For a year we have seen the stock market rally very significantly. Investors are feeling a little better, but they still have losses in their portfolios and 401Ks.

Ben Bernanke has been flooding the world with paper called dollars; however, the dollar is stronger.

Ben has kept interest rates near zero to help the housing market and in some areas home prices have stabilized. Mortgage rates are hovering around 5%. Unfortunately the number of foreclosures has not declined.

The “cash-for-clunkers” program sold a lot of cars. Now we have the “cash for appliances” plan. Let’s hope it works better.

A huge majority of economists think the recession is over and the economy is growing. Others count 11,000,000 unemployed or underemployed.

Like it or not the key to recovery is employment. Our economy had been running at full tilt because 70% of spending is from consumers. When they don’t have an income things suffer so Washington’s solution is to give them “free” money in both direct and indirect forms.

Unemployment insurance used to be for 26 weeks. Now it is 99 weeks. Sit at home and watch TV for a while. Maybe do some “cash only” work or barter.

None of the above “stimulus” produces productive employment that helps the economy grow. It does require money from the central government. Ben keeps the dollar printing presses running to pay for all the excess “benefits”. In the long term, about 18 months, it will show its ugly head as inflation.

In order to pay for all this stimulus many new taxes will be imposed. They will be hidden in various Congressional legislations such as health care, cap and trade and VAT (that’s the killer). (Value Added Tax)

The “freebies” will seem to help, but in the long term merely prolong a recession. Washington is copying what Roosevelt did in the 1930s that did not work.

The tea party advocates say stop the ridiculous spending and let the economy sort it out. Washington get out of the way. That worked in 1922 recession.

Neither “solution” will prevent the recession from getting worse. The major difference is the Tea Party solution will be fast and furious, but it will be over in a short time. Washington’s solution will be as bad and drag it on for years and years and will not allow a solution to find it self.

No matter who is elected in the next election there will be no solution. All politicians think about is getting re-elected so they will find “easy” solutions with freebies that won’t work. Don’t believe any promises. Not one will want to do the “hard” stuff. The one who offers the most “freebies” will be the worst choice.

I have no solution because there is none at this time. We have hard times ahead. Hunker down. Get out of debt. The next 20 years is going to be a mammy jammer.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2010 Williamsburg Investment Co. All rights reserved.