TMFJake (96.84)

What if this is as good as it gets?

August 26, 2009 – Comments (1)

A few weeks ago, I blogged about the stimulus program, and it's present and future impact on the economy. Today, I was reading Sprott Asset Management's August Letter (thank your Abitare for putting this in your blog), and Sprott includes an interesting chart from Moody's on the impact of the stimulus program and GDP growth:

According to this model, while the bulk of stimulus spending will come in future quarters, the impact on GDP growth will peak this quarter. At roughly the same time, the Fed will stop it's quantitative easing program of buying up debt from the Treasury, Fannie and Freddie.

To paraphrase Buffet from my previous blog, the viagra will start to wear off in October.  And the impact of the stimulus and will turn negative next year as we start to service new debt--please don't play the viagra metaphor out here.

All of this makes the unemployment figures loom that much more significant.  If we see unemployment stabilize or shrink, I expect the Bernanke miracle will have more legs.  If not, I'd look for the sequel to stimulus after a test of how the economy and are markets fare in the absence of a robut enconomic catalyst and stimulus-driven GDP growth...