The trouble we are not experiencing is the end of a credit bubble whose origins go back to the early 1980's. After record interest rates in 1982, total debt has grown at a faster rate than GDP. The past few years have shown this to be rather acute. We have sustained this all by debt financed consumption - sacrificing future economy activity for the present by the use of debt. It has finally caught up to us, and what should happen is a period of lower economic activity as we make up for all that debt financed consumption by de-leveraging the balance sheet.
So what do the wise sages of the political class propose. More debt financed consumption under the guise of "stimulus".
All we are doing is delaying the inevitable with fiscal chicanery. Switching consumer debt spending binge with a government debt buying binge to be paid for with future taxes.
So what do we call someone who does the same thing over and over and expecting a different result?
1 comment:
For all the crowing that politicians are doing, their own best case scenario on the stimulus is far from rosy.
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