GDP has a real chance of printing negative in one of the next 3 quarters.
Happy Independence Day!!!
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