4 reasons why a second stimulus is a bad idea
Wells Fargo/Wachovia economist John Siliva makes his case:
1) A second stimulus would add fuel to the already recovering economy and would create the false impression that all is now back to the “happy days” of an overleveraged consumer and strong growth. Therefore, estimates of top-line revenues are likely to overstate the true sustainable future pace of sales in a deleveraged economy.
2) A second stimulus would likely add to inflation/interest rate pressures and, thereby, higher interest rates and the cost of capital down the road.
3) A second stimulus would further raise doubts on the ability of our nation to control future spending/deficits and lead to a depreciation of the currency and possible loss of our near-exclusive role as the world’s reserve currency.
4) A second stimulus would further hide the negative impacts of the numerous micro policy proposals in place and thereby obscure, for a short time, the economic losses from the misallocation of public resources.