Posts Tagged ‘stimulus’

How to Recover From a Depression

March 3, 2009

Fire Chief Bernanke (thx Daily Reckoning Australia). Article by Bill Bonner asking how will the economy improve? Bill asks, “What are they [assets such as houses and stocks] worth, now that the economy that created them no longer exists? That’s the big question. The U.S. economy has been expanding for the last 60 years – largely by increasing consumer spending and debt. Now, neither consumer spending nor debt is increasing.” Bill goes on to ask, “… if it is no longer an economy that grows by increasing consumption and debt…how does it grow at all?”

I think I know how the economy will recover but it certainly won’t be from government spending. See the quote below.

New Deal
In 1933, Roosevelt became President and appointed Morgenthau governor of the Federal Farm Board. In 1934, when William H. Woodin resigned because of poor health, Roosevelt appointed Morgenthau Secretary of the Treasury (an act that enraged conservatives). Morgenthau was an orthodox economist who opposed Keynesian economics and disapproved of some elements of Roosevelt’s New Deal. In New Deal or Raw Deal?, Burton Folsom quotes Morgenthau, testifying before the House Ways and Means Committee in May 1939: “We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot.” (emphasis added)

What scares me is that the only way for an economy to recover is for demand to rise to prior levels. If we can’t do that through credit anymore (and we can’t) then, and this is the scary part, perhaps the only solution is time. Time for population growth to rise enough to provide the necessary demand. Thus we are talking about the time required to create a whole new generation of people which usually takes about 25 years. Told you it was scary.


Lowering Expectations

February 15, 2009

An article on RedState observed that the Obama administration is rapidly working to lower expectations for its brand new stimulus package. In that regard:

I briefly listened to a Maryland Congressional Representative this morning (Sunday, Feb 15) as she was speaking on Fox News. She noted that Maryland had some large amount of “shovel ready jobs” all approved, permitted and just waiting for the stimulus package to fund. Okay, swell. But will those jobs go to the currently unemployed?

Or will they go to the existing employees of the existing engineering and contracting firms? In other words, will these “shovel ready jobs” be new jobs for newly unemployed or ongoing jobs for the currently employed in which case there will be no new stimulus, unemployment will continue to rise and the national economic problems will continue to fester.

“Second Thoughts On Stimulus”

February 11, 2009

From “The Daily Reckoning” in an article regarding the stimulus, TARP II and the supposed loss of confidence in the economy being a big issue.

“Or, as economist Dr. Roger Garrison writes in a chapter on the Austrian theory of the business cycle, “The loss of confidence comes from the realisation that the economy is overextended, asset values cannot be supported, and decisions about how to allocate capital have been based on a false cost of capital and the false level of demand it ‘stimulated.’ You don’t fix any of that with new stimulus.”

Consider that thought when the government tries to help restore confidence in our economy by printing money and throwing it at the banks.

How to cure a credit hangover – more credit

February 11, 2009
Comment on article by James Stewart:
Mr. Stewart,
I’ve long read your articles and admired both the writing and your ability to (almost) always be making money buying and selling various securities. Good for you.

(Now I go off-topic for just a moment.) Then you whined about Auction Rate Securties and demanded that the government make you whole. You who, if anyone, qualifies as a sophisticated investor complaining about an investment you made with your eyes wide open. But for fractions of a point in extra yield you ignored the risks and when your money got trapped you whined for government to save you.

In the same vein (back on-topic now) now you are whining for the government to save the economy. Our economy is suffering a credit hangover and your prescription is more of the same. As other posters made clear, Keynesian spending did not cure the 1930’s depression and it sure as heck hasn’t helped Japan.

We have not even reached the recessionary depths of the 1980’s when Reagan and Volcker killed inflation yet you and a whole host of smart people are stomping your collective feet for a multi-trillion spending program THAT YOU HOPE will “cure” this recession.

I do not admire President Obama nor his Democrat colleagues nor the three LIBERAL Republicans for passing this monstrosity. I do admire the few Democrats that opposed it, I do admire the majority of Republicans that opposed it and yet it will pass. It is a political instrument designed solely for the 2010 elections to preserve and protect the Democrat majority. While I am as angry at President Bush as anyone there is no hope for any positive change from President Obama. This nation, my child and my grandchildren will pay an enormous price for my generations failure to pay the bill for the services we abused.

Obama’s Economic Plan

February 10, 2009

(From President Obama’s speech February 9, 2009)

“That is why the single most important part of this Economic Recovery and Reinvestment Plan is the fact that it will save or create up to 4 million jobs.”

Not exactly. It won’t create private sector jobs, nor will it save them. What it will do is create a government monstrosity that stifles private sector economic development for many years while hanging a debt weight (pun intended) around our nation’s neck.

“It is only government that can break the vicious cycle where lost jobs lead to people spending less money which leads to even more layoffs.”

That’s only fair since it is only government that created the problem in the first place! When the Fed lowered interest rates to record low levels and kept them there for two years; when Congress repeatedly resisted efforts to rein in Fannie Mae and Freddie Mac; when a Republican administration threw away some 3/4 of a Trillion dollars on a hope and a prayer; yes only government could have created such an enormous  problem in the first place.

This nation has a severe economic crisis but it has not yet reached the levels of the mid 1970’s or the early 1980’s. Yet our institutional leaders seem to be in a panic and are running helter skelter throwing billions and trillions of dollars at the situation on the hope that something, anything works. Meanwhile our political leaders are knowingly using this crisis as a smokescreen to subvert our economic system and create a Euro-socialized system. Note Rahm Emanuels policy statement to not let a crisis be wasted. So we end up with a “stimulus package” of outdated, unneeded, wasteful social spending that the President wants passed and fast so the public doesn’t have time to understand what is being done. It is a disgraceful and dishonest process that we, our children and grandchildren will rue for many years.

Vote No on the Stimulus

February 6, 2009

To:                                                                             February 6, 2009

Rep. Mike McIntyre

Senator Richard Burr

Senator Kay Hagan

As one of your constituents I am asking you to vote no on the current stimulus bill working its way through congress. I firmly believe, as a small business owner, husband, father and grandfather that this bill will not provide the corrective action our economy currently needs. Even worse I believe this billl will make the situation considerably worse and will unduly burden our children for the rest of their lives. While I appreciate the politics of the current circumstances I am asking you to vote no on the stimulus bill.