Getting A Sense Of The Economy’s Current Hole And How The Government’s Measures To Fill It (Don’t) Add Up

The numbers just don’t add up. Even if you treat this stuff on the most charitable of terms, dollar for dollar, way too much of the hole almost certainly remains unfilled. That’s the thing about “stimulus” talk; for one thing, people seem to be viewing it as some kind of addition without thinking it all the way through first.

You have to begin by sizing up the gross economic deficit it is being haphazardly poured into – with an additional emphasis on “haphazardly.”

Everyone forgets the last time when the government tried this, impressing markets and the media with its huge numbers, that after it was over its proponents complained how it wasn’t big enough. Paul Krugman most of all (seriously, in November 2009, after it was over, he wrote Obama’s plan was awesome but it wasn’t “nearly enough”). If you don’t know how big is the abyss, if you can’t even size the thing up properly while it’s unfolding, how can you even attempt to call it “stimulus?”

What we are dealing with today is an economic disruption the proportions of which are an historical outlier. That means an unfathomable number of workers are not getting paid and therefore consumers not spending, businesses don’t collect that revenue which destroys their profit levels, and then business investment which doesn’t get done on top of both consumers and businesses far more likely to save and act differently than before.

The federal government (we’ve done the Fed’s “stimulus” a million times over already) is attempting to bridge this enormous divide by making up what it hopes ends up being the vast majority of this difference. For workers that aren’t working and therefore not being paid, the government offers souped-up unemployment benefits and safety nets. “Helicopter” payments to citizens. Business loans and grants in lieu of revenue that will never happen.

The feds aren’t adding to an economy experiencing a mild downturn, and therefore create an excess, they’re trying desperately to redistribute a sufficient amount just to be able to hope they can keep this thing afloat long enough (For what? No one wants to answer, the goalposts continue to shift.)

The stock market like many commentators are all saying the government’s done more than enough, perhaps too much (inflation). That all depends first upon the scale of the hole.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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