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So much for "stimulus"



January 29, 2008 – Comments (2)

I've seen a lot of articles like this. Our quick-fix politicians better hope people don't save, or their stimulus package will do even less.

2 Comments – Post Your Own

#1) On January 29, 2008 at 1:31 PM, FoolishChemist (93.28) wrote:

One of the best pieces of advice I've heard was that "It is not your patriotic duty to shop."

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#2) On January 29, 2008 at 1:41 PM, abitare (30.20) wrote:


For those, who do not like to read, SNL with Steve Martin:


For those who can / like to read:

The Great Fiscal Stimulus of 1929

Consider The great fiscal stimulus package ... of 1929

Herbert Hoover -- only nine months into his presidency -- assembled leaders from the public and private sectors to create an economic-stimulus package. Among the measures, Time magazine reported at the time, was a promise from Congress to offer bipartisan support for a tax-cut package. Also on the table was an assurance from the Federal Reserve that it would provide cheaper credit.

Of course, there were a litany of public-works projects, plans for new corporate investments, and even a promise by Henry Ford to raise wages at his auto plants.
None of this worked.

Certainly, our economy now has far more differences than similarities with the economy of 1929, and few expect a new depression for the decade ahead. But it's also worth remembering that the best laid plans of presidents, chief executives and senators can sometimes come to nothing.Like the fiscal stimulus of 1929 the Fiscal "Stimulus" Of 2008 Is Doomed To Fail.

Yes, there are differences between 1929 and 2008. However, many similarities are striking.

Similarities Between 2008 and 1929
In the 20's, there was a massive overexpansion of manufacturing capacity. Today there is a massive overexpansion of productive capacity in China and a massive overexpansion of retail stores in the US.

In the late 1920s, bank credit propelled a massive real estate boom in New York City, in Florida, and throughout the country. We now have the biggest housing bubble in history.

In late 20’s credit was expanding at a rapid pace but there was no need for additional productive capacity. Today GDP is rapidly falling but credit is still rising (for now).

In 1929 there was no pent up demand for manufactured goods, especially autos. Today there is no pent up demand for homes, restaurants, retail stores, strip malls, autos, trucks, or anything else.

In 2008 as in 1929, the ability and willingness of consumers to borrow and banks to lend is under attack not only in the US but Europe as well. For more on the latter please see Financial Crisis Poised To Hit Europe. 


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