Half Measures to No Measures

Prof K;

There's a trap, and it's the same thing that happened with fiscal stimulus. You do something in the right direction that's inadequate, and then people say, well, that didn't work, and instead of increasing the dosage and proving it right, you give the thing up altogether.

All of this is very familiar if you studied Japan in the '90s. In fact, we're doing worse than the Japanese did. Our monetary policy is a bit more aggressive, but our fiscal policy has been less aggressive. We have a larger output gap than they did, and we've had a surge in unemployment that they never had, and our political will to act has been exhausted much faster than theirs was. On the current track, we're going to look at Japan's lost decade as a success story compared to us. What we should be doing is a really big dose of stimulus on all of these fronts. Throw the kitchen sink at it. But if you ask me for ways to solve this problem that lives within the constraints of policymakers who don't want to be bold, I don't know that I have an answer for that.

I think I wrote a post about that a couple years ago. It's why Obama is the worst President.. ever.

When you have a half-measure President that thinks the best policy is the middle point between conflicting policies, you never get to see the effect of the ideology. Read just about any member of the Loon Brigade, and you'll see them claiming that "Liberal economics failed". The reality, of course, is that things would be worse had there been no "stimulus" in the first place, but when most political commentary is merely propaganda, "reality" is irrelevant.

Obama has set back Liberal political thought for a generation. We're on the verge of a huge meltdown economically. My retirement fun (non 401K, but mutuals, etc.) is just about at an even point. I checked this afternoon and it's only like $300 down. I'd like to break even, including broker commissions and such, and convert it all to cash. Gold might be worthwhile, but really.. I'm not interested in anything that has risk associated with it. Inflation is going to remain very very low, and the devaluation of cash will be trivial unless you're got millions in cash, which I don't.

Look at it this way. The odds of making money in the market will be small. The odds of losing a lot of money is probably pretty good. Losing 1.5% of your cash value annually is trivial. Maybe buy a CD if you can be bothered.. at 2%.

Hopefully we get a Republican take-over of congress, and President Palin in 2012. When it all burns, cash will be important.