Updated: May 3, 2013 12:14PM
The economy is waiting. We are all waiting, and hoping. Banks are waiting to lend. Businesses are waiting to borrow. Consumers are waiting to spend. And home buyers are waiting to make an offer. Unemployed workers are waiting for jobs to come back. Bosses are waiting to hire. Troubled homeowners are waiting for either foreclosure notices or modification help.
And meanwhile the economy is basically in a standoff, according to a series of reports released Thursday.
Unemployment: The latest economic figures released Thursday bear out that scenario. New claims for unemployment dropped slightly, giving hope that the job picture is bottoming out -- but with 450,000 new jobless claims being filed in one week, you can hardly say the recession is "over."
Inflation: Producer (wholesale) prices increased 0.4 percent in August, mainly because of rising wheat and egg costs in the food sector and a 2 percent increase in energy costs for the month. Normally, we don't like to hear about inflation -- but at least these numbers show that we're not falling into the black hole of deflation and depression.
Government balance sheet: The "current account deficit" -- the difference between the goods, services and investments that we import and export, grew slightly to $123 billion in the second quarter. It was slightly better news than expected, showing that foreigners are at least buying more services from us these days.
Housing: Illinois foreclosure activity fell 14.3 percent in August compared with the previous month but was up 28.5 percent compared with the same month last year, according to RealtyTrac Inc. The foreclosure filing rate in Illinois represents one in every 314 housing units in the state. That is higher than the national rate of one in every 381 properties.
Higher foreclosures are not good news in any case, and especially for the families involved. But the number is a sign that banks are finally taking action, clearing the decks of bad deals -- a signal that they might be ready to lend again, and that buyers can find bargains Again, the glass is half empty, half full.
The stock market: Despite many predictions of a huge decline in stock prices, the market is holding its own, with the Dow Jones industrial average closing up 22 points Thursday, at 10,594.83 -- still in the midst of a trading range it has maintained for months. Companies like Oracle and RIM, which reported after the close, are still posting earnings that beat expectations, and forecasting better future profits -- enough good news to give a lift to stock bulls. Apple stock traded at an all-time high of more than $276 per share.
What's economy waiting for?
So with news that could reasonably be interpreted as positive for the economy, what is everyone waiting for? The answer is simple: The economy and the markets are waiting for word from Washington as to what steps it might take next that could help, or hurt, the economy.
In the Senate, Democrats proposed hiking taxes on investment fund managers and oil companies. Professional investors would no longer qualify for capital gains. And oil companies would ante up $13 billion over 10 years for a "trust fund" in case of future oil spills. Neither proposal spells good news for investments in these sectors.
Meanwhile the Senate, in a 61-38 vote, passed a $30 billion government fund to help open up lending for small businesses, cut their taxes, and boost Small Business Administration loan programs.
But debate over a tax increase on the wealthy drags on. Many politicians want to continue the Bush-era tax cuts for middle-class taxpayers making less than $250,000, while increasing the burden on higher wage-earners. Few are arguing that the proposed tax increase on the wealthy would cut the deficit -- only that the government needs more money to spend to get the economy growing.
The prospect of all this government intervention in every sector of the economy is what is keeping the economy waiting. Add in the politics of an election year, and you have the perfect recipe for economic paralysis.
When will it all end? It will all move -- in one direction or another -- only when Washington has a clearer mandate to act.
Meanwhile, like the canary in the mine, gold prices have soared to a record high of $1,279 an ounce, before closing at $1,273.80 on Thursday. Clearly, global investors are wondering whether the dollar can maintain its value in the face of proposed spending, wider deficits and tax increases that could derail growth. And that's the Savage Truth.
Terry Savage is a registered investment adviser.