Wednesday, February 18, 2009
Sell the News
Obama launched the Stimulus Program and the Nasdaq lost 5%. I am reading serious reservations about the Keynesian plan of pumping money into the economy. It did not work in Japan. Former recessions were overcome without any stimulus. Many consider Obama´s plan as a gigantic ¨pork¨ package to Democratic constituencies. Eastern Europe including Austria is collapsing. Something is smelling no good.
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4 comments:
Extensive spending is necessary to keep deflation at bay. Stagnation-deflation is a toxic combination that kept Japan's economy down for an entire "lost decade". You wrote on here earlier about the need for inflationary pressures to fight deflation, and this is what we're getting with the stimulus bill.
The markets are signaling displeasure about the lack of credit, and the general toxicity that has built up in the banking system, and stalling the flow of capital. Until something is done about the toxic assets -- Swedish style nationalization of banks is gaining steam -- the markets will continue to signal disapproval.
Nouriel Roubini and Matt Richardson interview with the Wall Street Journal on why we need to nationalize insolvent banks in order to avoid turning private banks – that have recently received massive government guarantees of their new debts – into another Fannie and Freddie bankrupt monster. And now even Alan Greenspan - after Republican Senator Graham and other Republicans - has come out in favor of a temporary nationalization of insolvent banks.
Interview here: http://online.wsj.com/article/SB123491676536704371.html
Obama is already campaigning for reelection, that is the purpose of the stimulus bill. I wonder how long before all of the Africans in Africa receiving food assistance (foreign aid) will start showing up here.
I heard about Austria, I hope they don't default. As for Eastern Europe, I hope they don't default either, but I am pessimistic for their finances.
I suspect the stimulus will eventually result in inflation if it is not accompanied by a commensurate rise in productivity.
Which it won't be.
But, hey, who cares about 'eventually'?
Anon.
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