More evidence ‘stimulus’ doesn’t work too well

June 26, 2009

From Action Economics (bold is mine):

Today’s U.S. reports revealed a bigger May income boost than we assumed from recent stimulus legislation, but a lower service consumption trajectory nevertheless, to leave a remarkable surge in the savings rate and a slightly weaker trajectory for aggregate demand as we approach mid-year.  We also saw a small upward bump in the Michigan sentiment index in June as the various confidence measures post gains from Q4-Q1 lows, though confidence remains remarkably lean. The soaring savings rate shows that households are still bracing for the worst despite improving market conditions, as they hoard distributed stimulus benefits and hence truncate some of the “stimulative” effects.

4 comments

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I’m not sure how this proves your point made in the headline. The very fact that households are saving more and spending less is the reason why stimulus is needed. Not much of the stimulus allocation has been spent yet, so you can argue it has been too slow. But if the government is spending the money directly (through infrastructure spending, etc) then it is impossible for households to “hoard” the benefits of the stimulus. If anything this is an argument against tax cuts, which do tend to be “hoarded” in recessionary times and won’t give you any multiplier effect.

Posted by Kramer | Report as abusive

LEHMAN down, GM down, Citi, Chrysler … Is AMERICA really hurt ?

PONTIAC, BUICK, CHEVROLET… the “American dreamt” brands, the symbol of an era in America.
The wish of many teenagers that then became great personalities around the globe.

But, this was a forecasted end. TOYOTA has been for many years, the real revolution in the american auto industry. Together with NISSAN, both japanese manufacturers, leaded the auto sales market for many years in a row.

Afterwards, came the korean cars… the asian conquer of the american auto corporations.

Is this the sign of an hegemony change ?… Is AMERICA really that hurt ?
Is competitiveness the key crack-down factor for this consequences ?

The US will always mean marketing, show, branding, globality, with its own values and essence. But, is this enough to keep US sovereignity in the planet ??

AMERICA has voted for a change. Barack Obama, the first black president, meant a new change era and a barn of hopes for many americans. But is it enough with a good carisma and beautiful words ??

USA is now playing a tough game. The game of competitiveness, the game of innovation, the new rules of capitalism…

Can AMERICA workers compete with the 24-hour turns of japanese or chinese workers ?
Can AMERICA export more than import ?
Can AMERICA reissue the huge external debt owned by CHINA now ?

Does anyone know that the main owner of the USA is CHINA ?

Yes, the main owners of US debt is CHINA. If CHINA decides to do it, US Dollar can dissapear.

Nowadays, CHINA has lived of US imports. Therefore, CHINA has accumulated vast deposits of T-bonds and US Dollars. This has been the reason for the dollar stability.
Once CHINA develops their internal consumer rates, or begin diversifying their exports, CHINA will be in position to change US dollars for other currencies. Then, US Dollar will be dead.

Is AMERICA ready for this era ?
Does Barack Obama has a real plan to put a brake on this dynamic ?

Huge challenges ahead. But, for sure, the only opportunity for AMERICA is not to lose their essence. The AMERICAN DREAMT must be on, but politicians and decisions makers must also help on this.

One advice for Mr Obama:
Capitalism has not failed, it has been the lack of regulation in the financial markets.

It is very important to keep this clear, because around this point, the US must build their next future generations.

Jose Luis Revilla Escudero
Chairman&CEO
WWShares, Inc
-Global Wealth Management-
http://www.worldwideshares.blogspot.com

TRUTH

Let´s tell the only truth:

1. China is the main owner of the US, since it is the main debtor in US T-bonds and external debt.

2. Hedge funds and leveraged financial operations have been existing for a long time. It is nothing new that just arrived 2-3 years ago. Nick Leeson bankrupted BARINGS BANK 14 years ago playing with derivatives in Singapore Stock Exchange.
Georghe Soros became rich managing hedge funds focused on leveraged currency operations more than 20 years ago.

3. CAPITALISM has not failed, it has been the antique regulation vs. NEW and more complexed financial products ( options, futures, warrants, leveraged buy-outs, mergers, etc… )

4. Barack Obama is president of the US because of the worst performance ever of an US president (George W. Bush ),… But even with that, if the financial crisis does not explode 2 months before the election, B.O. would not have won it either.

5. B.O. was a complete unknown, but very useful to revitalize the image of the US in the world: youth, muslim relatives, black, elegant, the blackberry, … the US lobbies have achieved their goal, and they have said to the world:

Look how robust is our democracy that we have elected a black president !!!…
Look how our relationship with the muslim world is going to change in a positive manner !!!…
Look how we are going to restructure the whole world !!!

Political Marketing, media and more dirty games …

6. The US has finally understood that a war against “3 muslims hidden in a cave” was not a good idea, even more while China became more and more powerful, while the US became weaker with stupid wars.

7. Do not blame Wall Street !!!… Wall Street are not aliens living in a different world. They are only the representation of what America is. Wall Street has auto manufacturers, utilities, proud companies such as GOOGLE, MICROSOFT, and obviously it also has banks.
“Subprime loans” existed for a long time in the US, even since its colonisation.
The handling of these subprime loans is a different aspect, and it is precisely here where REGULATION failed.

8. ENRON case was not 2 years ago. Have we learned something since then ?…

9. Where is the “free journalism” ??… Let´s hope people will stop reading lobby newspapers and concentrate on real free bloggers.

10. INDIA has the key of the world hegemony. If it leans to the US, US will continue leading the world. If it leans to China, the US power is over.

11. What country will first realize that AFRICA has a lot to offer to the world ??… China is doing it already.

12. Why do I know that Obama has a dog called “Bo”, and I do not know if HU JINTAO (China president ) has even kids ???

Please, let´s tell the truth to the world.

Jose Luis Revilla Escudero
Chairman&CEO
WWShares, Inc
-Global Wealth Management-
http://www.worldwideshares.blogspot.com

I’m squirrelling away my extra $13/week to pay for my share of the carbon tax pass throughs. That way I only need to come up with an additional 842.23 through the year for those offsets.

Can a VAT be right around the corner? Thank you Sir, may I have another?

Posted by Hank Reardon | Report as abusive