The Paradox of Stimulating Growth With Government Spending

Here we are at the end of another week. What have we learned?

Not much. Yesterday, the markets went nowhere.

So, we'll think a bit more about Tim Geithner and the other men who rule us. Geithner wrote an article for The New York Times, “Welcome to the Recovery.�

The gist of the article was that, though the recovery wouldn't be quick and easy, it was still real and moving forward.

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5 Ways to the US Government Can Fix the Economy

A pop quiz: How much money did the US government inject into the American “financial system� from June 30, 2009, to June 30, 2010?

Drumroll…

$700 billion.

That's right…the same amount promised to the financial system in TARP, back in 2008, when they were literally on the brink of destruction. Over the last 12 months, as the S&P 500 rose as much as 30% (up about 15% now, after the summer correction), evidently banks, brokers and lenders needed another $700 billion… just trust ‘em…really.

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US Learns Nothing from Japan’s Economic Mistakes

“Data raise fears over faltering economy,� says this morning's Financial Times.

What a surprise! What happened to the recovery?

The Dow fell another 41 points. Gold got hammered for a $39 loss.

Why would gold go down so much? Because people are finally realizing that deflation is the real risk, not inflation. Gold could continue to slip and slide for a long time now… It's hard to say. It can rise in a deflation. But it depends on how volatile and uncertain the markets appear. In a stable, Japanese-style slump, gold could go down and stay down for many years.

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Welcoming the Failure of the Economic Recovery Team

The latest from the G20 meeting in Toronto. As you recall, the meeting was billed as a showdown between the Germans and the Americans…that is, between the deficit cutters and the big spenders…

That is, between the people without a hope and the people without a clue.

TORONTO (AP) – World leaders must work together to make sure the global recovery stays on track, Treasury Secretary Timothy Geithner said Saturday.

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US Economy Still Inching Toward a Japan-Like Slump

Another week gone by! Another week closer to Tokyo!

The Dow dropped another 145 points yesterday. Gold rose $11.

Will stocks recover today? Or will they just keep going down?

We're not a soothsayer. We can't read the stars…or interpret the charts. Still, we don't mind taking a guess about the future from time to time. And don't bet on it, by the way…

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A Faux Recovery Based on Economic Stimulus

More money! More stimulus! And more borrowing from the future to combat the errors of the past…

President Obama wants another $50 billion, presumably to keep the economy “stimulated.â€? We “must take these emergency measures…â€? he wrote in a letter to congressional leaders, or else risk “…massive layoffs of teachers, police and firefighters.â€?

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Government Spending and the Façade of a Successful Economy

I've got to admit it's getting better…
A little better all the time.

– The Beatles

Another Monday…another week… Are we getting better?

And what will this week bring? More evidence that things are improving?

On Friday we got word that consumer sales had fallen in May…from the month before. That is, they didn't get better; they got worse.

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Government Growth Measures Endanger the Economy

You could almost imagine Larry Summers making the announcement, pinky finger to his lip and affecting his best Dr. Evil impersonation, “We’ll call him…Mini-Stimulus.”

Summers, President Obama’s top economic policy wonk, this week advocated a second, smaller round of stimulus measures in order to sure up the precarious economic recovery. About $200 billion ought to do it, so says Summers. Never mind that this is the same “recovery” Summers could, until very recently, be heard lauding for its strength and resilience. Now, apparently, it needs a bit of help; help that comes, as usual, from involuntary contributions by taxpayers – present and future – and the ongoing, though increasingly worn, kindness of foreign strangers. More debt, in other words…precisely what the nation does not need. But we’ll let Summers do the talking:

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Global Debt Crisis: Navigating Through the Icebergs

While the whole nation seems to have bought into the ‘recovery,’ idea, we remain very skeptical. Some of the numbers seem to have bottomed out. But they are still terrible…and will probably begin a new decline soon.

We say that because the underlying causes of the downturn remain unfixed…and because the government is unfixing it even more. From what we can tell, the biggest jolt of stimulus in the history of the human race has stabilized US unemployment at about 10%…nearer to 20%, if you use a broader measure. It seems to have temporarily stabilized the housing market, with housing prices down 20% to 30%. (The first-time buyer credit expiring tomorrow!) And it seems to have slowed the move towards higher savings and less consumer spending.

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