The Carville/Begala line was "It's the economy, stupid!" The economy, back in day, 1992, was actually going pretty well, but by chanting the mantra of "the worst economy in 50 years," enough people were convinced that the economy was bad and Ross Perot sucked away enough GHWB votes that Bill Clinton got elected. Now the MSM and the Democrats are pulling the same trick but with some different lyrics to the tune.

Now they sing about high inflation even though the core inflation rate is still low. Inflation is caused by too much money chasing too few goods, and they point to the Fed's lowering of interest rate as a source of the "too much money" chorus. But looked at rationally, the monetary base "grew" at a -3.1% rate corrected for a CPI increase of 4.3%, M-1 "grew" at a -4.6% rate, and M-2 only grew at 2.6% rate. These are hardly inflationary numbers. The high oil prices are inflationary only in the headline inflation rate in transportation and energy sectors, but function as a tax and reduce discretionary income and hinder economic growth, thus serving to reduce inflationary pressures. Thus core inflation rates are remaining relatively low and stable and should do so.

Some economists are saying that the stimulus package has not had an effect. Duh! The money hasn't been disbursed yet, experts! Pay attention. Besides, such stimulus packages and other government manipulations typically have a lag time of anywhere from 6 months to 18 months because of the inertia of our huge economy. Thus, even when the money and the tax and depreciation laws hit the street, there will be a delay before economic growth is affected.

I expect the Fed will note the lack of monetary growth and the sluggish economy and drop interest rates a bit more when they meet next week. I expect that all these factors will combine to get the economy moving sometime in the third quarter. Beyond that, the fourth quarter of 2008 and all of 2009 looks like a fairly decent year for stock market investors.

Of course it is always possible for our politicians to kill this trend with higher taxes and more government spending. We'll be watching.