This is odd. I thought once Barack Obama ascended to the presidency and appointed his team of financial wizards that all would be well with the economy.
The slumping U.S. economy barely improved early this year, with businesses slashing spending and inventories, according to a surprising report indicating the recession didn’t ease as much as expected.
Gross domestic product decreased at a seasonally adjusted 6.1% annual rate January through March despite rising consumer spending, the Commerce Department said Wednesday in its first estimate of first-quarter GDP.
Could it be that perhaps more debt and spending are not the way out of an economic crisis caused by too much debt and spending?
It’s absurd…and it seems the Fed will continue to purchase large amounts of this treasury debt – effectively monetizing it.
I’m quite convinced however, that with a sufficient lag, there will be a general economic recovery in the short term. You cannot create this volume of money without inflating your way out.
The trouble lies in the long term – reversing the inflation once it begins. Hayek likened this to having a “tiger by the tail.” Perpetuating any recovery (after such an inflation induced shot of adrenaline) is only possible by continuing to inject more money. It is so obviously flawed that you might only see it advocated by either myopic politicians or an economist whose last name starts with the letter “K” and who thinks the long term doesn’t matter. It is a disaster economic policy for the long term.
I fear we shall all eventually experience a severe dollar devaluation and an inflationary depression in the next 3-5 years.
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US economy is the biggest market in the world. Our sales increases in the first quarter of 2009..
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LP: I agree. I’ve heard estimates that the effects of all this spending will kick in within the next 2 to 4 years.
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