Thursday, May 7, 2009

Superb Article from Investors Business Times

This article offers an excellent explanation of the ramifications of the current administrations economic policies. It is definitely worth your time to read and digest.

Putting It All Into Perspective

By Tyler Durden
07 May 2009 @ 11:35 am ESTNext Equities Article
Tonight, instead of more charts that demonstrate an increasingly broken market, or links to mainstream media sources of exponentially diminishing value, I provide a selection, culled from the most recent investor letter of hedge fund Elliott Associates. The letter does an exemplary job of addressing and explaining the core issues affecting both U.S. taxpayers and investors (as well as our global readers), with either a near- or long-term horizon, and cuts through the verbiage, the rhetoric, the patronizing and the obfuscations of both the MSM and the administration and its agents, like a warm knife through butter.


A fresh, enthusiastic and self-confident team has come to power in Washington, but we fear that the stimulus program that was recently enacted will not have the desired multiplier effects, and was not designed to create lasting value or solid future growth. Contrary to widespread hopes and sound practice, the spending programs are front-loaded with superficial effectiveness and back-loaded with problems.

Promising to spend, and actually spending, hundreds of billions of dollars, with “whatever it takes” waiting in the back pocket, will definitely appear to stabilize the economy. If the government spends enough money, a flush of pink will be slapped back into the pale cheeks of the stunned economy—even if the spending is mostly pork, payback and pet projects of the new gang in town. The money will be spent (at least in the beginning) at a time of underutilized capacity and falling aggregate demand.

However, the government is operating as if it does not matter where it goes, as long as it is “shovel ready” and large. That said, one is reminded, shovels can be used for both worthy long-term projects and piles of garbage.

The program to get us out of the recession should have been aimed not only at stabilization but also at fostering incentives to save and invest. It does not. It could have provided large spending for infrastructure (such as energy infrastructure) which would remove bottlenecks in the supply chain, catalyze growth and innovation, reduce dependency on uncertain and expensive foreign sources of energy, and other spending which would provide leveraged long-term benefits. It does not, except in very small doses. Instead, it focuses on hollow spending which will result in some stabilization at the cost of trillions of dollars of government debt being added, year after year. Merely shoveling money out the door is not a path to giving people confidence in America's economy, future growth and leadership in the world. We applaud the fact that the government action is big and relatively fast. However, it could be much stronger and smarter, and it could have included more strategic thought, collaboration and input from others across the political spectrum. We predict that these errors and omissions will produce ill effects much later.

Read More Here

1 comment:

undertaker said...

The article handles the issue with a lot more dignity than I would. The true objective is to cripple the economy, the investor and the taxpayer. Just enough jobs will start to materialize just in time for the 2010 election and disappear as soon as the "projects" are completed (after the 2010 elections). The debt will snowball and haunt us for two generations. In the meantime, the current resident of the White House, will increase his personal ownership of businesses and banks at will. Small businesses will die on the vine, which is just fine with him because they get in the way of socialism. So sayeth the crystal ball.