April 30th, 2009

Due to the drastic decrease in inventories and a very large Fiscal and Monetary stimulus effort I believe our recovery is going to come much quicker and stronger than people anticipate. The recovery will lead to production because there will be a shortage of inventories and capacity will begin to feel squeezed. If the unemployment percentage stays high, we may lead ourselves into stagflation as prices are forced to escalate due to inflationary pressure caused primarily due to this imbalance of supply and demand. In this scenario I would imagine we should see adverse affects around the end of 2010 or into 2011. The caveat here is that it largely depends on a number of dependent variables which are controllable including things such as the savings rate (long-term), or the Capacity Utilization Rate, which if remain where they are now will greatly alter this outcome and create a much longer recovery.