Stimulus Package Like Throwing Snowballs at a Wall

With Governments around the world proposing massive financial stimulus packages, its like throwing snowballs at a wall and hoping some will stick.

Have they all gone stark-raving-bonkers? “The government can increase its spending only by reducing private spending equivalently. Whether government finances its added spending by increasing taxes, by borrowing, or by inflating the currency, the added spending will be offset by reduced private spending.”

They have no idea of the size of the financial problems but they believe that if they can just make it really big it should help avoid the worst of the recession. It just has to be REALLY BIG 😉

Who defines how big it should be? On what basis? All I see Congress doing is arguing about the size of the package.

What ever happened to rational objective analysis? I know politicians believe they must be seen “doing something” but does that make it right?

In Australia our government has decided to install insulation in all those houses where people have not bothered to install it. Those that have been eco-responsible will miss out on a $1600 hand-out.

At least everyone will be cooler with this summer heat as they stay at home with no job to go to.

I’m thinking of setting up an import/export company to bring in insulation batts (assuming they meet the inevitable Australian standard). It should be a real money spinner.

Then I will recruit a whole bunch of out-of-work financial guys and teach them how to install the batts. It should be a no-brainer for these highly educated people.

I believe Australia is about to throw $43Bn worth of snowballs at the recession wall. Enough is supposed to stick to create or maintain 90,000 jobs.

Those jobs will most likely be in the favored businesses rather than the businesses that need them.

It seems strange to me to allow small business to lay off skilled and knowledgeable workers and then offer them employment building roads and bridges or repairing school buildings or installing home insulation.

It is illogical to me to allow this to happen. If you intend to spend money trying to keep people employed, why not try to keep them in the job they are currently in?

If the FED can give unlimited lines of credit to the banks why is this not done for small business? They are the people who can most effectively create and maintain jobs. A line of credit can keep their business going and their staff employed until the good times roll around again.

Provided a small business can present properly audited account history why not lend it money rather than throw money around without any real idea of direction?

Surely $43Bn would be better spent by allowing small business to apply for a loan interest free and with no repayments for at least two years. That way it’s not all thrown against the wall.

I’m sure some business will fail and some loans will have to be written off. But at least the public will see it was a real attempt to keep the current economy going rather than create a new parallel economy with winners and losers selected by government favor.

Putting $43Bn to work on projects selected by public servants sitting in the halls of government and with no real world perspective, will severely distort the existing economy and cause money and resources to be mis-directed.

The US is no different with its $850Bn and counting, stimulus package.

Throwing these huge sums of money around has NEVER been done before by any government around the world. And now they are all doing it. They are taking a big gamble with the stimulus package and it will definitely affect Baby Boomer retirement plans.

Getting into debt in order to get out of it makes no sense to me.

If the stimulus package works – great. If it doesn’t I think it will lengthen the recession and that will mean it will take much longer for your nest egg to recover.

If you have a significant portion of your nest egg locked away in stocks or equity funds with significant losses, I’d put them in the bottom draw and forget about them. Use whatever cash you have now to build a new nest egg.

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