By Dave Anderson:
As you have noticed, our writing pace has declined dramatically over the past couple of years. For me, I have cut back becuase I am seeing the same Stupid repeated over and over again.
Barry Ritholtz looks at the economic policy Stupid and I am convinced that we are stuck with that until President Perry loses in 2017 for all today's failure has proven is that we have not inflicted enough pain on the lucky duckies (of which I am one):
I suspect the Fed's blunt language was telegraphing a message to Congress. Rates are at zero, mortgages are at 60 year loans, and yet demand simply is not there. The Fed has done pretty much all it can do. As we noted yesterday, responding to the weak economy at this point requires fiscal policy, rather than further monetary approach. "The Twist" and purchases of mortgage-backed paper is an attempt to rates down even further. It is hard to see how that can be effective in the current environment.
Don;t expect a policy response from the Austerians. These misguided politicos are in charge in D.C., despite having gotten the past few economic cycles precisely backwards. During the last expansion (2003-07), instead of raising taxes and cutting spending - managing the deficit, creating a better private/government spending ratio - the hypocritical deficit peacocks in the USA did the exact opposite. We cut taxes during (2) wartime, created yet another entitlement program, and raised yet other government spending during private sector economic expansion.
That approach makes much more sense in the current environment of consumer de-leveraging, weak private sector job creation, modest capex investment, and low growth. Instead, we suffer from the opposite:
Based upon a fundamental misunderstanding of the works of John Maynard Keynes, they are once again out of phase. Now, the same crowd is looking at raising taxes and reducing government spending when an already frail economy cannot support it. Hence, the Austerians and a complicit White House are all but guaranteeing a 1937 like recession will be increasingly likely.
Excess government stimulus during expansions and austerity during (or immediately after) contractions is simply misguided economics, bad politics and awful poilicy.
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