Dow down another 332 points

[Winnie]

Getting back to your original comment - we all know this is likely to be a long and painful process. Even with a stimulus the economy may still 'collapse', and after it's all over, we will still have to pay the check. But hey, maybe we get lucky, maybe Keynes and Krugman and Mankiw are all right, maybe all this will work out perfectly and we sail out of this with ease. I doubt it.

I heard him on All Things Considered this week say that a trillion dollars is not that much! I think his context was: The United States is a very big economy. A trillion dollars is not that much.

Our GDP is something like 13 or 14 trillion - to me, that makes one trillion MUCH.

 

[traderx]

I heard him on All Things Considered this week say that a trillion dollars is not that much! I think his context was: The United States is a very big economy. A trillion dollars is not that much.

Our GDP is something like 13 or 14 trillion - to me, that makes one trillion MUCH.

One trillion added to the already one trillion deficit and the $11 trillion or so debt makes it way too much.

30ashopper, as to the differences between FDR and Obama, two points. Obama's agenda is still evolving and we don't know just how all the money will be spent. It is clear that some money will be earmarked for things like contraceptives and fixing dangerous sidewalks in Atlanta. When you study the Great Depression, as it deepened and spread, government leaders did things that were heretofore inconceivable. Usually that meant that a country would turn inward and pass legislation designed to protect itself which only backfired. Who knows, we could see more of the same as time goes on.

As for the crowding out effect, as you know, this occurs when the hurdle rate for private investment is raised. It results from increased inflation at the hands of government spending which leads to higher interest rates. This seems predestined to me.

 

[Matt J]

Trillion is the new billion.

 

[30ashopper]

30ashopper, as to the differences between FDR and Obama, two points. Obama's agenda is still evolving and we don't know just how all the money will be spent. It is clear that some money will be earmarked for things like contraceptives and fixing dangerous sidewalks in Atlanta. When you study the Great Depression, as it deepened and spread, government leaders did things that were heretofore inconceivable. Usually that meant that a country would turn inward and pass legislation designed to protect itself which only backfired. Who knows, we could see more of the same as time goes on.

Yep yep yep! My concerns as well.

As for the crowding out effect, as you know, this occurs when the hurdle rate for private investment is raised. It results from increased inflation at the hands of government spending which leads to higher interest rates. This seems predestined to me.

Ok, I was looking at the purer form of crowding out via government competition in the private sector. (Think TVA) I get what you're saying, although I thought you were convinced inflation was a ways off or not likely?
It's hard to imagine what would happen if we get hit with a massive inflation wave... do you think 800 billion over two years (assuming TARP $ is kept under control) will kick inflation into high gear?

 

[traderx]

Yep yep yep! My concerns as well.



Ok, I was looking at the purer form of crowding out via government competition in the private sector. (Think TVA) I get what you're saying, although I thought you were convinced inflation was a ways off or not likely?
It's hard to imagine what would happen if we get hit with a massive inflation wave... do you think 800 billion over two years (assuming TARP $ is kept under control) will kick inflation into high gear?

I think inflation is probably a ways off only because it seems clear that it will take time to deploy the trillion dollar package but it will get there it seems. Right now, we have deflationary pressures. :shock: